What's Good for Industry
SEGAL, HARVEY H.
What's Good for Industry... The Rise of the Corporate Commonwealth: United States Business and Public Policy in the 20th Century By Louis Galambos and Joseph Pratt Basic. 286 pp....
...That huge Federal undertaking was supervised by Warren's imaginative Berkeley-educated son, Stephen...
...Galambos and Pratt endorse such protectionist policies on the grounds that they "will persuade American business and labor to make needed adjustments in the adversarial system...
...This is due not only to the reduction of imports, but also to Japan's switch to more expensive models, and decisions by the big three domestic automakers—who pressed so hard for the rise in the dollar value of the yen—to hike their prices, thus throwing away an advantage that could have permitted them to retake a bigger share of the domestic market...
...Moreover, they utterly fail to acknowledge the burden foisted on consumers by the quotas...
...Chrysler, by contrast, sells in a sluggish market that is increasingly vulnerable to foreign competition...
...To this effort Louis Galambos and Joseph Pratt bring a presumptive expertise as academic business historians...
...When McCone became CIA director after the Bay of Pigs fiasco, there was an intimate and profitable collaboration, especially in Saudi Arabia and Indonesia, between what McCartney deftly calls "The Company and the Company...
...Group psychologists, quality control engineers and Nipponophiles—to say nothing of candidates for high political office— are deeply engaged in propounding diagnoses, therapies and prognoses...
...Conflicts of interest arising out of corporate efforts to secure government business are, like fleas on a dog, to be expected...
...John A. McCone—Stephen's Berkeley engineering school classmate, Boulder Dam steel contractor and business partner—was often in the right place at the right time...
...Speculating on the prospects of the American corporation in increasingly competitive world markets has by now become a small industry...
...As chairman of the Atomic Energy Commission in the second Eisenhower Administration, McCone pressed hard for more nuclear-powered generating plants, of which Bechtel was already a leading builder...
...Galambos, Pratt, and others who look back nostalgically to the mercantilist policies of the 1930s seem not to realize that the American economy today is more dependent on imports and exports than at almost any other time in our history...
...270pp...
...Close friends and favorable circumstances helped...
...19.95...
...What Galambos and Pratt really mean by "flexibility" is resourcefulness in shaping the "system...
...Friends in High Places: The Bechtel Story—The Most Secret Corporation and How It Engineered the World By Laton McCartney Simon and Schuster...
...ideological PR only diverts resources from that task...
...Morgan, by assembling the United States Steel Corporation in 1901, achieved what the authors view as a major goal of any business: "control of external environments...
...Similarly, Iacocca solved Chrysler's "external problem" by pushing Congress to provide the automaker with a loan guarantee and—much more important—by lobbying for protection from Japanese competition, first through quotas and then "voluntary" export restraints...
...As agents of the shareholder-owners, managers have a fiduciary responsibility to maximize the market value of the company...
...I share neither their reading of history nor their optimism...
...Whatever the rhetorical merits of the Morgan-Iacocca parallel Galambos and Pratt draw, its significance is undermined by certain economic and political disanalogies, which they ignore...
...Laton McCartney's excellent book about Bechtel gives concrete meaning to Hobbes' characterization of the corporation as a "Body Politique.' The world's largest engineering and heavy construction company, with revenues of more than $14 billion in its peak year of 198 3, Bechtel has always operated in markets and countries where the lines that divide business from politics are blurred, if they exist at all...
...His accounts of the tax-loophole lobby and "governmentgiven entitlements" to business, such as the auto import quotas, are among the best parts of this uneven book...
...Those profits were easily extracted—though not without some Congressional resistance—from a domestic steel market that was effectively insulated by tariff barriers and was growing rapidly by dint of rising demand for autos and other products containing steel...
...Contrasting with Galambos and Pratt's rosy expectations is the rather jaundiced view of Paul Weaver, who was assisted by no fewer than five tax-exempt foundations in writing his flamboyantly titied The Suicidal Corporation...
...auto prices are now on average more than $2,000 a unit higher than they would be without the restrictions...
...I share his predilection for private property, open markets and the rule of law...
...From 1901 through 1924, U.S...
...The Suicidal Corporation: How Big Business Fails America By Paul H. Weaver Simon and Schuster...
...He sharply reduced competition by bringing Andrew Carnegie's more efficient plants into his fold, and saw to it that a collusive floor under steel prices was maintained through Judge Elbert H. Gary's notorious industry dinners...
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...Sure, U.S...
...Another friend who proved useful to Stephen Bechtel was Henry Kearns, a former used-car salesman and a crony of Richard M. Nixon...
...the KeamsBechtel affair, however, was extraordinary...
...Steel managed to exert a measure of control over the market during the 1920s—in part thanks to the timing of World War I. But to suppose that the hustling Lee Iacocca, Ford's Donald Petersen or General Motors' Roger Smith can somehow repeat that feat is erroneously to endow the visible managerial hand with power far beyond its grasp...
...Today the corporation is by far our dominant form of business organization, but as these three books attest, Hobbesian perplexities about its relation to civil society persist...
...After his father's death in 1933, Stephen, a hard driving entrepreneur, made Bechtel what it is today...
...From that vantage point he observed what he rightly regards as the "sleaze" of the Reagan Administration...
...Weaver was doubtless well-compensated, though, for the humiliation of discovering Dearborn's awful truth—that corporate managers don't hew to the gospel of capitalism and will use whatever bureaucratic means they can to put down any true-believing proselytizers who may come among them...
...Steel earned a return of better than 10 per cent annually for its shareholders, a rate so far above the industry average that the economist George J. Stigler described it as a " master stroke of monopoly promotion...
...Founder Warren Bechtel was a successful and politically attuned California-based road builder whose company roseto national prominence in the early 1930s when it led the six-member consortium that built the Boulder Dam...
...This was not a wise career change for a man whose intellectual baggage included the quaint belief that corporate executives are duty-bound to further the cause of competition and free markets...
...And I was not enchanted by Weaver's "agenda for change," especially the part exhorting corporations openly to espouse Lockean principles...
...vice president, Citicorp When Thomas Hobbes, in his Leviathan (1651), turned to "those things that Weaken or tend to Dissolution of a Common-wealth," he included "the great number of Corporations which are as it were many lesser Commonwealths in the bowels of a greater, like wormes in the entrayles of a naturall man...
...Having been appointed by Nixon as chief of the Export-Import Bank, Kearns proceeded to put Stephen Bechtel on the Bank's project advisory board...
...and Lee Iacocca as archetypes...
...They offer J...
...Morgan Sr...
...After his stint at Ford—about which he tells us much more than we want to know—Weaver went to Fortune's, Washington bureau...
...Yet after long grappling with economic policy issues at Citicorp, I'm convinced that corporations should not concern themselves with propagating a pohtical faith, no matter how benign...
...Thus he was in a position not only to initiate great projects for his corporation in the Third World countries but to assure their financing on favorable terms...
...Nor is Galambos and Pratt's enthusiasm for the kind of interventionist concessions Iacocca wrung out of Washington well-founded...
...On the debit side, I was astonished to learn from this former Harvard prof essor of government that Ronald Reagan is "the most gifted American leader since Lincoln...
...The message they deliver in The Rise of the Corporate Commonwealth is: Hold the obit—the " flexibility of the American business system," in evidence since the beginning of the century, will assure its survival...
...What particularly vexed Hobbes was the "double Monopoly" that a company of merchants, as sole buyer and seller, acquired when a higher authority permitted it to become a corporation or "Body Politique...
...Reviewed by Harvey H. Segal Former editorial writer, Washington "Post, "New York "Times...
...273 pp...
...They accept without scrutiny government estimates that a Chrysler failure in 1980—and the assumed permanent idleness of all of its plants—would have cost the country some 300,000 jobs, a 1.5 per cent decline in the GNP and other heavy losses...
...The cozy situation ended when Kearns, under Congressional fire and investigation by the Justice Department, resigned and became—what else?—a Bechtel consultant...
...So much for the authors' hoped-for "adjustments...
...A disaffected neoconservative-turned-libertarian, Weaver gave up a job at Fortune and an affordable Manhattan apartment in 1978 to join Ford Motor Company in Michigan as an "economics communications planning director...
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Vol. 71 • May 1988 • No. 8
