Who Will Speak for Capitalism?

It's time for business leaders to stop compromising and rise to the defense of the free market.


No doubt about it—the corporation is today one of the least liked and respected institutions in American society. It is also, and partly for that reason, the tendency of current public policy to thrust great and increasing costs upon business in an attempt to achieve a wide variety of social goals. These costs are reaching levels that now impair the efficiency of our economic system and may shortly threaten the capacity of corporations to perform—in terms of production, investment, and employment—in ways the public regards as adequate.

Since capitalism as a system is not widely loved for itself but is, rather, tolerated for its superior performance, the prospect is worrisome. Unacceptable performance will not be attributed to the costs imposed by government; it will be blamed upon the corporate system itself. The demand will then be for further reforms that threaten the continued existence of capitalism.

The puzzles are—Why is this happening? How can the system be defended? and, particularly, Why is it not being defended more vigorously?


These may, though, be the wrong questions altogether. The problem may not be specific to corporations and capitalism. The fact is that the institutions of our society are generally in decline. It is a phenomenon that sociologist Robert Nisbet calls the "twilight of authority." In the last 10 or 15 years most of our major institutions—government, corporations, the military, universities, the family—all have experienced a loss of respect and of moral authority, so that one is inclined to suspect a more general cause at work than simple, specific distrust of business and capitalism. Be the causes what they may, it is apparent that there has been a flattening of the American institutional landscape.

Political battles, however, cannot be conducted in terms of general societal trends. They must be fought in terms of particular proposals for the reform of specific institutions. It is also true that victories and losses in confined fields affect trends in larger areas.

When we examine the conditions necessary for the continued vigor of our corporations and the survival of the capitalist system, the issue of moral authority is crucial. Capitalism has performed unprecedented feats in the production of material well-being, but economic performance by itself is not enough. Institutions that hope to survive in a society like ours have to be seen as possessing moral authority: their powers and their wealth must be accepted as legitimate in some moral and political sense. It is apparent that corporations have little moral authority today and very little notion of how to regain it.

It is interesting to meet the leaders of major American corporations when they are out of the office, gathered together, and thinking about their position in the society. These are the people thought of by the general public and by the critics of the corporate system as bold, rapacious, cunning leaders—the Machiavellis of our society. There could hardly be a greater disparity between that image and the reality. In their concerned discussions of their relationships with the outside world, many of them turn out to be docile, apprehensive, defensive, and unsure of how to respond to sharp and unrelenting attacks.


I remember a talk in which a prominent businessman said that he and his colleagues were concerned that the large American corporation does not possess legitimacy in the eyes of the rest of the society. He asked how they could alter their modes of corporate governance, in particular, in order to be accepted as legitimate. He was, of course, quite right to be concerned about the decline of the corporation's legitimacy, but I recall having two reactions to his approach.

The first was surprise at the triviality of the response suggested. A change in corporate governance—which may or may not be advisable on other grounds—will have very little impact, if any, upon the public perception of the corporation and its role in the society. Anticorporate sentiment is directed to the entire role of business and free enterprise in our lives. Changing the details of, say, stockholder voting will not placate the hostile. Fiddling with corporate governance for no better reason than to defuse hostility and head off punishing "reforms" is like tinkering with a leaky faucet in the hope of averting the Johnstown flood.

My other reaction was surprise at the mood of defeat, of lowered morale, that suffuses meetings to discuss problems of this sort. It is as though a large fraction of the community of business leaders wants to make preemptive concessions, as if they meet not to plan a fight against a wrongheaded movement but to discuss how best to negotiate the terms of surrender.

That attitude will not lead to peace and popularity, much less to reestablishment of moral authority. It will be seen as weakness and will earn only the contempt of the enemies of corporations and capitalism, while leading the large, relatively indifferent majority to suppose that the critics must be right: if capitalism were a positive good and worth defending, business leaders would not be so ready to compromise and even to capitulate. To ask what you can do to be accepted is to admit that you are not acceptable. Nobody ever got into a club that way.

The hostility that fuels the attack upon corporations arises from an alliance or, perhaps more properly, a congruence of interests and beliefs between socialists, populists, politicians, and intellectuals. In that constellation the intellectual class seems the crucial element, for it provides the indispensable theoretical apparatus for attacking the institutions of capitalism.

The academic branch of the intellectual class, which is the creative core, produces an enormous amount of scholarship designed to prove that free economic and social processes work so inadequately that extensive governmental intervention is required. This scholarship—because of the academic intellectuals' influence with the mass media, the policy professions, government bureaucracies, and other segments of the intellectual class—has a very heavy impact upon the formation of public policy.

The reasons for the hostility of intellectuals in general to corporations and to capitalism are complex. Even brief consideration of them, however, shows that that hostility may be permanent or, at least, likely to persist for a very long time.

Irving Kristol has advanced the theory that the intellectuals, whom he refers to as the New Class, see themselves as possessing distinctive tastes and interests and are now engaged in a class struggle for power, prestige, and wealth possessed by the bourgeoisie, a class whose interests are associated with business. The shift of power from business to government represents a shift from the primacy of the market to the primacy of politics and hence a gain for the intellectual class at the expense of the bourgeoisie. There may be a great deal of truth in that hypothesis, but perhaps it is not the entire explanation.

Allowance must also be made for the economic ignorance that characterizes not only the population at large but the intellectual class. Few intellectuals have been exposed to a good basic course in price theory. Most of them have no firm idea of the functions that markets serve, and they tend to suppose that better economic results can be ordered by law. Thus, the great majority of academics appear honestly to believe that minimum-wage laws benefit workers as a class, supposing that such measures simply transfer income from wealthy businesses to poor workers. People who believe that have no difficulty supporting detailed regulation of all business activity, since they have little notion either of its real costs or upon whom those costs ultimately fall.


But I think we also overlook the environment in which professors spend their lives, that we underrate the influence exerted on professors by their students. Studies show that when students first enter college their political sympathies shift massively to the left, a phenomenon usually taken to be the result of the intellectual atmosphere created by the faculty. No doubt that is partially true, but it may not be the entire story. Students entering universities are for the first time in their lives freed of effective adult influence. They tend to be very insecure and, thrown into a society composed entirely of their own age group, are almost certain to become egalitarian. They have had no experience of the world, are somewhat afraid of it, and, moreover, are at a stage of life when passions run strong. They are almost bound to turn left for these reasons alone. Over time their effect upon the faculty is likely to be considerable. Almost all teachers would prefer to be popular with their students, and they may, many of them quite unconsciously, begin to modify their attitudes in ways that meet with student approval.

There is something approaching a parable about this. A professor of psychology used to lecture his students about modifying behavior by granting or withholding approval. His students decided on a test. The professor was a classroom pacer, walking from one side of the room to the other as he lectured. The students agreed that as he approached the door to the hall, they would pick up newspapers and read, gaze in boredom at the ceiling, whisper to one another, and so on. But as he walked in the other direction toward the windows, they would become increasingly attentive until, as he paused by the windows, they would be leaning forward in rapt attention. After being subjected to 15 minutes of this alternating treatment, the professor was pinned to the outside wall, quite unconscious of what had happened to him. It seems likely that an analogous sort of conditioning, taken over a period of years, may modify the political outlook of many professors at universities.

There are, of course, other factors influencing the outlook of intellectuals. Like other people, they are apt to find capitalism uninspiring because it lacks a central vision, seems to offer no meaning to personal existence beyond the narrowest self-interest. That is hardly capitalism's fault, since in modern times, at least, it does not pretend to be more than a means of organizing production and distribution. But other systems of belief that once lived alongside capitalism and supplied its spiritual lack have declined. People tend to want more than self-interest and material prosperity. They appear to hunger for transcendental values, and socialism and similar creeds offer secularized versions of such values, as capitalism does not. They offer, though the promise is false and never realized in practice, a vision of community, of concern for society at large, of man seen as more than a consumer.

Finally, one must not underestimate the degree of authoritarianism to be found among intellectuals. They are, after all, moved primarily by ideas, by abstractions, and such people are likely to be impatient with the messiness of free economic and social processes. Few intellectuals carry authoritarian impulses to the logical conclusion that some intellectual European and Asian movements have done; but there exists the tendency, and such tendencies are inevitably anticapitalist.

If these are the major factors shaping the intellectuals' attitude toward corporations and capitalism, it seems unlikely that their hostility will disappear soon. The prospects for change on that front are not very good. So we need to consider why the natural leaders of the bourgeoisie in our time—the business executives—appear so timid in confronting the hostility, criticism, and demands for misguided reform directed toward them and the institutions they head. It is, at least at first glance, surprising that such persons should display low morale, amounting at times almost to listlessness, in defending a system they know to be not only the best ever devised for the public at large but one that has rewarded them so well personally. Upon reflection, however, a few reasons for this phenomenon appear to be convincing.


The heads of our major corporations in modern times have lost some of their functions that once conferred moral authority in the society and hence personal confidence. They are no longer the owners of the enterprises they direct—the personal risk-takers—but are instead hired managers. Though the reasons may not be entirely clear, not perhaps entirely logical, we have always accorded to owners and risk-takers a respect we do not give to salaried managers.

And the change from owner-managers to salaried has been accompanied by a shift in business rhetoric that may both reflect and contribute to decreased respect. The public-relations departments of major corporations are fond of pointing to all the ways in which corporations serve the public. But such rhetoric does not describe actual motivations, however accurate it may be as a description of results. So it may end up actually eroding the moral authority it intends to shore up. The pursuit of private interest in a free market does contribute to the public good, but the public senses hypocrisy in rhetoric that suggests corporations and their managers are actually motivated by a selfless desire to serve.

Another factor behind business leaders' failure to defend capitalism may be the fact that they have reached their positions by almost total absorption in the affairs of their companies. They have not learned to debate with intellectuals, who are verbalists by vocation, and do not have the time or perhaps the inclination to do so. Even if they had the training and the taste for public discourse, though, executives might think it unduly dangerous to their companies to stand in opposition to political trends.

Finally, however, it should be said that executives may defend capitalism inadequately because, though it seems paradoxical, in some ways they have less personal stake in its survival than do the rest of us. The days when owner-managers passed their businesses on to their children are gone, and the hired managers of today have no direct economic interest in the survival of the system beyond their lifetimes. Indeed, their interest may not run even that long, since business executives may feel, with considerable justification, that they and persons like them would remain a managerial elite under socialism. (That thought should be tempered with the reflection that their posterity may not be managers, or intellectuals either, and will then have to suffer the spiritual and material poverty of socialism along with the rest of us.)


The result, in any event, is that capitalism and the free market are defended primarily by dissident members of the intellectual class. But that's not good enough. There are not enough such persons and, if intellectuals do have a predisposition toward politicization of the economy, there may never be many such persons. The academic world tends at present to view its function in such a way that persons who attack the capitalist order, or at least do not defend it, are preferred for recruitment. It is not uncommon to hear the view that the prevalence of the left-liberal point of view is proper for an academic community, since the function of the academy is to question the status quo. This can hardly be taken seriously, of course, for one would then expect to see a vigorous challenge within the academic community to the growing regulatory state that has been the status quo for decades. But the view is entirely incorrect, in any event. The function of the intellectual is not to start with an adversary posture to one segment of the society but to think questions through, whether that brings him into opposition to or support of the status quo.

The question remains—Who will speak for the free market and the capitalist system? The obvious answer is that effective advocacy must come in large measure from the leaders of the institutions of capitalism. No one will respect institutions whose leaders attempt to gain legitimacy by giving in to demands for "reform" that they know will lessen the ability of the institution to perform. Their worsened performance will be blamed on them, not on the reforms. Moral authority is not necessarily conferred; often it can be gained by asserting it.

There is in this a dilemma, but not an insuperable one. Business executives do not display constant devotion to free-market principles. They, like other groups in the society, often ask government for favors, subsidies, and protection they should not have. When that happens, as it will, they may expect to be opposed, and opposed vigorously, by those who are otherwise their allies in preserving the institutions of the free market. To the degree that business leaders behave that way, they undercut their credibility on issues where their position accords with the public interest. But regrettable as that is, it is no reason for them to be hesitant and defensive when they are right. Many interest groups are involved in such contradictions and do not become ineffective.

Business leaders will have to decide whether they are really willing to let the corporate system slide and perhaps expire without putting up a determined fight. Perhaps they are willing to; there is no particular evidence that they are not. The slide has gone pretty far already, however, and if corporate managers continue as they have, the rest of it may be shorter than they imagine.

Robert Bork, former solicitor general of the United States, is Chancellor Kent professor of law at Yale Law School. This article is adapted from an American Enterprise Institute publication, "Capitalism and the Corporate Executive"AEI), by permission of the author and AEI.