The Power of Big Business

THE power of big business is an apparition that has haunted almost as many men as has the specter of Communism. Like the cartoon of the bearded Bolshevik with his bomb, the picture of the big businessman is familiar to all of us, with his top hat and frock coat, a dollar sign across his bulging vest, one foot trampling the scenery of America and the other crushing its workmen, the fingers of one gloved hand picking the pockets of the ordinary citizen while those of the other manipulate legislators and even Presidents.

It is a caricature, of course — but how much of a caricature? How much significance should we accord to the fact that six hundred big businesses produce goods worth half the entire gross national output, or that an average one of these supercorporations handles as much revenue in a year as an average state? I low alarmed should we be that the national defense and offense of the United States has become the chief source of profit of some of its large corporations, and that the heads of these corporations enjoy easy access to the corridors of the White House and the Pentagon? What attention should we pay to the opinion of Professor A. A. Berle, one of the most informed and least hysterical students of big business power, who has said, “Some of these corporations can be thought of only in somewhat the way we have heretofore thought of nations”?

These are the kinds of awkward but all-important questions to which a consideration of business power leads us. Perhaps we should realize at the outset that the questions cannot be answered altogether objectively — wish, suspicion, and apology crowd in irresistibly along with the facts. Nevertheless, they are questions with which we must try to come to grips if we are to understand our society. So let us begin by examining one aspect of the problem of business power where the facts are pretty clear. This is the question of what is happening to the sheer size of big business within the economy.

The answer may come as something of a surprise to those who are familiar with the trend of corporate amalgamation in the past. Thirty years ago, when Professors Berle and Means made the first brilliant study of the two hundred biggest nonfinancial corporations, they came up with the halffanciful prognostication that if the observed rate of expansion of the big corporations relative to the smaller ones were maintained for another 360 years, all the nation’s corporations would have disappeared into one mammoth concern, which would then have a life expectancy roughly equivalent to that of the Roman Empire. Long before that day, however — in fact, by 1950 — Berle and Means warned, the two hundred largest corporations would already have absorbed 70 percent of all corporate wealth.

Well, 1950 has come and gone, and it appears that these worst fears have not been realized. We do not have statistics exactly comparable with the Berle and Means estimates, but a study published by A. D. H. Kaplan of the Brookings Institution is close enough. It shows that the top one hundred industrial corporations in 1960 had amassed 31 percent of all industrial corporate assets, compared with 25 percent in 1929. This is evidence of continuing concentration, but at nothing like the rate envisaged in the Berle and Means projection.

Why? One main reason is simply that the great corporations, for all their enormous mass, are not totally invulnerable to attack, to erosion by technology, or to suicide by incompetent management. If we look back at the list of the one hundred biggest companies in 1929, we are impressed by how many sixty-one — have weathered the strains of the greatest depression and the greatest war, not merely to survive, but to remain among the top one hundred companies of 1960. But we are also impressed with the fact that some of the erstwhile giants have fallen mightily and that some have not survived at all. The locomotive makers, for instance, are gone, pushed aside by a new technology and by an inability of their managements to relinquish an obsolescent product. The leather makers are dead, victims of plastic poisoning. The movie-theater combines, once among the largest enterprises, no longer grace the list of the supercorporations, having yielded to the double blows of antitrust divorcement and to the competition of television.

A complementary reason for the standstill in the trend toward concentration lies in a change that has affected the big corporation from within rather than from without. This is the growing reluctance of the big companies to ram home the economic advantage that is theirs by running their competitors out of business. General Motors, for example, makes three times as much profit as the entire asset value of American Motors, but no one expects GM to “compete” by eliminating its rival from the field. Partly, management itself has little heart for this sort of thing. Equally important, the government does not want the existing distribution of industrial power substantially altered. Many a board of directors has shelved a merger plan — and in the case of the very biggest firms, even throttled down growth — rather than get entangled in the antitrust net.

Do these standard explanations promise a continuance of the relative stability of big business size within the economy? We do not know. There is some evidence that the vulnerability of the topmost corporations is decreasing, lessening the chances that they will be displaced by other firms; between 1948 and 1960 only twenty-four of the top hundred had their places usurped, whereas between 1909 and 1919, forty-one leaders were displaced. Then, too, large areas of the economy construction, for instance, or the service industries—are still characterized by small or medium-sized business, and it would be in line with past experience if largescale enterprise eventually “rationalized” these fields. Finally, the new technology of administration and control, automation, may provide the techniques and the impetus to further concentration.

Thus the relative quiescence of the “monopoly” problem today does not guarantee as much for tomorrow. It is at least possible that the economic pressures toward agglutination will again rise. In that case much will depend on the attitude of the top corporation officialdom and on the counterpressures exerted by other groups in society.

THE MEN AT THE TOP

Fifty or sixty years ago it would have been a much easier task to form an opinion about the attitudes of big businessmen, for the supercorporations were then still dominated to a considerable extent by the supermen who started them. Not alone the names but also the personalities of Rockefeller, Garnegie, Morgan, Harriman, Frick were familiar to every reader, albeit often in romanticized versions. Today it is not so simple to identify or to dissect the business elite. We are confronted with a largely faceless group known as “the management.” How many well-informed people can name or describe in any way even one of the chief executive officers (except Henry Ford, Jr.) in the ten biggest industrial firms: GM, Standard Oil of New Jersey, Ford, General Electric, Socony, U.S. Steel, Chrysler, Texaco. Gulf, Western Electric?

Who is this management? Two contrary myths are generally in circulation. According to one, the men at the top are those who have risen there from humble circumstances by virtue of their superior intelligence and stubborn efforts. This myth has been considerably abetted by businessmen themselves, who like to exaggerate the steepness of the climb behind them. The Scientific American magazine made a survey of the background characteristics of one thousand top executives of six hundred supercorporations, who filled out questionnaires about their careers. Almost a quarter of them claimed to come from “poor” families, and only 10 percent rated their families as “wealthy.” Dr. Mabel Newcomber, surveying a substantially similar group fifteen years earlier but investigating family circumstances independently, found the percentage of “poor” families to be only half as large and the percentage of “wealthy” families three times as large.

On the other hand, it is not a very elitish elite, which effectively spikes a second myth — that the top executives are mainly the sons of top executives. On the contrary, in 1964, again according to the Scientific American survey, only 6 percent of the top corporate officials were sons of heads of the same companies. More striking, less than half of the whole group of top executives had fathers who were independent businessmen. The majority came from middle-class employee families or from professional families.

Not only their socioeconomic backgrounds but also their career patterns are gray rather than gaudy. Less than 3 percent of the corporate elite today describe their principal occupational experience as that of “entrepreneur” or “capitalist,” and most executives trace their rise through administration or science and engineering. By way of contrast, as recently as 1925 almost a third of the then top executives were “entrepreneurs” or “capitalists,” and in 1900, half were. As a result of this decline in business-building, formal education has achieved a much greater significance in paving the way for corporate leadership. As recently as the 1920s a majority of top corporate officials did not have a college degree. Today 90 percent have been to college, three quarters have a B.S. or B.A., and a third have a graduate degree, increasingly in engineering or science.

THE EDUCATED MANAGER

This little excursion into the sociology of big business leaders has more than an academic significance. It, too, bears on the problem of corporate power by raising the question of the kind of men who control these giant enterprises. For the profile of the new “educated” manager, contrasted with the old “ignorant” robber baron, raises the interesting possibility that the power of big business may be restrained by the “professionalization” of big businessmen themselves.

Is the manager now a professional man? The idea is an appealing one. It conjures up the image of a corps of highly competent and dedicated individuals for whom the scruples and standards of their own calling provide the discipline and surveillance that will hold business power to strict account. Unhappily, it is not so easy to give substance to the image. It is true, as the Scientific American survey stresses, that the manager today is more educated and better trained than formerly — although it is a moot question whether his increasingly scientific background will particularly help him with pricing, personnel, or public relations, the key top-management problems. But education and training are only necessary, and not sufficient, conditions for professionalism. There is also the matter of sanctions. The malpractitioner of law or medicine is disbarred from the further practice of his certified calling. But the malpractitioner of management faces no such punishment. Of the fifteen executives fired by General Electric after they were convicted by the courts for conspiracy in fixing prices for electrical equipment, twelve were subsequently re-employed elsewhere at high levels. One was appointed to the presidency of one of the companies surveyed by the Scientific American.

Then, too, one wonders whether professionalism is the word to describe some of the attitudes and activities of management during the post-war decades. I am thinking of the refusal of the steel managers to expand steel capacity after World War II; of the ignorance or complicity of the electricalindustry managers in the price-fixing scandal; of the arrogance in regard to public health shown by the managers of the tobacco industry; of the omniscient denial by the automobile managers of the public’s interest in compact cars or safety belts; of the tactics employed by the managers of the drug industry during the Kefauver investigation; and then, in regard to managements in all fields, of the arrogation to themselves of remunerations that in any other sphere of social activity — science, education, government — would be called piratical.

Thus when it comes to the containment of the power of the executive elite, I think we had best look elsewhere than to their “professionalism.” There is one place we can look, however, although I do not imagine that the business literature will celebrate it particularly. This is the increasingly bureaucratic character of the business elite, and their marked conditioning by a changed social and cultural milieu.

For it seems clear to me, comparing the big businessman of today with those of a few decades back, that the contemporary executive represents a generation of administration rather than of acquisition. This is not merely a matter of the statistics of concentration we have already examined. It refers as well to a style of business leadership in which “good public relations” have come to play an extraordinarily important role. Here perhaps is where the increased educational exposure, the lengthened training, the so-called “professionalization” of the executive, should be given its due.

One result of this new style, particularly noticeable among the executives of the biggest firms, is a certain caution in utterance and action quite untypical of their predecessors a generation back. In the main, the approved managerial tactics are now those of long-run security rather than shortrun risk, of staying out of trouble rather than of taking a chance, of bucking for the title of “business statesman” rather than “tycoon.” Among the smaller firms, we still see something of the uninhibited drive of the past, but at the top, inhibition itself begins to appear as a managerial virtue.

Another characteristic of the business elite is its essentially reluctant relationship to political power. Noise, oratory, and table-thumping to the contrary notwithstanding, I think that what is noticeable about the great majority of big businessmen in America is a striking absence of real political involvement. What is visible instead is a profound unwillingness to get embroiled in anything that might take them away from their jobs, or that might not look good in the newspapers, or that might incur the displeasure of their main customers or their boards. There is in the big business world a great deal of political rhetoric but not much political commitment — what could be more significant than the fact that for all the endless business talk of freedom, not a single major corporate executive found the Alabama Freedom March important enough to warrant leaving his desk, although educators, government ollicials, housewives, trade unionists, students, and scientists felt the need to go to Selma, despite the nuisance, the call of other duties, or the danger to which it exposed them.

THE NEW ELITES

All this discussion of the structure of big business and the sociological attributes of big businessmen circles around our main subject — the power of big business —and yet fails to engage it squarely. What is big business power? What does it look like in ordinary life?

The oldest and purest exercise of business power has always been the market exploitation of the weak. We think of labor, the historic victim of the big corporation, working a twelve-hour day and a seven-day week (with a twenty-four-hour shift every two weeks) as late as 1919 in the dangerous mills of the United States Steel Corporation. We think of little business, undersold and outbought and forced to pay additional freight charges to the railroads, who then turned the money over to the Standard Oil combine. We think of the consumer, pictured by a commentator of the 1890s as “born to the profit of the Milk Trust and dead to the profit of the Coffin Trust.”

To recall these instances from the past does more than give reality to one meaning of the words “business power.” It also serves to give some historical perspective on the trend of that power. Surely the strength of labor vis-à-vis big business has been enormously enhanced since the days when labor unions were literally afraid of the big company. So, too, although less noticed, has the position of little business improved. We often forget that it was the political pressure of little business and not of the public that brought about the passage of most anti-big-business legislation, including the antitrust acts. But this animus of the past seems largely to have evaporated. Now and again there is some anti-big-eorporation talk, as when the auto dealers rose up against General Motors or when small business complains that big companies get all the defense contracts. But the complaints, however true, quickly subside. From the peace that prevails, it is hard not to conclude that little business no longer feels the brunt of big business power as it did in the past.

It is less easy to make an unambiguous determination in the case of the third historic target of business power in the marketplace, the consumer. Certainly he is more ardently wooed than in the publicbe-damned days, but the wooing is sometimes accompanied by breach of promise; not too long ago, for instance, the Federal Trade Commission found that General Foods was charging more per unit of weight for its “economy-sized” packages than for its regular packages. Nor does leafing through Consumer Reports overwhelm one with a sense of corporate solicitude for the consumer. Still more important, perhaps, although the trusts have gone, there is no evidence that profit margins have declined over the past fifty years or so. General Motors, for example, makes almost as much in profits before taxes per car as it pays out for wages on that car.

But even if we leave the case of the consumer undecided, it seems fair enough to conclude that the power of big business to throw its weight around in the marketplace has been considerably restricted in the past three or four decades. Yet that does not fully satisfy our inquiry. For everyone knows that market exploitation, however bad, is not all of what we mean by “big business power.” In fact, what usually comes to mind when we say the words is not so much these instances of market abuse, but larger and subtler kinds of influence — for instance, the use of the national government to create new domains of private profit such as the enormous land-grabs of the railroad era, or the insinuation of business goals into foreign policy such as the banana-republic diplomacy that once made the world safe for United Fruit, or the blind deference accorded to business views just because they were business views, as in the general adulation of the businessman during the 1920s.

It is difficult to assay the trend of this hugely varied exercise of power with much accuracy. Certainly, we cannot airily dismiss the influence of big business on the nation’s affairs as being a thing of the past. Nonetheless, I would still hazard the opinion that its ability to manipulate public affairs or to have its way in the formation of national policy is declining.

I base this opinion not so much on the static size of big business within the economy or on the quieter bearing of its executives as on another development that strikes me as being of signal importance. This is the rise within our society of new elites, whose competence for government is rapidly becoming of greater importance for national survival or even well-being than that of business leaders. One such new elite consists of the military professionals. A second is composed of advisers from the fields of science, economics, sociology, and the academic world in general. A third includes the civil servants and the career administrators of public programs.

These new elites play increasingly central roles in the elaboration and exercise of government policies in the crucial areas that now confront us: education, civil rights, poverty, urban renewal, foreign aid, the scale of the military establishment, the determination of fiscal and monetary policy, and the conduct of foreign affairs. At the same time, it seems undeniable that the voice of big business in the delineation of these specific programs is much smaller than in comparable programs of the past.

Further, it seems to me that this swing of power toward the new elites is likely to become intensified. I expect to see fewer big businessmen in positions of power in Washington and more soldiers, scientists, educators, and government administrators; to see fewer big businessmen as trustees of universities and more of the new men of power there; to hear less about the sanctity of private investments abroad and more about international government-to-government programs; to find less attention paid to the aging rhetoric of laissezlaire and more to the academic language of neoKeynesianism and input-output tables. To be sure, we still live in a civilization in which the accumulation of individual wealth is believed to be the most admirable objective of human life, and in such a civilization great centers of wealth must perforce be great centers of influence. Nonetheless, I think the exercise of business power in the direction of national affairs is on the wane and that the power of new nonbusiness groups is sharply on the rise.

MANAGED CAPITALISM

Do we conclude, then, that the power of big business is declining? If we ask the question in terms of the ability of the big corporation to exploit others on the marketplace, I think the answer must be Yes, its power has been curtailed. If we ask in terms of the ability of big businessmen to work their will with the governing authorities, or to turn national policy to pecuniary advantage, I would answer more carefully that I think this power is now being curtailed.

Yet, curiously, I do not think that quite exhausts the matter; for while the specific powers of big business are being compressed, from another vantage point I think it can be said that its generalized power was never greater. By this I mean that its legitimacy is now complete, its acceptance without exception. For perhaps the first time in American history no one any longer seriously opposes the system of big business or questions its enormous economic privileges and benefits. We hear no more of drastic social modifications, or of the outright replacement of the business system by some other system, either from labor or from the intellectuals, the two traditional sources of social protest and reform.

As for the new elites that now contest with businessmen for the control of the levers of the nation’s working programs, they are certainly not anti big business. The new elites have no thoughts of nationalization, of extensive decommercialization, of far-reaching changes in the enjoyment of property incomes. At most, their programs imply a kind of managed capitalism in which the great corporations, largely maintained intact, would be coordinated within the national effort by some form of permissive planning. But it is in itself indicative of the total acquiescence in the ideology of business that even the formulation of such mild goals comes as something of a shock, and that most of the elites would plead that they have no goal other than a day-to-day “pragmatic” approach.

If this is true, what does it portend for the future? There are, it seems to me, important possibilities for social evolution still unexplored within the business system, and I would hope that in the hands of a new guard, uncommitted to the ideological fundamentalism of the old guard, a liberal capitalism might develop greater stability, less poverty, more public concern. At the same time there is also a less pleasant possibility. The prospect of a business society no longer made uncomfortable by the presence of alternative social formulations presents the threat of a human community arrested at a still primitive level of striving and quieted by an intellectual asphyxiation and a moral dullness. But this brings us far beyond the bounds of permissible speculation. Perhaps at the moment we can say no more than that we seem to stand at the threshold of a new era of contained capitalism, in which the power of big business is more constrained — and yet less contested — than in the past. What may be the horizons and what the limitations of such a society we must now begin to find out.