The Social Compact
David Leonhardt writes in today's New York Times about an opinion piece that appeared in Fortune magazine in October 1944. The author was William Benton, the co-founder of Benton & Bowles ad agency, who was writing for a corporate lobbying group. Benton wrote that when the war ended, "'... our goal will be jobs, peacetime production, high living standards and opportunity.' That goal, he wrote, depended on American businesses accepting 'necessary and appropriate government regulation,; as well as labor unions. It depended on companies not earning their profits 'at the expense of the welfare of the community.' It depended on rising wages. These leftist-sounding ideas weren’t based on altruism. The Great Depression and the rise of European fascism had scared American executives. Many had come to believe that unrestrained capitalism was dangerous — to everyone.... In the years that followed, corporate America largely followed this prescription."
Leonhardt goes on to summarize a plan Elizabeth Warren has to force companies to invest in their workers and communities as they did decades ago -- that is, to be good citizens.
Following is a somewhat revised version of a comment I made to Leonardt's column:
What Leonhardt is writing about is the so-called "social compact" among business, labor & government. It was a given for a quarter of a century, albeit one accompanied by a certain amount of grousing by all three legs of the stool, which of course remained in tension.
Lewis Powell effectively tore up the social compact in his infamous 1971 memo to the then-head of the U.S. Chamber of Commerce. It was a "corporate blueprint to dominate democracy."
Richard Nixon rewarded Powell's destructive political philosophy by appointing him to the Supreme Court. (Powell didn't want the job; it meant a deep cut to his income. Ironically, Nixon & his felonious attorney general John Mitchell eventually talked Powell into accepting the nomination by appealing to his sense of civic responsibility.)
About a year after Powell wrote the memo (and after he was sitting on the Court), Washington Post columnist Jack Anderson exposed it, assuming Americans would be horrified by Powell's attempt to undermine the democratic compact that had worked so well. Instead, the Powell memo inspired the growth of the now out-of-control conservative movement. And we can thank Powell for Wall Street's 1980s "greed is good" mantra.
As Leonhardt wrote in another column last year, "A half-century ago..., a top automobile executive named George Romney ... turned down several big annual bonuses. He did so, he told his company’s board, because he believed that no executive should make more than $225,000 a year (which translates into almost $2 million today)." Benton's premise, shared by many patriotic Americans of his generation and those that followed, gave us George Romney. Powell's gave us Mitt.
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Reading this–-and thanks so much for posting this, Marie––it gives us another peek into the once moral and democratic theory of running this country. It's a sad commentary that greed takes over after the "The Great Depression and the rise of European fascism had scared American executives. Many had come to believe that unrestrained capitalism was dangerous." A case of amnesia took over and the milk and honey started flowing once again for those with power enough to make the change. Now we again have to fight like hell to push out the Mitts and put more Georges in charge. Why is it always so hard to be decent human beings.
As you point out, Marie, the social compact, such as it was, was temporary, and merely papered over the capitalism's fundamentally rapacious nature.
In 1944 the ravages of the social unrest of the Great Depression had brought some business leaders up short and encouraged some long-overdue navel- gazing, but as you say, the tension between capitalism's urges and the obvious social needs it would prefer to ignore--in 1944, winning a world-spanning war primary among them-- of the time remained.
Between WWII's end and the Powell memo, one big thing had changed. For the twenty years or so following the war, America was the world's unquestioned and unrivaled economic power. By the late sixties, America's pre-eminent place in the world, economically and politically, was in question, so it was natural for businesses, which had been doing just fine by sinking their roots ever deeper into American soil, began to look elsewhere. Besides, the Depression that brought capitalism into question and the War that engendered all that patriotism were so long ago.
I remember free trade was the subject assigned to high school debate in the early 1960's. Looking back on it, I'd link the unmooring of American capitalism to the country of its origin to that time, because American business was already going global, a process that accelerated over the next half century, until most businesses everywhere are truly international, not tied closely to any one country and the fate of its citizens, and is therefore free to do whatever it must do to make as much money as possible, regardless of social consequence.
If capitalism, private or state-run, can't act as a responsible citizen of even one country, how can we expect it to operate in a way that will benefit an entire world?
The idea of capitalism as world citizen is a bad joke.
Capitalism just doesn't care.
Today's corporations (who aren't "people" BTW, looking at you little Rmoney) have lost any sense of responsibility to local community development, unless it's to slap a few gold-plated inauguration plates on the local swimming hole or a library in attempts to rewrite their vulture legacy.
The Powell Memo has ultimately led to the deep corporate ethos of, above all, Maximizing Shareholder Happiness. It's the fentanyl of the investor class. Once they get a little they need some more, regardless of company performance. These endless demands of dopamine hits have come at the detriment of workers who get bypassed by their overlords who convert their increased production into ever more shareholder payouts. Then the rich buy empty suits to skirt their taxes.
The government loses revenue through corporate extortion, then through the rich evading taxes. Seeing red balance sheets, governments move to eliminate social programs and squeeze the ordinary citizen. You see the anger and desperation on the streets of Paris these days? Voilà the source.
Depressing as it is, I'm starting to see Donald as the perfect symbolic culmination of American culture's glorification of the Businessman (yes, masculine). The other day with the Jimmy Kimmel video revealing the idiocracy we live in (claiming Trump wanted to send the Statue of Liberty back to France), one of the younger dimwits completely overlooked any moral or historical meaning of this act, and analyzed it down to dollars. Would it make business sense? Could we make money off of it? Break even?
Fox "News" has brainwashed about 35% of our population to love their Dear Leader more than Truth, but American media and culture has brainwashed us all to pray to the might dollar and put its relentless search and use before all else in life. Half the Powell Memo was corporations strategizing to infiltrate the state. The other half was brainwashing us into accepting and applauding it.
Mission accomplished.
It seems that social compacts, which have been around for centuries, have an indefinite shelf life. The ancient Romans devised a compact of sort called the comitia which began as a pragmatic ordering of the various tribes that constituted the very early Republic. The pragmatism ran along the lines of assigning civic duties and privileges to the various constituent tribes, but as immigrant groups poured into early Italy, it became clear that racial divides could be deadly if tribal groupings were maintained along the lines of race. A pretty nifty idea, no?
A pragmatic idea that had almost nothing, at the time, to do with any form of moral standing or equality but more a sense that in order for civil society to cohere and work in any manageable form, race could not be a factor in civic engagement. Too bad Confederates like Trump and his entire party, are still unable to see the value in such an arrangement.
As things progressed, the comitia became more well defined and interestingly, a sense of what later came to be seen as the bedrock of civic virtue was centered in the rural provinces rather in the richer, more "connected" urban locales. The idea was two-fold. First, most of the best soldiers came from the country. Second, the idea of the work of feeding the Republic was considered noble and highly respectable. One other side effect was that many of the urban movers and shakers all owned bucolic, rural estates and saw country life as eminently more agreeable (and morally more uplifting) to constant habitation of dirty, crowded urban centers.
Nonetheless, what began as an honest assessment of the importance of populist support within the comitia (where rich people could be "punished" for being too showy and not deferential enough to the polis), was turned on its head as Trump-like demagogues found that they could enjoy the spoils of wealth and still pretend to be of and for the common citizens.
It was all downhill from there. Pretty soon, as in our own Reagan era, poor people, those previously respected commoners, were blamed for more and more of society's problems. The rich created a situation in which their status was now the most important civic virtue and all others were deemed as being there to serve the interests of the wealthy and the connected. It was cool to be rich. It sucked to be poor.
The comitia eventually became completely corrupted and by end of Augustus' reign, a non-factor.
So much for the social compact in ancient Rome.
And so we have today a similar situation in which the corrupt rich, their businesses and corporate avatars, have no interest in or feel a duty toward the betterment of society as a whole. It's all, as Safari says, about maximizing the profits of shareholders.
The new compact is between corporations and their shareholders. As with a company like the Carlyle Group, if others have to bear the brunt of their ability to make a profit, even to the point of dying a horrible, violent death, so be it. If you're not part of the solution (keeping the wealthy rich and the connected powerful), you're considered part of the problem (and therefore disposable, and unworthy of the vote).
My mistake growing up was thinking that the socio-economic environment in which I lived was a permanent thing -- that it was "the American way" -- and was what made this country better than banana republics. I didn't realize that we were just one political party away from tearing down all that. Benton's wasn't really an original idea. Henry Ford, who was as right-wing a winger as there was in those days, was smart enough to know he had to build cars his workers could afford. There are only a few companies -- and some of them are at least partly worker-owned -- that know that now, even though it seems so obvious to anyone who thinks about it for two minutes.
Economic oppression really is not a good business model, yet it is now the American business model. I don't see how it is sustainable unless, as Ken's points about globalization mean that we can become a second-tier country selling our fancy products to countries where workers earn wages high enough to buy them.
Bea,
Yeah, I grew up with the same misapprehension.
The main point I would make is that beyond an interest in controlling them, American business has no interest in any state, certainly not the the masses they purport serve, and when business has seemed to be allied with national interests, the marriage was only, as you say temporary, and one of convenience.
Interesting that you referenced Henry Ford, whose understanding that he needed a market for his cars led him in what some have deemed socially responsible behavior.
But with Henry, as with most worshippers of the almighty dollar, the allegiance was to the dollar first. Though he may well have been attracted to Hitler's anti-Semitism, that's not the only reason he had no trouble doing business with him.
As I remember Ford's eagerness to do business with Germany was already evident in WWI.