A Defense of those Unpopular Goliaths---the Large Corporations

A speech by Melvin D. Barger, Director of Corporate Communications, Libbey-Owens-Ford Company.  Delivered to the Tipton Chamber of Commerce, Tipton, Iowa, October 13, 1975

        Author’s Note:  In 1975, I became a self-appointed advocate of Big Business, which then as now was not a favored institution in American society.  As an employee of a major corporation, I had an obvious bias and wanted to see my own company prosper and grow.  But what should have been plain to anybody, I believed, was that everybody should have had an interest in preserving the vitality and vigor of the corporation.  We could all see the damage and pain that results when any business falters and dies.  What would happen if many businesses collapsed at the same time?  It was not something I wanted to consider.

       I gave my advocacy speech in Toledo, Ohio, Marshall, Michigan, and Shreveport, Louisiana.  It was a talk in Tipton, Iowa, that found its way into the January 15, 1976 edition of  Vital Speeches of the Day.  To my embarrassment, I was identified as a director of Libbey-Owen-Ford Company. I never achieved the  exalted status of board membership, but did have the title of director of corporate communications when I made the talk.

       To my dismay, the talk did nothing to save big corporations, and a number of them have come upon hard times in the 35 years since I sounded the alarm.  What would have amazed any of us back in 1975 was the eventual bankruptcy of General Motors Corporation, which had once seemed so powerful that calls came to break it up.  We should have no joy in witnessing the decline of this onetime colossus, because  thousands of individuals and communities have suffered from its failure. We were far better off in Michigan and Ohio when GM was riding high, and if I had a magic wand I would restore it to its former greatness.  I’d do the same for other companies now in trouble.  I may have been right in 1975 in feeling that big trouble was on the way, but it gives me no pleasure to have been right.  We needed the Biggies then and we still do today.       

THIS EVENING, I want to say a few words in defense of Big Business. I have a feeling that this is a tough assignment. Everybody knows that Big Business is in trouble with the Public. Everybody knows that some Big Corporations are in other kinds of trouble. Everybody also knows that these various business troubles are intensifying.

There are many experts who tell us how and why Business got into trouble, and what must be done about it. Much of the time, it seems to me, Big Business is attacked too harshly by its critics and defended too apologetically by its friends. I'd like to steer a course this evening that is neither harshly critical of the Big Companies nor apologetic for them.

Let me begin by defining what I mean by Big Business and by disclosing my own bias. Big Business is the famous "500" directory issued annually by Fortune magazine. The term covers the 500 largest industrial corporations, and the largest banks, life insurance firms, retail chains, and other organizations. The Big Business names are often household words: Exxon, General Motors, Ford, Chrysler, Bank of America, Prudential, TWA, and Sears Roebuck. How big are these companies? Well, in the industrial field alone, in 1974, the 600 largest industrial corporations had combined sales of $833 billion, combined assets of $630 billion, combined profits of almost $44 billion, and total employment of well over 15 million persons. That's big. Big Business is a big chunk of all business. It is true that some companies have large shares of the market in their respective fields.

My own bias is that I do not think Bigness is necessarily Badness. Yet I can't remember a time when Big Business was not a bad term in the public mind. I also believe in private property, a free marketplace, and individual liberties. I do not believe that the answer to all human problems can be found in Washington, D.C., and I am frankly apprehensive about the road ahead. You know that I am also employed by a Fortune 500 company, but let me plead that this is not necessarily a proof of pro-business bias anymore. Big Business now has some of its severest critics in its own ranks, and there's no longer a business viewpoint on many issues. That's okay. Our views should be our own and not the rubber stamp impressions of the companies we work for.

What is the plight of the large corporations? At first glance, things don't look so bad. We've been through a recession, but it may be easing. Auto companies, air lines and utilities have been battered, but other companies have done fairly well. There have been fierce attacks on corporations, but this hasn't put them out of business. So what's the problem?

In my opinion, the corporation has at least three major problems. One is that Big Business is not loved. Big Business is hated and feared by large groups of people and for a variety of reasons. There always has been a strain of anti-business bias in America; now it is active, influential, well-organized and militant.

The second problem is that the corporation is rapidly losing ground in running confrontations with consumerists, environmentalists, ecologists, and other cause movements. Maybe all of these causes are good. For the corporation, however, they are bringing a burden of regulations and controls that are destroying not only its vitality and flexibility, but also its ability to solve problems. Most of these regulations are manageable when taken separately. Cumulatively they are becoming a millstone that is slowly crushing some companies and industries to death.

The third problem is that the corporation has no real defenders and supporters in the political arena. Last year, Professor Irving Kristol of New York University pointed out in a Wall Street Journal article that the corporation has no political constituency. He said that "the corporation today is largely defenseless — a nice, big, fat, juicy target for every ambitious politician, and a most convenient scapegoat for every variety of organized discontent." Hostility toward the large corporation is not new, he pointed out, but what is new is the corporation's utter defenselessness against this hostility. There (the corporation) is, he says, a wealthy and powerful institution that is utterly vulnerable to a political take-over bid. Naturally, the competition is keen.

It may seem a contradiction to describe the corporation as being wealthy and powerful and utterly vulnerable, all in the same breath. But that's the way it is. Whatever the powers and resources are that enable the corporation to succeed so well in the marketplace, they don't work down in Washington. General Motors and Ford and Chrysler know how to build and sell cars; they don't know how to create a political constituency that cuts any ice in Congress. Neither does any corporation or, for that matter, any pro-business organization. Small wonder that the large corporation may, as Professor Kristol said in another article, look more and more like a species of dinosaur on its lumbering way to extinction. "The cultural and political environment becomes ever more hostile; natural adaptation becomes ever more difficult; possible modes of survival seem to be beyond its imaginative capacity."

At this point, perhaps the proper remark is: "So the corporation is a dinosaur on its way to extinction. Who cares? If the corporate dinosaur can't survive in the new environment, maybe it doesn't deserve to. What difference will it make in our lives, anyhow, if the dinosaur dies?"

Well, I think the answer is that you and I ought to care — and care plenty — about the future wellbeing of the large corporation. In fact, maybe we ought to question some of the trends and changes that have made the environment so threatening to the corporation, just as we now question change to the natural environment. Any living species can be destroyed if you change its environment enough. Living institutions, such as business corporations, also need a certain kind of environment to survive. The corporation is not really a dinosaur, by tbe way, it is remarkably adaptable and flexible and even resilient. But its powers of adaptation are not infinite.

There are several good reasons why we need the Big Corporation. For one thing, we will continue to require the goods and services of Big Business. Producing and marketing goods and services at market prices is the businessman's thing, something that he does with the skill and ease of a Jack Nicklaus playing golf. This job has been done so well that we've taken it for granted. We may think that the goods and services will flow forever no matter what we do to the business system. The truth is that the current attacks on the business system will profoundly inhibit the Big Corporation's long term ability to provide goods and services at acceptable prices. We have already seen some effects of this punitive campaign, there's much more on the road ahead if we follow our present course. Every regulation and restriction carries a price tag — and you and I must pay that price.

We also need the corporation as the efficient manager of resources, labor services and here again, it's the Jack Nicklaus thing. Private corporations have, on balance, performed so well in bringing together resources and capital that we don't pause to consider how badly this job is botched when it's done by the wrong people operating under different ground rules.

The large corporation also serves as an instrument of material progress, although it gets little credit for this service. I am thinking here of improvements in materials, manufacturing methods, distribution, and products. True, companies did not give us these things out of the goodness of their hearts; market forces required them to improve or die. But if we don't have the big company around to bring new products and ideas on stream, the job just won't be done. There's nobody out there to do it.

And that's a fourth reason for sticking with the Big Corporation: It's really the only game in town. Nobody has an alternate system that works. We seem to be heading toward some kind of socialism, but if we ever get there, we won't like it and we won't be able to make it work without banging a lot of heads together. Now and then, we hear about the wonders of socialism in countries such as Sweden. What's really happening in Sweden is that an efficient private business system pays for a great deal of social welfare. Yugoslavia is another country that has been hailed as having a new kind of system. Perhaps we should give the Yugoslavs good marks for making improvements over Russian-style communism and for allowing some freedom in the marketplace, but they haven't discovered anything new. Yugoslavia has also availed herself of lots of help from the money-grubbing capitalists of the West.

What about a mixed economy, with cooperative ventures between Business and Government? Well, we already have that to a large extent, and it's an unstable mixture. What it really means is that some businesses eventually become wards of the Government. The railroads were the first large industry to become a mixed economy, and were badly crippled long before we had the Penn Central mess. We don't know what the railroads would be like today if they had been left alone, but it's hard to believe that a country possessing so many dynamic and thriving industries couldn't also have had progressive and profitable railroads.

Finally, we need Big Business because it still gives us freedom of choice in the marketplace. That freedom of choice is another thing we take for granted. It's there, but it won't always be there if we continue on the present course. We are already paying for many things that we wouldn't buy if we were given free choice in the matter. You can still choose among makes of automobiles, TV sets, suits of clothes, and canned goods. You have no choice in the matter when your money is spent on countless Federal ventures that will not benefit you or your community. I am sometimes told that we voted for these programs. I don't remember doing any such thing; I think we simply lost freedom of choice in such matters.

What will happen to Big Business and the American economy if we continue on the present track? Ever since the advent of the New Deal, businessmen have been saying that various Federal measures and programs would bring about collapse or dictatorship. I don't think we'll have either. What we will probably get is stagnation and a great deal of bureaucratic control. We probably won't get brownshirts marching in the streets and hauling people off in the middle of the night for torture and questioning. We will get a great deal of humiliating and exasperating controls from the various bureaus and agencies that now rule our lives in so many ways. We will pay, and pay, and pay again for the kind of bureaucratic foolishness that we joke about in our daily conversation. This is not scare talk. The American alternative to private, profit-seeking business is a whole system of Government-controlled, Government-subsidized, and Government-regulated businesses. This must result in an unresponsive marketplace, marked by frequent shortages and costly surpluses.

The model for this future American society is Great Britain, not the Soviet Union. The reports from Britain nowadays are grim; they tell of a once-great nation that is sliding into stagnation and decay. The distinguished journalist Vermont Royster was a recent visitor to Britain who sees a parallel between what happened in Britain and what is happening here. Surprisingly, good intentions, not bad ones, got the British into trouble. It began with the most humanitarian motives, first the desire to provide free health care to all, and then the addition of subsidies for food and housing. Actually, a good society should be able to subsidize some of its parts, particularly people in need, and neither I nor Mr. Royster would argue with that objective.

What happened, however, was that the British government eventually was forced to subsidize auto manufacturers, steel mills, shipyards, and coal mines; that is to say, Mr. Royster writes, many of the parts of the economy which should be not only self-supporting but providing a surplus for subsidizing the health program and the like, these parts are themselves subsidized. Well, we know what happened. A sticking point was reached that plunged the whole country into trouble. Here in the United States, we haven't reached that sticking point, but we're trying hard. I find it ominous when our Government begins to subsidize certain industries, because here, as in Britain, it is the profit-seeking part of our economy that should always support the parts we choose to subsidize.

It is not chance or accident or even poor management that converts corporations from profit-making institutions into wards of the state. It is really almost inevitable that companies drift into this kind of dependency once they become subject to political intervention. First, the state intervenes in the affairs of an industry and takes over critical decision-making powers. Before long, most of the firm's decisions are made in response to political pressures rather than market forces, though it manages to remain profitable in the short run. In the next phase, however, the company begins to lose money. But since the company is large and important — a Lockheed, say, or a Penn Central — the government steps in to save it with subsidies. This sets a precedent for other companies in similar trouble, and before long the state has a glut of subsidized industries. One doesn't have to be an economist to understand that this is an undesirable result and that it cannot work indefinitely; there has to be a sticking point.

I believe that most business leaders perceive these dangers and oppose government intervention for fairly honest reasons. There are others, however, who march down to Washington to demand subsidies for their own industries or legislation that will give them an advantage over their competitors. Unfortunately business today is divided on many questions at the very time it faces its most serious threat.

To their credit, however, many business firms have launched rescue measures aimed at halting the plunge into statism. Some companies have started public information programs to explain just what they do and how they serve the public. A few companies and industries are starting to show a surprising amount of backbone in responding to regulations that they consider ill-advised.

For example, the major auto companies recently published an advertisement about current regulations governing auto emissions standards. The message was that the public will pay for more stringent emission controls; therefore, the public should let Congress know how it feels about them. In today's climate, it takes more courage than you might think to make such an announcement. This sort of thing doesn't set well with certain Government agencies that have already decided what's best for the country. But if the corporation can't carry its case to the public and to Congress, who will?

Major corporations are also making a stand by defining just what companies need in order to survive as useful institutions. For example, an industry group called The Business Roundtable has been informing the public about profits, productivity, capital formation, inflation, and taxes. You probably know that the Roundtable has presented excellent editorial-type advertisements on these subjects as a series in The Reader's Digest. The point of the messages is that Business just can't do its job if it can't make a buck, produce as efficiently as foreign competitors, generate new capital funds, or protect itself from inflation and excessive taxation.

There has also been some interest in building a political constituency for the corporation, thanks to the article by Mr. Kristol. Chief executive officers of major corporations have referred to this need, but so far nobody's shown how a corporate constituency can be put together. And without a constituency, the corporation continues to lumber along on its way to extinction, a nice, big, fat, juicy target for everybody.

Well, who are to be the constituents of Big Business? Professor Kristol thought that shareholders could do this job, if they could be brought into a more active role. This suggestion has merit, but shareholders have been strangely silent about harsh political action that harms their equity holdings. I'm afraid that many shareholders think of their stock as an investment and not a cause and will not take the time to go to bat for Big Business in general.

Union members and salaried employees of companies could also be corporate constituents. The difficulty here is that many employees hold inconsistent views. They want job security and good pay and benefits, and may even think well of their own company. But they may also be hostile toward Big Business in general and may even support actions that will eventually come home to roost right where they work. They are not to be criticized for this inconsistency; it is almost impossible to show, until it is too late, that attacks on Big Business are a threat to the employee's own job security. A company's plant communities often share that attitude; they like the companies in their city but they want to see the other guys punished.

I haven't by any means given up hope. Probably the real corporate constituency is not to be found in any special interest group. It has to be found among all groups; it has to be found among the responsible people with common sense who know that in the long run there's no such thing as a free lunch. The common sense people, if given all the facts bearing on a problem, can usually be counted on to make judgements that are fair, reasonable, and consistent. Common sense people can be critical of certain corporate actions without calling for the end of the competitive enterprise system.  Common sense people certainly know that their own economic wellbeing is made more secure by the success and growth of large business firms; they also know that any cost burden or restriction imposed on business eventually finds its way to the customer, the employee or the shareholder.  They know that we need the Big Corporation, not as a subsidized and sickly ward of the government, but as a healthy, independent, and progressive institution in society.

And someday, if there are enough of those common sense people in this great land of ours, they will come to the corporation's defense. They will defend the corporation, not because they own stock in it, but because they know that we need the private corporation as the efficient manager of productive resources. They will defend the corporation, not because they love the managements, but because they know we need the professionalism and ability of corporate managements. They will defend the corporation because they know that a big corporation is also big groups of decent and very deserving people, people who are shareholders, people who are employees, and people who are customers. They will also defend the Big Corporation because they know that all of us need this institution and we also need the kind of political and social climate that it needs — a climate that is favorable to private property, a free marketplace, and individual liberties. You and I and the Big Corporation need some of the same conditions: the chance to try new things, even if it means risk — the right to make our own decisions, even if it means making mistakes — and also, the right to be free, even if it means losing the illusion of a free lunch.

Thank you.