Coddling Our Corporations to Death : THE SUICIDAL CORPORATION : How Big Business Has Failed America <i> by Paul H. Weaver (Simon & Schuster: $18.95; 236 pp.) </i>
In a perfect world, the corporation is the basic unit of a free market economy. It gainfully employs people, produces a product or provides a service and turns a profit in the process. When times get tough, according to the rules of the game, the corporation has two choices: compete or get out.
But the world is not perfect. Corporations lobby Washington for subsidies and tax breaks and regulations, all of which, like excessive alcohol consumption, improves the moment but also creates a false sense of well-being.
Paul Weaver’s “The Suicidal Corporation” is the story of how the rules changed and why corporate America must untie Washington’s apron strings and go it alone in the international marketplace if it is to survive.
Weaver, a Fortune writer and Harvard professor, actually has two separate stories here. One is an excellent historical survey of our evolution from free market capitalism to free ride socialism.
The more personal, and perhaps more intriguing, story is a memoir of his two years inside the Ford Motor Co., where he worked as a public relations executive in the late ‘70s.
The ‘70s were a lousy time for U.S. auto makers. They had defiantly ignored higher fuel prices, lower foreign labor costs and changing public tastes for so long that by 1979, it was evident the Big Three were mass-producing dinosaurs.
For Weaver and his colleagues, it was a public relations nightmare. Their job was to convince the American people that the corporation’s goals were their goals. But nothing could have been further from the truth.
“What the large majority of Americans believed in--individualism, limited government, free markets--the corporation scorned and worked against. What corporations wanted--subsidies, industrial policy, protection from competition, governmentally sanctioned monopoly--most Americans hated.”
In fact, Weaver implies that Ford may have had an ulterior motive behind the Pinto recall of 1978.
After a number of product liability lawsuits were filed alleging faulty fuel tanks that caught fire after rear-end collisions, Ford recalled 1.5 million Pintos and Mercury Bobcats. Weaver claims, however, that Ford had hard evidence that nothing was wrong with the tanks.
“But we didn’t tell the truth about the Pinto,” he writes. “To the contrary, we acted the part of a person who has done something wrong but can’t bring himself to admit it. Under pressure from private lawsuits and government regulators, we recalled the car to rebuild a fuel system that was no different from those in millions of Ford cars we weren’t recalling. We settled many lawsuits out of court on condition that the plaintiff not disclose anything about the settlement. In short, we acted guilty.”
A public relations gaffe? Hardly. Ford’s desire to stay on the government’s good side was so strong that it spent the money on the recall instead of on a politically sensitive court battle it apparently could have won.
But Ford and the rest of the automotive industry were not unique in their simultaneous pursuit of profit and protection.
Book Two of “The Suicidal Corporation,” the historical part, proves that. It makes it clear that there never really has been a time in our history when business wasn’t asking government for a favor, and vice versa.
The irony of the whole thing is that the uniquely American entrepreneurial ingenuity--which is at the heart of the free-market system--is what drove the brightest of the corporate executives to seek government protection in the first place.
“The corporation was created by people who thought the marketplace inefficient, backward, a drag on progress. . . . “
“(They) wanted to grow faster, become bigger, achieve more efficiencies . . . than seemed possible with traditional business structures.”
The solution, as they saw it, was to get the government to underwrite their profits in the name of progress:
In the 1850s, at the height of political tensions over the slavery question, the Illinois Central railroad convinced Washington to subsidize construction of its North-South route from Chicago to New Orleans because it would serve as a peaceful link between warring factions.
At the turn of the century, AT&T; successfully argued that America “deserved cheaper, better integrated, higher quality phone service than the market was providing. AT&T; meant to meet this emerging social need, but voters should be on notice that this would require state governments to make AT&T; an official monopoly.”
Today the issues are more complex and more global. A number of other countries, most notably in the so-called Pacific Basin, are challenging our dominance in several basic industries like autos and electronics.
The ball is clearly in our court. Will our response be competition or protectionism?
Weaver’s message is clear: If capitalism is to succeed, the time is right to turn back the entitlements and regulations and let the games begin.
If only it were that easy.
