Progressive Business: An Intellectual History of the Role of Business in American Society 0198701039, 9780198701033

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PROGRESSIVE BUSINESS

OUP CORRECTED PROOF – FINAL, 7/9/2015, SPi

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Progressive Business An Intellectual History of the Role of Business in American Society

C H R I S TI A N O L A F CH RI S T I A N S E N

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Great Clarendon Street, Oxford, OX2 6DP, United Kingdom Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries # Christian Olaf Christiansen 2015 The moral rights of the author have been asserted First Edition published in 2015 Impression: 1 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America British Library Cataloguing in Publication Data Data available Library of Congress Control Number: 2015937257 ISBN 978–0–19–870103–3 Printed and bound by CPI Group (UK) Ltd, Croydon, CR0 4YY Links to third party websites are provided by Oxford in good faith and for information only. Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work.

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Til Susan, Annabell og Villum

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Preface Take a walk in any major city and you will quickly see a host of different messages brought to you in commercials by private businesses trying to persuade you that they are not only in business to make money. Quite some time ago, I started wondering about something which just didn’t add up: on the one hand there is the common idea we have about businesses, namely that they are profit-seeking entities; on the other hand there are the various kinds of commercials and self-descriptions about how, for example, coffeeproducers support the local communities in which they operate, how corporations in the apparel industry support non-sweatshop working conditions, or even how oil companies care about the environment and sustainability. In brief, there seemed to be a fundamental mismatch between the way we usually think about businesses and their purposes, and then this new “soft” business rhetoric. Since they were in some respects each other’s contradictions—one message being that businesses are in it for the profits, the other that they are in business to achieve various social purposes—both of them couldn’t really be right at the same time. After all, if there is one thing you pick up as an academic, it is to avoid contradictions. I was skeptical, to say the least, about the sometimes lofty rhetoric of businesses and of popular management books that carried forward the message of businesses serving broad social purposes. I also, however, started getting tired of a supposedly enlightening and revealing, but too often unqualified leftist jargon, saying that in “the final instance” businesses were just in it for the profits, and that there was really not much more to it than that. I found it hard to reconcile this view with reality. For example, I know about an owner of a business who, despite several years of economic hardship in the firm, continues to donate money to charities, and who votes for the most leftist political party in Denmark. From a pure class and business interest perspective, some of these actions might be difficult to explain. Maybe the ideology of “soft business” was not as firmly rooted in a material basis after all. If there was a need for an ideological critique of the “soft” business rhetoric of corporate social responsibility, business ethics, and similar ideas, then—and I did and do still think there is—it would have to be one on an altogether different footing than old-school armchair Marxism. So I started exploring and digging. I went backwards in time, and I did this because the present is, really, nothing if not a product of its own history. I quickly learned that the history of such soft business ideas were much older than commonly assumed. I also learned that such ideas had been critiqued early on, which only bears witness to their significance. After all, why bother critiquing something if it doesn’t matter? I also learned that soft business ideas

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were not always simply the product of the interests of a ruling business class, but also concepts used against corporations, as when they were reminded of their social responsibilities and obligations. In the end, I learned that one important way of understanding the various kinds of soft business ideas is to look at them as alternative promises of social protection against a regime of pure market forces. I first got this idea when I read Karl Polanyi’s fascinating book The Great Transformation. In this book, Polanyi presents a dialectic movement between marketization and then different kinds of “countermovements” of social protection of land, labor, and money. One of my central theses became that business also tries to persuade us that they can offer such social protection beyond mere compliance with market rules, but also without “resorting” to traditional politics of increased regulation, welfare politics, or enlarging the influence of labor unions. At bottom, then, my point is exactly not that ideas such as corporate social responsibility don’t matter, or that they are simply “in the final instance” about making money. Such claims require empirical qualifications, and they don’t explain much about why such ideas arise in the first place. My point is rather that such ideas should be seen in a broader historical, institutional, and political context. My point is that they are, ultimately, only one out of several, alternative ways of governing our societies. My point is that they should encourage a critical awareness about whether other, more democratic, more rights-based, and more universalistic ways of addressing our problems and challenges, are simply crowded out whenever we start believing in the self-reforming and self-regulating potentials of capitalism.

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Acknowledgments This book would not have come into being without others’ help, constructive advice, support, and encouragement, and not least that much undervalued process of criticism and endless questioning. The best help is often given by those who take your thoughts seriously enough to bother objecting to them. A special thanks goes to those who have read and commented on the whole draft or chapters of it (and sometimes even more than once): Casper Andersen, Howard Brick, Patrick Joseph Luke Cockburn, Paul du Gay, Andrew Hartman, Jan Ifversen, Campbell Jones, Morten Raffnsøe-Møller, Niklas Olsen, Nick Salvatore, and Mikkel Thorup. On the same note I would also like to thank the three anonymous reviewers at Oxford University Press for their constructive and knowledgeable criticism. Thanks also goes to my colleagues at the research project ECORA, Jakob Bek-Thomsen, Stefan Gaardsmand Jacobsen, and Mikkel Thorup, for their help, encouragement, and understanding. The book benefited from the comments I have received from participants at various conferences, seminars, and other events: Applying the Sociology of Luc Boltanski (Aarhus), Center for Sociological Studies Annual Seminar (Sandbjerg), Critical Management Studies Research Workshop (Los Angeles), Designing and Transforming Capitalism (Aarhus), Economic Rationalities (Aarhus), Histories of American Capitalism (Cornell University), Nordic Summer University (Tyrifjord), and the Research Unit for the History of Political and Economic Ideas Thought (Aarhus). The book would not have been possible without the funding I have received from the Velux Foundation, the Danish Council for Independent Research, and the Sapere Aude: DFF-Research Talent Grant, and I would like to thank these institutions for supporting my research. I also owe a special thanks to the editorial team at OUP that I have been in contact with during this process and their professionalism: David Musson, Emma Booth, Rachel Neaum, and Clare Kennedy. A special thanks also goes to Dan Harding for his excellent copy-editing, to Matthew Hollow for proofreading, and to Kirtiga Balakrishnan for project management. Needless to say, I remain responsible for all remaining faults, mistakes, and shortcomings in the book. Finally, I owe the greatest of thanks to friends and family for their encouragement and understanding, but first and foremost to Susan for letting a very time-consuming third party enter our life, and for a tremendous amount of support, and to Annabell and Villum for each day reminding me that there is something in the world other than working on this book.

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Contents List of Tables Introduction: An Intellectual History of American Market Reformers and their Critics

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1. O Father, Where Art Thou: The Spirit of Paternalistic Capitalism in the Age of the First Great Transformation (1870s–1900)

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2. A Corporation Lives in Society: The Invention of Managerial Capitalism in the Age of the New Deal (1930s–1960s)

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3. The New Man Wants Your Soul: Critiquing Managerial Capitalism (1945–1960s)

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4. How to Do Well and Do Good: The Spirit of Entrepreneurial Capitalism in the Age of the Second Great Transformation (1970s–2000s)

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5. Corporations are Not Set Up to be Charities: Critiquing Entrepreneurial Capitalism (1990s–2000s)

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Conclusion: Progressive Business and its Critics in Retrospect Bibliography Index

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List of Tables I.1 Definition of market reformism (progressive business)

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1.1 Market reformism in the First Great Transformation (c.1870–1900)

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1.2 Rival views on social protection in the First Great Transformation (c.1870–1900)

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2.1 Market reformism in the New Deal era (c.1930–70)

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3.1 Two ideal types representing the relationship between individual and organization

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3.2 Rival views on social protection in the New Deal era (c.1930–70)

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4.1 Market reformism in the Second Great Transformation (c.1990–2000s)

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5.1 Rival views on social protection in the Second Great Transformation (c.1990–2000s)

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6.1 Comparing market reformism in the First Great Transformation, the New Deal era, and the Second Great Transformation

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6.2 Comparing leftist critiques of market reformism in the First Great Transformation, the New Deal era, and the Second Great Transformation

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Introduction An Intellectual History of American Market Reformers and their Critics Toward a “gentler capitalism”? Even as the financial crisis of 2008 unfolded, the view that capitalism could become more enlightened and more civilized had become widespread, at least among a group who saw themselves as business reformers: We may just be at the beginning of an economic revolution, one that is happening quietly, gradually, and from the bottom up; one that is constantly gaining momentum, despite (or perhaps because of) its lack of revolutionary fanfare, making it more thoughtful and balanced, and thus more likely to succeed. (Spitzeck et al. 2009b: 427)

These were the editors’ final lines of Humanism in Business, an anthology concerned with how business can take an active role in a global context of poverty and sustainability problems. The authors ambiguously captured the theme of a “silent” revolution, a transformation of the economy already taking place, but combined with an invitation for the reader to join an evolving group of “humanists” that believe in the idea of a “life-serving economy” instead of a “profit-serving economy.” But it is not only management and organization researchers who observed a radical transformation. Under the heading “A Gentler Capitalism,” David Callahan, a senior fellow at the left-leaning think tank Demos, wrote that the times are changing toward a gentler and more socially responsible capitalism. Referring to recent statements by America’s top business leaders, H. Lee Scott Jr., Chief Executive of Walmart, and Microsoft’s founder Bill Gates, Callahan implied that a sea change is under way, changing the role of business in society: “As more corporate leaders proclaim their commitment to social responsibility, and as politicians, unions and activists demand that they live up to this rhetoric, a new era of a gentler capitalism may truly begin” (Callahan 2008).

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Statements such as these are likely to have perplexed social critics, politicians, as well as the public at large, leaving them with the impression of a radical change, not only of discourse, but of practice. The financial crisis of 2008 may have shattered the dreams and the visions of “a gentler capitalism,” but these ideas remain of great historical as well as contemporary interest. What neither of these pre-crisis observers reflected upon, was that these ideas of a self-reforming capitalism were reminiscent of a host of historical precedents, and that these have often been alternatives to political attempts to tame the beast of laissez-faire capitalism. This is a book about the history of ideas of moral self-governance of business. It is also a book about how these ideas have been critiqued. The “soft” rhetoric of a more socially responsible kind of capitalism is not new, and neither is it new that critics have tried to come to terms with it. Both the proponents of “capitalism with a human face” as we might call it today, as well as their critics, share something with previous generations, who were also divided between believers and skeptics of the ability of business to transform itself. At the same time, however, advocates as well as skeptics have changed their way of thinking, embedded as it is in historical context.1 Revisiting the history of these ideas and their critics will offer historical self-understanding and help put the present in historical perspective. We may never get “behind” the soft rhetoric, but we will come to a better understanding of how it has been advocated and critiqued for the last approximately 150 years. This book will investigate the historical arguments for and against a set of beliefs that holds that our common problems can be solved through a gentler capitalism—that is, by invoking a new, social ethic in the minds and hearts of managers, capitalists, and entrepreneurs. Historically, free market liberals have sought to legitimize capitalism, lauding it for its ability to promote economic growth, social efficiency, and individual freedom. By contrast, radical and reformist leftists have critiqued capitalism and argued that it causes intolerable inequality, environmental destruction, and the degradation of work. Others, however, have sought to conquer a middle ground by showing that capitalism was already in a state of flux, transcending the harsh economic doctrines of narrow self-interest and of laissez-faire, and that it could become more gentle and civilized through moral self-governance of corporations and ethical business. Or in the words of historian of the institution of American business schools Rakesh Khurana (2007): “to juxtapose hierarchy (in the form of law and regulation) and markets as the only two ways of ensuring that our capitalist system retains the confidence and trust necessary for its optimal functioning is to overlook a third possibility.” This third possibility Khurana then identified as “a broader American tradition of self-regulation in a social system that seeks to promote responsible action through a sense of shared purpose rather than through the

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atomized interactions of the marketplace or the centralized direction of the state.” Finally, Khurana ended his book on the moral decay of business schools since the 1980s turn to “the emerging logic of investor capitalism” calling for “a recovery of the higher aims,” that is, a rediscovery of the ultimate purpose and meaning of business so that it, again, would be capable of moral selfregulation as an alternative to the free market as well as to the hierarchical state.2 This book argues that “market reformism,” i.e. the notion of progressive business, was an important element in the historical discourse on capitalism in three, defining periods of time in US history: the late nineteenth century (c.1870–1900) which I refer to as the US’s First Great Transformation, the New Deal era (c.1930–70), and the most recent period of globalization and triumphant capitalism (c.1970–present day), which I refer to as the Second Great Transformation.3 In each of these periods, market reformism was offered as an alternative, third way of handling the manifold risks of industrial modernity (unemployment, sickness, degradation of work, environmental destruction). This third alternative was that businesses would morally self-regulate, and not leave the course of events to the random play of market forces, but, most certainly, neither to the strong hands of the state or labor unions. The book sheds new light on how capitalism has been justified and critiqued from the late nineteenth century until today. It thereby supplements the important work which has been done on the intellectual histories of neoliberalism and of conservatism.4 These stories have detailed the histories of right-wing thinking. But capitalism has not just been justified using conservative and neoliberal economic arguments, but also by arguments developed by people whose life and workings were more closely tied to the daily practices of corporations, such as writers on management, organizational theorists, industrial psychologists, and business ethicists. And whereas ideas of the moral self-governance of business have undoubtedly played a minor role in the past as compared to free market liberalism, these roles are historically contingent. Ideas about the moral self-regulation of business and broader appeals to the social legitimacy of capitalism have been understudied in any broader intellectual and political context, which is the gap that this book seeks to fill. The book thereby helps explain why capitalism was not thrown overboard in those periods of time which were fed up with laissez-faire, most notably in the time after 1929. It helps explain how capitalism regained its social legitimacy in the face of different kinds of legitimacy crises, be it after the stock market crash of 1929, after the protest movements of the 1960s, or after the corporate scandals of recent times, e.g., child labor in the 1990s. It helps explain how capitalism was defended by appealing to ideals such as the social responsibility of industrialists, the soulful corporation, serving the public, or responsibility for humanity and life itself.

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Market reformism: definition My thesis is that “social protection,” normally understood to be sought by countermovements facing policies or realities of laissez-faire, has also repeatedly been negotiated around what will here be termed “market reformism.” That is, one way of “protecting” society from unrestrained market forces is to build a social consciousness into business—often as an alternative to increased state regulation or union power. Market reformism is not a historical term, i.e. used by the historical actors themselves, but my analytical term. It is a theoretical abstraction that has been constructed, because my thesis is that a number of positions in historical debates share some common features. This is what justifies the introduction of this new, analytical concept, which I use synonymously with the term “progressive business”. I identify market reformist stances with reference to the following characteristics that they share with one another. First, market reformism stresses “internal” (at the corporate and management level)—as opposed to “external” (labor unions, government, legislation)—reform, relying upon the principles of market self-regulation and voluntariness, on private property, and on private command. Second, it is ambivalent toward profits, often invoking “higher” purposes than material or pecuniary incentives, such as having responsibilities for a variety of stakeholders, not just shareholders, and being critical of the credo that “the business of business is business.” Third, it stresses social harmony, cooperation, and mutuality of interests, as opposed to conflict. Fourth, it mounts moral critiques of “economism” or “materialism,” and skepticism of free market economics. That is, against the lack of a moral dimension in a world supposedly governed only by market forces, it calls for market actors to act more responsibly, be it industrialists, capitalists, managers, employees, or corporations, depending upon the historical context. Table I.1 defines and summarizes the key characteristics of what has here been labeled “market reformism.” It is at the same time an empirically Table I.1. Definition of market reformism (progressive business) 1. Internal—not external—reform. Belief in private property and private control of companies, skepticism of labor unions and of the state. 2. Ambivalence toward the profit motive and self-interest as superior moral principles for business/capitalism, and critical of “economism”/free market economics. 3. Capitalists/managers/corporations have a “direct” responsibility toward a variety of stakeholders in business. They also have a scope for moral agency (beyond compliance to “market laws”). Prefers voluntary responsibility instead of legal demands and regulations. 4. Social harmony between classes (capitalists and workers), working together for common purposes. 5. In brief, an ideology which believes in the self-reforming potentials of business/capitalism, fusing together economic concerns with a social ethic.

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grounded concept, constructed on the basis of the historical material of this book, and a constructed, “pure” type. Some of the key business and industry reform movements, ideologies, and ideas that by and large satisfy these listed criteria are: industrial betterment, company towns, welfare capitalism, some notions of a “socialized” or “soulful corporation,” human relations, corporate social responsibility, corporate citizenship, social entrepreneurship, and “humanism in business.” They all address the moral and social responsibilities of business—from responsibilities toward employees, their families, their education, and their local communities, to responsibilities for the nation’s educational system, to responsibilities for the natural environment, local communities in less-developed economies, etc. Market reformism, then, does not refer to political attempts at regulating capitalism, to introduce new legislation, or to make widespread use of government intervention into the economy. Market reformism is an ideology, as much as it is a vision; it changes over time, and has had different shapes in the hands of its different advocates and critics. Its basic idea, however, is that capitalism or simply business organizations can change, or already have changed, in a more humanistic and socially responsible direction—that they can perform moral self-governance.

Normative justifications of capitalism go far beyond free market thinking This is a history of ideas, and particularly ideas about the role of business in society, about capitalism, about the social responsibilities of business—and about the critiques of these ideas. To my knowledge, this is the first book to offer an intellectual history of the idea of moral self-governance and its critics. The book borders, however, on a number of other disciplines and work, especially on American twentieth-century intellectual history and histories of neoliberalism and conservatism, histories of business ethics and corporate social responsibility, histories of management and organizational thought, and economic and historical sociology. The book highlights figures that have received comparatively little attention in intellectual history so far, such as management writers, organizational theorists, and business ethicists. As Nils Gilman (2006) has argued, such writers have been far more influential than has hitherto been recognized. In order to understand the constant renewal, survival, and manifold ideological justifications of capitalism, the intellectual histories of neoliberalism and of conservatism need to be supplemented with an account of the ideas traced in this book.

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The history of the “triumph of the market” and of neoliberalism has been covered in books that focus on the writings of key conservative and neoliberal thinkers from Ludwig von Mises to Friedrich von Hayek, from William F. Buckley to Ayn Rand, from Milton Friedman to Gary Becker.5 This is work that, for example, has turned attention toward important differences between neoliberalism and earlier forms of liberalism, such as the view upon the state, and has traced the funding and wider institutional history of the conservative movement in the United States or of neoliberalism more generally, reflecting the powerful influence of neoliberal ideas especially since the 1980s. Less explored, however, is which role ideas about moral self-governance of business and selftransformations of capitalism have played. I argue that these ideas have helped legitimize business in times of crisis and critique for capitalism and for neoliberalism, and that they also helped bring about the extreme uncompromising belief in free markets in the latest decades. The idea of totally free markets has not always been in vogue. As Luc Boltanski and Ève Chiapello (2007) argued in their The New Spirit of Capitalism (to which we will return several times), justifications for capitalism go far beyond standard economic liberalist doctrine. According to Boltanski and Chiapello (2007: 14), the three central “supporting pillars” of capitalism during two centuries have been “material progress, effectiveness and efficiency in the satisfaction of needs, and a mode of social organization conducive to the exercise of economic freedom compatible with liberal political regimes.” The point is, however, that “precisely by virtue of their very general and stable character over time, these reasons do not seem to us to be sufficient to engage ordinary people in the concrete circumstances of life, especially working life,” which is why Boltanski and Chiapello looked at management discourse. Similarly, my focal point is mostly broader appeals to the social legitimacy of capitalism and of corporations, such as when capitalism was described as being democratic, cool, revolutionary, and capable of moral self-governance in the 1990s. In this book, I thus urge the readers to consider whether, for example, the writings of someone like Peter F. Drucker and his work on the social legitimacy of the American business corporation in mid-century, were in some respects equally if not even more important as compared to, say, the writings of an early neoliberal such as Ludwig von Mises. The present study focuses particularly upon how “visions of a new society” have been articulated by those who thought that such a new society could be brought about through market reformism, in contrast to social-liberal or social-democratic “post-capitalist” visions (Brick 2006). This story may also shed some new light on the widely discussed corporate liberalism thesis, i.e. the thesis that the regulated capitalism of the mid-century advocated by socialliberals did not endanger, but rather supported capitalism.6 Contrasting these “corporate liberals” with market reformists shows that the latter advocated an ideology which typically should be placed to the right of social-liberals,

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social-democrats, and others, since the market reformists were typically more unambiguous about their trust in a market-based transition. Mid-century market reformists were typically of a conservative political orientation, and they were not “corporate liberals.” In this respect, the concept of market reformism here demonstrates its analytical value in disentangling more business-centered views on reform from other views.

An American spirit of capitalism? The idea of this book is in more than one way indebted to The New Spirit of Capitalism by French sociologists Boltanski and Chiapello (2007). Boltanski and Chiapello were looking at France, this book is on the US, and with some justification it can be read as a pendant to their book, although with several reservations. The New Spirit of Capitalism tries to answer the question of why capitalism in France, after a crisis around May 1968 and the two oil crises in the early 1970s, was again able to gain strength and flourish in the 1990s without much protest and critique. This was in spite of worsening conditions for wage earners, with lesser shares of the profits and worsened working conditions under the new regime of “flexibility.”7 Boltanski and Chiapello’s explanation was that a new “spirit” of capitalism, a new “justification regime,” had emerged: the “project-oriented justification regime” which endorsed networks, projects, creativity, and flexibility (Boltanski & Chiapello 2002: 9; Boltanski and Chiapello 2007: 103ff.). The new spirit seemed to incorporate what was earlier seen as critical (anti-capitalist) values and ideals, such as creativity, mobility, and authenticity—central ideals of what Boltanski and Chiapello dub “artistic criticism.” This new spirit was, according to Boltanski and Chiapello, a main reason why different critical forces, i.e. intellectuals, social movements, and labor unions, were weakened, as they were unable to decipher the new ideological justification for capitalism in France.8 It should be stressed, though, that the “spirit” cannot be assumed in any simplified manner to totally represent the interests of a business (or otherwise ruling) class. In Boltanski and Chiapello’s (2007: 3) words, ideology is not then, as “in the Marxist vulgate . . . a moralizing discourse, intended to conceal material interests, which is constantly contradicted by practice.” The spirit is not simply a “superstructure” reflecting an economic base. In the Conclusion I thus show how their work—itself part of the history of critics of “progressive business”— departs from other forms of ideology critique. While having many resemblances, even in respect to empirical sources, some precaution is needed when doing direct comparison. Theirs was a sociological book, which made a claim about changes in the spirit of capitalism, referring to actual beliefs held and internalized. This book does not claim

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to have traced the American spirit of capitalism, in the sense of how people at large talked, discussed, and thought about capitalism, but instead to have mapped a history of ideas about a self-regulating, self-reforming capitalism, in the context of changing historical discourse on capitalism. It could be argued, though, that to the extent that Boltanski and Chiapello’s main empirical sources are texts (discourse), the research methods are somewhat similar, but with a main difference that they used quantitative analysis of the examined sources. The sources do, however, tell us something about shifts and continuities of discourse, and there are in fact several similarities, also in historical findings, which I further account for in the concluding sections of each chapter.

Karl Polanyi’s legacy Another crucial thing this book shares with Boltanski and Chiapello’s is the influence of Karl Polanyi, whose work has experienced a remarkable revival in the last couple of decades.9 The book is indebted to Polanyi in several ways. For one, I have used Polanyian concepts to term the three main time periods. One thing that particularly needs to be emphasized is that this book argues that market reformism can be seen as an alternative promise of social protection. This is the book’s main contribution to Polanyian studies. According to Polanyi, a social world only governed by market forces is, in the end, a utopia. As Polanyi (2001: 3) wrote on the opening pages of The Great Transformation: “Our thesis is that the idea of a self-adjusting market implied a stark utopia.” One reason is that the mere existence of periodic business cycles—booms and busts—will bring people toward starvation during downperiods. Societies do not bear being flipped totally from having a market economy toward being a market society. At some point, there will be a call of for protection, whether of land, labor, or money. In a Polanyian framework, there is a dialectic between, first, a movement toward marketization, i.e. the commodification of land, labor, and money, and then afterwards various countermovements, which call for social protection against a regime of pure market forces, whether this call for social protection is then associated with the welfare state or organized labor (Polanyi 2001, especially pp. 136–228). Scholars working in the tradition of Polanyi have since renewed and developed this dialectic between marketization and social protection. One prominent example is the work by Marc Blyth, who argued that there was a neoliberal counter double movement in the 1970s and 1980s, whereby, “by the 1990s a new neoliberal institutional order had been established in many advanced capitalist states with remarkable similarities to the regime discredited in the 1930s” (Blyth 2002: 6).

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This book’s contribution to the Polanyian view is that the social protection theme can also be taken up by (and against) business. Market reformism can be an alternative to increased state regulation or union power, trying to persuade people that businesses can morally self-regulate in order to provide such social protection, as for example when businesses offer to insure their workers against risks of illness or unemployment, or deals with social risks of lasting economic depressions, or environmental risks. Market reformism differs, then, both from free market liberalism, whether in its late nineteenth-century form or in its twentieth-century form of neoliberalism (which acknowledges the role of the state in creating markets), which generally offers ideological support of moves toward marketization. It also differs from different variants of socialism and social democracy, which opt for social countermoves against laissez-faire capitalism as, e.g., the late nineteenth-century progressive movement responding to industrial capitalism, or New Deal liberalism responding to the Great Depression, and various other forms of state regulation, redistribution, and welfare policies. This does not imply that business actually offers—or does not offer—such social protection; a question which would require an altogether different set of research methods. Furthermore, unlike Polanyi, the book does not make strong empirical claims about historical development and the causal role of institutions. Instead, it traces the development of historical discourse on capitalism and on the moral self-governance of corporations.

The history and strategy of corporate social responsibility and business ethics The ideas about moral self-governance of business are closely related to ideas of business ethics. Two aspects which have been understudied so far are when the discourse on business ethics and social responsibilities of business appeared and what role these ideas have played in a larger context. Critics and protagonists disagree over whether capitalism has become more responsive toward a range of societal concerns, but they tend to share the assumption of the novelty of this ideology, or they argue that corporate social responsibility and related ideas of business ethics were very different earlier, and especially that they have only recently become more strategic (Banerjee 2008: 60; Carroll 1999; Shamir 2008a; Vogel 2005).10 This book argues that the quest for the social legitimacy of the capitalist market system (or simply of business) has a longer history than is commonly recognized in contemporary debates, an argument which is in line with recent studies of the history of business ethics (Abend 2013; 2014; Smith 2003: 53).11

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Debates related to corporate social responsibility and similar concepts go back to the late nineteenth century if not earlier. Already the first “generation” of late nineteenth-century market reformism construed industrialists and capitalists as morally responsible, critiquing what they saw as a fatalistic view of an economics that legitimized a harsh industrial reality by omitting moral responsibility and agency. Throughout most of the twentieth century, the “magic formula” in free market thinking, namely that the pursuit of individual self-interest would lead to the greater common good, was an inadequate slogan for those who were more preoccupied with the problems of business management than with theoretical economics, and who had to explain the social legitimacy of business in a context of sometimes hostile labor unions, encroaching state power and regulation, or reluctant employees. Similarly, Gabriel Abend (2013; 2014), drawing upon a vast amount of archival work, has demonstrated that business ethics was taught at a number of American business schools at major universities in the first decades of the twentieth century. Abend’s impressive work is mainly devoted to the first decades of the twentieth century, and can be read in connection with this book, which concentrates on other historical time periods, and which prioritizes a history of how market reformist ideas were critiqued. In the Conclusion I question the distinction between a non-strategic past and a strategic present. In fact, market reformist ideas may have been used to pursue a number of strategic goals (not confined to being strictly economic), such as to prevent government regulation of business, to strengthen the social legitimacy of business and of capitalism, to respond to criticisms, to limit the power of labor unions, and to participate in new markets. Also in a strict economic sense, however, there are early examples of the “business case for virtue.” Along similar lines, Abend (2014) has shown that the “business case for virtue” was widespread in the 1920s, and he has also demonstrated how, for example, the US Chamber of Commerce made active use of business ethics in order to prevent state regulation. Against the conventional views that ideas about a “gentler capitalism” are fairly new, and that they only recently became strategic, then, this book starts by demonstrating that they were already widespread already back in the late nineteenth century.

The approach This is a history of ideas about the moral self-regulation and self-renewal of capitalism and the critiques of these ideas. As ideas do not respect firm boundaries drawn between different branches of academia or realms of human affairs, neither should the histories of these ideas. Discussions concerning the nature and quality, the strengths and weaknesses of capitalism

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have been prevalent in a large range of different genres and fields: from sermon-like texts to articles in the popular press and magazines, from treatises on political economy and economics to political philosophy and political science, from cultural critiques to business ethics, from sociology to cultural anthropology. They are comparable because they engage in struggles over the same subjects, and it would do injustice to a history of intellectual struggles over capitalism to stick to one genre. It might be objected that particularly authors from the genres of management and organizational development mainly write on organizational issues, but the reader should bear in mind that these authors have frequently sought to promote solutions to grand social, political, and economic questions, and it is for these views that they are here addressed. Indeed, there are many studies of the history of management thought, rhetoric, discourse, or ideology, but I have focused particularly upon how they engaged in larger discussions about capitalism, society, the role of the corporation in society, and politics, rather than with technical aspects of different management and organization ideas (Abrahamson 1997; Barley & Kunda 1992; Bendix 1963; Guillén 1994; Jacques 1996; Kunda & Ailon-Souday 2005; Wren 2005). As Thomas Frank pointed out, management theory should not just be understood as technical advice, but as a genre which is often just as much about “a far more abstract goal: the political and social legitimacy of the corporation” (Frank 2000: 178). Or as Boltanski and Chiapello (2007: 58) wrote, “management literature must [ . . . ] demonstrate how the prescribed way of making profit might be desirable, interesting, exciting, innovative or commendable. It cannot stop at economic motive and incentives.” The chosen sources have been selected because they advocate a market reformist view, critique a market reformist view, or mark an important critique or justification of capitalism. The main approach of this book consists in textual analysis of important interventions in debates about social responsibilities of business, the role of business in society, and capitalism—rather than in the histories of particular people, their whole authorships, or developments within these.12 The approach is defined by historical contextualism. To paraphrase Karl Polanyi’s (2001: 48) famous dictum that “man’s economy, as a rule, is submerged in his social relationships”, so too are ideas embedded into their social contexts. No ideas or debates develop in a historical vacuum. Certainly not ideas such as these, which were concerned with how to govern and manage business and society, and concerned with how to deal with various kinds of risks under shifting political and economic circumstances. If we are to understand these debates and the arguments of historical actors, then, we need to know their historical context.13 Throughout the book, I situate this history of ideas in relevant economic, political, and intellectual contexts, and also what could be termed a “context of conflicts.” In order to probe that ideas of progressive business were alternative offers of social protection, they are contrasted with

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other positions, especially free market liberals on the one hand, and various leftist positions on the other. Critics are a very important part of the context for the protagonists of moral self-regulation (and, of course, vice versa). Protagonists and critics are doing something when they engage in these debates (Austin 1975; Skinner 2002). They position themselves; they try to influence how people should think, and which courses of action should be pursued, in a context of conflicting views and conflicting interests. At bottom, the argument for a contextualism which incorporates antagonism, conflict, and disagreement about ideas, is a strong one, namely that this is a necessary condition for understanding what historical debates, arguments, and discourse about the moral self-regulation of capitalism were all about. The other reason is simply that there has not, to my knowledge, yet been an attempt to tell a history of the critiques of progressive business. The time periods in the book have been chosen for several reasons. One reason for choosing the First Great Transformation (c.1870–1900) is that it was then that much of the modern industrial and capitalist order and its main institutions was made. The New Deal era (c.1930–70) was chosen partly to examine how market reformist ideas were articulated in a time when free market ideas were not popular. This, in turn, offers a rich ground for comparison with the most recent Second Great Transformation of the globalization age (c.1970–2000s). This selection makes it possible both to demonstrate striking similarities between the First and the Second Great Transformations, and to study ideas of moral self-governance in times when free market thinking was popular, as well as when it was marginal. Finally, the Second Great Transformation was also chosen because these are the times we live in, and because the rhetoric of progressive business helps explain why there was little critique while inequality was skyrocketing. The book has several tables. In particular, they compare market reformists, leftists, and free market liberals, in respect to the problems they have identified, the solutions they have offered, and, more generally, the kind of social protection they suggest. I also present tables that highlight the significant characteristics of market reformism in each of the three time periods. Finally, one table in the Conclusion compares the historical critiques of market reformism. The tables are placed at the conclusions of every chapter, but may also be consulted before reading the chapters in order to keep track of the main argument. The tables are based upon the sources used in this book, and I have tried to show, throughout the book, why these sources were relevant. The tables highlight defining traits of the concepts used to characterize market reformism in each of the time periods—paternalistic, managerial, and entrepreneurial market reformism. These concepts are empirically grounded concepts. At the same time, they are stylized, ideal types, exactly because they are reductions and abstractions from the empirical “data.” They should be read as theses of main trends, as heuristic tools that one can use to start thinking

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about the different time periods and about what defined the ideas of market self-regulation therein. More fine-grained concepts and more fine-grained definitions of time periods, using more sources, could be important tasks for future work.

Book overview Chapter 1 describes the development of market reformism and its criticisms in the context of the First Great Transformation (c.1870–1900), in which the United States went through a profound transition toward capitalism, wage labor, the rise of big business, nationally integrated markets, etc.14 It was accompanied by various kinds of industrial unrest and uprising, the founding and institutionalization of labor unions, and the rise of the progressive movement and of the Christian Social Gospel. Several “countermovements” advocated new kinds of social protection against a pure market regime, be it in relation to workers’ salaries, the use of child labor, the length of the working day, or insurance against illness and death. At the same time, free market liberals vehemently supported free markets. Market reformism, then, offered its own kind of social protection, often revolving around individual capitalists and industrialists who should take on extra social and moral obligations for some of the risks of industrial capitalism, and who were often cast as “fathers” who watched over their enlarged “households.” In conclusion, I propose to conceptualize these ideas of business’ moral self-governance as paternalistic market reformism. Chapter 2 shows how market reformism was reinvented in the New Deal era (c.1930–70). This period has been described elsewhere as a time of unprecedented and sustained growth, rising living standards, Keynesian economic policies, and declining levels of inequality (Piketty 2014). It was a period of crisis for the ideas of laissez-faire and of free markets (Judt 2010). Polanyi, writing The Great Transformation in 1944, even thought that the time had come to an end for the utopian project of laissez-faire economics. In this sense, he turned out to be a poor prophet of history. The chapter sketches key trends of the first half of the twentieth century, which changed the context for market reformism profoundly. Most importantly, the world wars and the strengthening of political reformism in the wake of the Great Depression, along with theoretical developments within the fields of cultural anthropology and of socioeconomics, marked a new era in which free market liberalism was severely challenged. Influential proponents of the market reformism of the mid-twentieth century, such as Chester Barnard, Elton Mayo, and Peter Drucker, morally dissociated themselves from what they saw as the failed vision of nineteenth-century free market liberalism. Stressing cooperation,

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concern for human relations in industry, ideas of industrial citizenship and of a new “soulful corporation,” they tried to show how market society could eliminate what had been its worst features, but could do so typically without “resorting” to the realm of politics. The idea was to civilize capitalism from within, through enlightened management. In conclusion, I have dubbed this era’s ideas of moral self-governance of corporations as managerial market reformism. Chapter 3 shows how mid-century market reformist notions in the subsequent years were criticized from a host of different observers of widely different scientific and political orientations. Market reformist notions such as the ideas of the “soulful corporation” and of managers as statesmen acting in the public interest, were widely discussed issues in the struggles over American capitalism. Much was at stake for free market liberals, as well as for (among others) Marxists, in critiquing these ideas. Furthermore, the chapter highlights John Kenneth Galbraith’s notion of “countervailing power,” which was to become a keynote in later critiques directed against market reformism, stressing the need for government, and for unions and other non-governmental organizations to counterbalance the market power of corporations. Chapter 4 describes the new spirit of capitalism in the US in the most recent era of globalization, which I refer to as the Second Great Transformation (c.1970–2000s). It shows how capitalism and free markets were lauded in neoliberal terms for being necessary as well as superior, creating wealth and new technologies in the most efficient manner. But besides these neoliberal arguments, there was also a discourse on capitalism which described it as being democratic, cool, revolutionary, and egalitarian. Not least, there was a new surge in the idea that capitalism was capable of moral self-governance. One result was a new thinking about markets and firms as key partners and drivers in new, creative ways of solving the world’s global problems. Many of these market reformist notions of the present, however—such as the idea of corporate social responsibility, or of creating an ethical awareness among managers—should be seen in prolongation of the continual history of struggles over the legitimacy of American capitalism. The chapter explains how this version of market reformism arose, which I propose to call entrepreneurial market reformism. Chapter 5 describes how the triumphant, global capitalism was met by various kinds of criticisms, both from the left and from the right. There was a renewed insistence upon a social criticism of capitalism, highlighting increased economic inequality and inequality of life chances brought about through the emergence of triumphant capitalism. Furthermore, the chapter particularly highlights the critiques of the ideas of moral self-governance of corporations. Critics argue that the market reformism of today typically does not break with the neoliberal principles of market self-regulation and voluntariness.

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In the Conclusion, I address three major issues: the Polanyian theme of social protection and the historical and strategic use of market reformism; historical patterns in critiques the history of market reformism; and, finally, the wider analytical significance of the concept of market reformism, briefly illustrated through the financial crisis as a case study.

Concepts The attempts at regulating or civilizing capitalism from the “outside,” is referred to as political reformism. I use the latter term to designate a broad range of political, legislative, or interventionist initiatives which seek to enlarge the influence and rights of citizens, encompassing progressive policies such as nineteenth-century factory legislation, the 1930s New Deal, and the 1960s Great Society. I also use the term in the sense of government intervention in the economy, meaning that, for example, John Maynard Keynes and John Kenneth Galbraith approved of political reformism in this sense, whereas, for example, Milton Friedman was much more skeptical (as, e.g., in relation to using fiscal policies to stimulate the economy). The term is not used, however, to describe political and legislative attempts to roll back the rights or influence of wage earners. I also use the term “political reformism” in a broader sense where it encompasses various attempts to influence the power structure of the economy, most notably in strengthening labor unions. Mostly, however, I instead use actual historical terms which share these basic characteristics: progressivism, New Deal liberalism, liberal pluralism, or simply liberalism, in the distinct American meaning of the concept (Kornhauser 2013; Vorländer 2004). To distinguish these from free market thinkers who have also used the terms liberal and liberalism, however, I use the terms social-liberal and social-liberalism. In contrast to “progressive liberalism,” this term has a more neutral flavor. Broadly put, it refers to how liberalism in the US has been associated with a belief in a plurality of institutions, not least the state, but also to some extent labor unions and various civil society organizations, to achieve the goals of welfare and of equality. In opposition to laissez-faire liberalism or conservatism, liberals have placed much less emphasis upon the laws of the market (as well as upon the laws of God), and have instead supported the progessive extension of collective institutions and public goods, and ranked the political and democratic civilizing of capitalism above a society built upon a free market economy. Reforming business from within or from without, civilizing capitalism from within or from without—this is the central analytical dichotomy between market reformism and political reformism. By contrast, various advocates of free market liberalism—from the late nineteenth century to mid-twentieth

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century to the present day—have argued that businesses should not take on any social responsibilities beyond the requirements of the law. Most famously, Milton Friedman (2002: 133) argued that “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.” Free market liberalism is generally characterized by central values such as individualism, limited government, free markets, and private property. In the US, liberalism in this sense has frequently been referred to as conservatism, much against the will of intellectuals such as von Hayek and Friedman. Within the discourse of free market liberalism, there was a central shift in the view upon the state with the reinvention of neoliberalism from the 1930s onwards (Jackson 2010; Peck 2010). Now, the state should play a more active role in creating a free market economy, building the right kinds of institutions, and securing rights. To recognize this shift in the view upon the state within free market liberalism, I mainly make use of two concepts of free market liberalism, namely laissez-faire liberalism and neoliberalism. Furthermore, it should be stressed that the contents of these different liberalisms vary across time and across actors; for example, several early (wartime) neoliberals had considerable reservations as regards totally free markets, unlike the next generation with Milton Friedman in a lead role (Burgin 2012). Despite these internal differences, however, there was an emphasis upon individual liberty, free markets, private property, and limited government, in opposition to progressives. A guiding aim of this book it to offer clarification for those who have been perplexed by the new ethos of progressive business. The only way out of this perplexity is through a historical recollection of how we got there.

NOTES 1. See, for example, Wood (2008) for an argument about why any history of political thought and of political ideology should be situated in social history. 2. Quotes from pp. 367, 378, 368, and 381. 3. For literature on global capitalism in the 1990s and 2000s as a new “great transformation,” see e.g. Dale 2010 or Habermas 2001. The argument is that the world underwent a new, great transformation in the age of globalization. 4. See e.g. Burgin 2012; Harvey 2005; Jackson 2010; Peck 2010; Phillips-Fein 2009; Mirowski & Plehwe 2009. 5. See e.g. Burgin 2012; Harvey 2005; Jackson 2010; Peck 2010; Phillips-Fein 2009; Mirowski & Plehwe 2009. 6. The thesis of “corporate liberalism” was advocated by “new left” historians of the 1960s who argued that liberalism and the expansion of the state in the twentieth century was by and large in the interest of capitalists, whereas the traditional interpretation of liberalism had been that liberalism was a movement that curbed

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8.

9. 10.

11.

12. 13.

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the power of big business. Cf. e.g. Block 1977 for a critical view on the corporate liberalism thesis, or Brick 2006, especially pp. 82–5; cf. however e.g. Sklansky 2002: 3f. for a more positive evaluation of the corporate liberalism thesis. According to Boltanski and Chiapello, capitalism is characterized by (a) “a minimal format stressing the need for unlimited accumulation by pacific means”; (b) competition; and (c) wage earning (Boltanski and Chiapello 2002: 2). “In many ways,” Boltanski and Chiapello wrote, “capitalism is an absurd system”: wage earners “have lost ownership of the fruits of their own labor as well as any hope of ever working other than as somebody else’s subordinate” (ibid.: 2). And even for the capitalists, whom one would expect were only pleased with the system, capitalism is also absurd, as the capitalists are linked to the endless processes of accumulation and self-preservation (ibid.: 2). Since capitalism “in itself” does not have a meaning, this must be accomplished through its “spirit” (ideology): “We call the ideology that justifies engagement in capitalism ‘spirit of capitalism’ ” (Boltanski and Chiapello 2007: 8). Based upon the theory of justification regimes, Boltanski and Chiapello argued that capitalism must be legitimized in a way that addresses the common good: “It is impossible for capitalism to avoid being at least somewhat oriented towards the attainment of the common good, as it is this striving which motivates people to become committed to its process” (Boltanski and Chiapello 2002: 2). Central to their thesis is the role critique plays in this process, and the way it works as a recuperation mechanism for a new spirit to emerge. As Boltanski and Chiapello wrote in the preface to the English edition of The New Spirit of Capitalism, their “object was to highlight the role played by critique in the dynamic of capitalism, and to construct a model of normative change” (Boltanski and Chiapello 2007: xiii). The declared object was thus twofold, in that it was both to empirically investigate the ideological transformations of capitalism in France from the 1960s to the 1990s, and to develop a theoretical model of change in relation to capitalism. See e.g. Block & Somers 2014; Dale 2010; Halliday 2008; McRobbie & PolanyiLevitt 2000; Mendell & Salée 1991. The concept of corporate social responsibility is conventionally ascribed to Howard R. Bowen’s Social Responsibilities of the Businessman from 1953 (see e.g. Carroll 1999), after which certain semantic and theoretical innovations are then highlighted as important contributions to the field (for examples cf. e.g. Elbing 1970; Frederick 1963; Petit 1968). Nonetheless, as I argue in this book, debates about the social responsibilities of business by far predate the 1950s. See also Abend 2013 and 2014. Authors who do recognize a longer history of, e.g., the notion of “corporate social responsibility,” acknowledging as N. Craig Smith does that “it is not a new idea, the hype surrounding it today notwithstanding” (Smith 2003: 53), do typically not link it to broader struggles about the legitimacy of capitalism or to their ideological and intellectual context (cf. e.g. Bassen et al. 2005: 231–2; Carroll 1999: 268–9). See Eyal & Buchholz 2010. See e.g. Bevir 2009 or Butler 2012 on contextualism in intellectual history. Some scholars in intellectual history have recently moved more toward social history

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and economic and political contextualization, see in particular Sklansky 2012 (for an overview), or Wood 2008. 14. Recently, historians have produced fascinating, important accounts of the relationship between slavery and the origins of capitalism in the United States (see, for example, Baptist 2014).

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1 O Father, Where Art Thou The Spirit of Paternalistic Capitalism in the Age of the First Great Transformation (1870s–1900)

This chapter investigates reactions to the rise of industrial capitalism in the United States. Its key priority is to trace what I have, overall, referred to as market reformist ideas. The post-bellum spread of industrial capitalism in the northern part of the United States was marked by industrial unrest, conflicts, and a great number of reform movements and ideological struggles about the new society of large-scale industrial capitalism. Different ideas about property, political governance, work, taxation, responsibilities, and the state clashed with one another. At the bottom of these various struggles about the new industrial society were very often two issues: property rights and management prerogatives (workplace control), i.e. the right to define and control the labor process, and the nature and rhythm of work. Were the business leaders sovereignly to decide over their business—not just to extract the profits, but also to control the workplace—or would other scenarios be possible? What were the responsibilities of the businessmen, the workers, the state, and labor organizations, and which parties would have what kinds of power? Such were, grossly put, some of the questions of an age in which wage labor seemed neither natural nor immediately acceptable. It was a period marked by ideological diversity: a broad variety of ideas for reform, for revolution, as well as for defending industrial capitalism. In brief, there was a feeling that the future was still open. In 1870, the order of largescale industrial capitalism and widespread, permanent wage labor had not yet solidified. By 1900, it had. The period witnessed the emergence of a broad variety of worker organizations, labor agendas, and very different reform initiatives coming from different ideologies and perspectives: free market liberalism, Marxism, socialism, and different branches of these, just to name a few. These ideological and political struggles about the new industrial society

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often drew upon traditional moral and political sources of evaluation, such as Christianity, the work ethic (itself an outgrowth of Protestantism), or American ideals of independence, property, liberty, and democracy (not least in that kind of participatory democracy that Tocqueville had famously described in his book on America and its townships), as well as newer sources of evaluation such as different theories of political economy and of social theory. To be sure, not everyone agreed that industrial capitalism was in need of political reform, revolution, a more powerful state, or powerful labor unions. The doctrine of American “social Darwinism” and related ideas that celebrated “effort and ruthless competition” provided moral justification of the violent and antagonistic course of rapid industrialization in America (Bendix 1963: 254–74). Through the close readings of texts, this chapter presents the key ideas and arguments of some influential advocates of different ideological stances.1 Each in their different ways, free market liberals, socialists, Marxists, Social Gospel Christians—and many others—tried to come to terms with the new reality of industrial wage labor.2 Reform movements arose in order to offer social protection against the growing impact of unregulated capitalism. They were, however, often split between those who aspired either to regulate or control (or even to overthrow) the capitalist corporation from the outside—through the state, through labor unions—or from the inside, as for example through new kinds of enterprises relying upon the then prevalent ideals of worker coownership and autonomy, shared by some socialists as well as by some liberals of the nineteenth century. Capitalists and industrialists at the time could find ideological support in one of two different business creeds—one which was grounded in laissez-faire liberalism and social Darwinism, and one which opted for moral obligations and reform, but a reform driven from within. Whereas historians of the late nineteenth century have detailed the history of the labor movements, the rise of big corporations, and the various political and ideological movements at the time, this early version of “progressive business” has received much less attention (Chandler 1995; Davis 1999: 3–51; Perrow 2002; Sklansky 2002). Revisiting it will demonstrate striking similarities—in awareness of crucial differences in historical context—between an unregulated capitalism of the late nineteenth century, in which “market reformism” offered one way of social protection, and our own age’s period of global capitalism, where market reformist ideas once again have risen as alternative offers of social protection. In both cases, market reformist ideas rely upon a discourse of responsibilities, as opposed to a discourse of legal requirements; in both cases, they respect property rights and the idea of a free market, but urge business owners to take on social responsibility. To understand these striking similarities, and to appreciate the lasting influence of the late nineteenth century, we need to go back there.

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The challenges of industrialization America changed profoundly in the aftermath of the Civil War. Rapid industrialization, urbanization, and a new wave of mass immigration constitute three of the most defining processes of the last third of the nineteenth century (Brogan 1999: 377–406; Reynolds 2009: 243–301). In the words of Daniel Rodgers (1978: 22): “In the second half of the nineteenth century the factory system invaded the antebellum farm and shop economy, overturning not only the familiar patterns of work but the ways Northerners had been accustomed to think of their labor.” It is here we can date the rising prominence of “capital” and “labor” in the United States, a dividing line not nearly as important earlier. It is also here we can date some very important organizational innovations—the rise of the business associations and of the labor unions. Historians have used the periodization “Gilded Age” to refer to this age of new riches, railroad tycoons, industrialists, financial magnates, and political corruption (Pettegrew 2001). It is arguably the only periodization term used pejoratively, as the period was also characterized by unprecedented inequality, mass poverty, and social despair. This is one of the reasons why the period has often been looked back upon as a time that, by and large, failed to deal with the new challenges of industrialization, urbanization, and mass immigration. There was not, at this time in the United States, anything that nearly resembled a “welfare state,” an institutional innovation first seen in Germany in the late nineteenth century, initiated as a kind of class compromise toward the laboring classes, and which did not have anything which resembled it in the United States until the rise of the New Deal in the 1930s (Eisner 2011: 58–79). Instead there was a lot of criticism of political corruption. Whereas the “labor question” or the “social question” had so far been haunting the old world of Europe, while the slavery question had divided the United States, they now became increasingly urgent in America. The period from around 1870 until 1900, from the Gilded Age to the Progressive Age, was a period of profound transition, and it did not go by peacefully. As labor historians Philip Taft and Philip Ross noted: “The United States has had the bloodiest and most violent labor history of any industrial nation in the world” (Taft & Ross 1969: 221; cf. also Guillén 1994: 38f.). Or as Sanford Jacoby wrote: “No industrial country was as successful as the United States in suppressing organized labor” (Jacoby 1997: 13). Politically, there was a beginning shift toward the state playing a greater role in the economy in the Progressive Age, but it was still minimal when compared to later expansions of federal state power. This was an age in which representative democracy (not for women and not for the vast majority of African Americans) as a means for offering social protection against capitalism, not least at the federal level, had yet to be discovered.

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To get an idea about just how much this era of industrialization was a period of transition and novelty, we may start by taking a closer look at the history of wage labor. Today, wage labor may seem as natural in the modern world as trains, airplanes, or cell phones. But it was not until the nineteenth century that wage labor became a widespread source of income. In the late eighteenth century, the working class, defined by not owning capital goods used in production, not controlling the labor of others, and not being slaves, amounted only to about 5 percent of the American population; at the end of the twentieth century, more than half of the population were part of the working class, and almost an additional third belonged to the “new middle class” who controls labor over others (Bowles et al. 2005: 155f). The United States was an industrial latecomer. It was not until the 1870s that industrialization gained speed, but when it did, it did so rapidly, sparked by technological change (railroads and mass manufacturing) and massive immigration of cheap, unskilled labor (Barley & Kunda 1992: 367; Bowles et al. 2005: 152–64; Guillén 1994: 34ff.). The transition from an agrarian household economy to industrial capitalism gained momentum in the aftermath of the Civil War, and wage labor gradually outmatched independent commodity production by individual households and small workshops. This initial stage of American capitalism has been dubbed “competitive capitalism” (Bowles et al. 2005: 160–2). It was still largely characterized by small businesses, employing less than twenty people, that mainly competed by price-cutting, but it gradually gave way to industrial capitalism and the factory system. By 1910 the United States was the world’s leading industrial power, with nearly double the production of the world’s next largest, Germany (Rodgers 1978: 27). Back then, however, the economy of the late nineteenth century was not referred to as a “capitalist” economy—a term which did not come into widespread use before the beginning of the twentieth century (Brick 2006: 3). Instead, contemporary writers often referred to it with terms such as “the wages system,” the “regime of wages,” or the “factory system.” When the people of North America experienced the transition to a wage labor economy, many, at least in the decades following the Civil War, thought that the system of wages would only be an intermediate phase in history, not something that would permanently define life. Abraham Lincoln, for example, stated in the 1850s that wage employment would only be something that would serve as a temporary form of income for individuals. The people of the North may have been successful in abolishing slavery, but many felt unease with the rapidly spreading industrial system of wage labor. And this even to the extent that, for several decades into the post-bellum period, there was uneasiness with the distinction between wage labor and slavery. As the Christian socialist and abolitionist Jesse H. Jones said in 1857, “it is inconsistent with Christian freemanship for any man to work for wages for any body” (quoted in Rodgers

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1978: 32). Half a century later, such a view had indeed become out-of-date with the reality of industrial capitalism.

Responding to industrialization: market reformism as an alternative promise of social protection Some of the reactions to industrial capitalism advocated organized effort against the power of capital, stressing the need for labor unions, or for abolishing the new regime of private capitalist-industrial ownership and control altogether, as in Europe.3 These various groups—popular movements, labor unions, newly founded scientific associations, various writers and intellectuals—advocated political or democratic reform or revolution. They wanted to break the regime of industrial capitalism—through unions, through self-ownership and co-operatives by self-employed workers, etc., although not through state socialism (at least not yet), and not through increasing the power of the state (which becomes more prevalent first around the shift toward the twentieth century). Approaching the turn to the twentieth century, there was an increasing cry for progressive legislation and for public and civil society organizations. By contrast, similar goals of curbing the newly unleashed market forces of industrialism were seemingly shared by others who instead advocated solutions based on private initiative—initiatives of industrialists and owners. In principle, they supported the idea of market self-regulation, but they added an ethical, religious (Christian), or another moral world view that would mitigate the excesses of the capitalist market system. In short, they advocated market reformism, that is, they argued that there was definitely something wrong with the new reality of industrial capitalism, but they thought that its problems could be overcome without handing over too much power to especially the labor unions, to states or the federal state, or to socialists.4 Market reformism was about adding new social responsibilities to the industrial corporation, rather than giving away any lasting concessions concerning property and control rights. Market reformism would be “progressive” but anti-union, often anti-regulation and anti-statist, and definitely anti-state-socialist; it would often share with various utopian socialists as well as progressives a critique of the existing capitalist order, but it would mainly rely on a traditional moralistic critique. It was reformist but mildly so, and definitely not anti-capitalist. It would serve as an ideological foundation for “progressive employers” and “enlightened management.” In later variants of market reformism in the course of the twentieth century, it would accommodate critiques of capitalism into its vision of a better, more enlightened, more

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humanistic, more social capitalism. From its very outset, market reformism was not a unified ideological position or discourse; it was rather different variations over the idea that industry could better accommodate the needs and wants of the workers. Market reformism was one, particular response for providing social protection in an age of unregulated capitalism. If we follow the concepts of Karl Polanyi, we may say that American industrial capitalism, the self-regulating market, and the social dislocations they produced, were met with very different ideas about social protection. Market reformism was a reaction to the ongoing threats of organized labor, revolutionary ideas, and class struggle. Its promise was that it would protect humans (labor) from the pure regime of market laws, and be an alternative to various strands of socialist, revolutionary, and populist thought, as well as to nineteenth-century free market liberalism and the principle of laissez-faire. There was a pluralism of market reformist ideas—ideas of cooperative movements, of profit sharing, of industrial betterment, and of welfare work, to mention some of the most important ideas. In the 1860s and 1870s, the idea of cooperative movements became widespread, resting on the central belief that individual workers would make partnerships and become owners on an equal footing. In short, cooperation was that period’s response to “the labor problem.” It was an idea that even spanned across typical lines of ideology and class. Especially from around the 1870s, ideas of “industrial betterment” and of welfare work became more widespread. Central to industrial betterment was the notion of employers’ responsibility for the workmen; the aim of bettering the employee, his character and habits, and his conditions; of achieving industrial peace through partnership and cooperation—and of accumulating profits. As organizational theorists Stephen Barley and Gideon Kunda noted: “In short, the path to profit, control, and industrial peace lay in bringing the worker’s interests, values, and beliefs in line with those of the owner” (1992: 368). Originally, welfare work arose in companies controlled by the companies’ founders, who had made great personal fortunes. Some of the earliest examples of welfare work were driven by Quaker and Protestant businessmen (1992: 365). Industrial betterment spread from the railroad industry, and its establishment of Young Men’s Christian Associations (YMCAs), to other industries in the 1880s and 1890s (1992: 365–8). It became known in the popular press, and it was described in governmental reports as producing examples of good practice. New associations were formed that promoted industrial betterment, and a growing number of firms adopted welfare programs. “Industrial betterment” consisted of elements such as different recreational opportunities (e.g. cafeterias and gardens, company housing, magazines, athletic facilities), but also financial elements such as profit sharing, paid vacations, unemployment and job security measures, and retirement arrangements (1992: 366). It sometimes operated

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with some degree of industrial democracy, as marked by the institution of “company unions,” and embraced ideals of workers’ participation, as an alternative to union membership. Originally, it was more concerned with life outside the workplace than with reforming the work itself (1992: 367). In the mid-1880s, the idea of profit sharing rose to prominence (Rodgers 1978: 45–50). Instead of employees aspiring to start up their own enterprises, they would have a share of some of the profits. In brief, there were a number of ideas for social protection against the pure market regime, which were not based upon labor unions or the state: cooperation (some forms), profit sharing, industrial betterment, welfare work, and company towns. Many of the ideas, theories, and concepts by which the inhabitants of the American North tried to come to terms with their new industrial reality were originally conceived in Europe (Rodgers 1978: 1–29). It makes little sense to treat a nation as a self-contained source of ideas and ideologies, and least of all in the case of America, the modern immigrant nation par excellence. Historians of the US in the post-bellum period until World War I have detailed the influence of European thought on America, describing a web of, in the words of historian Daniel Rodgers, “Atlantic crossings.” As Rodgers (1998: 1–2) explained: “A key outpost for European trade and a magnet for European capital, the eighteenth- and nineteenth–century United States cannot be understood outside the North Atlantic economy of which it was a part,” and Rodgers further noted that “Atlantic-era social politics had its origins not in its nation-state containers, not in a hypostasized ‘Europe’ nor an equally imagined ‘America,’ but in the world between them” (1998: 5). The migration from the old to the new world was not just an immigration of people, but also an import of ideas. The reformist or revolutionary ideas often had European origins or experiences at their root, as European countries, most notably England, had industrialized earlier. If anything, the rise of industrial capitalism triggered a new import of ideas from Europe, most notably perhaps socialist and Marxist theories. As noted by philosopher Hannah Arendt (1990: 55) in her book On Revolution, then, the end of the nineteenth century was also an era in which there was a renewed migration of “theories and concepts [ . . . ] from the old to the new world.” What, then, were the most important European influences on market reformism? European experiences with industrial capitalism and the ideologies striving to understand it, or to offer solutions to the “labor problem,” crossed the Atlantic basin from England, but also from France and Germany. Important sources of influence were, for example, particular “best practice” examples of what we today might call “socially responsible” businessmen. One of these was the Scotsman and utopian socialist Robert Owen. Owen was not only renowned for creating a new kind of socially responsible business, but also for his writings on utopian socialism. Although ideas of “industrial betterment” were already manifest in the first half of the nineteenth century,

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as in Owen’s 1813 book, A New View of Society, and in James Montgomery’s lesser known The Carding and Spinning Master’s Assistant: Or the Theory and Practice of Cotton Spinning, from 1832, it was not until the 1870s that it caught the American industrialists’ attention, introduced to them by a loose coalition of reformers (Barley & Kunda 1992: 365). The British John Ruskin’s “aesthetic” critique of industrial work was also widely read in the US (Rodgers 1978). The idea of profit sharing, for example, had been advocated by the British thinker John Stuart Mill, whose book on political economy from 1848 served as something like the age’s textbook of political economy, until it was eventually substituted by Alfred Marshall’s book on economics in 1890 (Winch 1970: 11). And it was the American publishing of the British Sedley Taylor’s book on profit sharing in 1884 that most thoroughly outlined the advantages of profit sharing, with “best practice” examples from England and France (Rodgers 1978: 46). This was a kind of literature which would demonstrate, through empirical examples, that another kind of industrial capitalism was indeed possible. Such work would widen the imagination of possible futures for industrial development. Many market reformist ideas may have had European origins, but they were also received in a distinct American cultural and ideological context. According to intellectual historian David A. Hollinger (2002; 2004), the most defining exception of the US has been its Christianity. Christianity is important for understanding the reform movements, whether they made a pledge for the reform of industry from within or from without. It was important for early progressives, and also those who were skeptical of market self-regulation and opted for various kinds of state initiatives, social engineering, and institutional design. The ideas and ideals of the revolutionary era also continued to exert its influence upon how Americans evaluated their society. The Jeffersonian idea that economic independence was a prerequisite for political liberty, for example, had a lasting influence. As Daniel T. Rodgers wrote: in the midst of most Northerners of the Civil War generation, democracy demanded independence, not only political but economic; it demanded the maximum diffusion of self-reliant habits; and it demanded that the distance between the status of a rich man and a poor man not be so immense as to corrupt the one or provoke the other to a desperate rebellion. (Rodgers 1978: 33)

Industrial capitalism was judged and evaluated on the ideological traditions already strongly embedded in the United States, not least Jeffersonian liberalism and Christian Protestantism. Indeed, industrial capitalism marked a fundamental challenge to key ideals of the American Revolution and of American republicanism—notions of self-ownership and self-rule, of equality, and of liberty. But it also, as in the case of the priest Washington Gladden and the Social Gospel, marked a threat to the values of Christianity, at least in the Social Gospel’s distinctive interpretation of it. With Gladden as an example,

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we can see how market reformist ideas of “the system of cooperation” played out in the 1870s—an age in which it was still common to suggest that “the wages system” would disappear again.

Christianity as civilizer To offer a kind of social protection against wild, unregulated industrial capitalism, such became an agenda of parts of the Protestant church. Some market reformist ideas of this age were morally and philosophically justified through a Christian ethic. This can clearly be seen through a close reading of one of the Social Gospel’s early leading figures and key inspiration for the industrial betterment movement, Washington Gladden (1836–1918), a congregational church pastor. Gladden was a particularly influential “early spokesperson” of industrial betterment (Barley & Kunda 1992: 365).5 Gladden, however, is best known for being a key figure of the American Social Gospel movement—one of its early leading figures (Boyer 2009; Dorn 1996). This movement arose in the late nineteenth century Gilded Age, in response to industrialization, urbanization, and immigration, and the dislocations and social despair associated with these. It had roots in the pre-Civil War evangelical reform movement, but it was, in particular, a way in which some pastors and members of the Protestant church tried to reform the church in such way that it would respond to the immediate social and economic challenges of the age. In brief, the cornerstone of the Social Gospel was to insist upon an interpretation of contemporary society from the standards of the Bible, asking the question: “what would Jesus say?” if he was to witness this misery. The Social Gospel insisted that the message of the Bible was directly applicable to society and its urgent social and economic issues. To be sure, proponents of the Social Gospel had dissimilar views, but uniting themes were theological liberalism (open toward evolutionist theories and of non-literal readings of the Bible), the idea of fulfilling God’s will on earth (by having a direct focus on social and economic justice), and a variety of reform proposals in relation to child labor, factory safety, etc. (Dorn 2001). It continued to be important around the turn of the twentieth century and the Progressive Age, and its influence can be seen in, for example, social settlement worker Jane Addams and her founding of Hull House in Chicago in 1889, built for various educational and welfare facilities for Chicago’s poor, immigrants, children, and women. Gladden, at least in the text examined here, first and foremost believed in the movement’s focus upon reform through the change of values, and by addressing individuals’ consciousness, as opposed to, e.g., the Christian socialists. To Gladden, the direct application of Christian ethics, the law of

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love, implied that “the labor question” was something which could, and should, concern the church. Working People and their Employers came out in 1876, a year after Gladden had become the Congregationalist pastor in Springfield, Massachusetts, after serving as a priest at several other churches in various places of New England. He had witnessed labor unrest, strikes, social despair, and continuing racism numerous times. Springfield was then a worn down factory town, heavily marked by the economic depression of the 1870s. Working People and their Employers was, according to historian Paul Boyer, “an early social gospel manifesto” (Boyer 2009: 91). Gladden’s work was intended for a popular audience, providing moral guidance for “working people” as well as for employers. As with the bulk of Gladden’s numerous publications, the book was composed of sermons. The book was a treatise on proper conduct, especially related to the urgent “labor question” and class warfare. Its message was to prepare workers as well as employers for the coming of a new society where capitalism would be reformed by Christianity.6 Offering moral guidance to managers or “agents” as well as to employees, it bears some resemblance to the later popular genre of management books. The three pillars of Gladden’s thinking were Christianity, a theory of historical evolution, and political economy. As with his contemporaries, Gladden drew heavily upon European economic and political thought. He fused his Christian preaching with arguments derived from political economy, most importantly the Irish political economist John Elliott Cairnes, but also the English writer and Christian socialist John Ruskin. In his skepticism of state interference, Gladden also referred to Herbert Spencer, while in his vision for the future of the labor class he derived some (if not all) of his ideas from John Stuart Mill, most notably the ideas of profit sharing and of worker cooperation. He distanced himself from socialism as well as from laissez-faire liberalism, critical of the state as well as of the orthodoxies of political economy, and offering an alternative theory of historical evolution against the “survival of the fittest” social Darwinist theory. Gladden’s solution to the labor question seemed wholly to be an abolition of the wages system altogether, using his theory and vision of history to create the image of a future in which wage labor disappears again. Gladden presented and justified a new vision of industrial society. In his ideal society (the “system of cooperation”) the drive toward private accumulation of wealth is constrained by Christianity. Gladden thus provided the moral foundation for a new course of action for capitalists as well as for workers. He represented a Christian criticism of capitalism (“the wages system”), but it was a reformist criticism, not a radical criticism. He outlined new criteria for justifiable actions, both for employers and employees. Capitalism was justified, but only to the degree that it exhibited features that were in accordance with the Christian law, the law of love. As in much later versions of

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market reformism, we find the same structure in justification: capitalism is justifiable, but only to the degree that it is in accordance with central norms in the cultural and ideological context. For Gladden, this was, ultimately, the Christian vocabulary of love, and the idea of humanity; in later variants of market reformism it is ideals such as social responsibility and humanism. Gladden recognized the parallel increase of total wealth along with growing inequality and class tensions. He was both critical of “the wages system,” as well as of socialism and communism, but clearly most skeptical about the latter two. He strongly urged the need to alter the relations between capitalists and workers in modern industry. For Gladden, the path to a more just and humane society went through the dissemination of a Christian ethics. This would not only improve the sentiments of the capitalists and their hired managers (“agents”) Gladden argued, but also the morality of each individual workman. From Christianity, the workman would learn the virtues of hard work, self-denial, “economy” (meaning parsimony, wariness of waste, the ability to save), but also the meaning of higher purposes (than simply accumulating wealth), i.e. learning to live a life governed by the law of love. One of Gladden’s key concerns was his critique of political economy. He argued that the doctrines of political economy offered an ideological justification for a pure market regime, in which employers do not have any further responsibilities toward their workmen. Again, the Christian law of love is the foundation for his critique. Although Gladden recognized the description of society provided by political economy, and its truthfulness in the depiction of human nature in its current state, he opposed giving political economy the final word. “Political economy tells us what the laws of exchange are: the New Testament shows what the relations of men ought to be” (1876: 168). Gladden faulted the fatalistic view inherent in political economy for omitting individual action and responsibility. In blunt prose, Gladden addressed what he saw as the common conviction of the capitalist, and at the same time passed along his own message of welfare commitment: Might he [the capitalist] not, if he had chosen, have used his money in increasing the wages of his laborers? “But that is all nonsense”, answers the capitalist. “Business is business. Supply and demand, my dear parson! Supply and demand! Every man must pay the market price for labor, and any man is fool who pays more.” No, my friend: you do yourself wrong. You are not wholly the victim of these economical laws: you resist them and you rule them sometimes, in the interest of humanity. There is a poor man in your employ who has been partly disabled. In the market, he could get almost nothing for his labor. But you take pity on him and his household, and continue his wages you paid upon him when he was in good health. That is not “supply and demand” at all. Another law comes in here, a better law,—the law of love. You do bring it in, now and then, to alleviate the hardships that would result from the inflexible enforcement of those

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economical laws of which you speak. The question is, whether, indeed, you might not incorporate it into all your dealings with your working-men; and instead of saying, “Business is business”, say, “Business is stewardship: business is the high calling of God, into which I am bound to put conscience and benevolence, as well as sagacity and enterprise.” (1876: 37f.)

That each individual, not least the capitalist or the manager, has an individual choice and a responsibility is a generic argument for advocates of market reformism (cf. e.g. Ghoshal 2005). Gladden was an early advocate of the criticism of the alleged moral neutrality of political economy; he insisted that “the questions of social science or of political economy are in part moral questions” (1876: 37). Standing in the midst of a rising number of professionally managed corporations with little or no direct contact between capitalists and workers, Gladden observed the increasing distance and the “soullessness” of corporations; “the tendency of the large system of industry is to render capital impersonal, and thus unmoral, if not immoral, in its relations to labor” (1876: 174). As a remedy for this development, Gladden insisted on the moral obligations of employers to the physical and mental welfare of employees, invoking ideals of courtesy, respect, and gentlemanliness (1876: 175ff.). Again, Christianity provided the all-important moral foundation: “The Christian law is, that we are to do good to all men as we have opportunity; and certainly the employer’s opportunity is among his employees” (1876: 181). Gladden’s solution to the labor question was a kind of gradual, historical evolution. “Cooperation” among workers was a bearing idea for how to deal with “the labor question” in the 1860s and 1870s, and it was a catch word at the time (Gladden 1876: 45, 206, 234ff.; Rodgers 1978: 40). Gladden’s idea of cooperation was based upon his idea of historical evolution, in which he offered an alternative to the “survival of the fittest” doctrines. Gladden sketched the historical development in three stages: the system of slavery, the system of wages, and the system of cooperation (1876: 30ff.). The present system, i.e. the system of wages, was ruled by the laws of supply and demand and not much else; it was a system based upon contracts between buyers and sellers of work, and of competition between employers as well as between workers. Indeed, Gladden partly acknowledges the opposing interests between employers and laborers, as it was described in the natural laws of political economy (1876: 33ff). The war between capital and labor stemmed from their diverging interests, i.e. the contingent constellations of demand and supply of labor and capital. Ultimately, Gladden’s criticism of industrial strife was connected to what he saw as the role of the preacher, i.e. taking on the task of reconciling the classes and diminishing conflicts. It was the “preacher’s duty to show both classes [ . . . ] that they are bound together in a community of interests” (1876: 191).

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In this sense, Gladden took a position generic to later variants of market reformism, stressing the common interests of wage earners and employers. Indeed, Gladden’s solution to the labor problem was a solution that claimed to be to the benefit of all. In the system of cooperation (the system that would replace the wages system), there would be what Gladden described as an identification of the laborer and the capitalist, as the workers will own their own capital and divide the profits among them. Laborers will become capitalists. This, however, could only be achieved through the willingness of each workman to save capital, and to join together with others in a cooperative enterprise. The key to social change thus lay not in legislation, not in government, and not in worker unions (although Gladden does not suggest that unions are illegitimate). Instead, it lay in the “internal” transformation of workmen, i.e. primarily through the changing of their morality and character. The idea of workers joining together in free, cooperative enterprises did not break with the principle of private property rights, and neither with producing for a competitive market. As in its most famous articulation by John Stuart Mill, it was anti-capitalist in the sense that the only progressive future for the laboring classes was self-ownership—Mill saw nothing admirable in the wages system (Mill 1970: 118–43). It is perhaps not too surprising that this particular idea has been advocated by liberals as well as by socialists, and that it was taken up by Washington Gladden. Indeed, Gladden saw “industrial partnerships” and profit sharing as a steppingstone to the system of cooperation (1876: 49). The idea of profit sharing, according to Daniel Rodgers, rose to prominence in the mid-1880s, partly leaving the last decade’s ideas of cooperation, industrial partnerships, and worker autonomy behind, which Gladden still believed in. The idea of profit sharing was, following Gladden, that the workers’ own proprietary interests were integrated into the work—something that would later, in the 1890s, be increasingly dealt with instead through employer and business organizations’ idea of piece work (Rodgers 1978: 50–7). Gladden thus maintained the belief in private industry and private property, arguing that progress was due to prospects of profits; he insisted on the intimate relationship between private property, individual character, and freedom. But the ideal of worker autonomy, meaning both self-rule and self-ownership, was the end goal. In the ideal system of cooperation, economically independent workers would join together, own the capital together, and share all of the profits. Some decades later, as the reality of industrial capitalism, widespread wage labor, and highly concentrated ownership solidified, this vision seemed more and more out of reach. Gladden’s way to the goal was first and foremost through a spiritual revolution—a spiritual conversion of each individual now working for the realization of the Kingdom of God on earth, essentially meaning a society in

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which the care of each individual is provided for. In his book of 1876, he thus warned against other ways for socially protecting workers against blind and wild market forces, so painfully made present through that decade’s economic depression. Gladden positioned himself against the proposals for social reform that saw government or legislation as the means. Gladden argued against a variety of political reforms, such as that the government should subsidize cooperatives and industrial partnerships, as this would only impose an unfair tax on others (1876: 207). Gladden strongly opposed the different ideas of socialism prevalent at the time, being skeptical of ideas of the nationalization of capital, and of violations of the right to private property. He warned against the centralization of power, and was skeptical of the communist principle that each should receive according to their needs (1876: 224ff.). In Gladden’s criticism of governmental and legislative means toward social reform, he also faulted the rising initiatives of public charity organizations for their perverse effects on individual responsibility: There is no lack of organized charities, hospitals, homes, relief agencies, city missions, and all that; but I sometimes think these very agencies aggravate the evil. [ . . . ] Quite willing, far too willing, are most of our good Christians to let the clergyman be the poor man’s only friend; to turn him over to the duty of caring for the lowlier classes of society; to make him a sort of charitable middle-man whose function it is to keep the poor from troubling the rich, and the rich from taking thought for the poor. (1876: 189f)

Gladden attacked the political initiatives for social reform. Contrariwise, the most beneficial, most Christian thing there is, is to have a business employing large masses of workers, thereby creating a community and aiding workers in living better, healthier, and more intelligent lives, and thus helping laborers in helping themselves (1876: 185f). This activity constituted the most praiseworthy contribution to the world, and Gladden was here describing how industry, properly governed, can be thought of as more Christian and much more laudable than, for example, public charities. According to Gladden, combining industry with philanthropic motives was indeed possible for capitalists. In a question directly addressed to “gentlemen capitalists,” Gladden asked: Are not such opportunities on a larger or a smaller scale open to all of you, gentlemen capitalists? And is there any better way for you to serve Christ and your country than to put yourselves thus into kindly and helpful relations with the people you employ? [ . . . ] Perhaps the time may come when the improvement of the condition and the character of human beings will afford to some good men an equal pleasure. It is not by alms or largesses that we wisely aid our fellowmen, but by encouraging them in their efforts to take care of themselves. There is a great field here for philanthropic labor; and the time will come, I doubt not, when good men will be ready to occupy it. (1876: 186f.)

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In Gladden’s moral universe, the ultimate greatness was achieved through industrial enterprises that care for the welfare of employees, and help them to help themselves. Gladden argued, sometimes preached, that the free enterprise system could be brought into accordance with the values of Christianity. In the ultimate test, the test of Christianity, the system of free enterprise passes the test better than public and political measures toward social reform. In sum, Gladden reacted to problems of “the wages system,” and offered a solution that combined Christianity, free industry, and cooperation. His proposal for reform was for an inner revolution—changing the mindset and the morality of workers as well as capitalists. But it was also a vision that remained firmly rooted in the republican, pre-industrial ideals of selfownership and self-rule. An advocate of the capitalists’ moral obligation to care for the welfare of employees, Gladden at the same time articulated his skepticism of state intervention and legislation (1876: 43). As Gladden later urged, an employer should consider his employees “as the flock over which he is the shepherd” (Gladden 1897 quoted in Boyer 2009: 95). By describing free enterprise and its prospects of becoming a cooperative system of industrial partnerships as being morally good, judged from the standards of Christianity, Gladden justified capitalism, although it was a justification that would have come with a “price”: from the employers’ point of view to embrace welfare and industrial betterment; from the workers’ point of view to focus upon individual responsibility, “economy,” and cooperation. Gladden did not question the economic growth brought on by capitalism, but first and foremost critiqued the notion that capitalists and managers did not have any responsibility toward their employees. He did not bring the principle of market selfregulation into question. On the contrary: against the notion that capitalists need only to comply with market forces, Gladden sought to show that there was always a scope for moral action. Gladden’s position was ambiguous: using thoughts from classical political economy and free market liberalism, he lauded the accumulation of profits, accepted and praised competition, and insisted on individual freedom, responsibility, and autonomy With Christianity, he urged the need for mutual dependency, responsibility for others, and higher goals than pecuniary ones. The strength of his vision of a market reformism, i.e. that it united the two strong normative vocabularies of both Christianity and of liberalist political economy, was also its latent weakness, since the relations between them are in many respects contradictory. Gladden later moved to Columbus, Ohio, serving as a pastor, and again witnessing labor unrest. He successfully ran for public office in 1900. According to historian Paul Boyer (2009), Gladden became more radical as he aged. In contrast to the views propounded in Working People and their Employers, he publicly defended worker’s rights to unionize, as well as various public organizations. Still, the basic message was to appeal to the individual consciousness and the law of love.

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Gladden wrote at a time when market reformist ideas became influential. They materialized in private welfare arrangements, company towns, and other initiatives. But market solutions to social reform were soon met by criticism of various sorts. Reformers mainly concerned with industrial democracy often saw trade unions as “the only genuine vehicle for realizing citizenship norms within industry,” whereas others, such as Gladden, and the later surge of “welfare capitalism,” were mainly “skeptical of legislative responses to social problems, preferring instead to rely on private solutions” (Jacoby 1997: 17). In economist Richard T. Ely’s study of a complete company town, Pullman, the distance between market and democratic reformism was also clear—but from the perspective of a thinker who had more belief in democratic reform than in market reformism. Ely’s study was a comprehensive critique of the company town of Pullman. It was a critique of that benevolence which is conditioned upon the making of profits. But, in a wider perspective, the study of Pullman was also a principle case for whether market reformism was truly progressive or not.

An early progressive evaluates a company town As we have seen, unregulated capitalism, ideologically justified by free market liberalism and popular notions of the survival of the fittest, was increasingly met by a broad variety of ideas and ideologies concerned with social protection against a pure market regime. Economic depressions and repeating labor unrest were part of the reason why employers and business owners sought new ways for managing industrial capitalism (Barley & Kunda 1992: 367). One of these market reformist ideas was company towns—the idea of building a complete town next to the factory where workers worked, renting them accommodation, facilitating places where they could eat, buy goods, go to church, etc., and where all these facilities were owned by the company. In brief, the factory town was one of the experiments (as had been ideas of workers’ cooperation, profit sharing, company unions, etc.), of social protection against the pure market regime. One aspect of it was that it was an attempt at showing that industrial capitalism could reform from within, without relying on labor unions or the state, and by remaining definitely anti-socialist. One of the best-known factory towns was Pullman, a factory producing railway cars located near Chicago. On 11 May 1884, a workers’ strike broke out at the company Pullman. Workers protested against a wage cut, launched in response to the economic depression of 1883. Half of the striking

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workers lived in the company town Pullman which was built in the beginning of the 1880s by the owner, industrialist George Pullman (1831–97). Soon, the Pullman strike received national attention, as the American Railway Union, led by the leader Eugene Debs, organized a boycott of all trains with Pullman sleeping car trains. This also led to an outburst of violence in Chicago, the sending in of federal troops to stop the riots, a legal injunction against the boycott supported by the Supreme Court and later to be used against other such boycotts, and the prosecution and imprisonment of union officers such as Debb. A critical comprehensive study of Pullman, one of the most developed company towns, was written by the renowned economist Richard T. Ely (1854–1943) in 1885. Ely was then professor in political economy at Johns Hopkins University, and one of the founders and the first secretary of the American Economic Association, founded that same year. He was educated at Columbia University in New York, as well as in Berlin and Heidelberg, where he received his PhD, and where he was heavily influenced by the German historical school of economics—an influence which, through Ely, had direct impact upon the development of institutional economics in the US. Both through Ely’s writings, such as his textbook on economics, other economic writings, writings on socialism, etc., and through his organizational entrepreneurial skills (Ely also became the director of the School of Economics, Political Science, and History at the University of Madison, the founder and the first secretary of the Christian Social Union, and was involved in a range of learned and civic organizations), Ely was an influential figure in his own time. He wrote several books on socialism, the first in 1883; but he also criticized and publicly dissociated himself from socialism, as when he was under accusation for teaching socialism in 1894, which threatened his university position. According to M.S. Wilkins (1958), it seems fair to note that he was actually quite sympathetic to socialism when it was compatible with Christianity. Ely became closely associated with the Social Gospel. The key idea of the Christian Social Union was also the direct application of Christian ethics on economic affairs. Ely is renowned as one of the early leaders of the Progressive Age, in which can be seen an increased role of the federal state around the turn toward the twentieth century (Eisner 2011: 39–57). To be sure, one should be cautious with too rigid a historical periodization, and the Progressive Age was under way prior to this. The American Social Science Association, for example, was founded in 1865, and combined an application of social science with ideas of social reform: charity, poor relief, public health, education, and crime prevention, stressing the increased interdependence in social relations (Sklansky 2002: 109ff.). It dissociated itself from socialism and radicalism and was a “deliberately constructed alternative to the looming threat of class politics” (Sklansky 2002: 111). It gave rise to a network of professional organizations in the 1870s and 1880s.7

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Ely’s text carried the simple title—“Pullman: A Social Study”—and it was published in Harper’s New Monthly Magazine, intended for a broad public (Ely 1885). As on other occasions, Ely wanted to “see for himself,” probably attracted by the national attention the company and town received in 1884. He wanted to evaluate whether the system of a company town was a way forward for protection in an increasingly industrialized capitalist society. It was a text that critically tested the idea and practice of Pullman, using a social, egalitarian ideal and the American legacy of self-governance as the measurement of critique. Ely ultimately drew the conclusion that he did not support the idea of relying on private regimes for the securing of the welfare of workers, and for the promotion of social change. In his study of Pullman, we find a telling criticism of a particular variety of market reformism that attracted widespread attention in the late nineteenth century. According to Ely, Pullman was the residence for more than 8,000 workers who lived and worked there. Housing was only available by renting, and everything that could be bought or rented in the city was owned by the company. Ely describes the city as having brilliant architecture, and being perfectly cleaned, ordered, and hygienic. One of the founder’s central ideas is described as the “commercial value of beauty”—it thus combined “philanthropy” with a pure business point of view: It is maintained that Pullman is truly a philanthropic undertaking, although it is intended that it should be a profitable investment, and this is the argument used: If it can be shown that it does pay to provide beautiful homes for laborers, accompanied with all the conditions requisite for wholesome living both for the body and the mind, the example set by Mr. Pullman will find wide imitation. [ . . . ] We may feel inclined to shrug our shoulders at the philanthropy which demands a good round sum for everything it offers, but certainly it is a great thing to have demonstrated the commercial value of beauty in a city of laborers. (Ely 1885: 461)

If it can be proved that it is profitable to be philanthropic, philanthropy can become widespread—so ran the logic. If it is profitable, other companies will be ready to pursue the same path of philanthropic industrialism, as here embodied in the system of the factory town.8 This is an early version of what in present-day language would be called the “business case” for virtue.9 For Ely, Pullman must be understood within the context of the new progressive current of deliberate social action against simply complying with market forces. In this sense, the factory town was an alternative to a pure market regime, an alternative to laissez-faire liberalism. “Cooperation” had become “a new social form,” Ely optimistically wrote—the popular concept of the 1870s clearly still had some resonance in the 1880s. Ely, though, did not as such speak of cooperation in the same way Gladden did, where it referred directly to the self-rule and self-ownership of workers, joining together in

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cooperative enterprises, but in a more abstract way. Ely also added that the dogmas of laissez-faire were being abandoned (1885: 452f.): The pretty dream of a perfect, natural order of things brought about by the free play of unrestrained social forces has vanished. It has given place on the one hand to pessimism; on the other, and more generally, to a determination not to let things go on of themselves, but to make them go in such manner as may be desired. The conviction has become general that the divine order never contemplated a social and economic world left to itself. Material is furnished out of which man must construct a social fabric according to his lights.

According to Ely, the world of laissez-faire and the belief that divine providence would ultimately guarantee the right development of things, had given way to the more authentic modern belief in social and political reform, and attempts by humanity to take charge of things. For Ely, the new current of deliberate action for social change had very different approaches to the problems. Ely sees both the “many attempts of “captains of industry” to step in between those they lead and the unrestrained action of existing economic forces,” as well as the new international ideologies of communism, socialism, and nihilism, as expressions of the widespread discontent with the current order and the ideal of non-interference (1885: 452). For Ely, both the market reformers and the political reformers were thus part of the broader trend of believing in deliberate social action. But if the doctrine of non-intervention seems left behind, is it then market solutions or political and civil society solutions that best promote social reform? It is this question which makes the study of Pullman a study not just of an individual entity, but a study whose ultimate purpose was to judge whether market or political solutions were the way forward for a society facing the challenges of industrial capitalism. Ely described Pullman as the most “extensive experiment” belonging to the class of action proposed by the industrialists, i.e. the promoting of social change through private initiative. Pullman and other similar practices had already been lauded as examples to imitate. Ely was standing at a crossroad: was adequate social reform to be executed solely by private means? Will the new reformist impulses embraced by industrialists be sufficient measures in the quest for bettering the conditions of life for each individual? Did this mark a new era in the history of labor? Ely thus asked whether Pullman is “a success from a social standpoint,” invoking his ideal standard of social reform, namely that “each individual be so situated as to participate, as fully as his nature will allow, in the advantages of the existing civilization” (1885: 455). After a comprehensive description of the city’s best features, Pullman fell short in Ely’s conclusion, put to the test of his social ideal. Ely discovered that Pullman offered very little, if any, opportunity for critical voices on the behalf of laborers; that there was no newspaper; no real opportunities for religious expression as the rent for church buildings

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was too high; marked restrictions and restraints on behavior; favoritism and nepotism in employment policies; and no real private property possibilities except for the company. Because all power rested in the company, “every man, woman, and child in the town is completely at its mercy, and it can be avoided only by emigration” (1885: 463f.). In conclusion: In looking over all the facts of the case the conclusion is unavoidable that the idea of Pullman is un-American. It is a nearer approach than anything the writer has seen to what appears to be the ideal of the great German Chancellor [Bismarck]. It is not the American ideal. It is benevolent, well-wishing feudalism, which desires the happiness of the people, but in such way as shall please the authorities. (1885: 465)

It was political as well as economic aspects that Ely denounced. With what might very well be an unspoken reference to Tocqueville, Ely warned of the omitting of political participation: “The town-meeting of New England has ever been regarded by writers of the highest authority on American government as one of the bulwarks of our liberties” (1885: 464). He thus suggested adding cooperative features and elements of democracy. Economically, Ely also warned of the suppression of laborers’ property rights: “The desire of the American to acquire a home is justly considered most commendable and hopeful” (1885: 464). And the fact that there are well-meaning capitalists was not sufficient ground to endorse Pullman as a new ideal for social reform: What would this mean? The establishment of the most absolute power of capital, and the repression of all freedom. It matters not that they are well-meaning capitalists; all capitalists are not devoted heart and soul to the interest of their employés, and the history of the world has long ago demonstrated that no class of men are fit to be intrusted with unlimited power. In the hour of temptation and pressure it is abused, and the real nature of the abuse may for a time be concealed even from him guilty of it; but it degrades the dependent, corrupts the morals of the superior, and finally that is done unblushingly in the light which was once scarcely allowed in a dark corner. This is the history of a larger share of the degeneracy of manners and morals in public and private life. (1885: 465f.)

Ely reasoned that even if some capitalists might be benevolent, it is in no way sure that all of them will be; laborers would be at the mercy of the will of their masters. His criticism of this particular branch of market reformism was a criticism of the arbitrariness of the system, and of the centralization of power. At the end of the day, Ely argued that Pullman represented a new type of feudalism, reintroducing master–servant relationships. These were not in accordance with the ideals of personal liberty and of American democracy; and Ely rhetorically invoked the ideals of John Stuart Mill as well as of the Founding Fathers as critical tests that Pullman did not pass (1885: 466). Indeed, one of the central innovations of the American Revolution was a new concept of popular sovereignty that was not attached to any singular

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institution (Wood 2005: 155ff.). Against the backdrop of American republican ideals of liberty, equality, and autonomy, Ely argued that Pullman was “Un-American.” Ely measured Pullman against his ideals of independence, freedom, and possibilities for political participation. From his ideal social standard of securing the possibility of each individual to participate according to their abilities in the goods of current civilization, Pullman clearly failed. Whereas Ely critiqued market reformism from the perspective of early democratic social engineering, other voices continued to appraise a more traditional conception of capitalism that did not need to excuse itself in front of social reforms. Reformists of both strands, market and political alike, were met by a criticism that saw no reason why the wages system should be mitigated by either the warm sentiments of Christian moralists or by the new progressive social scientists who wished to enlarge the powers of the state. Today, the term “social Darwinism” is conceived of as misleading (Hodgson 2004). This does not change the fact, however, that the vocabulary of “survival of the fittest” was used to describe the laws of society back then. For example, the banker Henry Clews gave this advice to Yale students in 1908: “America is the true field for the human race [ . . . ] Here merit is the sole test. Birth is nothing. The fittest survive. Merit is the supreme and only qualification essential to success” (1908, quoted in Whyte 1956: 19). In the rejections of social reform written by sociologist William Graham Sumner, we find an example of an ideological criticism of reform written on the basis of the principles of natural order and laissez-faire. Early reformers, market and political alike, were met by a free market liberalism that confronted them outright. A very influential text was Sumner’s What Social Classes Owe to Each Other, published in 1883. According to intellectual historian Jeffrey Sklansky, Sumner simply became the “fighting priest of organized capital” (Sklansky 2002: 124f). This was somewhat unwillingly perhaps, as Sumner often claimed to be speaking on behalf of the independent middleclass laborer (Hofstadter 1941: 473).

In defense of laissez-faire and “the forgotten man” William Graham Sumner (1840–1910), son to a poor immigrant laborer from England, and from 1872 professor of political and social science at Yale, was the most influential opponent to post-bellum “protoprogressive” reform.10 Reacting to public charities and to new public welfare associations, Sumner warned against the enlarged influences of the state. Drawing on a Lockean notion of the natural right to the product of one’s labor, coupled with the political economy of David Ricardo, Robert Malthus, Harriet Martineau’s

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Illustrations of Political Economy (1834), and an influence from Herbert Spencer, Sumner vehemently supported a philosophy of natural order, and a politics of non-interference. Against the various proposals for social protection against a pure market regime, Sumner defends the latter as the natural, best way for a society to work. As the first in America to teach a course on sociology in 1876, Sumner was part of a new generation of social scientists that had great hopes that politicians and political ideas could be guided by a scientific understanding of the laws of society. As Lester Frank Ward, sociologist (and fierce opponent of Spencer, cf. e.g. Ward 1894) wrote in his 1897 book, Dynamic Sociology: Before progressive legislation can become a success, every legislature must become, as it were, a polytechnic school, a laboratory of philosophical research into the laws of society and of human nature. No legislator is qualified to propose or vote on measures designed to affect the destinies of millions of social units until he masters all that is known of the science of society. Every true legislator must be a sociologist. (Ward 1897: 37, quoted in Walters 2002: 9)

For Sumner, the same principle would apply, but his science of society would urge the legislator to keep their hands off society’s natural order, as it would only interfere with the system of natural liberty. Sumner took the complete opposite stance to those who saw social science as a means toward an increased, enlightened, active role of the state. In his What Social Classes Owe to Each Other from 1883, Sumner launched a fierce attack on social reformers. His theory of society bears much resemblance to later generations of free market economists that responded to social critics and reformers of industrial capitalism. Sumner’s main opponents were what he referred to as the “social doctors,” “humanitarians,” “friends of humanity,” “friends of the working class,” “professional socialists,” “world reformers,” “philanthropists,” “sentimentalists,” or “social architects.” Common to these, according to Sumner, was a “superstition of government,” and an insufficient knowledge of society, which meant that reform proposals were always suggested without the possession of real knowledge of their effects (1883: 108). Following Albert O. Hirschman’s study of “reactionary rhetoric,” we may say that Sumner tried to argue that reformers’ proposals would have “perverse” effects, i.e. having the opposite effects than they intended to (Hirschman 1991). In the reformers’ promise of “perfect happiness” they always just ended up violating other persons’ rights to pursue happiness. Of course, political reformers were what Sumner argued most strongly against. But he was also skeptical of the proponents of market reformism because they were too critical of the system of free enterprise, properly understood. Sumner’s arguments did not share the ambiguity of Gladden’s joint critique and justification of capitalism, simply because for Sumner the system of freedom was not subject to “higher” standards, freedom being the ultimate value and principal test.

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Sumner elegantly invented the famous notion of “the forgotten man.”11 The forgotten man is the victim of the reformers’ unrecognized effects of their “best intentions.” Each time the reformers invent a new proposal to improve conditions of the poor, the working man, or any particular industry, somebody else always suffers—the forgotten man. Correspondingly, Sumner’s utmost contempt was reserved to the protective tariff, which would only violate the right of a forgotten man from entering the market. Politics of redistribution, Sumner also argued, inevitably takes away from one person what he or she has rightfully earned, giving it to another. Sumner was skeptical of exploitation of political power, and he condemned any form of “job” or “jobbery,” referring to the practice of using a public office or position of trust for one’s own benefit. This was but one of the many examples whereby one party unjustly appropriated another man’s property, using the democratic state as a means. Democracy would thereby, according to Sumner, easily jeopardize liberty. A further danger of democracy then, Sumner explains, was its easy degeneration into a plutocracy, where might (wealth) translates into right, and where money buys political influence. This was a special danger in America, Sumner warned, where no aristocratic codes or other moral institutions would hold the passions of men in check. Sumner’s criticism of social reform relied on his theory of society. This theory was in turn mainly composed of classical political economy, together with ideas of natural order and adjustment. In fact, it would make little sense to distinguish firmly between economy and society: supply and demand are the natural laws which govern relations between free men, committed to one another by mutually agreed temporary contracts. Sociology explicates these fundamental laws of human existence, from which a theory of liberty, duties, rights, and their internal relations can be deduced. The most essential fact of human existence, Sumner explained, is man’s struggle against nature in order to make a living. That each individual should struggle against nature to preserve his or her own existence is, simply, natural. Accordingly, there are natural ills which stems from this struggle with nature and the given conditions humans find themselves in. Social ills, on the contrary, are ills continuously created by civil laws and institutions that are not in accordance with the fundamental conditions of human living, the laws of human life (Sumner 1883: 14, 17, 102ff.). According to Sumner, each individual had the duty to provide for themselves in the struggle against nature. And, correspondingly, each would then have the right to the product of his or her own labor. A society is a society of individuals, each with the duty to take care of themselves, each with their own spheres of interest and influences, which will often, however, collide with one another. In this case, a series of mutual and “natural” adjustments would take place, where each of the interested parties should take care of their own interests, instead of relying on extra powers, i.e. the state, to intervene. If it is first learned that the state or others will step in, no

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individual will learn the true education of liberty, and what it means to be free. In a free state, everybody is in a sense a sovereign, but with freedom also comes the duty and the responsibility of being independent. In a central passage, Sumner wrote that “the notion of civil liberty which we have inherited is that of a status created for the individual by laws and institutions, the effect of which is that each man is guaranteed the use of all his own powers exclusively for his own welfare” (1883: 30). Like Gladden and Ely had done in their distinct ways, Sumner focused upon the economic independency of each individual. According to Sumner, liberty was liberty under the law, i.e. civil liberty. Liberty contained the freedom to labor, the freedom to engage in contracts, and the safety of one’s property. Sumner stressed the promise of constitutional freedom, which was to guarantee equal rights in the pursuit of happiness, but not to guarantee happiness itself. The social order was an order based upon equality before the law and independence; society was now a society of contracts—no longer sustaining paternalism of any kind, master–servant relationships, community bonds and the like, which, according to Sumner, nostalgic and romantic writers wrongfully missed from the age of feudalism. Freedom was won, but it came with a price: “The free man in a free democracy, when he cut off all the ties which might pull him down, severed also all the ties by which he might have made others pull him up. He must take all the consequences of his new status. He is, in a certain sense, an isolated man” (1883: 34). According to Sumner, the aggregation of capital led to new historical possibilities that were to the benefit of all (1883: 48ff). “Capital,” i.e. “any product of labor which is used to assist production” (1883: 72), is simply the reason “why man is not altogether a brute” (1883: 51ff), since it is capital which has enabled human society continuously to improve its conditions for living. Accordingly, there should be no infringements upon private property. The entitlement to the rent of one’s land is just because it reflects the owner’s toil with the land (or the toil of an earlier generation in the line of the owner). According to Sumner, these people took a risk and used their own labor to make the land productive, and are thus entitled to whatever rent it pays. Sumner clearly argues against another influential writer, Henry George (1839–97), although George is not mentioned by name, whose Progress and Poverty had come out in 1879 (Sumner 1883: 42ff). In his book, George proposed a 100 percent single tax on land, supporting equal access to natural resources in the tradition of agrarian radicals of the likes of Thomas Paine, Thomas Jefferson, and Thomas Skidmore (Sklansky 2002: 121). According to Jeffrey Sklansky, George had written what would quickly become “an unofficial manifesto for many American workers and their bourgeois allies in the nascent labor movement” (Sklansky 2002: 106). According to Sumner, the litmus test against which a society’s laws and institutions should be tested is whether they supported liberty; they should

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support the natural principle of laissez-faire (1883: 105). This cardinal principle Sumner translated into an American down-to-earth maxim: each should “mind their own business.” Liberty must never be compromised on the grounds of another goal, namely equality, Sumner urged. Furthermore, there should always be equilibrium of rights and duties; if this principle is violated and someone is given more rights than they have duties, they are unjustly privileged at the expense of someone else who consequently will have increased their duties (or burdens) without a corresponding increase of rights. The former party’s lack of labor and will to self-denial will be at the expense of the latter’s. Unearned privileges (the phrase itself a pleonasm) in the form of rights automatically violate another man’s constitutional liberty to pursue his own happiness. “Instead of endeavoring to redistribute the acquisitions which have been made between the existing classes, our aim should be to increase, multiply, and extend the chances” (1883: 144f.). For Sumner, there was a sharp divide between political reform and “private” means to social reform. Public charity was simply not just, because it meant that capital rightfully owned by one man was taken from him without his consent, and given to another man. Private charity, on the other hand, should of course be a matter of individuals. But Sumner did warn that quite a few causes would be pointless to support: the drunkard, the gambler, and the pauper were all failing in the struggle for existence, and supporting them would never teach individuals the true meaning of independence, something which Sumner might very well have learned already from his boyhood reading of Harriet Martineau (Hofstadter 1941: 458f.). Sumner argued that society should be ruled by little else than the natural laws of supply and demand, and individuals who are “minding their own business.” According to Sumner, aggregation of capital was the driving, progressive force in history—abolishing feudalism, raising the level of liberty and opportunity—but he explicitly acknowledged the conflicting interests between employers and employed. Sumner’s individualistic philosophy was not “corporatist”: It is a common assertion that the interests of employers and employed are identical, that they are partners in an enterprise, etc. These sayings spring from a disposition, which may often be noticed, to find consoling and encouraging observations in the facts of sociology, and to refute, if possible, any unpleasant observations. (Sumner 1883: 74)

Sumner stressed that employers and employed have shared as well as divided interests, as was the case wherever “supply and demand operate” (1883: 74). Under the wages system, employers and employees make contracts “on the best terms which they can agree upon” (1883: 75). To this extent they have interests that can unite them, and in this respect they are “controlled by the universal law of supply and demand” (1883: 75). But it is to the interest

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of the employer that the capital is “good but rare” (meaning that there is an abundance of labor), while it is in the interest of the employee that “capital be good and plentifull, but that productive energy be good and rare” (1883: 75). The laborer’s ideal is “when one man can do a service, and he can do it very well” (1883: 75). Sumner further claimed that the wage system “frees” the laborer from “all responsibility, risk, and speculation” (1883: 75). Sumner did support the need for trade unions, however, since workers needed to unite in order to defend their interests. In trade unions responsibility became localized, people took care of their own interests, when compared to government legislation and government inspection (1883: 82f.): The safety of workmen from machinery, the ventilation and sanitary arrangements required by factories, the special precautions of certain processes, the hours of labor of women and children, the schooling of children, the limits of age for employed children, Sunday work, hours of labor—these and other like matters ought to be controlled by the men themselves through their organizations. The laborers about whom we are talking are free men in a free state. If they want to be protected they must protect themselves. They ought to protect their own women and children. (1883: 83)

Sumner vehemently argued against factory legislation and other ways in which the state would interfere with the natural “system of liberty” where each person takes care of their own interests. Sumner did, however, admit two factors working against trade unions in America—mobility of the population and the already achieved personal independence of the American workman— but still, he uncompromisingly attacked any politics of interference and the instrumentalities enforcing them: “Government boards, commissions, and inspectors” (1883: 85). Sumner was an “innovative ideologist” to the extent that he coined the term “the forgotten man.”12 It was not the poor man who was the real victim, but instead the “forgotten man,” the laborer who strived to accumulate capital and minded his own business. In Sumner’s moral universe, the greatness of a person depended upon independency and the ability to better the condition of himself and his family in the struggle for existence. Accumulation of capital was a personal virtue and a key educational lesson to give one’s children. Selflimitation, self-denial, and the ability to help oneself was lauded as the right personal ethic. By contrast, unwillingness to provide for oneself and to become a burden upon others was morally offensive. This was also a warning of dangerous tendencies within the new democracy of free men: the development of new privileged classes and of plutocracy. Sumner’s ideal was rigorously meritocratic and based upon stern principles from which government legislation and inspection could be critiqued. His justification of capitalism was one that was more aggressive, or radical, as compared to the “soft” response of market reformism. Like Gladden, however,

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he also presented Christianity as the basic moral kit and foundation which would induce individuals to take care of each other in a society of isolated individuals, although he was far less reluctant to acknowledge any shortcomings or excesses of the new economic system, such as the moral license to operate only under the natural economic laws of supply and demand. In fact, Sumner’s position seemed as unenthusiastic about market reformism as Ely’s, who, however, had critiqued market reformism for very different, socialist democratic reasons. It is important to note, though, that the dividing line between market and democratic reformers, both of whom were critiqued by Sumner, were not always marked that sharply as the dividing line between reformists and the proponents of laissez-faire. We find evidence of this in sociologist Charles R. Henderson’s (1848–1915) article “Business Men and Social Theorists” from 1896. Henderson had served as a pastor for twenty years before he joined the University of Chicago in 1892. He was a publicly known Christian progressive reformer, working with the prison system, the organization of charity, children, worker’s conditions in industry, and much more (Abbott 2010). The social application of Christian principles, a liberal theology, and a belief in science and the progressive role of sociology were central to Henderson. Henderson’s reform proposals stood on two legs, as he advocated both market reformism and political reformism. He argued against the view that reformists had no rights whatsoever to intervene in private business matters, a view which according to Henderson was widely held by business people. His argument should thus also be seen as an attempt to challenge the “closed door” of the corporation—to contest the idea of corporate sovereignty advocated by conservative business leaders of the time.

The business of business is everyone’s business In the first volume of The American Journal of Sociology, Chicago sociologist Charles R. Henderson opened his article “Business Men and Social Theorists” by stating that “representatives of two very respectable classes of the community are apt to find themselves in hostile attitudes in the discussion of contemporary social questions—the scientific student of social phenomena and the ‘captain of industry’” (Henderson 1896: 385). According to Henderson, businessmen insisted upon the right to keep industry and the management thereof their own business. Indeed, conservative voices of management fiercely opposed demands being raised by organized labor and any concessions made to the laboring class—a theme highly prevalent in conservative management and business publications at the time (Bendix 1963: 268–9). In their rejection of the

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demands being raised by labor, they may well have found ideological backing in the doctrines of Sumner or Spencer. By contrast, according to Henderson, it was the essential task—and duty—of social theorists to enlighten public opinion in order to improve the common welfare. Henderson argued in favor of reforms that would improve social welfare, guided by social knowledge, supported or executed by either legislation or by employers—both legislation as well as employers could take progressive action. The dividing line was between reformers and the believers in laissez-faire—not, as such, between social reformers and employers. Henderson’s main ideological opponents were instead businessmen who maintained that business affairs were strictly business affairs, and therefore should not be interfered with by progressives—humanitarians, preachers, reformers, legislators, and social theorists. By contrast, Henderson, like Ely, stressed the need for deliberate social action in order to promote welfare. A primary duty of the social scientist was “to keep attractively before ‘practical men’ all the known and tried methods of obtaining the elements of human well-being” (1896: 390). And a central task of the scholar was thus “to select the facts which will help generous and genial industrial leaders to promote the common welfare, and especially the welfare of those who are employed by them, and over whom their commanding position as leaders has given great power” (1896: 390–1). Henderson quoted “representative business men” on their criticism of philanthropy, religion, humanitarians, and preachers, which was that they interfere in what was “a purely business matter” (1896: 387). Henderson, however, critiqued the “automatic and fatalistic class theory of business” which equated economics with “biology, or even chemistry,” thereby omitting “human intelligence, will and aspiration” (1896: 393). Instead, he urged people to oppose this fatalistic view, and argued that the history of factory legislation showed the positive role of knowledge of social affairs in informing legislation, thus bearing evidence of choices available for not conforming to the laws of the market (1896: 393). Factory legislation, then, thus supported the non-fatalistic view (i.e. that alternatives and choices do exist) in the world of business. Thereby Henderson was in effect using the same type of argument against laissez-faire liberalism as Gladden and Ely, who had both argued against the poor “excuse” of having no responsibility in a world thought to be governed only by natural market forces. But he added something which was more in line with the political reformism of Ely than with Gladden’s vision of a market system disciplined by Christianity, namely the history of factory legislation. The historical victories of factory legislation were exemplary events of democratic social reform. Henderson further supported his view by referring to industrialists and businessmen who did actually “recognize the responsibility of employers to the public” (1896: 392); businessmen who acknowledged the positive role of labor unions or “who are broad enough to go to the margin of ability in

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making experiments. The names of Robert Owen, Godin of Guise, Leclaire of Paris, Peabody of London and America, belong in this brilliant company. Every city furnishes examples of the same class and in increasing numbers” (1896: 392). Against the common conviction of employers that their businesses should remain uninterrupted by any sentimental philosophy of reform, these examples of “progressive business” showed that it was indeed possible to recognize a larger social responsibility—to give room for moral action beyond the moral doctrine of economic laws. Henderson’s ideas of reform were justified with a vocabulary of terms such as “duties,” “common humanity,” “welfare,” “serving the public,” and “social welfare.” Ideas such as profit sharing and the development of funds for payment of employees’ wages in down-periods were briefly mentioned, but only to show what businessmen holding conventional views typically rejected. The central ideological battle for Henderson was fought between the ones who are willing to reform industry, and those who are not, and his text bears witness to a dividing line between reformists and non-reformists; between believers in social reform and believers in laissez-faire. Henderson, however, also directly warned against the rule of the lowest common denominator whenever there was an absence of “strong ethical feeling organized for common action,” unless legislative measures such as factory legislation was undertaken (1896: 394). Business was not a mere private affair. Later, in the posthumous 1915 Citizens in Industry, the message of the article of 1896 was repeated, claiming that “it is ridiculous to affirm that the business of a huge corporation which affects the health and enjoyments of millions of people is a mere private affair; so ridiculous that the more sincere and sagacious magnates are ready frankly to admit the absurdity” (Henderson 1915: 16, quoted from Abbott 2010: 360–1). As this chapter has showed, “progressive business” ideas in the late nineteenth century were not marginal ideas, but a central part of the debates about the new, emerging “system of wages.” Of course, some ideas had more bearing upon practice than others (Barley & Kunda 1992: 365–8; Rodgers 1978: 30–64). For example, American industrial betterment received wide attention, and was “so widely touted as the wave of the future that the Paris Exposition of 1900 showcased an exhibit on the betterment practices of American corporations” (Barley & Kunda 1992: 366). Although not exclusively an American phenomenon, “welfare capitalism” presented a predominantly American solution to the “labor question” that lasted well into the twentieth century: Welfare capitalism was an influential movement for the first three decades of this century. It was embraced by employers as well as by intellectuals, social reformers and political leaders, all of whom shared the belief that industrial unrest and other problems could best be alleviated by this distinctively American approach:

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private, not governmental; managerial, not laborist. To put its ideas into practice, employers cleaned up their factories, constructed elaborate recreational facilities, launched “company” unions, and even built housing for their employees. (Jacoby 1997: 4)

According to Sanford Jacoby, welfare capitalism is a distinct employment system, relying upon “private” (employer–employee) solutions instead of government and union interference and collective bargaining. Welfare capitalism sponsors the view that business organizations, instead of government and unions, are the source of security and stability (1997: 3). It also tries to combat market individualism, i.e. the fact that laborers are inclined to follow their own interests and show little loyalty to the firm, resulting in costly and frequent employee turnover. It does this by nurturing closer ties between corporations and employees, by fabricating employee loyalty to the organization, and thereby trying to keep unions and union identification at bay. To Jacoby, early “welfare capitalism” was paternalistic, often outright “condescending and manipulative,” trying to shape the worker in a new image: “Uplifting him, Americanizing him, and making his family life more wholesome” (1997: 15). Beyond any reasonable doubt, however, “welfare capitalism” did not arise out of the blue, but was clearly rooted in late nineteenth-century ideas.

Conclusion: paternalistic market reformism and its critics In this chapter, central “market reformist” ideas have been identified as ideas of profit sharing, company unions, company towns, the Christian responsibilities of business owners, industrial betterment, and welfare work, seeking to combine industrial and economic growth with a broad range of different private welfare arrangements. Table 1.1 highlights the main characteristics of market reformism in the First Great Transformation. It appears that late nineteenth–century market reformism was about local and homely responsibilities—responsibilities of a company toward “its” workers and their families, and toward local communities. There was, repeatedly, industrial unrest, with little stability provided by overarching institutions, such as a collective bargaining system, which first appeared in the New Deal era. Furthermore, there seems to have been a strong emphasis, overall, on the development of the character of the individual. Learning the virtues of selfdiscipline, the work ethic, saving, and being economic with one’s resources, as well as sobering up, was a steppingstone toward economic independence. It was also, sometimes, attached to ideas about becoming an American. Responsibilities seem first and foremost to have been that of individual responsibilities, whether that of the capitalist or of the worker, not so much

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Table 1.1. Market reformism in the First Great Transformation (c.1870–1900) Key reform ideas: what is to be done?

Cooperative movements, profit sharing, industrial partnerships Industrial betterment, welfare work, Owenism and “enlightened employers,” company towns, company unions, cleaning up factories, private charity/philanthropy Early twentieth century: welfare capitalism, corporate pension funds, Americanize, discipline, and morally improve workers (e.g. F.W. Taylor), the “class passers”: reforming the workplace from within (see chapter 2)

Social justifications and key normative terms: why social responsibility?

Responsibility “beyond wages” Responsibility beyond the laws of supply and demand Laws of Christianity rank above liberalist political economy “Service” (e.g. H. Ford)

Economic justifications of social responsibility?

“Business case” for “philanthropy” (e.g. Ely on Pullman)

What is being rejected?

Liberalist political economy and the principle of maximizing own self-interest as a superior moral doctrine

Who has a responsibility?

Primarily individuals Capitalists and individual entrepreneurs, owning and managing companies Workers themselves: through self-discipline, self-help and “economy” they can create their own industrial partnerships and move beyond “the wages system” (Gladden)

Responsibility toward whom, or what?

Workers Workers’ families

Ideal type example

A benevolent factory owner, offering recreational facilities to employees

that of corporations. The ideal type example is the benevolent factory owner who treats his employees better than other employers, offering them better wages and working conditions. This chapter has also outlined how exemplars of such progressive “best practice” businesses were widespread in late nineteenth-century American discourse on capitalism. At this point, it is useful briefly to compare the findings here with those of Boltanski and Chiapello (2002: 3, 6–7; 2007: 17, 19). In their study of the new spirit of capitalism in France, they also reconstructed a “capitalist spirit” of the late nineteenth century, based primarily on the writings of German sociologist Werner Sombart (1913). They described this spirit as being primarily domestic, meaning that it stresses homely responsibilities; as being entrepreneurial, with excitement created around the new, rising entrepreneurs; and with an embrace of bourgeois morality, a blending together of fairness principles based upon markets and upon charity, and where security is offered through personal property and personal relationships, through charity and paternalism.

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As seen in this chapter, each of these characteristics can be found in the American case, although the American experience had its own unique characteristics as well: the references to the home and to homely duties; the excitement around entrepreneurs and social mobility in Gilded Age America; the focusing upon personal character and discipline; the American dream of self-ownership, property, and self-rule, as seen in, e.g., ideas about cooperative movements, which was still very much alive in the late nineteenth century; and the private charity and paternalistic model of security (now tied to factories and their owners rather than the head of the household) in a pre-welfare state context.13 It is hard to pin down in one word what characterizes market reformism during the First Great Transformation. This is partly due to the fact that there were, indeed, different versions of the idea of moral self-regulation of businesses. But one candidate is that it was paternalistic. Certainly one of the best expressions of late nineteenth-century market reformism is, after all, that of the company town Pullman. It encapsulated the idea of paternalism; it tried to combine philanthropy (very broadly conceived) with business; it reflected that ideals of self-ownership and self-rule were challenged; it was thought of as a possible role model for a further development for capitalism which would neither be laissez-faire nor give in to progressivism, socialism, and social democracy; and it carried the link to a particular person. Or as Gladden later urged, an employer should consider his employees “as the flock over which he is the shepherd” (Gladden 1897, quoted in Boyer 2009: 95). Market reformism constituted a third, alternative route between laissezfaire and increased powers of labor unions and government, with its own specific kinds of problems identified, solutions offered, and, broadly, way of offering social protection against the risks of industrial capitalism. It represented a different, “soft” response of corporate strategy in comparison to the traditional hard line toward employee resistance. It was an alternative to class struggle, and one that did not really challenge the power to control and the right to the profits. Table 1.2 summarizes and concludes the main parts of the development traced in this chapter. Beyond the many differences and ideological cleavages in the First Great Transformation, something was still shared in this discourse, at least in the beginning of the time period examined here. This was the ideals of selfownership and of self-rule. Gladden, Ely, and Sumner all wrote within a context in which self-ownership as well as self-rule mattered greatly. These ideals had firm roots in republican America, and authors of widely different orientations tried to make sense of them, or critically use them, in the midst of an emerging society of employees. Gladden’s vision was one in which workers would again enjoy self-ownership, and his recommendation to contemporary industrialists was to implement profit sharing; Ely heavily critiqued the company town of Pullman for not allowing individuals any ownership; Sumner took a different stance, vehemently arguing against state policies and proposals

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Table 1.2. Rival views on social protection in the First Great Transformation (c.1870–1900) Radical left (socialism, communism)

Reformist left (unionism, progressivism)

Market reformism

Economic “liberalism” (classical liberalism)

Problems identified

Inequality, poverty, intolerable working conditions in industry, lack of worker autonomy and self-rule

Industrial unrest, class antagonism, intolerable working conditions in industry

Misuse of state power, interference in “natural system of liberty”

Solutions offered

Cooperative movements Unionism—national and international labor unions The progressive movement Length of working day, demands for higher wages Child labor legislation, factory legislation A more active role of the state Various more radical measures

Cooperative movements Profit sharing Industrial betterment Welfare work Owenism and “enlightened employers” Company towns Company unions Cleaning up factories Private charity/ philanthropy

Free trade, no tariffs, a minimum of taxes No state intervention Restore natural order Sanctity of private property Individualism and self-help Economic laws Economic self-interest leads to the best aggregate social good/ welfare

Social protection

Through collective owner- or partnerships, workers joining together in industries, in unions, or, later, through the welfare state “compromise”

Through employment in business of an enlightened capitalist

Individuals help themselves and their own families, a free market system generates most overall economic growth

for redistribution, defining the right to self-ownership and self-rule. Capitalism, the “system of wages,” may have brought new opportunities, but it also brought a host of new problems as workers were deprived of the possibilities for independency. Around 1900, however, that dream of autonomy had given way to a more abstract way of thinking about independence, as seen in the progressive movement (Sklansky 2002).

NOTES 1. The key texts analyzed in this chapter have been chosen because they show three ideological positions of, respectively: market reformism, political reformism, and free market liberalism. 2. For a historical overview of the history of the legitimization of industrial capitalism, I have especially relied upon Barley & Kunda 1992, Guillén 1994, and Rodgers

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3.

4.

5.

6.

7.

8.

9.

10.

Progressive Business 1978; for the history of welfare capitalism and of American employment systems, I am much indebted to Jacoby 1985 and especially Jacoby 1997. Jacoby’s study is written within economic and labor history, and is not primarily a study of key intellectuals and of ideological texts. Guillén and Barley and Kunda, writing in the tradition of Bendix (1963) about histories of management ideologies, focus only to a minor extent upon the reading of individual texts and their ideological context. Socialism and communism arose as reactions to industrial capitalism; they critiqued property rights and the rule of capital, and advocated reform or revolution. Karl Marx wrote his influential critique of “capital,” discrediting the regime of capital, i.e. insatiable accumulation of capital for reinvestment in profit-making enterprise, and its negative effects—poverty, exploitation, and alienation. English Fabians discredited the economic individualism of industrial capitalism. Utopian socialists faulted the modern business enterprise for its lack of sensibility toward employees, and started experimenting with new arrangements of social benefits and welfare for the workers, as in Robert Owen’s New Lanark. Early progressives in Europe were thus determined to push the capitalist economic system in the direction of more social justice, or even to overturn the system. There are thus two main, and interrelated reasons why the present intellectual history on market reformism starts in the aftermath of the Civil War: first, because of the spread of industrialization and of wage labor; second, because it was from then on that employers paid attention to working conditions or welfare, as Barley and Kunda note in prolongation of historians (Barley & Kunda 1992: 365). Other works that, according to Barley & Kunda (1992: 365), propounded similar views include Gilman (1889), Gilman (1899), Olmstead (1900), Tolman (1900), White (1879), and also the novelist Charles Reade’s Put Yourself in His Place from 1870. The argument here is not that Christianity in general or in this historical time tempered the spread of capitalism; the relationships between capitalism and Christianity remain manifold and complex. According to intellectual historian Jeffrey Sklansky, the American Social Science Association was directly or indirectly involved in the development of new professional organizations, such as “the National Conference of Charities and Correction, the American Public Health Association, the American Historical Association, the American Economic Association, and the American Bar Association” (Sklansky 2002: 111). It should be noted that Gladden, in contrast to this argument, insisted upon the moral responsibility of employers, even if it did not always pay financially to be philanthropic. In Ely’s critique of Pullman, however, the demands were lowered, i.e. it was assumed that philanthropic industrialism can only spread if it proved to be good business. A similar argument can be found in the late twentieth- and early twenty-firstcentury discussions of corporate social responsibility, revolving around whether “ethics pays” or not, and if there is thus a “business case” for virtue, cf. e.g. Vogel 2005. In writing this part I have relied mainly on Hodgson 2004, Hofstadter 1941, Sklansky 2002: 105–36, and Walters 2002. The label “social Darwinist” has been argued to be anachronistic and misleading (Hodgson 2004). Nonetheless, the

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classical account of Sumner in Hofstadter (1941) still contains valuable information. 11. Sumner quite consistently, as is typical for his time, referred to men rather than to women. I have chosen not to try to correct Sumner’s language, as I think it would be historically misleading, and have thus not corrected this in the reading of other texts. 12. For an account of the term “innovative ideologist,” see Skinner 2002: 145–57. 13. On a different note, it is interesting that Werner Sombart famously posed the question about why there is no socialism in the United States. This book may shed some new light on the question, as it shows how “market reformism” is a promise of an alternative kind of social protection to various kinds of socialist and socialdemocratic policies, as well as to a “pure” free market economy.

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2 A Corporation Lives in Society The Invention of Managerial Capitalism in the Age of the New Deal (1930s–1960s) Market reformists steering clear of new challenges The economic and social development of the twentieth century stood in marked contrast to Gladden’s vision of cooperative movements, which instead revolved around big corporations and mass production, the emergence of what was dubbed a “society of organizations,” and of new, innovative macroeconomic solutions for influencing the economy at an overall level. During the course of the first half of the twentieth century, a series of challenges to the legitimacy of capitalism arose, especially concerning the legitimacy of “big business,” the economic crises, and the two world wars, all in the context of a strengthened political reformism.1 The Progressive Age, from around the 1890s (sparked by the depression of 1893) to the end of World War I, was characterized by an increased role for the federal state. Examples include antitrust statutes where monopolies, cartels, etc., were broken up, and the regulation of corporate organization, railroads, food, drugs, national resources, and finance (Eisner 2011: 39–57). After the Great Depression and with the New Deal reforms, however, the role of the state increased even more significantly. Social and economic rights became more widespread, and the role of unions became much more institutionalized. It was a sea change. Karl Polanyi, for example, wrote on the New Deal that “America offered striking proof, both positive and negative, of our thesis that social protection was the accompaniment of a supposedly self-regulating market” (Polanyi 2001: 211). Historians of American political economy have referred to the rise of “regulated capitalism,” or of “embedded liberalism,” covering this period from around the New Deal until the beginning of the 1970s, when oil-crisis, stagflation, and a “crisis of governance” contributed to a growing critique of American political economy (Blyth 2002; Ruggie 1982; Kirshner 1999). World War I and not least the Great Depression, along with the rise of several competing political ideologies

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for how to govern and plan an industrial society and economy, meant that laissez-faire liberalism lost its appeal. Fascists, for example, believed that liberalism and democracy had definitely come to a halt. Indeed, in the 1930s American democracy was, according to contemporary observers as well as historians, fragile, threatened by the spread of dictatorships in Germany, Soviet Russia, and Japan, and anti-democratic, nationalist, and racist movements also present in the United States (Katznelson 2013). With unregulated capitalism and laissez-faire liberalism suffering a severe setback—the early neoliberals writing in the 1930s and 1940s rightfully saw themselves as being in a marginalized position—proponents of market reformism tried to show how the capitalist market system could steer clear of new criticisms raised against it. They did this in a context where the corporation was increasingly thought of as (but not necessarily acted as) a social corporation—as an institution that did not merely belong to owners, but was responsible to multiple interest groups. They articulated new visions of an enlightened capitalism that would be able to cure its own illnesses. They developed a new “managerial” American business creed that centered on the responsibilities of managers of large corporations toward various stakeholders and the public. Their rhetoric differed from traditional American business ideology and the free market liberalism which was its ideological core, especially by emphasizing the direct public responsibilities of corporations. Against the historical backdrop of the main long-term trends, this chapter examines significant works of three market reformists: organizational theorist Chester I. Barnard, organizational psychologist Elton Mayo, and management theorist Peter F. Drucker. They were all seminal figures within their respective fields.2 Although their contributions should not be read as part of a unified stance, what these authors did was, with different accentuations, to advocate a capitalism that would adjust to social, existential, political, economic, and human needs. All three positions distanced themselves from nineteenthcentury laissez-faire liberalism and economics; they morally opposed a pure economic logic in favor of a broader view of societal concerns. They articulated visions of a new, enlightened capitalism, and suggested that it would be possible to moderate the destructive effects of capitalism and of capitalist organizing, while still adhering to the principle of self-regulation. They sought to promote solutions congruent with the principles of private property and private command, as opposed to union power, redistribution, welfarism, and industrial democracy. Finally, the chapter turns to the mid-century’s most comprehensive investigation of business ideology, The American Business Creed (Sutton et al. 1956), which reached the conclusion that another variant of business ideology had emerged, namely a “managerial creed” which stressed the public responsibilities of corporations. This offers another striking proof for the great importance of market reformism in a context where government and organized labor had become business’ competitors for offering social

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protection and welfare—not least when compared to the pre-New Deal days of the 1920s, when the Australian H.G. Adam in 1928 could refer to America as an “employer’s paradise” (Bernstein 2010: 144). With the rise of the new, regulated regime of American political economy with welfare rights and institutionalized unionism, neoliberalism was, to quote historian Tony Judt (2010: 91), a “minority preference.” But, if neoliberalism was a minority taste, what, then, would secure the broader social legitimacy of capitalism? The obvious answer is perhaps that it had to do with the welfare state compromise, the continuing growth rates, and the relatively equal distribution of profits (at least as compared to the two Gilded Ages which encircled the twentieth century) (Piketty 2014). A main argument in this chapter, however, is that market reformist ideas contributed to keeping ideas of a “gentler capitalism” going. Such was, at least, the self-understanding of its key advocates. Market reformist ideas tried to show how a less state regulated and less unionized capitalism could survive, if only it adapted the route of progressive business. To do this, the ideas had to be reinvented for the New Deal era—as managerial market reformism.

Beyond laissez-faire? Big business, crisis, and post-capitalism, c.1900–45 The four key long-term trends that are relevant as a background to midcentury market reformism were the consolidation of an economy of big corporations, the crises of economic depression and war, the development of widespread visions of post-capitalist society, and the rise of the New Deal regime.3 All trends gave rise to ongoing questioning of the legitimacy of laissez-faire liberalism and of laissez-faire economics. In the context of a “regulated capitalism” where the federal state played a more active role, as compared to the “competitive capitalism” of the late nineteenth century, stable employment and seniority principles played a much larger role (Bowles et al. 2005: 160–4). The American political economy emerging at the beginning of the New Deal reforms was a very different kind of capitalism than the one that preceded it (Eisner 2011). Most importantly, it was one in which the state played a more active role in the economy, where labor unions were institutionalized and the right to organize formally recognized, and where the welfare state was founded. This meant introducing large-scale government spending to provide employment, and, through the Social Security Act of 1935, old age pensions, unemployment compensation, help for children, mothers, and the disabled (but, however, excluding agricultural labor and other categories into which African Americans fell, a compromise made with a strong

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congressional representation of Southern Democrats who supported Jim Crow laws in the South) (Katznelson 2013). In this new context, leading proponents of market reformism joined the growing chorus of criticism voiced against laissez-faire liberalism. They addressed manifold criticisms of the alleged destructive effects of capitalism, such as its dissolution of communities, alienation of individuals, and inequality of opportunities for each individual to be recognized as having social status and dignity. They also responded to social-economic criticism and proposed new means for curbing unemployment. They created new visions of a capitalism that would accommodate social and human needs. But they sought to promote solutions primarily based upon principles of self-regulation, as opposed to political reformism. Historians of business, management, and organization have described the spread of big business, coupling it to the rise of organizational society and the increased importance of management as a profession (Chandler 1995; Perrow 2002; Presthus 1979).4 Alfred Dupont Chandler Jr., a leading figure of business history, has described the development of professionalized business from around the 1870s until the 1940s in his seminal The Visible Hand: The Managerial Revolution in American Business (1995).5 Chandler described how the traditional allocation of resources by the market, the “invisible hand” as famously described by Adam Smith, had been replaced by the “visible hand” of managers of large corporations. The “management revolution” was characterized by a transition to large industrial businesses, “giants” who integrated mass production and mass distribution (1995: 285).6 Also important was the separation of ownership (capital) from management and thereby the transition to “managerial capitalism” and, interconnected with this, an increased professionalism in management. From the 1920s onward there thus existed a new professionalism which was clearly expressed in the further development of management and management theory.7 The further spread of big business, however, gave rise to a continued questioning of the legitimacy of the concentration of economic power, which in turn sparked a proactive effort to influence the public’s view of corporations. As public relations historian Roland Marchand demonstrated in his Creating the Corporate Soul: The Rise of Public Relations and Corporate Imagery in American Big Business, from around the 1890s there was a series of attempts at justifying the new, large companies, trying to acquire a substitute for a “soul” (1998). In this quest for legitimizing the “impersonalities of scale,” the companies had around the beginning of the 1940s successfully portrayed themselves in the image of the friendly neighbor. As Marchand wrote: “Legitimacy, of course, can never be a fixed and permanent condition. But by the mid-1940s, the great corporations had attained a conventional, largely uncontested standing that most corporate leaders could recognize as an acceptable substitute for soul” (1998: 5). In an environment characterized by ideological strife and industrial unrest, management theorists, consultants, public relations experts, and industrialists

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sought to justify their undertakings, often by invoking an ideal of market reformism. Even mechanical engineer Frederick Winslow Taylor’s highly appraised, and equally despised concept of scientific management, justified his theory on economic as well as distinctly non-economic terms. Taylor argued that his “mental revolution” would improve relations between managers and workers and help improve the character of workers, touching upon a well-known theme of nineteenth-century industrial betterment (Taylor 1998: iii–iv, 1f., 35, 66, 74ff.).8 A notable example of an industrialist who actively tried to convey a positive image of industry in several writings was car industrialist Henry Ford. Like Taylor, Ford vehemently defended the benefits of industry and of work efficiency. He had a no less than religious defense of new technologies that would ease the life of farmers, housewives, and everyone else: “Machinery is accomplishing in the world what man has failed to do by preaching, propaganda, or the written word” (Ford 1929: 44). Ford argued in favor of the progressive role of companies in society: the increase of national wealth, the bringing down of work-time as well as the removal of children and women from working in the mills, and the newly conquered leisure time with its possibilities for more creative lifestyles were effects of increased efficiency and new technologies (Ford 1926: 4, 7f., 79f., 179, 220ff., 250f., 271ff.; Ford 1929: 28, 55). He critiqued what he saw as a misleading “Bolshevik” vocabulary of industrial relations. But he was also critical of the financial industry, arguing that the real value was being created in industry and production (in the beginning of the 1920s, he founded his own newspaper in order to massively propagate anti-Semitism). His famous five-dollar-a-day wage was justified on the grounds that the increased purchasing power of the autoworkers would have positive effects throughout the economy, spreading in ever-widening circles. The argument can thus be seen as an early example of noticing the positive effects of stimulating purchasing power and consumption, albeit in the context of a thinking that focused exclusively on the positive economic effects of “private” industrial production. Ford advocated the idea that the ultimate purpose of industry is service, not profits. In rejecting the thought that the ultimate purpose of industry neither is nor should be profits, he touched upon a central theme of market reformism, but coined it in the name of “service.” Indeed, “service” has been a central, albeit highly ambiguous symbol in describing the relationship between business and especially customers in the US.9 To Ford, it was clear that business was the true servant of the public, whereas measures undertaken by government and legislation against poverty would have downright perverse effects: “Law never does anything constructive [ . . . ] As long as we look to legislation to cure poverty or to abolish special privilege, we are going to see poverty spread and special privilege grow.”10 Etymologically, the noun “service” and the verb “to serve” go back to the fourteenth century or even further; they suggest the relation of a servant to a

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master, and thus signify an asymmetrical power relationship.11 Historically, the concepts have been used to describe household master–servant relationships as well as a host of other forms of subordination, including slavery. But the application of the term “servant” also readily implies a positive moral status, which is illustrated not least from its usage in religious (being a servant to God) as well as in public affairs (a servant to the state).12 In this respect, it is not surprising that the ideal of “service” to the public, the people, or the nation was invoked by spokesmen of industrial capitalism, since it described their affairs in a positive moral light, and directly implied that corporations were subject to the public, not the other way around. Increasingly, legislators, government officials, but also professions (such as the medical profession), and various institutions, were redescribing their affairs in a public discourse in which the notion of “service” and to be a “servant” to the people had become commonplace.13 Ideas about reforming capitalism from within took on different forms. The project of the so-called “class passers” of the 1920s was market reformist. The class passers dressed up like workers and worked among them, trying to study at first hand the life of workers.14 They were critical of the characterizations of the laborer in F.W. Taylor’s The Principles of Scientific Management, in abstract economic thought, and in scientific racism, and were looking for new ways to “transform the workplace and its broader social setting” (Pittenger 2003: 146). As historian Mark Pittenger notes, “class passers saw themselves as offering a third way between militant labor and repressive capital” (2003: 149); their project can thus be seen as an attempt at reform from “within”: “It now appeared that earlier progressive reformers’ hopes of building a more just and efficient society might be achieved by changing the workplace from within, rather than by regulating it from without” (2003: 146; my emphasis).15 Taking account of certain international events is crucial for understanding the intellectual debates concerning the economic, organizational, and social transformations related to the American economy in mid-century. The world wars were fundamental ruptures of the existing household of human experience. The Russian Revolution and the rise of fascist and Nazi regimes profoundly shaped the way intellectuals discussed, critiqued, and justified the capitalist economy. Frequently, discussions now revolved around comparisons of the capitalist American economy with the Soviet planned economy—a tendency that would only become more widespread during the Cold War. The existence of alternative political, economic, and societal models deeply shaped expectations and the perceived realm of future possibilities. In terms of justification, grand economic arrangements increasingly had to prove themselves in an environment of competing and alternative forms of social organization—capitalist, socialist, and mixed economies. After a high point of labor strikes in 1919, the 1920s was a conservative era. In the years of Herbert Hoover’s New Era, facing a growing international

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socialism, business propagandists took proactive stances defending capitalism. As a writer for the US Chamber of Commerce declared: “Capitalism is today triumphant and the American business man, as its most conspicuous exponent, occupies a position of leadership which the business man has never held before.”16 Or as industrialist Earnest Elmo Calkins confidently declared in his Business the Civilizer: “that eternal job of administering this planet must be turned over to the business man. The work that religion and government have failed must be done by business” (Calkins 1928, quoted in McCarraher 2005: 95). Then came the rupture. The Great Depression was a new, fundamental challenge to free market ideology. The Great Depression has commonly been conceived as a proof of the deficiencies of a “free enterprise” economy (cf. e.g. Galbraith 1988). Roosevelt’s New Deal marked a new standard for government intervention and public planning. Proponents of political reformism conquered ground. The Wagner Act of 1935 increased the rights of unions.17 John Maynard Keynes’ The General Theory of Employment, Interest, and Money was published in 1936, and quickly became an extremely influential book, supporting the active role of government in preventing the devastating effects of business cycles. It said that capitalism was unable to cure itself. Keynesian “underconsumptionists” argued for the necessary role of government spending (Jacoby 1997: 35). In short, political reformist ideas, related to the role of government and unions, again gained more legitimacy, whereas the notion of a self-sufficient, self-reliant economic and social order was hit by a severe stroke. In a campaign speech of 1932, the soon-to-be-elected President of the United States, Franklin D. Roosevelt, said that the task now was for the state to play an active role in regards to “the problem of under consumption, of adjusting production to consumption, of distributing wealth and products more equitably, of adapting existing economic organizations to the service of the people. The day of enlightened administration has come.”18 The Great Depression undermined, at least for a while, the confidence and legitimacy of free market capitalism. It also undermined the belief in welfare capitalism, and drew people more toward the state and the unions for welfare and social protection (Jacoby 1997). Industrial society was in a period of transition. The period after the Wagner Act was characterized by a restructuring of the American economy and employment system. Employment was made more secure and tied to seniority principles (Jacoby 1985).19 Whereas practices of industrial betterment and welfare capitalism did not disappear, they seemingly went underground during the period from the 1930s until the 1960s. In the 1930s it became a widespread notion that “managers were expected to play a professional role in a coming social-democratic order” (Brick 2006: 133). The period from the 1930s until the 1960s was the heyday for American labor unions and the system of collective bargaining (Bowles et al. 2005: 164–9; Jacoby 1997). Economists have dubbed this stage of

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American capitalism “regulated capitalism,” lasting from around the end of the 1930s until the 1970s, among other things characterized by the enlarged role of unions, the establishing of the National Labor Relations Board in 1935 created by the Wagner Act, and “macroeconomic stabilization through deficit spending, expansion of social security, medical, unemployment, and other insurance” (Bowles et al. 2005: 161). After World War II, corporations put great efforts into winning the competition against union interference. As Barley and Kunda note, “After World War II, corporate experimentation with strategies for enhancing loyalty, motivation, and satisfaction blossomed almost overnight” (Barley & Kunda 1992: 374). The notion of a new type of society, often connected to a new conceptualization of the economy, was propounded by a host of different authors of different orientations, and it had been in the making since the inception of World War I. The notion should be seen in the context of that broad discourse which intellectual historian Howard Brick designates the “post-capitalist vision,” which was highly prevalent from around the beginning of the twentieth century until the mid-1970s: Examined over time, the postcapitalist vision appears as a limited set of themes, motifs, terms, expectations, and arguments handed down from one intellectual cohort to another, at each step replicated, deployed in new ways, or reshuffled, recast, and supplemented by new additions. This discursive set included notions regarding the changing nature of economic organization and of property; so-called “silent revolutions” that were transforming the older order; the cultural malady of competitive individualism and the expanding scope of social solidarity that might check or reverse it; the decay of the old ruling classes; the emergence of new forces of productivity and impulses to economic dynamism; the perpetual reinvention of modernity; a break with economistic standards of public policy and conceptions of social order; the declining imperatives of scarcity; and the coming centrality of social rights in the definition of citizenship. Select arguments or phrases like these echoed each other from 1914 through the 1950s and 1960s, until in the 1970s or 1980s, when capitalist triumphalism drove from the scene the postcapitalist confidence of the long “middle” of the twentieth century. (Brick 2006: 18)20

Mid-century market reformism would frequently share features with the postcapitalist vision, especially in relation to notions of a changed economy, of an increasingly socialized corporation, and of critiques of competitive individualism. But it should be seen as a particular branch of the post-capitalist vision, if not a competing alternative, as it insisted upon the ability to foster social change through private and market—as opposed to public and statist—means. Mid-century market reformism was often intellectually and conceptually indebted to post-capitalist visions, but it was a discourse that should be placed to the right of social-liberal and social-democratic notions. Intellectually, early twentieth-century social thought was driven by new attempts to comprehend industrial society.21 Especially after World War I,

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the idea that the fundamental structure of society and economy was in a period of profound transformation became more common. Two key trends of interwar thought were part of the effort to redescribe and re-evaluate the existing social order: “socioeconomics” and cultural anthropology (Brick 2006: 121). As Brick summarizes, “The new economics should be more a science of welfare than a science of wealth. A distinct moral element, assumed by most of the writers though made explicit by only a few, accompanied their positivism and sustained their confidence in a reformist science that humanized the economy” (2006: 68–9). Whereas socioeconomics investigated possibilities for making economic development and growth directly contribute to social welfare, cultural anthropology studied the economies of non-Western, nonindustrialized societies.22 Market reformism borrowed elements from socioeconomic thinking, especially the notion of a “socialized corporation,” and similarly it typically shared the criticism of Homo economicus offered by cultural anthropology. Within the context of socioeconomics, American intellectuals were analyzing modern society and economy, working in opposition to nineteenthcentury economics of laissez-faire and perfect markets. In America, there was often a link (or identity) between institutionalism and these new approaches, with Thorstein Veblen as the most influential figure, although Ely had been important in institutionalizing historical and institutional economics in the late nineteenth century. A key trend of social thought was thus to try to get to grips with the reality of modern society, but also to pave the way for new politics and solutions.23 One of the central discussions within the milieu of socioeconomics revolved around what was originally a Marxist set of ideas, namely those related to the socializing potentials of capitalist economy. The basic idea was that the development of the corporation, i.e. the ongoing revolution in the social technology of production, would show how production increasingly had become socialized, which in turn would make the fact of private ownership increasingly problematic and outdated. Whereas some took a more optimistic stance on the transformative potentials of established practice, others were more skeptical. Among the latter, Veblen had, in his 1923 book Absentee Ownership and Business Enterprise in Recent Times, argued against the social efficiency of the existing business system, claiming that it resulted in limited production and higher prices (Veblen 1964).24 From Veblen’s perspective there was little prospect of a more “socialized” economy stemming from the existing “price system.” Veblen’s oeuvre did not lend support to a doctrine of market reformism that would stress the self-transforming potentials of business itself. Other socioeconomists were less skeptical than Veblen, but still primarily relied upon political reformism.25 They envisioned a new ideal of substituting the drive for private gains with service for the common good, and discussed means for macroeconomic planning that would take social justice into account

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and even develop ideas of “social accounting” (Veblen 1964: 72). The most remarkable intellectual achievement of American socioeconomics was the publishing of professor of corporate law Adolf A. Berle and economist Gardiner C. Means’ The Modern Corporation and Private Property in 1932. In this work, Berle and Means argued that the concept of the corporation as a “private” institution had increasingly become nonsensical, as it now involved a large range of parties, as ownership had become separated from management, and as ownership became dispersed and passive.26 Their work was not, Brick stresses, simply a justification of “the corporate regime as a shareholder’s democracy,” but rather an attempt “to challenge the very idea of private property in production” (Brick 2006: 80). As Berle and Means wrote: It is conceivable—indeed it seems almost inevitable if the corporate system is to survive—that the “control” of the great corporations should develop into a purely neutral technocracy, balancing a variety of claims by various groups in the community and assigning to each a portion of the income stream on the basis of public policy rather than private cupidity. (Berle & Means 1932: 356, quoted in Baran & Sweezy 1966: 33)

Berle and Means’ analysis of the increasingly socialized corporation thus leads to a distinct social-economic recommendation: dividing profits among several groups of the community. Their concept of the corporation was much more dangerous, seen from the perspective of the capitalist class and from free market liberalism, as compared to the market reformist notion of a socialized, public-serving corporation as expressed in the writings of, for example, Henry Ford. Whereas the rise of what Brick designates “socioeconomics” constitutes one main trend in early twentieth-century social thought, another is modern cultural anthropology (Brick 2006: 86–120). The interwar period witnessed a significant development of cultural anthropology, which was often directly at odds with the anthropology of economic man. As witnessed in, e.g., Margaret Mead’s Cooperation and Competition among Primitive Peoples from 1937, a key theme was to study “comparative economic ethics”; by documenting a plurality of cultural solutions to economic systems and morality, the naturalness of the propensity to “barter, truck, and exchange,” as well as of the American ethic of success, was brought into question (Brick 2006: 105, 111ff.; Mead 1966). Empirical evidence of the contingency of the prevailing economic ethic was produced, often combined with a cultural critique that was open to other societal patterns of individualization than economic individualism. The idea of market reformism faced new challenges in the first half of the twentieth century, which witnessed ideological diversity, labor unrest, and the existence of alternative grand schemes for social, economic, and political organization. The Great Depression was a thorn in the eye for that triumphant capitalism which had been propounded in the 1920s. In the intellectual

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context of social thought, socioeconomics and modern cultural anthropology tried to grasp industrial society and the nature of the corporation, and to launch new ideas of planning and social accounting from the perspective of political reformism, as well as to “denaturalize” economic individualism and the American ethic of success. As we shall see, key advocates of market reformism such as management theorist Peter F. Drucker, organizational psychologist Elton Mayo, organization theorist Chester I. Barnard, and economist Carl Kaysen, could cling on to notions developed by political reformists, arguing that corporations increasingly had become socialized, and that the vocabulary of laissez-faire economics and of Homo economicus should indeed be revised. These advocates of market reformism sought to show how problems of industrial capitalism could be overcome. They tried to show how industrial capitalism could better adjust to ideals of individual autonomy and a variety of other goals. Their criticism of capitalism, however, was a moderate one that did not question the principles of self-regulation, private property, and private command. It was of a conservative orientation, stressing that market society must be guided and steered by something other than “pure” market rationality.

The whole is greater than the sum of its parts: Barnard in praise of cooperation Business executive and organizational theorist Chester I. Barnard (1886–1961) is known as one, if not the, founder of American organizational theory.27 His seminal 1938 book The Functions of the Executive was the first comprehensive, universalistic theory of organizations by an American. Barnard’s theory of organization was intimately connected to leadership and the functions of the executive. It thus served both as a theory of organization as well as a contribution to understanding management. Whereas his stated intention was to do pioneering work in organization theory, this endeavor was simultaneously rooted in a vision of cooperation which transcended the capitalism–socialism dichotomy. Published in 1938, the book should be seen against the backdrop of the historical context of the social and labor unrest of the 1930s, the Great Depression, the Wagner Act of 1935, and the growing influence of unions and radical ideas, along with the looming international tensions and gloomy prospects of social dissolution. Barnard’s vision was one of social harmony and of peace. A new type of justification was thus brought to fruition that lauded common endeavors, communality, and social stability. If one had failed to achieve personal success, what mattered was to be part of something greater than oneself: the organization.

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Barnard redescribed society, claiming that it had become a society of organizations (1958: ix). In an organizational society, no singular individual is of great importance, and yet from another perspective even the lowestranked is of decisive importance in securing organizational efficiency. No army is stronger than its weakest part. Barnard, often referring to organizational experiences of the army, invoked a moral ideal of self-sacrifice to the organization. To Barnard, “cooperation” was all-important for the continuance and progress of civilization; cooperation simply constitutes the most important social technology, since it is due to cooperation that humanity continuously overcomes the limiting conditions of existence. Alone, no singular individual could provide for even the simplest means necessary for modern existence.28 Whereas Sumner had appraised the development of capital (in his distinct use of the term) as the singular most important process in human development, Barnard gave this role to the art of cooperation. Barnard’s work constitutes a seminal text in the history of market reformism, exhibiting many of its key features: arguing that service, not profits, constitutes the substantial rationality of organizations; that non-economic motives are all-important in corporations; applauding high moral standards, especially of managers; and describing society as an organizational society, beyond the capitalism versus socialism dichotomy. For Barnard, the corporation is always already in the service of community. His theory of organizations celebrates harmony, common goals, collective identity, and organizational loyalty. As fellow important market reformists of his time, Elton Mayo and Peter Drucker, Barnard criticized the “economic man” anthropology envisioned by late eighteenth- and nineteenth-century political economists. By stressing the importance of non-material inducements, of common purposes, harmony, and social equilibrium, Barnard’s description of economic life and society in general presented itself as a vision that went beyond opposing interests and economic motives. Contributing to higher purposes is presented as being morally superior to the almost contemptuous seeking of private material gain. Cooperation is justified on a universalistic scheme: it produces mutual benefits that exceed what individuals might ever hope to achieve in solitude. Unions and government, however, seem mostly to be just inconvenient disturbances to the workings of the business organization.29 Barnard’s cooperative theory was propounded as an enlightened, non-ideological alternative to both free market liberalism and to socialism. To Barnard, “false ideologies” were blocking the path to a more cooperative and integrative society. When Barnard is advocating “progressive change,” it is through enlightened ideas of cooperative systems and organization, in tandem with high ethical, social, and religious ideals anchored in leadership (Barnard 1958: 293). Barnard’s theory of organizations—and of corporations, which constitute a subgroup of the first category—is filled with venerations for “formal

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organizations,” i.e. consciously organized efforts toward a common purpose. Barnard’s theory is market reformist, but of a distinct conservative persuasion, stressing harmony, equilibrium, and the subordination of individuals to organizational goals.

If it exists, it must be legitimate: the moral organization Barnard’s theory was mainly derived from his own experience as an executive at the New Jersey Bell Telephone Company, but also to a large degree influenced by sociological theory and the academic milieu of the Harvard Graduate School of Business Administration. Barnard declared his great debt to Lawrence J. Henderson, professor of chemistry at Harvard University, whose 1937 book Pareto’s General Sociology Barnard repeatedly refers to (Barnard 1958: xiv). Henderson had, through his Pareto-sociology and its theory of social equilibrium, exercised great influence on the Harvard milieu, including Barnard and Elton Mayo (Guillén 1994: 60f.). In Henderson’s introduction to Vilfredo Pareto’s Sociologie Générale, he presented Pareto’s thoughts on social systems and equilibrium theory, thereby introducing key concepts which would influence Barnard’s thinking about organizations, as well as later generations of organizational systems theory. In Pareto’s work, Barnard may also have found ground for his assault on the rational Homo economicus of economics, stressing the influence of a variety of human motives.30 In Barnard’s work, the newly gained sociological insights would, in conjunction with his first-hand practical knowledge of organizations, yield a redescription of the social world, and an argument stressing the legitimacy of already existing organizations. Among other intellectual influences on Barnard, not least Talcott Parsons’ 1937 book The Structure of Social Action also seems highly important, especially concerning the effort to get beyond the capitalism–socialism dichotomy.31 According to Barnard, the primary characteristic of society was that it was a society of organizations (Barnard 1958: ix). Barnard defined a cooperative system as “a complex of physical, biological, personal, and social components which are in a specific systematic relationship by reason of the coöperation of two or more persons for at least one definite end” (1958: 65).32 Albeit diverse in their “character of purpose or objective,” there was a host of cooperative systems: “churches, political parties, fraternal associations, governments, armies, industrial enterprises, schools, families” (1958: 65). As Barnard explained: “Organization will then mean a similar thing, whether applied to a military, a religious, an academic, a manufacturing, or a fraternal cooperation, though the physical environment, the social environment, the number and kinds of persons, and the bases of their relation to the organization will be widely different” (1958: 73).33

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Individuals were simultaneously “members” of many different organizations. According to Barnard, the insight that society is basically a society of organizations is new, since academic interest so far had mainly concentrated on the state and the church, and the question concerning their authority. Barnard referred to Austrian sociologist of law Eugen Erlich to suggest that the source of the law was formal and not least informal organizations, instead of the rulers and legislators. The latter are often merely explicating the principles and rules by which society is already living; the task for sociology of law should therefore be to study the legal consciousness of the people. Sociology of law has to look at social norms and values that dominate life itself, the “living law.”34 For Barnard, this “bottom-up” perspective on law and authority explained and even legitimized authority and existing formal organizations (the latter would not be able to exist without the first). Barnard reached bold conclusions: if organizations exist, they not only have a purpose, but they are legitimate. If they were illegitimate, they would not have existed. Even if coercion and manipulation was involved, organizations would still rely on a tacit consent. We have to assume that people agreed to cooperate, and thus, by their mere existence, organizations are legitimate. This, then, is not least what marks Barnard’s variant of market reformism as conservative, and, if the term may be used, “more conservative” than Drucker and Mayo who more explicitly criticized contemporary practices.

Against the “oversimplification of economic life” Barnard faulted economic thought for hindering an adequate theory of organizations. In particular, Barnard wanted to draw attention to the anthropology of economics, arguing that neither organizational, executive, nor individual behavior can be explained by economic motives. Barnard’s attack on what might be called “economism,” i.e. pure economic explanations of action, involve several, interrelated aspects: he claimed that economic incentives are over-emphasized; and that economic theory has not developed a proper theory of motivation, instead implanting its underdeveloped idea of motivation “in pure economic theory, a materialistic philosophy rooted in utilitarianism,” thereby contributing to the “prevalence of highly erroneous conceptions of the place of the intellectual, as distinguished from the emotional and physiological, processes in social behavior” (1958: x). Barnard carefully underlines his point related to “business organizations”: “I mean specifically with reference to business organizations that non-economic motives, interests, and processes, as well as the economic, are fundamental in behavior from the boards of directors to the last man” (1958: xi).35 Any attempt to understand cooperative systems as well as individual action is thus severely handicapped if it only takes economic theory as a guide.

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Barnard sketches his own refined theory of incentives. His theory predates later and now very common “humanistic” management theories that stress the importance of motives other than material ones, and advocate the creation of a feeling of common purpose.36 Barnard argued that this “enlarged” theory of incentives should lead to a revision of economics (1958: 154). Again, Barnard specifically drew attention to what seems to be the “hardest” case for his theory, i.e. business organizations. Barnard stated that: “In an industrial organization the purpose is the production of material goods, or services” (1958: 154). In a footnote, he elaborated on this statement: The purpose is not profit, notwithstanding that business men, economists, ecclesiastics, politicians, labor unions, persistently misstate the purpose. Profit may be essential to having a supply of inducements to satisfy the motives of that class of contributors usually called owners or investors whose contribution in turn were essential to the supply of inducements of other classes of contributors. The possibilities of profit and their realization in some degree are necessary in some economies as conditions under which a continuing supply of incentives is possible; but the objective purpose of no organization is profit, but services. Among industrialists this has been most emphasised by Mr. Ford and some utility organizations. (1958: 154, footnote)

Barnard as well as Ford tried to justify the business organization by invoking the ideal of service, which was part of their language of debate, i.e. part of the normative vocabulary of their age.37 Barnard argued against the widespread opinion that the objective of business organizations is profits. He did, however, acknowledge the some role of profits. It is the incentive for shareholders: why else invest one’s money in the firm? This investment in turn is the foundation for providing the proper incentives for other contributors to the organization, i.e. employees. This process is then a continuing one, securing both the inducement of shareholders and employees to participate. But when Barnard states that the objective purpose of business organizations is service instead of profits, the perspective is shifted from that of the shareholders to a more general one.38

Beyond individualism and collectivism Although the overall purpose and intention of Barnard’s text was to do pioneering work in creating a science of organization, his theory led, unintentionally (as he states), to a treatment of a particular paradox, namely the coexistence of freedom and determination characteristic of being an individual in an organization: This study, without the intent of the writer or perhaps the expectation of the reader, had at its heart this deep paradox and conflict of feelings in the lives of

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men. Free and unfree, controlling and controlled, choosing and being chosen, inducing and unable to resist inducement, the source of authority and unable to deny it, independent and dependent, nourishing their personalities, and yet depersonalized; forming purposes and being forced to change them, searching for limitations in order to make decisions, seeking the particular but concerned with the whole, finding leaders and denying their leadership, hoping to dominate the earth and being dominated by the unseen—this is the story of man in society told in these pages. (1958: 296)

The individual was highly limited in his or her being; he or she has “a limited power of choice,” limited by “the factors of the total situation,” but is not, on the other hand, altogether determined (1958: 60). In an opening page of the book Barnard tellingly quotes Aristotle in a celebration of the order of the social world, appraising the way a general is the source of the order and efficiency of an army: Everything is ordered together to one end; but the arrangement is like that in a household, where the free persons have the least liberty to act at random, and have all or most of their actions preordained for them, whereas the slaves and animals have little common responsibility and act for the most part at random. (Aristotle quoted in Barnard 1958: 2)

In organizations, individuals almost lose their personality and power to choose and act freely, but still they are a part of something greater, striving toward a common purpose. Freedom is realized at a higher level, the level of cooperation and joint effort. Here, Barnard’s intended contribution to a science of organization, his “hypothetical scheme,” is presented also as a more adequate account of social life than the conflicting ideologies of “extreme individualism” and of socialism (1958: 292). The first puts too great an emphasis on an individual’s free will and power to choose, inconsistent with the facts of life in organizational society, whereas the notions of socialism “are likely to advocate uncritically a vast regimentation, an endless subordination, a completeness of coordination, that in their unrestricted dogmatism would stifle all development of individuals beyond what is found inescapable” (1958: 295). Both are dogmas or “extreme faiths,” hindrances to cooperation and social integration, biased by “unrecognized limitations” that neither the prophets of individualism, nor “those who trumpet so loudly for the state and society” do recognize (1958: 295). It is important to bear in mind that this critique was “radical” in the sense that it tried to strip both ideologies of their value, since they are simply judged to be antiquated. Total individual, isolated freedom is a conceptual monstrosity in a society of organizations, but there is still room for freedom and for the overcoming of limitations through free cooperation (1958: 22). Only in the “communion of men” arise the “higher purposes of individual and of coöperative behavior alike” (1958: 296).

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Barnard did not, however, believe that the exposition of a science of organization would automatically lead to “a greater integration of social forces” (1958: 293). The primary driver of this change was to be ethical: The ethical idea upon which cooperation depends requires the general diffusion of a willingness to subordinate immediate personal interest for both ultimate personal interest and the general good, together with a capacity of individual responsibility. The senses of what will be for the ultimate personal interest and of what will be for the general good both must come from outside the individual. They are social, ethical, and religious values. For their general diffusion they depend upon both intelligence and inspiration. [ . . . ] No one who reads, or who observes the events of our times, but will recognize, it seems to me, the supreme importance of belief in ideals as indispensable to cooperation. (1958: 293–4)

Real change comes through diffusion of the right ethic, which only seems to be possible through moral leadership.

Greatness achieved through self-sacrificing participation in an organization Barnard invoked a moral ideal which favors collaboration over individualism (but still individual responsibility over the individual’s dependency on the state or on society). In this particular moral order, the purpose of organizations exceeds the purposes of individuals. Individual greatness is achieved through one’s willingness to sacrifice one’s personal interest in favor of the interest of the organization. Contrariwise, individual smallness would be to constantly emphasize individuals over organizations. Excitement is achieved through participation in cooperation, for cooperation is what constantly frees each individual from the necessary limitations of being a singular individual. Individually, our possibilities in a complex world of an ever-increasing interdependence are severely limited. The “critical” test of justice is what serves the ends of the organization. And since the organization is already grounded in a common purpose, the ends of organizations matter more than the ends of individuals. Barnard’s thinking was market reformist in the sense that it argued that business organizations are always already working toward a common purpose which is service, not profits. The role of unions and of the state in relation to the business organization is hardly mentioned, and Barnard did not present himself as a political reformist, to say the least. If real change toward greater social integration should be accomplished, it is through changing the moral fabric of society, which seemed to rest upon moral leadership. Barnard’s market reformism exhibits strong conservative features in the ways in which he legitimizes already existing corporations, and by invoking ideals of

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community and self-sacrifice. Much later, Charles Perrow argued that Barnard failed to see that organizations are also powerful tools in the hands of their masters (Perrow 1979: 70ff.). Perrow criticized the idea that organizations, merely on the grounds that they exist, should be conceived as moral, always already working for a common purpose. Perrow also faulted Barnard for his downplaying of material motives. In Barnard’s time, however, the idea of the “moral organization” in service of the public was not uncommon, and had earlier been propounded by industrialists and management theorists. Barnard’s treatise on organizations was an appraisal of cooperation, since cooperation is, according to him, what makes humans overcome the limitations of human existence. His vision was one that stressed mutual dependency and restoration of social equilibriums. Similar sentiments were shared by the industry reform movement “human relations” and its figurehead, Australianborn organizational psychologist Elton Mayo. Concerned with the destructive tendencies of industrial capitalism to dissolve communities and not to recognize workers’ needs for expressing their thoughts and emotions, Mayo coined his version of market reformism in dramatic terms: if industry could find no room for workers’ social needs, it would be at the risk of civilization itself.

Restoring communities: Mayo and human relations The happiness of the individual does not rely on the individual, but on his or her belonging in a small group, argued sociologist George C. Homans in his influential book The Human Group (1950). Paradigmatic for the postwar period’s fear of the collapse of cooperation and the arrival of human catastrophes, Homans warned at the end of his work that: If we do not solve this problem [learning about and directing small groups], the effort to achieve our most high-minded purposes may lead us not to Utopia but to Byzantium. The problem will not be easily solved, but one step we can take in the beginning is to learn the characteristics of the human group. (Homans 1950: 468)

Learning about sociality or risking the outburst of more catastrophes—thus was the dilemma posed by Homans. Homans had earlier declared his intellectual debts to a major intellectual figure of his time, organizational psychologist Elton Mayo (1880–1949), the “father” of human relations (Smith 1998: 239).39 An all-important development in the history of market reformism in the mid-century was the dissemination of human relations.40 Based upon industrial psychology, it marked a new approach to industrial relations. The main interest of the human relations movement was social relationships. As with many contemporary sociological and anthropological studies, this

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management ideology stressed that “man” was first and foremost social man, contrasting this to economic man. Through the works of Elton Mayo a new vision for industrial capitalism was presented, relying upon new criteria for the legitimacy of economic production. As in earlier notions of market reformism, the rhetoric of human relations, at least in the works of Mayo, offered a criticism of industrial capitalism along with a proposed remedy for its pathologies. Human relations launched a more “humanistic” rhetoric of caring for the emotional well-being of employees. In this sense, it bears witness to a generic feature of the different variants of market reformism: it adds a moralistic constraint on the process of capital accumulation. In short, it says that not all types of industrial production are just; the ones that take no interest in the well-being of the workers are not legitimate. It invokes the notion of a moral responsibility on the part of the capitalists and the managers for something more than securing their own economic interests. On the other hand, human relations also reveals another typical feature of the different strands of American market reformism: it couples benevolence and economic motives, presenting what in present-day language use might be dubbed a “business case” for human relations, arguing that incorporation of this enlarged responsibility for worker welfare will also prove to be profitable. As a pamphlet on human relations by the most important and largest industrial trade association, the National Association of Manufacturers, said on the subject: “Increased attention to employees as individuals brings about substantial improvement in productivity. Only as a man is able to secure satisfaction through his work, does he put forth his best efforts. Many companies will testify that ‘going out for the good life’ pays dividends.”41 Pay attention to human relations in industry, and not only will the possibilities for conflict decline, but business will become more profitable. As in other variants of market reformism, the new changes were meant to come from “within” industry. In fact, a leading proponent of the human relations movement like Mayo would be outright anti-union, because unions would destroy the possibility of fostering solidarity and community within the workplace.42 Compared with earlier variants of market reformism, a defining characteristic of this new movement of reform was its reliance upon an applied psychological knowledge. Led by Elton Mayo, the human relations movement claimed that “scientific management” had neglected individual human beings’ thoughts, emotions, and social needs.43 As perhaps the leading industrial psychologist in the interwar period, Mayo had written the preface to the final report on the Hawthorne Experiment, at the time the by far most comprehensive empirical investigation of working environments ever undertaken.44 In his preface, Mayo warned against the depravation of the art of human collaboration, making a plea for a restoration of spontaneous cooperation, as this would be the singular most important means to avoid war and

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chaos (Mayo 1943). Like Barnard, Mayo, through the writings of Pareto and Henderson, invoked the ideal of a “social equilibrium” that needed to be restored. During the 1920s, Mayo had developed an interest in clinical psychology, inspired by the works of Freud and Pierre Janet. From Janet, Mayo would learn that conflicts stemmed from individual maladjustment (Smith 1998: 231); as Barley and Kunda note, “labor conflict was a form of group psychopathology” (1992: 373).45 Academics as well as industry saw great opportunities in Mayo’s work, and in 1926 he was offered a position at the faculty of Harvard, supported by his patrons (1992: 373). The Rockefeller foundation supported him financially for more than twenty years. In 1927, the Laboratory of Industrial Psychology was established at Harvard by Mayo and his research associates. Early in his writings Mayo exhibited distrust in the powers of the state, in politicians, and in formal procedures for handling industrial conflict (Smith 1998: 224). In his early political work, published at the end of World War I, he criticized the “irrational vested interests of both capital and labor” (Mayo 1919; Smith 1998: 231). Sociologist John H. Smith rigorously demonstrates Mayo’s early—and enduring—stance: For Mayo, the central problem of a changing society was how to develop and maintain cooperative systems; pre-industrial societies depended on the spontaneous cooperation of skilled groups and modern society must recreate these conditions. Politicians by contrast exploited class feelings and sectarian prejudices and only intensified the problems they claimed to solve. (Smith 1998: 231)

Mayo wanted reform of industry, but it was a market reformism that strongly opposed political reformism. In Mayo’s 1933 book The Human Problems of an Industrial Civilization, a bestseller, he developed the later much criticized notion “that social collaboration can only be restored through the creation of administrative elites trained in techniques of social organization and control coupled with a readiness to move away from a belief in simplistic political solutions” (Smith 1998: 237). It was his book The Social Problems of an Industrial Civilization from 1945, however, that became his most influential work. Here, Mayo’s central ideas of a social reconstruction of capitalism are unfolded. Mayo’s market reformism was one that demonstrated how industrial capitalism could respond to the challenge posed by the dissolution of communities. The Social Problems of an Industrial Civilization was first published in 1945; it was translated into numerous languages, and it stayed in print for more than thirty years. Confronted with the disturbances of the time, Mayo in this book advocated the restoration of the human ability to cooperate as the most important challenge for human kind. Western societies had, over several hundred years, undergone an incredible industrial, material, technological, and scientific development. But, according to Mayo, there was an underside of

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this development, a neglected problem: the industrial and machine age suffered from a social and human deficit. This had had catastrophic consequences. With reference to classical sociologist Émile Durkheim’s studies of suicide, and to the French engineer Frédéric le Play, who undertook wide-ranging travels in nineteenth-century partly industrialized Europe, Mayo claimed that society, due to industrialization, found itself in a condition of far-reaching social disintegration and individual neurosis. This, together with the Great Depression and what came thereof, was a key explanation for war and chaos according to Mayo (Mayo 1949: 5ff.). The ideal society for Mayo thus became a new “adaptive society” instead of an “established society” (1949: 11). In modern society the workplace had become the central frame of the individual’s life. The pressing task was thus a social adaptation to the technical, industrial, and scientific breakthroughs. The individual had to, on a social and personal level, be integrated into the industrial factory, where she had hitherto been subject to alienation. In order to accomplish this mission, Mayo said, it was necessary to do behavioral studies of industry, and there should be massive investment in the education of managers or administrators, who should be trained to be socially competent practitioners. The social sciences should no longer educate unworldly, socially incompetent theoreticians—people who, according to Mayo, adhere to abstract theories, as for instance the French physiocrats’ phrases laisser faire and laisser passer, or to the economist David Ricardo and the philosopher Thomas Hobbes’ bleak notion of natural society as a horde of “economically” selfsufficient egoists (Mayo 1949: 33). The socially incompetent practitioners were unhappy people, Mayo claimed, who possessed a mistaken view of man: “In industry and in other human situations the administrator is dealing with wellknit human groups and not with a horde of individuals” (1949: 99). As the Hawthorne experiments showed, individuals form informal groups and spontaneous cooperation. This knowledge was now to be used to improve human relations in industrial corporations. And this ideal was, according to Mayo, to be disseminated widely. It was all of society that needed to manage its institutions more humanely. There was clearly an emphasis on community and the meaning of the social for individual fulfillment in Mayo’s thought. This is not least due to influences from Émile Durkheim, American pragmatism, and social-psychology. The self is ultimately a social structure, formed by social experience, claimed the pathbreaking thinker of social-psychology, George Herbert Mead (1863–1931). The ideal of a renewal and humanization of the social relationship between individual and organization could thus be rooted in the idea of the social self. As sociologist Mauro Guillén rightly pointed out, applying Hirschman’s (1991) classical typology, Mayo invoked classical “reactionary” arguments. In Guillén’s words:

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Mayo mounted a classic reactionary argument against scientific management and mechanized production, using both a perversity thesis (overreliance on technical variables actually decreases production), and a jeopardy argument (technical progress endangers previous achievements of human society), to use Hirschman’s framework. (Guillén 1994: 62)

But Mayo clearly also went further than just a mere skeptical stance, as human relations as a reform movement was to help reshape the workplace and the employer–employee relationship. As such, the rhetoric of human relations exhibits a generic feature of market reformism: it criticized the existing, but incorporated a remedy to the perceived evils into its own, new vision for a reformed capitalism. It criticized the excesses of capitalism and offered a cure that would not break with the principle of self-regulation. It invoked new “social” ideals where greatness was related to the ability to help others find their social function and identity. Contrariwise, little moral value was ascribed to the person who thinks of life in terms of individual isolation. Seemingly much less dependent upon a Christian framework than earlier versions of market reformism, human relations offered a new, secularized market reformism that would ultimately justify the system of free enterprise and be critical of state and government intervention and regulations, but that would insist on the new “social ethic” as a central test against which industrial society should be tried. In short, it offered a new road out of industrial strife because it accommodated parts of the criticisms of industrial society, especially criticisms concerning alienation and criticisms concerning social disorganization. Like Barnard’s ideas of the moral organization, human relations did not focus upon questions of economic distribution of corporate profits. Instead, human relations questioned the legitimacy of corporate and organizational activities that did not take the “human factor” or “human element” into account. As with other variants of market reformism, its influence was complex and multi-faceted. As Jacoby notes, referring to sociologist Reinhard Bendix’s original findings, it was not until “the late 1930s and early 1940s [that managers became] fully aware of the blue-collar worker as a ‘human being’, possessing a personality, attitudes, dignity, and rights” (Jacoby 1985: 280). In the 1950s, human relations was embraced by many American top executives because it was viewed as a means to reduce industrial conflict, and even seen as a tool for preserving the market economy from the rising threat of socialism and communism (Guillén 1994: 68–9). Human relations, like the class passers of the 1920s, was instrumental in creating a more humane view of workers; but it was also embraced by industry in order to diminish conflict, to increase profits, and to affect the subjectivity of workers. Whereas the main contribution of Mayo’s market reformism was to focus upon social and human relations in industry, another market reformist of the time, Peter F. Drucker, continued along these lines, invoking a notion of

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industrial citizenship, but he also introduced new elements. Indeed, as Drucker in his 1946 book Concept of the Corporation argued, “big business” had become the representative institution of society, and it was all-important that it could be brought into accordance with the most important ideals and norms of American society (Drucker 1983: 123). Drucker’s market reformism was more distinctively existentialist as compared to Mayo’s, but Drucker also focused upon adjusting capitalism to urgent social needs and challenges such as unemployment. Whereas earlier versions of market reformism such as industrial betterment had, for example, developed corporate pension funds, Drucker reacted directly to advocate a counter-response to the Keynesian political reformism aimed at preventing unemployment. What Drucker did was to describe the corporation and the free enterprise system in a number of favorable terms, not least by presenting new visions for what the corporation could become. In short, Concept of the Corporation was a piece of market reformist, innovative ideology.

Drucker: “A corporation lives in society” Peter F. Drucker, often acknowledged as the most important management thinker of the twentieth century, or simply the “guru of the gurus,” wrote Concept of the Corporation in 1946 (Micklethwait & Wooldridge 1997: 71ff.).46 Drawing on the German conservative political theorist Friedrich Julius Stahl and the existential philosophy of Danish philosopher Sren Kirkegaard, Drucker tried to “find a solution to the crisis of the liberal capitalist order” (Gilman 2006: 122). According to intellectual historian Nils Gilman, “Drucker’s unique contribution would be to recognize and emphasize that conservatives had to develop a democratic theory of industrial organization if they wanted to save capitalism form existential implosion” (2006: 117). Drucker’s market reformism envisioned a capitalism that would accommodate individuals’ needs for a social function and for dignity; but he would also launch an idea for how unemployment could be limited to a minimum primarily through exploiting market forces themselves, as opposed to relying upon Keynesian economic politics. Capitalism had to be adjusted to and moderated by social, existential, and ethical concerns, and this was to be possible through enlightened self-regulation. Capitalism was producing its own destruction if it was not redirected by other ethical impulses, which could be done at the management level. As Gilman notes: “What was striking for a conservative was that Drucker placed the majority of the onus for change on management” (2006: 122, my emphasis).

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To be sure, Drucker’s book was, as with other market reformists, not a book that fundamentally challenged the system of free enterprise. Indeed, Drucker did invoke free market liberalist arguments in favor of capitalism. But he also presented a market reformist scenario of a more socially and humanely responsive capitalism – of progressive business in 1946. Concept of the Corporation was a study of General Motors and its organization. As such, it was a large report written from the perspective of management consultancy. But the book was much more than that. As Drucker explained: “Our study seeks to examine General Motors primarily as a test of the achievements, problems, and solutions of a free-enterprise system” (1983: 102). It was an attempt to see how the “free-enterprise system” could be brought back into good health, which firmly places it within the history of market reformism. In Drucker’s own immodest opinion, explicit in his 1983 preface, the book was, “despite all the books on the corporation and its management which have appeared in the last forty years, the only book that looks at a major business in its totality, and looks at it from the inside” (1983: 12). His book was a defense of what he consistently referred to as the free enterprise system. Drucker contrasted this system with state socialism, and with state capitalism. But Drucker also contrasted it with the doctrines of laissez-faire economics from the nineteenth century, of which Drucker often referred to Herbert Spencer as a leading proponent. Drucker’s Concept of the Corporation dealt explicitly with several main criticisms of capitalism: existential depravation, the eclipse of equal recognition and status, and unemployment. The strategy was to show how the “free enterprise system” was indeed still the best possible choice, and not least to show how it would be possible to develop remedies against the pathologies from within the free enterprise system itself. This, then, was a very powerful justification of capitalism— accommodating elements of both a social and an “aesthetic” criticism concerning personal fulfillment and status.47 Writing at the very beginning of the Cold War, Drucker presented what he conceived to be the proper economic policy of “capitalism in one country”—a counterpart to Joseph Stalin’s Soviet Russia. He underlined the need for harmony, stability, and freedom, and the book should be read as policy advice for both politicians and business leaders. The central question it tried to answer, much like Mayo’s concerns, can be posed like this: how can the free enterprise system be redesigned in such a way that its current pathological features are avoided? In Drucker’s view, the novelty of the book was its systematic way of looking at big corporations not only from an economic point of view, but from a political and a social perspective. The task was thus to explain how, exactly, one could rationally believe that a free enterprise system was the best possible available system, not only in terms of economic efficiency, but also in social and ethical terms.48 Again, it is important to recall that defenders of an

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enlightened capitalism have to describe how their description and evaluation of capitalism differs from the one provided by a “pure” free market liberalism.49 It was clear to Drucker that “big business” had come to stay, and that nothing was to be regretted about this fact—not least because big businesses were the primary drivers of the creation of wealth. This was due to supreme economic efficiency which had been made possible through organization, i.e. “the arrangement of human work on material resources according to a concept, which determines the social structure and economic function of an economic enterprise” (Drucker 1983: 33). Indeed, Drucker stressed that classical economics simply did not recognize that organization in itself had become a productive resource; to their three factors of productive resources, “labor, raw materials, and capital equipment,” Drucker added “managerial organization,” which had “become the most important one in modern mass production and the only one for which there are no substitutes” (1983: 177). This had become all the more evident since the rise of the large-scale industrial corporation. When Drucker described and justified the free enterprise system, the representative institution was thus the big corporation—like General Motors. A free enterprise system is a system wherein the market is the sole determinant of price, production, and profitability; means of production are owned privately (Drucker 1983: 113); and it is an “economy based on politically uncontrolled corporations” (1983: 175). The main argument for this system, stressed Drucker, was its greater economic efficiency. This primarily referred to its ability to produce a maximum at a minimum cost. Further, Drucker added that it is efficient because it satisfies the needs of individuals, who are the ones that define, through the market, what is produced. The reason why the free enterprise system would produce the most at the lowest price is the “effect of the competitive market check” (1983: 106). In Drucker’s account a corporation was not just an economic entity.50 Indeed, “a corporation lives in society” (1983: 82). Accordingly, society has multiple stakes in the corporation: Every major decision of a great corporation affects the public somehow, as workers, consumers, citizens; hence the public will react consciously or subconsciously to every move the company makes. On this reaction depends, however, the effectiveness of the company’s decision to no small extent—simply another way of saying that any corporation lives in society. (1983: 86f.)

If “big business” had become the representative social institution of the United States, it was urgently necessary to look at the corporations not only from an economic perspective, but also from a social as well as an ethical perspective: Only now have we realized that the large mass-production plant is our social reality, our representative institution, which has to carry the burden of our dreams. The survival of our basic beliefs and promises—the survival of the very meaning of our

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society—depends on the ability of the large corporation to give substantial realization of the American creed in an industrial society. (1983: 123)

Accordingly, Drucker criticized the popular view that corporations exist primarily because of their shareholders: In the social reality of today, however, shareholders are but one of several groups of people who stand in a special relationship to the corporation. The corporation is permanent, the shareholder is transitory. It might even be said without much exaggeration that the corporation is really socially and politically a priori whereas the shareholder’s position is derivative and exists only in contemplation of law. (1983: 31)

Still, Drucker wished to show how the profit-maximizing behavior of each corporation is in the interest of society. Here, Drucker argued, there is a harmony between the corporation’s goal of maximizing profits and society’s goal of getting the maximum amount of production at the lowest possible cost (1983: 25, 27, 122). The Smithian notion of each person looking after their own interests and at the same time thereby serving the interests of society was here repeated, only with the difference that the singular individual had swapped places with the new all-important unit of the economy: the corporation. But this economic test is, as stated, not the only one by which the corporation and its relation to society should be judged.51 According to Drucker, the free enterprise system must live up to the basic ethical beliefs of America: the belief in equality of opportunity, and of the uniqueness and dignity of each individual. (Drucker sees these values as originating from Christianity.) As regarding the belief in equality of opportunity and the worth of each individual, Drucker stressed that America was already a middle-class society, or simply that “there is no class” (1983: 121).52 Furthermore, he interpreted the dignity of each individual as that of having a status and a function in society. This, then, is where his distinct political vocabulary was applied to industrial society; most importantly, Drucker stressed the need for developing “industrial citizenship.” Against the labor unions’ “negative nature,” Drucker instead argued that: “What is needed however is an integration of the worker as a partner in the industrial system and as a citizen in society” (1983: 137). Drucker described the industrial plant as a community which should be guided by the idea of industrial citizenship. Equal opportunities should be provided for by relying much more on the institutional design of General Motors: decentralization. Furthermore, decentralization would make it possible to introduce the market as a yardstick at more local levels. What the workers, foremen, and managers needed, Drucker argued, was an objective yardstick by which their individual performances could be measured. There thus needed to be mobility and advancement options which would be based upon transparent measures. But equally important was, according to Drucker, the need to offer a worthy social status and function for each employee. Here, Drucker for

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instance mentioned active participation, as for example in the worker’s own management of the plant’s community services; the need for experiencing a meaning in the work and a satisfaction; of involving workers more in production, and the importance of listening to them. He stressed the (standard) point, derived from the experience of the war, namely that to have meaningful objectives would go hand in hand with increased efficiency and production.

A market solution to unemployment Drucker’s idea of industrial citizenship was not, however, his only proactive defense of capitalism which sought to adjust it to criticisms. Drucker not only tried to show how industrial citizenship could be used as a regulative idea to better the human relations in industry. He also suggested how full employment could be reached within the system of free enterprise itself, by virtue of the right laws. Drucker was self-consciously writing within a context of “social engineering,” invoking ideals of statesmanship and of industrial leadership, and explicitly rejecting what he saw as an outdated ideology of free enterprise, namely nineteenth-century laissez-faire economics. In this new, mid-twentieth-century attempt to justify the system of free enterprise, ideas of natural order and of divine providence were being pushed into the background. Drucker articulated a new counter-response to socialKeynesian ideas. In short, Drucker’s proposal was to couple two systems—corporate taxation and business cycles. Instead of taxing corporations each year, a large part of their profits should go, motivated by tax exemption, to an employment fund. In booms, the funds would obviously grow; in slumps, however, there would be an inclination to spend the money, and thus to make the capital productive again. This was to be secured through a law that said that the funds would be heavily taxed after ten years if they were not reinvested. Unlike the institution of public spending, then, this private enterprise system would have built in a mechanism of its own that guarded it against rising unemployment, and did this through the workings of the market, as the funds-money would be invested according to the prospects of profits, i.e. where it was expected there would be a demand. This economic policy would then acknowledge that the economy does not “naturally” cure itself, in this sense sharing the post-Great Depression experience. But, on the other hand, it would not accept Keynesian public spending ideas, but show how mechanisms of economic recuperation could be built into the free enterprise system itself, by employing the right economic policy. Furthermore, Drucker reminded the reader that depression and unemployment are not exclusively capitalist phenomena, but also prevalent in communist countries, and he thus concluded that “everything we have learned

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about the anatomy and the pathology of the depression contradicts the claim that economic fluctuations depend on the ownership of a society’s economic resources” (1983: 219). Drucker’s vision of a “reformed” free enterprise system thus also defended the system against economic and social criticisms concerning social efficiency, economic growth, and full employment.

Economic man: natural or rational? Drucker acknowledged the importance and relevance of modern cultural anthropology. He affirmed a key insight of modern cultural anthropology, namely that it is not a “natural” propensity for “man” to truck, barter, and exchange.53 He referred to Karl Polanyi’s The Great Transformation, which drew heavily on insights from modern cultural anthropology, as an outright “brilliant” and “profound” work (Drucker 1983: 196, 210).54 Throughout Drucker’s work there was a repeated attempt to distance his idea of a free enterprise system from nineteenth-century laissez-faire and ideas of a “natural order.” He stressed that the market is “a man-made social institution, operating not in a vacuum but in society” (1983: 203). But whereas Drucker readily accepted the critique of a fixed view on “man’s nature,” he argued that it would nonetheless be rational for a society to have a free enterprise system wherein corporations seek to maximize profits. In Drucker’s account there had been “an excessive reaction against the wrong psychology of the utilitarian economists” (1983: 195). What is not natural might still be rational; “to say that the profit motive is not inborn in man and the expression of his true nature, is, however, something very different from asserting that it is vicious, unnatural, and socially undesirable” (1983: 196). In explaining why profits, profitability, and the profit motive were actually socially desirable, albeit neither “natural” but nor “unnatural,” Drucker argued that profits are the most important factor in obtaining economic growth (1983: 195).55 Profitability is the necessary “yardstick and determinant of the nature of the economic process” (1983: 191); profit, in addition to being the insurance premium against the risk involved in the gamble of the future, is also the only source of the new capital equipment without which expansion would be impossible. New capital can only be created by keeping resources or their products for future use, that is, out of a margin between total production and production currently consumed. This margin is the profit margin. The higher it is, the faster can an economy advance, the more jolts can it take, the faster can it recover from setbacks. (1983: 191)

Capital breeds capital. Here, Drucker relied upon the dynamic theories of economics, stressing growth, entrepreneurship, profits, and risks, by economist Frank Knight’s Risk, Uncertainty and Profit and Austrian-American

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economist Joseph Schumpeter’s The Theory of Economic Development (Drucker 1983: 194; Knight 1964; Schumpeter 1963). Power exists, has existed in all societies, and will exist in all future societies; but in the free enterprise system, it is at least possible to channel power in a direction where it creates economic growth and thus may be relatively unharmful and even useful, Drucker argues (seemingly unaware that he is in fact embarking on an old argument in favor of commerce, namely that the drive toward accumulating wealth is a relatively harmless “cold interest,” which could counter the dangerous passions of man, as argued by seventeenth- and early eighteenth-century protagonists of trade and commerce (Hirschman 1997)). In sum, Drucker launched a new, social, and political vision of the corporation that would view its role in a larger perspective; indeed, behind Drucker’s analysis of the corporation and of General Motors was always the larger concern of his book: how to help restore the “free enterprise system.” Drucker’s market reformism, then, was one that was especially concerned with “existential” and individual needs, trying to show how notions of dignity, social status, participation, and a sense of equality of opportunity, could be promoted within the capitalist market system. In his defense of capitalism, however, he also advocated economic and social arguments. He argued that this system, through competition and profitability, was the best provider of economic efficiency; that unemployment could be decreased primarily through an intelligent system of market self-regulation; and that America was fundamentally still a middle-class society—an argument that has often been invoked to cancel out critiques of a deeply class-marked society.

The soulful corporation Barnard, Mayo, and Drucker were not alone in advocating a new, gentler capitalism, which would carry social responsibilities on its shoulders. In 1951, for instance, the chairman of the board of Standard Oil Company (later to be known as Exxon), Frank Abrams, wrote the article “Management’s Responsibilities in a Complex World” (1951). Abrams here noted that management had become a profession in the ranks with other, older professions such as doctors. As professions, they shared the same essential purpose: serving the common good. Abrams distanced himself from earlier businessmen who neglected their “social responsibility,” underlining the claim that no corporation can prosper if it only seeks short-sighted profit maximization and does not pay attention to other values (1951: 31). By this time, however, the theme of management as a profession had been widespread, at least since the 1930s; it had been given much attention by authors such as Barnard; and the moral

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devaluation of “short-sighted profit maximization” had likewise been a prevalent theme in earlier proponents of market reformism, both in its earlier mid-century variants as well as in the late nineteenth century. Also in 1951, A.P. Smith Company donated $1500 to Princeton University, which lead to a trial in the New Jersey Supreme Court, where the court ruled that the company could rightfully donate the money without prior approval of the shareholders. Thereafter, several major firms’ foundations, together with the General Education Board, joined hands in founding the Council for Financial Aid to Education, with Abrams serving as chairman of the executive committee, and with leading members such as Alfred Sloan. Another example will also demonstrate the continuity of notions of market reformism. In 1957 Harvard economist Carl Kaysen (1920–2010) published his paper “The Social Significance of the Modern Corporation,” originally presented in 1956 at the annual meeting of the American Economic Association (Kaysen 1957). Kaysen took stock of the development of the American economy into an economy of corporations. Among other key trends, Kaysen noted the progressive disappearance of ownership (1957: 312). Kaysen argued that no one, including managers, “has significant control over corporate action resting on stock ownership”; that “management has become professionalized”; that managers are not owners; and that “the whole labor force of the modern corporation is, insofar as possible, turned into a corps of lifetime employees, with great emphasis on stability of employment” (1957: 312). Kaysen repeated well-known themes from discussions concerning ownership of and power over corporations which go back at least to Veblen. What was new here is the description of the changed employment system which now, in the context of mid-century “regulated capitalism,” promoted stability of employment (cf. also Bowles et al. 2005: 160–4; Eisner 2011). As a main characteristic of the behavior of “the modern corporation,” Kaysen mentioned “the wide-ranging scope of responsibility assumed by management,” which at the time when Kaysen wrote included responsibility toward multiple parties, including welfare arrangements for employees such as “stable employment” and “high wages” (1957: 312). As Kaysen noted: No longer the agent of proprietorship seeking to maximize return on investment, management sees itself as responsible to stockholders, employees, customers, the general public, and, perhaps most important, the firm itself as an institution. To the customers, management owes an improving product, good service, and fair dealing. Where customers are themselves firms, not households, the emphasis on fair dealing is especially strong. To the employees, management owes high wages, pensions and insurance systems, medical care programs, stable employment, agreeable working conditions, a human personal policy. Its responsibilities to the wider public are widespread: leadership in local charitable enterprises, concern with factory architecture and landscaping, provision of support for higher education, and even research in pure science, to name a few. To the firm itself, as

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an institution, the management owes the primary responsibility of insuring the maintenance and, if possible, the expansion of its long-run position; in other words, sustained and rapid growth. (1957: 312)

Kaysen described the new state of affairs in a favorable moral light by invoking an ideal of social responsibility; this was not meant as a lofty vision of the future, but as an apt description of the present. It is not surprising that he tackled the question of whether this mid-century ideal of the “soulful corporation” was simply a subtle way of maximizing profits. A credible market reformism must distance itself from the principle of self-interest. The criticism of market reformism, namely that it is in the final analysis just a new, more subtle way of maximizing profits, had been around at least since early progressives such as Ely. Ely had questioned the “business of benevolence” of his time, suggesting that the proper bodily gesture when faced with capitalists that wanted to do good and make a profit at it at the same time was to “shrug one’s shoulders” rather than to clap one’s hands. In this new context of mid-century capitalism, Kaysen rhetorically posed a similar question. He asked whether these “wide-ranging” responsibilities were not intrinsically linked to maximizing profits. Kaysen answered in the negative that: the uncertainty attached to some benefits (say those of being a high-wage employer), the difficulty of translating into cash terms others (such as maintaining good community relations), the remoteness in time of still others (such as supporting liberal arts education) indicate that profit maximization must be given a very elastic interpretation indeed to cover all these activities. (1957: 312)

To Kaysen, there were in other words no guarantees that corporate social responsibility would have positive economic effects. There was no clear “business case” for the “soulful corporation.” Kaysen argued that there is a difference between profit maximization traditionally understood and the behavior of the modern corporation. The behavior of the modern corporation can be seen from two angles. First, as “responsible,” where “there is no display of greed or graspingness; there is no attempt to push off onto workers of the community at large part of the social costs of the enterprise. The modern corporation is a soulful corporation” (1957: 313f). Second, “from another viewpoint, we can summarize the behavior of the modern corporation in terms of the use it makes of its market power” (1957: 313). Here, Kaysen was in line with the Galbraithan notion that corporations to a substantial degree have market power, leaving great decision power and policy scope to managers; but he added that this in turn was “a necessary condition for the display of its characteristic behavior” (1957: 314–15). He thus implied that corporations’ market power, which is problematic in the eyes of both free market liberals and socialists, was actually the condition for assuming the wide range of social responsibilities he described.

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In Kaysen’s account, the “soulful corporation” fundamentally challenged conventional conceptions of corporations: We classically contrast favorably the operation of business with that of a government department aimed at promoting the public welfare. But the soulful corporation becomes less and less distinguishable, except in the matter of formal control and management responsibility, from the socialist enterprise if the latter operates under instructions to serve the public welfare but not to rely on the public treasury. They share common structural features: market power and a very long decision horizon—although typically the socialist enterprise as observable to date excels in both directions. (1957: 318)

According to Kaysen, the difference between “the soulful corporation” and “the socialist enterprise” (insofar as it does not rely upon the “public treasury”) was becoming less and less distinct, as they both essentially promote public welfare. In this sense, however, Kaysen only stated here what had been a widespread notion of market reformism as well as for political reformists at least since Berle and Means: the idea that corporations were servants to multiple parties who hold a stake in them. But whereas Berle and Means had opted for the division of profits for different “stakeholders,” Kaysen stressed the importance of a range of different welfare capitalist arrangements.

The American business creed That Kaysen was intensely engaged in these questions in 1957 is not surprising. He had been part of a distinguished writer team behind the biggest comprehensive investigation of American business ideology, namely the excellent book The American Business Creed, published in 1956. The book was written together with two other economists, Seymour E. Harris (1897–1974) and James Tobin (1918–2002), and by the sociologist Francis X. Sutton (1917–2012), who was the lead author. Later, they would all have distinguished careers within academia, government administration, and various scientific and other organizations. The American Business Creed gives a unique insight into the prevalent business ideology at the time. The analysis is based upon a meticulous study of a broad range of empirical sources of public statements in the years 1948–9. It draws upon “business advertisements in newspapers and magazines, books, pamphlets, and speeches by individual business leaders, business testimony before Congressional committees, the publications of trade associations and other business associations, and the like.”56 If there ever was a study on the “spirit” of mid-century American capitalism, this is it. And if there ever was a publication in mid-century that could support the thesis of the strong prevalence of market reformism, this is it.

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The main purpose of the book was to describe and explain the contents of the dominant business ideology at the time. The authors carefully underlined that their errand was not to debunk this ideology, and nor to free any other political and world views from being ideological. They distinguished between science and ideology and stressed that ideologies are selective, oversimplifying, and users of symbols (such as the idea of “service,” the symbol of small business).57 In their account of ideology, they advanced the claim that ideology is a “patterned reaction to the patterned strains of a social role.”58 That is, ideologies provide a basic, selective, simplified, and symbol-using outlook from which a person in a social role, such as being a business executive, can make sense of this world and legitimize actions. The social role is strained, meaning that it is subject to various different pressures, norms, and demands that are often conflicting (such as individualism and fierce competition versus strong organizational team spirit and loyalty). These strains are “patterned” insofar as there is much stability in the conflicting demands upon particular social roles, due to the institutional structure of society. Ideology is a means for coping with these strains, rather than being a simple reflection of economic self-interest. The main thesis of the book was that a “classical” American business creed had been supplemented by a “managerial” business creed during the latest decades. The defining characteristics of the classical creed revolved around key values such as: a strong belief in competition, individualism and freedom, hard work, austerity and balanced budgets, progress, sanctity of private property, materialism and productivity, practical realism, universalism and meritocracy, and limited government. The authors explained that there is a very close affinity with—and direct inheritance from—central ideas of classical political economy: Adam Smith, David Ricardo, Thomas Malthus, James and John Stuart Mill, and their popularizers.59 The core of this ideology is free market liberalism, and in addition it encompasses elements concerning the business enterprise in society, as well as ideas of American nationalism and exceptionalism. The business enterprise is praised as the central institution in American society, and that which not least has led to the unique increase in material standards of living. It has not only brought material prosperity, however, but also been a harbinger of universalism, referring to meritocracy, equality of opportunity, and the possibilities for personal freedom as well as acknowledgement of personal achievements. This unique American system of free enterprise, limited government, natural laws of the market, and universalism, was in the American self-understanding of the business creed in marked opposition to the European heritage of feudal and aristocratic entitlements. The American business creed believed in self-interest as the “universal and immutable motivation of every man,” and was skeptical about government interference and legislative reform: “Intellectuals, ‘do-gooders,’ and reformers are, accordingly, apt to be naïve about human nature and many of the reforms

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they propose are doomed as impractical by the self-interest of individuals.”60 It often acknowledged the importance of religion, but was, overall, secular.61 The authors tentatively concluded that the business creed seemed to have been of a remarkable stability in the US. Yet, early into their study, the authors introduced a key analytical distinction within the American business creed, namely between the “classical” and the “managerial” position. “The doctrine that the evil days of rugged individualism have now passed and that a new era of business responsibility has emerged wins increasing praise.”62 The “classical view” was being supplanted by the “managerial view”: The classical strand centers around the model of a decentralized, private, competitive capitalism, in which the forces of supply and demand, operating through the price mechanism, regulate the economy in detail and in aggregate. The managerial strand differs chiefly in the emphasis it places on the role of professional managers in the large business firm who consciously direct economic forces for the common good.63

It is furthermore concluded that the two strands are “hardly entirely consistent,” that they appear in different contexts of discussions, and that “the classical strand is basic in the business ideology,” whereas the managerial strand is not a separate strand.64 It is a distinction that was used throughout the book, carefully referring to the aforementioned broad range of empirical sources. In brief, what these authors were doing, to use the terminology of this book, was to map the significant role played by market reformism in midtwentieth-century America. The classical business creed and the managerial view differ in certain respects.65 In the classical view, social welfare comes through the workings of the free enterprise system. Each individual firm works in their best selfinterest, under the heavy constraint of free competition, and this is aggregated into a maximum of social welfare. This is the argument found in classical economics. By contrast, the managerial view stresses that enterprises achieve social welfare by acting directly with an eye to the public. It focuses much less upon the profit motive. In the classical view, the business enterprise is first and foremost legally defined, with owners having the natural right to maximize profits, which leads to a maximum of economic and social welfare. The owners are the enterprise. In the managerial view, owners are “on par with other groups who have stakes in, and just claims on, the organization.”66 The enterprise is a social system, in which employees, customers, and suppliers are “insiders” rather than mere outsiders. (Profits, however, may be legitimized for two different reasons: one for the provision of incomes to enterprises and then to individuals, but also as “a symbol of accountability and rational economic calculation,” as seen in e.g. the “managerial” work of Drucker.)67

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Whereas owners are at the center of the classical view, the managerial view places most weight on managers. These are conceived as analogous to statesmen, because their job is to mediate between many different groups, have attention on justice and wisdom in decision making, and “keeping the public paramount.”68 In sum, “managers as a group must deliberately create the balance which, in the classical view, results automatically from a proper functioning of the System.”69 From the vantage point of this distinction, then, businessmen such as Alfred P. Sloan (General Motors) and Frank Abrams (Standard Oil), who were active in supporting education, were described in the book as “managerialists.”70 In general, managers in public statements proclaim to have responsibilities toward consumers, employees, stockholders, the general public, and sometimes suppliers or other business contracts, not simply to stockholders: “stockholders have no special priority; they are entitled to a fair return on their investment, but profits above a ‘fair’ level are an economic sin.”71 According to the authors, “some exponents of the social gospel go so far as to command a Kantian criterion to individual managements for every decision: to consider what would be the consequences for society if every management acted thus.”72 As regards the relationship to government and legislation, both strands were generally hostile, although the managerial creed was a little less dismissive. For example, the managerial view is reported to be more open toward government fiscal policy for the purpose of mitigating cyclical fluctuations, although, as we have seen in this chapter, finding ways to manage fluctuations beyond state and central administration was on the agenda for Drucker.73 Furthermore, some “managerial writings tend to recognize Big Labor and Big Government as products of the same forces that produced the Great Transformation.”74 The relations to government however, are a difference of degree, not of substance. Thus, “the dominant tone of the creed is negative; government is at best a necessary evil; at worst, the evil far outweighs the necessity and, unchecked, can ruin society.” Government is “always viewed negatively, as a restraint on the individual.”75 The two strands share the above-mentioned key characteristics of the American business creed and are both business ideologies, but on various subjects they do have different accentuations. For example, they both emphasize competition, but the classical creed more than the managerial. Importantly, both strands of the American business creed stress how the free enterprise system contributes to the common good. Also, the “service” idea predates the empirical sources from 1948–9, as ideas of, e.g., philanthropy and of the community service of American business has long been prevalent.76 Most importantly, however, both strands are ultimately business creeds that support voluntariness instead of, e.g., government interference, government programs, and legislation as means to improve the human condition. Thus, the American business creed has stressed that:

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service is voluntary and is not due to the recipients as a matter of right. The managerial creed essentially preserves this pattern of thinking. It responds to the problems of the large public corporation not by calling for a legal redefinition of the social responsibility of managers but by exhorting them to assume new responsibilities voluntarily. It maintains a vigorous opposition to governmental assumption or dictation of responsibilities and the model of a transformed American capitalism decentralized and quasi-individualistic.77

Market reformism, as its more “classical” sister versions, stressed voluntariness and criticized the use of legislation for progressive purposes. According to Sutton and his co-authors, the rise of the managerial view should be seen in the context of the emergence of two competing institutions and ideologies in American society: that of government, and that of organized labor, both of whom supported universalism and collective responsibility. The Great Depression, the New Deal, World War II, and the continuing sense of national emergency, was thus the context for understanding the emphasis on the managerial view. Between the 1920s and the late 1940s, the hegemony of the American business creed was broken. “The major competitor of the business creed in recent years has been what may be termed the New-Deal-trade-union ideology.”78 This accounts for the rising prevalence of the managerial view. As the authors explained: The managerial strand in the ideology emphasizes social responsibilities. If American business is to preserve a strong sense of legitimacy in the ideological climate of the present, it must respond to the increased demands for general responsibility; and the growth of the managerial strand may doubtless be seen as a response to a growing challenge.79

Still, the business creed could not go too far in insisting upon a “picture of society wholly controlled by beneficent managerial decisions,” as this “would be so much like ‘socialism’ that it could hardly serve as a symbol in the business creed.”80 There was a limit to just how far the managerial creed can go and still be a business ideology. Accordingly: the business ideology is basically a stable body of doctrine, shifting its emphases and making concrete ad hoc changes, but not undergoing any fundamental revolutions. The biggest changes have been less in content of the creed than in the confidence it shows in its own general acceptance. It is now more definitely a “business” creed standing in opposition to other ideological positions firmly established in American society.81

According to Sutton and his co-authors, the managerial creed sounded “fresh and distinctive in America only because they are set against the background of the classical theme in the business creed,” arguing that the idea of business’s broader responsibilities toward, e.g., “customer, community, and nation” had

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already long been prevalent elsewhere, in fascism and also in the idea of “welfare capitalism.”82 However: it is in its vigorous cries against “government interference” and “socialism” and in its persisting faith in the workability of a vaguely defined “free” economy that the business creed is genuinely distinctive. The Western world has not swung over to totalitarian collectivism but outside America it no longer nourishes a Spencerian distrust of the state and a goal of maximum freedom for private enterprise. [ . . . ] Some British and Western European businessmen may be extreme individualists but they do not form national associations to broadcast their opinions.83

As Kim Phillips-Fein (2009) has shown, a free market movement was steadily growing in the 1950s, mainly sponsored by conservative businessmen who wanted to roll back New Deal liberalism, and to “broadcast their opinions.” On the history of the managerial creed, the authors noted that although “it seems to evolve from the emergence of the large, stable public corporation and, as such, to be a phenomenon of the middle twentieth century,” they also stress that the themes about the social responsibilities of business management predate the New Deal: “if we think of the managerial strand as including broader assertions of community responsibility than those peculiarly appropriate to managers of large, public corporations, then the older literature burgeons with ‘managerial’ statements.”84 Indeed, it did. As seen in Chapter 1, market reformism was one of the responses to the great transformation of America in the late nineteenth century. After the Great Depression the classical American business creed—owing most of its ideology to laissez-faire liberalism, classical economics, and appeals to American exceptionalism—lost much of its appeal to the world. Instead, the “managerial creed,” congruent or even encompassing many of the ideas of Barnard, and not least Mayo and Drucker, rose to the fore as a viable business ideology that could speak some of the same language as “big government” and “big labor”—a moral language of service and public responsibilities to the people of the American nation.

Conclusion: legitimizing the “social corporation” in the midst of mid-century regulated capitalism As laissez-faire thinking lost its grip due to the Great Depression, giving way to the New Deal regime and the birth of the American welfare state (for some), it became all the more urgent for believers in the free enterprise system to show that a system of “free enterprise” could still work, if only it was transformed from within. Business had to regain a soul which was fit for an era of “big government” and “big labor”. This chapter, then, has shown how market reformist ideas lived on, especially in the 1930s and 1940s, where not only

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free market thinking, but also democracy itself, was in crisis or threatened. With the gradual institutional embedding of Mayo’s human relations ideas, with Peter F. Drucker’s high standing as the twentieth century “guru of the business management guru’s,” and Barnard’s pioneering influence on organization theory, as well as many other examples shown here, we need not doubt that the influence of these market reformist ideas were substantial. Indeed, as the emergence of what Sutton and his co-authors termed the “managerial creed” showed, these were not singular voices, but part of a much broader discourse on capitalism, a discourse that had changed profoundly after the Great Depression. By offering new blueprints for a reorganization of capitalism along humane, existentialist, and social lines, these ideas helped keep basic ideas about capitalism and free markets alive, although along the reformed lines of progressive business. An account of these ideas, at this time, can help explain why capitalism was not thrown overboard in an age that was fed up with laissez-faire. It also explains how market reformists could rely on the development of a new kind of way of thinking about “the social corporation,” but in a much less radical interpretation of it. The central idea of mid-twentieth-century progressive business was the idea of the corporation as a social institution in society. Managers were put into the center of attention, reflecting in part the separation of ownership from control. Talk about the social responsibilities of businesses that are so familiar today were not only on the table in mid-century, but it was central to the way the social legitimacy of business was fought for. But whereas philanthropy was earlier mostly tied to individual affluent industrialists and businessmen, it became more closely tied to corporations and foundations, who themselves were “modeled” on the “corporate model, with a board of trustees, a written statement of purpose, and a government-issued charter” (Sealander 2001: 592). Whereas market reformism of the late nineteenth century was typically addressed to individuals, most of all capitalists and businessmen, the central point of intervention for mid-century market reformism was now corporations and not least managers. Gone were the widespread late nineteenth-century visions of cooperative movements based upon workers’ joint ownership of their enterprises; as the structure of the American economy had changed profoundly into an economy of large corporations, market reformism changed with it. To be sure, this did not mean that the “progressive role” of cooperation was stressed to a lesser extent; on the contrary: cooperation was a key normative concept, the all-important element in human progress and in the prevention of war and social dissolution. Just as late nineteenth-century market reformism often fused together philanthropic and pecuniary arguments (as noted, for example, by Ely), so was mid-century market reformist human relations justified on the grounds that it would increase efficiency and save humanity at the same time.

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What, then, defines the time period examined here, the long mid-century era of the New Deal regime? Table 2.1 highlights the most important characteristics of market reformism in the New Deal era. Table 2.1. Market reformism in the New Deal era (c.1930–70) Key reform ideas: what is to be done?

Human relations and human groups (Mayo) Industrial citizenship (Drucker) A free enterprise system for countering business cycles (Drucker) Corporate philanthropy (funding e.g. education)

Social justifications and key normative terms: why social responsibility?

Importance of workers’ sense of individual and social purpose (Mayo) A corporation “lives in society”; it is a social institution, not just an economic one; it is larger and more permanent than shareholders (Drucker) Christianity (e.g. Drucker) “Cooperation” (Barnard) Importance of non-economic motives and of “service” (Barnard) The social responsibility of business The “soulful corporation” (Kaysen)

Economic justifications of social responsibility?

Business case for human relations and industrial psychology Business case for corporate social responsibility: divided opinions (e.g. Kaysen)

What is being rejected?

“Economic man” The profit motive “Natural order” and “laissez-faire”: capitalism needs a new social ethic

Who has a responsibility?

Corporations and managers of corporations The manager balances between multiple responsibilities (Kaysen, Sutton et al.)

Responsibility toward whom, or what?

Employees Consumers Stockholders The general public—community, nation Suppliers and other business contracts (only sometimes emphasized, c.f. Sutton et al.)

Ideal type example

A manager of a big corporation with multiple responsibilities, funding public education

Mid-century market reformism, overall, seems to have had a more national flavor. The economy was more institutionalized and regulated, with the institutions of “big labor,” “big state,” “big corporations,” and Keynesianism playing a major role. The notion of responsibilities was now much more closely tied to corporations and to managers, rather than to owners.

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Furthermore, the notion of responsibilities seems to have become much more differentiated, as compared to the First Great Transformation. It now referred to a broader range of groups which had interests in, or were affected by, the workings of the corporation: employees, consumers, the general public, suppliers, etc. Human relations stressed that workplace social relations and the personal and social well-being of employees were to be part of managers’ concerns. The corporation was described as a social entity—larger and more permanent than its owners, embedded in society, run by statesmen-like managers who balanced the pressures and demands of different interest groups. For some, it was a clear sign of a more “socialized” economy. However, there was indeed quite a distance between the diagnosis famously laid down by Berle and Means in their book of 1932, in which they thought that the gains of corporations would be widely distributed and socialized, to that kind of socialized corporation which, for example, Drucker had in mind when he wrote his Concept of the Corporation in 1946. Here, businesses were indeed described as embedded into society, but with no implications—quite the contrary—that profits would be socialized. What was shared, however, was a sense that businesses were embedded into society—although with very different implications. The business creed was described as a new, “managerial” business creed. It would be misleading, however, only to see this as a break with the business creed of earlier times, as the new managerial creed drew upon and reframed well-known ideas of social responsibility and of “service” to the public. The importance of business ethics in the early twentieth century is also a reminder not to create too sharp a break between a managerial business creed rising in the mid-twentieth century in strong contrast to the “classical business creed,” at least not when it comes to public expressions of non-economic purposes of corporations. There was a change indeed, but it was not least a change in the institutional fabric. The corporation was now described as a big, lasting institution, working with a long-term time horizon, and in the midst of the complex of other big organizations and institutions, such as the nascent welfare state. Again, we may briefly compare these findings with the work Boltanski and Chiapello did on the history of the capitalist spirit in France (2007: 64–70; 2002: 4–7). In their description of the second spirit of capitalism (referring to writings of John Kenneth Galbraith, as this books’ chapter 3), the one lasting from around 1940 until 1970, the spirit of capitalism incorporates that peculiar kind of welfare coming from a particular mix of state, market, and other institutions, which were built in parts of Western Europe in the postwar period. (Of course, the New Deal regime era in this book goes back a decade more than that). By comparison, and while there are quite a few resemblances, this book has not tried to map an all-embracing spirit of capitalism, although it has traced some of the similar kinds of ideas, their history, and their critics, and investigated some of the key arguments that were championed by the

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defenders of capitalism in different time periods. I have tried to show how, during the New Deal regime—this compromise between state and market, between private profits and public welfare, this attempt to show the world in general, and the Soviet Union in particular, that the US was better at providing welfare to (some of) its citizens—there was still an ideology about the selfreforming, self-regulating potentials of business, which said that it would offer an alternative kind of social protection, an alternative path to the common good. As Boltanski and Chiapello to a large degree build their concept of the second spirit of capitalism on the works of Galbraith (but also on other American authors such as Drucker), it is not surprising that many of their found characteristics of the second spirit of capitalism in France also characterizes the US in this period, such as: long-term planning and career horizons, a representation of the firm as being hierarchical and vertically integrated, emerging critiques of the too big, too bureaucratic corporation, which instead was in the need of direction, e.g., “management by objectives” (Drucker 1954a). In Boltanski and Chiapello’s work, then, a characteristic feature of the second spirit of capitalism is the centrality of big, stable organizations. This only becomes more evident when comparing it with their third spirit of capitalism, which is first and foremost characterized by its “project-oriented” justification regime: a new value orientation for how to organize the work of this world, which places a great deal of worth on individual creativity and entrepreneurship, network organizations and flexible labor, constant mobility, and development. To be sure, such benefit of hindsight and historical comparison was not available to those who lived through American capitalism in the New Deal era. But, still, we will see how many (including contemporaries) have mapped the emergence of this particular kind of American capitalism dominated by the major institutions and organizations of business, labor, and state: from Chandler to Galbraith, from Berle and Means to Drucker, from Burnham to Bendix. There was much which divided these different authors. In fact, they differed hugely in their descriptions, diagnosis, evaluations, and politics for mid-century American capitalism. But they shared a sense that American capitalism had fundamentally changed since the Gilded Age, and that the rise of “big labor,” “big business,” and “big government,” in an “organizational society,” as Perrow (1979: 6) would later call it, had changed much of the institutional landscape of America. In a spirit of capitalism terminology such developments may be characterized as the “organizational regime” or the “organizational spirit” of the American mid-century. Our purpose here is a bit more modest, namely to understand how ideas about a self-reforming, self-regulating capitalism changed in this new context. The keyword here is “changed”: as Sutton and his co-authors were aware of in their book of 1956, ideas about moral self-regulation—referred to as service or as social responsibility—predated the rise of a new “managerial

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creed.” Ideas of business ethics and of moral responsibilities did not suddenly change the nature of the game, as these moral claims had been around for a longer time, and were already important during the First Great Transformation. Instead of being born, they took on new forms and shapes, formed by the new context. The self-regulating ideal corporation was to have not only a social consciousness, but also increasingly a psychological one, addressing the social and psychological needs of workers. The manager, thought analogous to a statesman, was to balance between different interest groups. And the capitalist system as a whole was to be able to self-regulate in order to mitigate business cycle swings that were too large. New Deal era market reformism (c.1930–1960s) was managerial. While probably not at all alien to Christian influences and groundings (as seen in, e.g., Drucker), it was developed in relationship to the modernist social sciences of economics and social and industrial psychology, believing in their scientific expertise in creating an enlightened, better self-management of corporations. It stressed the social embeddedness of the corporation into a larger institutional matrix. This, then, was the era of managerial market reformism.

NOTES 1. Advocates of market reformism are especially likely to be found responding to criticisms and crisis of capitalism, trying to show how a way out of the crisis can be offered with as little use of political and labor union power as possible. The early mid-century has been chosen as the main period of interest here mainly because it makes it possible to see how proponents of market reformism responded to several threats to the social legitimacy of capitalism. 2. These three have been chosen for the present purposes because they were very influential within their respective fields, which furthermore are sound places to look for market reformism. The purpose of the chapter is to show how a new market reformism arose in a context of crises, and to demonstrate which maladies of capitalism it tried to overcome. It does not assume that these voices were necessarily “representative,” but only that they were influential; neither is its interest the collected works, lives, or careers of these authors as such. Rather, it confines its field of inquiry to observing how a new market reformism was propounded. 3. Highlighting key trends for as long a period as from around 1900 until midcentury is a daunting task. I only accentuate key trends relevant to understanding the context for market reformism. 4. According to sociologist Charles Perrow the last part of the nineteenth century saw the formative years in which the United States developed into an organizational society; in retrospect, Perrow notes that: “The truly big organizations, public and private, have come to define and even absorb much of our society” (Perrow 2002: 1). This long-term trend has also been described by political scientist Robert Presthus in his The Organizational Society (1979), identifying key

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5.

6.

7.

8.

9. 10. 11. 12.

13. 14. 15.

Progressive Business developments such as “the emergence of an employee society”: “Beginning about 1875, social, economic, and political trends in the United States prepared the way for the ‘organizational society’, characterized by large-scale bureaucratic institutions in virtually every social area. The master trends included the separation of ownership from management; increasing size and concentration in business, industry, and eleemosynary fields; the decline of competition as the financial resources required for entry in almost every sector became prohibitive; the development of a political economy; and the emergence of an employee society” (Presthus 1979: 84). For references to discussions of Chandler, cf. Booth and Rowlinson 2006: 14–15. Here, I include Chandler to accentuate the increased role of managers and the development of the large, integrated industrial firm. Chandler’s use of the term “revolution” is somewhat misleading: first, developments across such a wide timespan ranging from the 1870s until the 1940s can hardly be described as “revolution”; second, historians have questioned Chandler’s uncritical description of a glorious revolution with little attention given to the darker sides of the industrialization process of the United States. Cf. also Chandler 1962 and Chandler 1990. Chandler conceptualized the economic efficiency of large corporations through concepts such as “economies of scale” and “economies of scope,” when explaining this economic efficiency. Chandler mainly relied on transaction cost theory in the tradition of Ronald Coase and his pioneering article “The Nature of the Firm” (1937), cf. Chandler 1991: 392. As Chandler wrote: “The appurtenances of professionalism—societies, journals, university training, and specialised consultants—hardly existed in the United States in 1900. By the 1920s they were all flourishing” (1995: 468). For instance, Taylor reported how alcoholism (also discussed by Gladden and Sumner) decreased due to the implementation of “scientific management,” and that the character as well as the lives of workers in general was improved. Furthermore, Taylor insured that the most important party was neither the employer nor the employee, but all of society, and that what matters the most are the rights of the people (Taylor 1998: 71). Finally, Taylor stressed both an individualistic ethic as well as the virtues of cooperation, underlining the new, friendly atmosphere between workers and managers, contrasting it with the typical “drive system” of American industry and slavery-based production. Sutton et al. 1956: 155–60. Ford 1922: passim, here quoted from Sutton et al. 1956: 195. Cf. Oxford English Dictionary (2010): “service” (n.), “serve” (v.). A similar mechanism as in the logic of recognition seems to be at stake: as the value of recognition is proportional to the worth of the position from which it is given, so the value of service or servitude is proportional to the value of the person or institution that is served. Sutton et al. 1956: 394–6. Some of the most known class passers were Whiting Williams, Charles Rumford Walker, and Cornelia Stratton Parker (Pittenger 2003). The class passers were influential; they lectured and published widely and were widely read, and helped put the conditions of workers on the agenda. They were

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18. 19.

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market reformists during the 1920s, as “Progressivism as a loose coalition of groups and individuals advocating broad social and political reforms contracted drastically during and after the war years” (Pittenger 2003: 145). The work of the class passers was influential in the development of human relations. According to Pittenger, though, their “legacy was a complex one”: on the one hand, “they helped to elevate the worker’s image in management literature and in public discourse”; on the other hand “they were nonetheless limited by their belief that managers and workers could simply get to know each other, respect each other’s feelings, and talk out their differences [ . . . ] All conflict, including strikes, boiled down to hurt feelings, not to systematic oppression or exploitation” (2003: 158f.). Quoted from Brick 2006: 33. The Wagner Act (after Senator Robert F. Wagner) or National Relations Labor Act is an amendment from 1935; it is a federal law that curtailed employer’s rights to suppress labor union organization, strikes, and collective bargaining. Roosevelt 1932, quoted from Eisner 2011: 62. Sanford Jacoby described the development thus: “the ten-year period following the Wagner Act was a time of accelerated diffusion and institutionalization of the internal labor market: Wages, promotion, and tenure were more tightly tied together. Job evaluation was linked to promotion ladders, seniority principles were strengthened, and job and relative wage structures became more rigid. Employment was made considerably more rule-bound and more secure” (1985: 274). In Jacoby’s conclusion he offered an optimistic perspective on this historical development: “the transformation that occurred in American industry between 1900 and 1945 can be regarded as a successful attempt to expand the labor market’s supply of good jobs. What the experience shows is that jobs can be upgraded through legislation, through trade union pressure, and through changes in managerial philosophy and values. This conclusion reminds us that our current employment structures are not the inevitable result of a free labor market, but instead were often formed in reaction to it” (1985: 285). Throughout the book, Howard Brick’s (2006) Transcending Capitalism: Visions of a New Society in Modern American Thought has been a valuable companion. (One justification for referring often to this particular source is the many favorable reviews of the book in journals such as American Journal of Sociology, Social History, American Historical Review, and Contemporary Sociology). Brick demonstrates a long-lasting continuity in American social and political thinking of a “post-capitalist vision”: the notion that society was in flux and tending towards something remarkably different from a society overdetermined by its capitalist economy. Brick traces the development of “post-capitalist” thinking from around 1914 until the mid-1970s. Reformist thinkers shifted their attention away from viewing society through the lens of “capitalism,” and instead turned to various other concepts and approaches, not least culture, but also developed other labels for the social-political-economic order such as “industrial society” and “postindustrial society.” Politically, post-capitalist thinking was also marked by an embrace of social liberal or social-democratic politics, i.e. the politics of reform associated with the grand American reform movements. In the early 1970s,

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21.

22. 23.

24.

25.

26.

27.

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Progressive Business however, economic crisis and a growing “economism” were influential in bringing the concept of capitalism back into the center of analysis of society. Whereas the concept of capitalism was not widely used in the nineteenth century, it became much more common after the 1910s, offering a key concept for understanding as well as for struggling over the nature of the social order (Brick 2006: 3). The term socioeconomics is Brick’s analytical construct (Brick 2006: 56). Listing names should be done with precaution within such a broad context. A non-exclusive list of some of the most influential American writers on understanding the prospects and limits of the new corporate industrial capitalist order would include institutional economist Thorstein Veblen, philosopher John Dewey, writer Walter Lippmann, New Deal economist Rexford Tugwell, liberal lawyer Adolf A. Berle, reform economist Gardiner C. Means, and sociologist Talcott Parsons (cf. Brick 2006: 54–85). According to Brick, it was Veblen’s view that “Corporate capitalism, inhering American traditions of property and chicanery, was a concentrated system based on speculative finance and governed by irresponsible absentee owners indifferent to production except as a means of draining revenue streams from all of society’s work into their own coffers” (Brick 2006: 64). A notable example is economist Rexford Tugwell. In 1924, Tugwell had edited the compendium The Trend of Economics (Brick 2006: 65ff.). Here Tugwell, along with other economists, launched new ideas and themes for an economics that was critical of laissez-faire economics and of the embedded anthropology of Homo economicus in the classical and neo-classical schools. According to Brick, the book was “a keynote for the post-capitalist vision” (2006: 56); their “interpretation of the corporate form as an implicitly socialized organization of production was an analog to Rudolf Hilferdings’s notion of ‘organized capitalism’ and an echo of Veblen’s critique of anachronistic, ‘make-believe’ property rights” (2006: 74). Barnard’s influence on later developments of organizational theory constitutes a triple legacy: the institutional school (Philip Selznick), the decision-making school (Herbert Simon), and the human relations movement (Elton Mayo and others) all drew heavily on Barnard’s pioneering work (Perrow 1979: 71). I am especially indebted to Charles Perrow’s interpretation of Barnard (1979). For a comprehensive account of Barnard, his theory, influences upon him, and on his own influence, cf. organizational theorist William G. Scott’s (1992) book on Barnard, Chester I. Barnard and the Guardians of the Managerial State. Scott demonstrates Barnard’s idealization of the moral leadership of a knowledgeable administrative elite. To be sure, Barnard was not the first to appraise cooperation and the plus-sum game of collective organizing, as this had earlier been done in, for example, the management and business writings of Taylor and Ford. But Barnard was influential in carving out the new “philosophy” of cooperation, and to ground it in social theory. In Barnard, the idea of a common organizational purpose is argued theoretically, not just preached or presented as conceived wisdom as typically done in popular management theory.

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29. Supporting this interpretation is Barnard’s negative stance towards unions as president of the New Jersey Bell Telephone Company (Guillén 1994: 63; Perrow 1979: 84–6). 30. Henderson’s book introduced Vilfredo Pareto’s Sociologie Générale, (Italian 1916, French translation 1917), appraised by Barnard as a brilliant, pioneering work. As Henderson wrote in his appraisal of Pareto’s general sociological theory, stressing the non-rational motives of human beings: “Machiavelli’s work endures, but has engendered little of like quality or substance, and until the publication in 1916 of the Trattato di Sociologia Generale by Vilfredo Pareto there has been very little further advance in scientific description and logical analysis of the influence of the sentiments upon human affairs” (Henderson 1937: 7). 31. In this major, path-breaking book, Parsons had introduced British economist Alfred Marshall, and the Italian, the French, and the German sociologists Vilfredo Pareto, Émile Durkheim, and Max Weber to an American audience and at the same time developed his own theory of action. As Parsons noted later, in his 1968 introduction to the third printing, he wanted to offer a way out of the “individualism-socialism dilemma”: “On the theoretical side, the book concentrated on the problem of boundaries and limitations of economic theory. It did so in terms which did not follow the established lines of either the theory of ‘economic individualism’ or its socialist opponents, even the British democratic socialists to say nothing of the Marxists. These orientations were probably of considerable importance in getting early attention for the book, since many intellectuals felt caught within the individualism-socialism dilemma, and economics seemed at the time to be the most important theoretical social science” (Parsons 1968: vi). As Parsons stressed, his later work in the 1950s showed that “the economy is a clearly and precisely definable subsystem of a society that can be systematically related to other subsystems” (1968: xii). 32. The latter part of the definition is the organization part; a formal organization is a system within the cooperative system, and it is defined as “a system of consciously coordinated personal activities or forces” and consisting of two or more persons (Barnard 1958: 72, 81). 33. In an organization, human activities are coordinated, and the organization thus has “systems” characteristics, as efforts of individuals are not primarily personal, but organizational (cf. the discrimination between the individual’s personality and his or her “organization personality” (Barnard 1958: 88). Barnard stressed the existence of both formal and informal organizations; whereas the first consist in coordinated social activities with a consciously defined purpose, the latter encompass tradition, custom, habits, and “culture.” 34. As legal scholar Marc Hertogh notes: “To Ehrlich, the need for ‘norms for decision’ arises only in cases of dispute and conflict, whereas ‘living law’ prevails under normal circumstances.” In Erlich, “society as a whole is considered a collection of social associations” (2004: 473). 35. Barnard did not present much empirical evidence for his claim. What counts seems to be his own life-long experience as a manager, the theory of organization he crafts on the basis of this experience, and the intellectual influences from a

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36.

37. 38.

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40. 41. 42.

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Progressive Business variety of sources: Eugen Ehrlich, Talcott Parsons, Lawrence J. Henderson, Vilfredo Pareto, T.N. Whitehead, Elton Mayo, John R. Commons, and others. Inducements other than material ones include, e.g.: “personal non-material opportunities; (c) desirable physical conditions; (d) ideal benefactions,” and general inducements: “(e) associational attractiveness; (f) adaption of conditions to habitual methods and attitudes; (g) the opportunity for enlarged participation; (h) the condition of communion” (Barnard 1958: 142). For another account of the widespread normative ideal of “service,” see e.g. Abend 2014: 108–14. In another telling passage of the work, Barnard again raises his criticism of economic theory, stressing its shortcomings in accounting for organizations (1958: 239ff.). As Barnard had stretched the term “economy of incentives” to encompass incentives in a non-material and non-monetary sense, so he here expanded the usage of the concept of economy, presenting four economies (material, social, individual, and organizational economy) to sketch a theory of organizational economy. “There is no unit of measurement for the economy of organization utility” (1958: 244), Barnard stated, demonstrating how a complete, holistic organizational view of the different utilities relevant to it cannot be accounted for in traditional economic terms, i.e. money, balance sheets, etc. A complete analysis of the total situation of an organization and the utilities is creates, transforms, and exchanges, necessarily refers to factors not conceivable in economic measures, such as the potential collaboration in the social economy of the organization. What Barnard was doing here was again, as in the book as a whole, to demonstrate how a science of organization contributes to knowledge of organizations and cooperation not found in economic theory. Kennedy 2007: 189; according to management historian Daniel Wren, though, the ideas had been diffused before Mayo, cf. Wren 2005. Still, Mayo was the leading ideological figure of the human relations movement, which has been described as a dominant industry reform movement (cf. Barley & Kunda 1992: 372–6; Bendix 1963: 308–40; Guillén 1994: 58–80). For a biography on Mayo, see Trahair 1984. According to Barley and Kunda, it was in the 1940s that human relations gained widespread institutional support (1992: 374). NAM, Human Relations and Efficient Production, pp. 10, 18, quoted from Sutton et al. 1956: 135. As industrial-organizational psychologist Michael J. Zickar (2004) has shown, industrial-organizational psychology has persistently shown an indifference toward unions, partly due to its reluctance to acknowledge conflicts between employers and employees. This tendency can be traced back throughout the history of industrial-organizational psychology, and can be seen in Mayo. The human relations movement explicitly countered scientific management, the dominant management ideology of the first quarter of the twentieth century that primarily aimed at increased efficiency of work processes. Both Taylor’s management ideas as well as car producer Henry Ford’s utilization of the assembly line were methods that were meant to replace older “natural” or traditional ways of managing work, with more knowledge-based and efficient methods. Regardless of

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the humanistic ambitions of the two, it was not exactly this they were known for. As Charles Chaplin (1889–1977) artistically staged the new working conditions in the 1936 movie Modern Times, the methods were infamous for reducing human beings to a cog in the machine. The Hawthorne Experiments were a series of investigations of workers’ behavior undertaken at Western Electric’s Hawthorne Works plant outside Chicago, conducted over the years from 1924–33. In 1950 the term “Hawthorne effect” was coined to mark one of the studies’ key findings, namely the effect upon workers’ productivity stemming from being studied and observed. For a study of the Hawthorne experiments, cf. Gillespie 1991. Cf. also Mark Pittenger’s account of the class passers as forerunners of human relations, and the tendency to interpret conflict and strife in a vocabulary of emotions (Pittenger 2003: 158f.). Among Drucker’s works from the time, Concept of the Corporation most explicitly carved out the new path for industrial capitalism, and thus for his concrete proposals of a market reformism. The project of creating a socially functioning society was laid out earlier, however, not least in his 1942 book The Future of Industrial Man, and an important background for his analysis is to be found in his 1939 book The End of Economic Man. The present purpose, however, is to present key ideas of market reformism, not developments of authorships. For an outline of “asthetic criticism,” see e.g. Chiapello 2013: 71–3. Drucker did not hesitate to stress the originality of his work: “neither the student of economic policy nor that of business management analyses the corporation politically, that is as a social institution organizing human efforts to a common end. Our study, however, sees the essence and the purpose of the corporation not in its economic performance or in its formal rules but in the human relationships both between the members of the corporation and between the corporation and citizens outside it” (1983: 24). As Drucker wrote in a passage that clearly exhibits his project: “The modern corporation as a child of laissez-faire economics and of the market society is based on a creed whose greatest weakness is the inability to see the need for status and function of the individual in society. In the philosophy of the market society there is no other social criterion than economic reward. Henry Maine’s famous epigram that the course of modern history has been from status to contract neatly summarises the belief of the nineteenth century, that social status and function should be exclusively the result of economic advancement. [ . . . ] But the rebellion went too far. In order to establish justice it denied meaning and fulfilment to those who cannot advance—that is, the majority—instead of realizing that the good society must give both justice and status. [ . . . ] It is perhaps the biggest job of the modern corporation as the representative institution of industrial society to find a synthesis between justice and dignity, between equality of opportunities and social status and function” (1983: 130–1). Three levels thus ran through Drucker’s analysis, and at the same time constitute the structure of Concept of the Corporation. The first level is the corporation seen as an autonomous entity (i.e. bracketing its relations to society), and its need to survive. The second level focuses upon the corporation as a social institution: does

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51.

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53. 54.

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56. 57. 58. 59. 60. 61. 62. 63. 64. 65.

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Progressive Business it fulfill society’s most basic ethical standards? Is it “ethically efficient”? The third level is the relationship between the function of the corporation as compared to the economic needs of society. Drucker stressed that the three levels are interdependent: the corporation needs to survive and be autonomous if it is to do any good for society; the economic goals of society should not be pursued at any cost, i.e. by bypassing basic ethical standards. Drucker did make a few important concessions in his defense of the “freeenterprise system”: there is seldom perfect competition; people should not be treated solely as a commodity; labor is not totally mobile; and there are certain limits to economic rationality. For instance, Drucker supported subsidizing poor farmers, because the “social rationality” here outweighs the economic irrationality of doing so. That the United States was fundamentally a middle-class society was rejected by social critics, such as in Michael Harrington’s famous 1962 book, The Other America: Poverty in the United States. See Brick 2006: 86–120 (chapter 3) for an account of modern cultural anthropology in the interwar period in its relation to “post-capitalist” thinking. This was probably an appraisal that Polanyi would not endorse with the warmest of feelings. The main argument of Polanyi’s book was that it was the nineteenthcentury free market liberalist credo of a market society, with the commodification of land, labor, and money (“fictitious commodities” in Polanyi’s language use) that eventually led to the destruction of that society (Polanyi 2001: 257). The historical rise of the market society was unnatural rather than natural from Polanyi’s point of view, and a main cause for the twentieth-century collapses. Interestingly, allowance was made for the “exceptional circumstances such as existed in North America in the age of the open frontier” (2001: 257). Polanyi noted that the experiences in this region were different due to the existence of the open frontier, which made new expansions possible and lessened the tensions known from European experiences—albeit creating others. Drucker distinguished between profits, profitability, and “the profit motive,” where the latter is the one that has to do with persons’ motives, and has been the most under attack as well as, according to Drucker, being falsely mixed with the other ones. Sutton et al. 1956: viii. Sutton et al. 1956: 3–6; 305–10; 316–20. Sutton et al. 1956: 307–8. Sutton et al. 1956: 280. Sutton et al. 1956: 351. Sutton et al. 1956: 267–9. Sutton et al. 1956: 263. Sutton et al. 1956: 33–4. Sutton et al. 1956: 34. Cf. in particular Sutton et al. 1956: 57–8, for some of the following characteristics that represent the main differences between the classical and the managerial creed. Sutton et al. 1956: 58.

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Sutton et al. 1956: 71. Sutton et al. 1956: 58. Sutton et al. 1956: 58. Sutton et al. 1956: 260. Sutton et al. 1956: 64–5. Sutton et al. 1956: 65. Sutton et al. 1956: 185, 189–90. Sutton et al. 1956: 42. Sutton et al. 1956: 186. Sutton et al. 1956: 263. Sutton et al. 1956: 263. Sutton et al. 1956: 298. Sutton et al. 1956: 401. Sutton et al. 1956: 401. Sutton et al. 1956: 401. Sutton et al. 1956: 281. Sutton et al. 1956: 281. Sutton et al. 1956: 388.

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3 The New Man Wants Your Soul Critiquing Managerial Capitalism (1945–1960s) Contested concepts of American capitalism and of the corporation As World War II faded into the background, mid-century market reformism was soon met with criticism from a variety of different perspectives coming from diverse economic and political stances. The critiques of managerial market reformism bear witness to a diversified ideological debate over American capitalism in the mid-twentieth century, especially concerning the raison d’être of the corporation. It became an intense matter of strife how to adequately describe the corporation and its relation to society. Did it serve the interest of stockholders, or of managers? Or, was it actually becoming an institution that did not serve any one group in particular, as implied in Berle and Means’ extremely influential book of 1932? If it did (or did not) simply maximize profits, should it? What where the consequences of the new power technology associated with applied industrial psychology? Was the new idealized relationship between organization and employee as an intimate bond not at odds with ideals of independency and of contractual relations? The market reformist ideas around the 1940s and 1950s, presented in the previous chapter— human relations, the social responsibility of business, and the idea of the corporation as an increasingly socialized form of production—were widely debated topics, attracting the attention of prominent public intellectuals on both the left and the right. These were important questions in an age in which laissez-faire liberalism was still in crisis, in which the state mattered more than ever, and in which the Cold War provided a defining context both internationally and nationally. Managerial market reformism was critiqued by social-liberals who endorsed a pluralistic society in which organized labor played a key role in achieving a more democratic society. Organized labor was one of those “countervailing powers” famously described by John Kenneth Galbraith.

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Managerial market reformism was critiqued by conservative business writers such as William H. Whyte and neoliberals such as Milton Friedman who reclaimed individualism and the sacred property rights of shareholders; and it was critiqued by neo-Marxists such as Paul Baran and Paul Sweezy who argued that the corporations were still, indeed, maximizing profits, not acting as public beneficiaries. In brief, it was a remarkable convergence.

Criticisms of the all-embracing corporation The market reformism of human relations and of similar notions that stressed the need to equip corporations and their managers with a social rationality instead of a mere financial one, was criticized from a variety of different positions. Leftists argued that the new ethic of organizational loyalty suppressed collectivistic ideals of democracy and the right to conflicts between groups rather than just between individuals.1 This view was held by Berkeley sociologist Reinhard Bendix (1916–91) and Berkeley political scientist Lloyd H. Fisher (1911–53). Bendix, Jewish and active anti-fascist, emigrated from Germany in 1938, studied in Chicago, and joined Berkeley in 1947, where he was to become a very influential sociologist in the following decades, most often working in the tradition of Max Weber (Smelser 1991). “If we want rather to preserve the freedom of association, we must run the risk of industrial warfare,” Bendix and Fisher had written in November 1949, the month of Mayo’s death, as part of their general, critical assessment of Mayo’s ideas (Bendix & Fisher 1949: 318). According to Bendix and Fisher, there was a recurring motif in Mayo’s thought, which they demonstrated by a reading of his entire opus, from his early political writings on democracy to his latest writings: “In 1947 as in 1919, Mr. Mayo creates a dichotomy between the spontaneous cooperation which is inherent in society, and the dangerous and destructive effect which politics and governmental action have on the will of the people to cooperate” (1949: 314). For Bendix and Fisher, the main method of critique would be to pinpoint the anti-democratic elements of Mayo’s ideal society—a society that left too little room for conflicts, for pluralism, and for governmental action. Indeed, most of their other criticisms revolved around the claim that Mayo’s vision was much too undemocratic. Central to this criticism was Mayo’s idealization of spontaneous cooperation, his traditionalism, elitism, and the way these ideas coalesced into a vision of “social health.” This vision of social health, then, was a vision wherein conflicts and social disintegration were minimized; it was a vision that Mayo shared with Barnard and Drucker. Opposing Mayo’s ideas, Bendix and Fisher worked with a framework that allowed more room to conflicts.

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Indeed, they linked conflicts and freedom intimately together: “Political conflicts do not necessarily cause a civilization to decline; they may as readily be the necessary condition of a free society, and except upon the radical hypothesis that freedom and civilization are mutual enemies, the charge cannot be supported” (1949: 315). To Bendix and Fisher, conflict was inevitable in a free society wherein each individual has a freedom of choice as well as freedom of association. “It is the peculiar blindness of Mayo and others who have seen the medieval vision, that they do not understand that it is precisely the freedom to conflict which establishes the boundaries within which the actual conflicts can be contained” (1949: 318). In Mayo’s concern for the achievement of spontaneous cooperation, and for the importance of the education of administrative elites and of their all-important role in society, he was, according to Bendix and Fisher, falsely assuming that workers and managers had identical interests, forgetting the authoritative element in industry, as well as the fact that “the leaders in union and management . . . are both the servants and the masters of their respective organizations” (1949: 318). Against the cooperative vision and the “proponents of the corporate state” that “have suggested that work satisfaction can be regained only by integrating the worker into the plant-community under the leadership of management” (1949: 316), Bendix and Fisher invoked the notion of a structural power relationship between capital and labor: “Organized labor is pitted against organized capital, and their co-operation is interrupted from time to time by a peaceable or combative re-definition of organizational prerogatives” (1949: 318). Bendix and Fisher, then, attacked Mayo’s vision of strong leadership, and its most recent version: “the attempt to persuade businessmen that they are able and ought to be willing to rescue our civilization” (1949: 316). They thereby invoked what is a repeated argument against the ideas of moral selfgovernance of business, namely that it tends to downplay the system characteristics of the world of business. Like both earlier and later critics of market reformism, Bendix and Fisher wanted to warn against the portrayals of business as a savior. Bendix and Fisher claimed that Mayo rhetorically invoked a sense of the great danger of society’s collapse, which was used excessively to stress the importance of cooperation. In short, Bendix and Fisher accused Mayo’s vision of a reformed capitalism of being undemocratic: it left little room for state and government; it did not open up for an affirmative recognition of a large range of different organizations, such as labor unions; it falsely assumed that workers’ interests can be defined by administrative elites. Furthermore, they accused him of idealizing spontaneity. Against the ideal of a democratic society, then, Mayo’s vision of an adaptive society, a capitalist-industrial society that would be able to uplift its moral standards

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of interhuman (social) relationships, failed. Instead, Bendix and Fisher stressed, freedom—freedom of association, and freedom of choice—would and should inevitably lead to some degree of conflict. On this ground they also criticized Mayo’s semi-medical language of “social health.” In their eyes, Mayo’s political thinking marked a stance where government was equal to force and coercion by central authority. They argued that Mayo’s market reformism did not break with the principle of selfregulation; by lauding spontaneity and objecting to political interference, there was a closer kinship between Mayo’s market reformist stance and free market liberalism than Mayo himself would probably have admitted. As with Barnard’s and Drucker’s market reformism, the principle of self-regulation was not brought into question, and this is why market reformism in this respect does not differ widely from free market liberalism. Mayo celebrated spontaneity no less than Hayek. Clark Kerr (1911–2003)—economist, founder of the Institute of Industrial Relations, chancellor of Berkeley, and later President of the University of California—was of a similar sentiment, as can be witnessed in his polemic voiced against the new ethos of organizational loyalty (Kerr 1953).2 Kerr argued that America was on its way down a slippery slope, removing itself too much from the ideals of independence and liberty. His polemic against the new ethos of organizational loyalty was directed against the corporation as well as the union.3 Kerr argued that the new spirit of organizational loyalty was endangering the foundational ideals of independence. He invoked similar ideals to those Ely had used to critique corporate paternalism, though the setting had now changed from the all-embracing company town of Pullman, to mid-century organizational life. Kerr reached back to Thomas Jefferson in his argument, but insisted on rethinking the idea of liberty in a way that would better fit the new age. Like Bendix and Fisher, Kerr critiqued what they saw as a common misconception, namely that strikes and labor turnover were evils, and then added business mortality to the list. Whereas these factors in themselves may be evils, the conditions and possibilities that lead to them are not, i.e. autonomy, initiative, and self-reliance, and competitive pressures: A strike is a declaration of independence by the union and the employer alike. Quitting the job to look for something better is the modern counterpart of moving west to better land. The death of a firm is free enterprise at work. A society without strikes, without labor turnover, without business mortality is a society without independence of spirit, self-reliance, competitive urge. (1953: 110)

Again, a central part of kerr’s argument was devoted to demonstrating that conflict is not an evil. His key objection was directed toward the tendency of organizations to claim the complete loyalty of their members. Following Fisher, Kerr stated that totalitarianism can be described as the demand for

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“total loyalty to an organization, whether that organization is the state, the church, the corporation, or the trade union” (1953: 111). To Kerr, personal independence instead relied upon a “multiplicity of allegiances” (1953: 136), where individuals always limit their loyalty to any particular organization. Against these liberal ideas, Kerr wrote, had arisen the new “factory sociologists” and their “plant sociology,” with its key adherents being Mayo, T.N. Whitehead, F.J. Roethlisberger, and Wallace Donham (1953: 111). Indeed, “this cult looks to a managerial elite to save industrial society from the ravages of personal independence” (1953: 111). Kerr critiqued the idea of a managerial elite being the true guardians of society—something which, according to organizational theorist William G. Scott (1992), did indeed seem to be the dream of Chester Barnard and others. Kerr paraphrases the goal of the new plant sociology: The plant should become the focus for as many of the worker’s interests as possible. It should substitute “welfare capitalism” for the “welfare state”. It should care for the security, the health, the welfare, the recreation, and even the psychological problems of the employees. The goal, then, is a relatively static society in which the workers are manipulated for their own welfare by a benevolent leadership. And the great triumphs of the liberal era—individualism, liberty, competition—are viewed as the great disasters, which will result in social disorganization. (1953: 134)

Against this tendency, Kerr insisted that “we must realize that freedom requires conflict,” and that “any free society has built into it a myriad of checks and balances” (1953: 110). As a concrete remedy (and, perhaps polemically), Kerr suggested a complementary new bill of rights, whose purpose would be to guarantee, at the very least, to non-members equal rights of access to work; to members the protection of the right to dissent, of the right to equality of treatment, and of the right not to participate beyond the minimum necessary to permit the organization to perform its essential and legitimate functions; and it would guarantee the right to leave the organization without penalties. (1953: 136).

As Galbraith would emphasize in his diagnosis of American capitalism, power needed to be dispersed, and according to Kerr even to the degree that a special bill of rights was needed to secure individuals’ independency in the new organizational society. As for the corporation, Kerr made the plea that: I would bid it eschew the path of welfare capitalism. I would ask it to return to that much-abused but little-understood phase when it had either lost its soul or not yet required one. I would ask it to revert to the view that labor is a factor of production, to leave pensions (unless full vesting rights are afforded) to governmental and individual action, where they belong, to let the worker find his own

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recreational facilities and minister to his own morale—in a word, to buy the labor power of the worker and leave his psyche alone. (1953: 136)

In conclusion, Kerr recommended the “limited-function” party, state, corporation, union, and church (1953: 136). No organization should have too much to say in the lives of individuals. Kerr became a very influential figure in US higher education, not least as President of the University of California. In the 1960s, there was increasing student unrest and political demonstrations at the university, and Kerr again stood in the midst of questions concerning the legitimacy of protest and conflict. Ultimately, Kerr opted for the allowance of political demonstrations on campus, but he was removed from his office in 1967 by a more conservative university leadership, the year after Ronald Reagan had become California’s Republican governor. The history of market reformism is not black and white. Even Drucker, in several of his writings from these years, found reason to voice criticism at what he saw as paternalism. As he wrote in his 1954 book, The Practice of Management, in a criticism of corporations: The tendency today of so many, especially of our larger, enterprises to assume paternal authority over their management people and to demand of them a special allegiance, is socially irresponsible usurpation, indefensible in the grounds alike of public policy and the enterprise’s self-interest. The company is not and must never claim to be home, family, religion, life or fate for the individual. It must never interfere in his private life or citizenship. He is tied to the company through a voluntary and cancellable employment contract, not through some mystical and indissoluble bond. (1954a: 387, my emphasis)

Drucker reasoned that the extent of corporations’ social responsibility had now gone too far. He reacted against what he saw as an increased confusion of what the responsibilities of business really were. Triggered by the views held by influential businessmen and opinion formers such as Frank Abrams and director of General Motors, Alfred Sloan, as well as by stories in the popular press, Drucker polemically asked when American business leaders would have time to do business, and mentioned numerous examples of failed understandings of “responsibility” (1954b: 67). Among these newly voiced criticisms of organizational paternalism, a business journalist at Fortune, William H. Whyte Jr. (1917–99), stands out. In his 1956 book The Organization Man, he particularly criticized human relations for introducing a new, subtle power over individuals. The Organization Man rapidly became a bestseller, quickly achieving the status of a classic, and appearing again and again as a reference in organization and management literature, as well as in critical theory.4 The Organization Man was a diagnosis and a critique of society’s condition. Whyte both described and criticized the changed landscape of the American economy, which had become one

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consisting of grand bureaucratic corporations. In particular, Whyte was skeptical of what he saw as a new subtle power inherent in human relations: Held up as an end-all of organization leadership, the skills of human relations easily tempt the new administrator into the practice of a tyranny more subtle and more pervasive than that which he means to supplant. No one wants to see the old authoritarian return, but at least it could be said of him that what he wanted primarily from you was your sweat. The new man wants your soul. (1956: 397)

Whyte heavily critiqued the subtle mechanisms of power in human relations, and this long before governmentality studies, taking its cue from Michel Foucault, would take up the subject, most notably in the work of Nikolas Rose (1999). Diagnostically, Whyte claimed that American society had, during only a few years, undergone an economic, social, and cultural transformation resulting in the production of a new standard personality—the “organization man.” Whyte wrote as if Mayo’s ideals had fully spread to American corporate life as well as everyday life. According to Whyte, the new mantra of the time was that the individual should feel belongingness within a larger community, the organization—a prevalent theme in Barnard and Mayo. Indeed, Whyte tried to reverse the moral worth of the qualities Barnard and Mayo had sought to attribute to organizations and corporations. Sadly, according to Whyte, the individual was now to be loyal to the firm, not an architect of his own fortune. Whyte claimed that a new ethic had become almost hegemonic, a new “social ethic” that subjected the individual to the community’s norms and conventions. Like Kerr, Whyte argued that while American society had earlier practiced liberal ideals of personal liberty, the social ethic now dominated the moral climate, at the expense of liberty. Like Kerr, Whyte repeated what had been a frequently voiced criticism against market reformism since the time of Ely, namely that it was paternalistic. Now, however, the new tools of market reformism, namely applied social sciences, were accused of being instrumental in manipulating the employees’ thoughts and emotions. As market reformism had entered a new age of corporations and of applied social sciences, criticism of market reformism changed with it. When Whyte wrote that the new manager wanted the employee’s soul, the older “just” the body, he referred to human relations and scientific management. According to Whyte, there had been a massively expanded supply of educational offers in management, administration, and human relations. These still relatively new disciplines were studied not just by up-and-coming top executives, but also by the broad middle layer of present and soon-to-be “organizational people”; classical university educations gave way to the new ideal that it was far more important to be socially engaged and take management courses than to be immersed in dusty classics and theories.

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According to Whyte, “organization man” was making his entry almost everywhere in society: from academia and the university to the military, from business schools to state bureaucracies, and not least in the large companies. The task for the big new array of managers and “organization men” was first and foremost to manage and control how other people were doing their jobs. They were not workers or white-collar workers in a traditional manner, simply working for the organization—instead, the ideal was a close unity with the organization. According to Whyte, their mission was that every employee in the corporation should be happy and share the emotions of belongingness and togetherness (1956: 3): ideologically, all the new emphases call for a closer spiritual union between the individual and The Organization. As the prophets of belongingness have maintained, greater fealty to The Organization can be viewed as a psychological necessity for the individual. In a world changing so fast, in a world in which he must forever be on the move, the individual desperately needs roots, and The Organization is a logical place to develop them. (1956: 161)

The premise of this new relationship between organization and individual was, following Whyte, that the interests of the individual and the organization were identical—which Whyte believed to be highly questionable (1956: 129). To Whyte the true logic of the organization was clear: “The Organization will look to its own interests, but it will look to the individual’s only as The Organization interprets them” (1956: 397). Whyte, however, made the principal claim that the individual never can nor should be totally absorbed in the organization. There is a basic conflict between individual and organization, not a total unity. According to Whyte the new social ethic thus tended toward a collectivistic tyranny where the ideal of belongingness was a subtle form of power. The ideal of the social group was not just “liberating”; it was also a new authority in disguise. The social ethic became a new straitjacket that tightly held every individual in the right place within the limits of correctness and conformity. As one of Whyte’s heroes, the French aristocrat, politician, and historian Alexis de Tocqueville said in his Democracy in America, the equality ideal of American society could suppress liberty (Tocqueville 2000). According to Whyte, the new social ethic was a collectivistic ideal, not one of personal liberty. However, according to Whyte what was even more alarming was that the new social ideas and ideals were backed by new sciences. Scientific proofs were given that group behavior and group dynamics were superior vis-à-vis individuals working hard on their own.5 The ethical “right” was running the risk of being defined as what was within the boundaries of normality. In other words, deviations of various sorts from the social order were potentially immoral (Whyte 1956: 29). The new managers could call themselves human or social engineers (1956: 26). They were given new managerial techniques to control employees;

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among other things the personality tests developed by the military. Ironically, Whyte commented, the new instruments of manipulation were directed primarily against the managers, not the workers (1956: 38). The psychologists were going in deeper and deeper (1956: 184). But, Whyte asked: “Is the individual’s innermost self any business of the Organization’s? He has some rights too. [ . . . ] In return for the salary that the Organization gives the individual, it can ask for superlative work from him, but it should not ask for his psyche as well” (1956: 201). The organization was supervising individual behavior and morals.6 Whyte, however, tried to debunk the social ethic by exposing a concealed dilemma at its core: “If manipulating people is bad—and manipulation is one of the dirtiest words in the new lexicon—how can one justify the manipulation of people for good ends?” (1956: 29). The “good” manipulation was still, according to Whyte, manipulation and only more so the friendlier it appeared. According to Whyte the new was not teaching people to manipulate others, but the justification of new psychological techniques on the grounds that that they would make people happy, instead of stating honestly that they were about increasing profits (1956: 123). With direct reference to Mayo, Whyte rhetorically asked whether there were not dangers connected with the therapeutic treatment of the worker and the turning of problems into subjective, individual problems that had their basis in an inner, subjective conflict—hence making it possible to claim that all you need to do is be happier (1956: 37). Could it not be that employees were actually rationally thinking individuals whose arguments should be taken at face value, not “explained” with reference to psychology and “true” needs (1956: 40)? It was not, however, only free market business writers and social-liberals that criticized market reformism in its form of human relations. As it had been criticized by social-liberals as well as by free market liberals—employing the typical “test” of individualism, independence, self-reliance, and so forth—so it was criticized by other intellectuals who stood closer to socialism. Psychoanalyst and critical theorist Erich Fromm (1900–80), for instance, heavily criticized the instrumentality of human relations. Fromm, critical of Western capitalism as well as of Soviet communism, was a proponent of socialist humanism, combining insights from Marxism and psychoanalysis, but also departing from them in certain ways (Rasmussen & Salhani 2008). His argument relied on the idea that capitalist society was centered on markets, which also, of course, included the market for labor. In this setting, the new psychological techniques were used not only as “market psychology” that would study and subsequently try to manipulate the consumer, but also as a new psychology that would study and manipulate the employee. According to Fromm, this development was intimately related to the new, cooperative state; it is a “logical outcome of the changed relationship between capital and labor. Instead of crude warfare there is cooperation between the giant colossi of enterprise and the giant colossi of labor unions, both of which have come to

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the conclusion that it is in the long run more useful to compromise than to fight” (Fromm 1957: 9). But not only was the new order based on compromise; because it turned out that happier workers were also more productive, workers were to an increasing extent manipulated by the industrial psychologist: Thus, what Taylor did for the rationalization of physical work the psychologists do for the mental and emotional aspect of the worker. He is made into a thing, treated and manipulated like a thing, and so-called “human relations” are the most inhuman ones, because they are “reified” and alienated relations. (1957: 9)

Rhetorically, Fromm used a typical strategy of neighborliness, claiming that the alleged humanness of human relations in reality was its opposite: inhumanness (Skinner 2002: 175–87). Manipulation of the employee was a key target in Fromm’s rejection of the new ethos of organizational loyalty that had been invoked by Mayo, Barnard, and other market reformists, and which was also a key concern for Bendix and Fisher, for Kerr, and for Whyte. But whereas critics of market reformism all frequently invoked ideals of individual independence, their concerns were also voiced from different angles. Whereas especially Whyte’s criticism seemed based upon free market liberalism and the classic American business creed, the criticism articulated by Bendix, Fromm, and others was of a more leftist orientation, as it questioned the superiority of markets. Focusing upon equality as well, their position was different from free market liberalism. Central to many of these criticisms voiced against human relations and the ideals of organizational loyalty was the idea that the quest for tying corporations and employees together in a community of interests had gone much too far. In response, free market liberals as well as social-liberals had begun to refer to the proper relationship between employees and corporations as a purely contractual one.

“Cool” contracts or unbreakable bonds? Managerial market reformism and organizational society turned out to be in conflict with individualism, and the development laid bare a tension between individualism and collectivism. The human relations movement accentuated the thought that the individual had a soul and a need for social intercourse at the workplace. It stressed individuals’ needs for strong social bonds. By contrast, free market liberals invoked a pure contractual relationship between employees and organizations. It was the ideal of the bond—of a closer spiritual togetherness or union of the individual and the organization—that Whyte, Drucker, Bendix, Fisher, and Fromm criticized. This conflict could also be understood as a tension between the managerial and the classical creed. The

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former invoked a communitarian ideal; for the latter, a defining feature of liberal society—in contrast to the old regime of master–servant relationships—was that it was a society of contracts in which human beings were free to make agreements and arrangements with whomever they pleased. It was no coincidence that William Graham Sumner had conceived contracts to be of the utmost importance in defining the new society of free individuals (Sumner 1883: 22f.).7 The contract and the bond can be seen as part of the modern social imaginary, which, according to philosopher Charles Taylor, is “the ways people imagine their social existence, how they fit together with others, how things go on between them and their fellows, the expectations that are normally met, and the deeper normative notions and images that underlie these expectations” (2004: 23). Whereas the idea of the contract has often underpinned free market liberalism and individualistic ideologies of society, the idea of a bond between individuals and their organizations has played a key role in conservative and communitarian ideologies. The idea of the contract is well known from labor markets as well as from the history of political philosophy.8 The fundamental logic of the contract is quid pro quo—something in return for something else. Pursuing the affiliation with liberalism further, one of its classical traits is a separation of different spheres from each other. Or in the words of the American political philosopher and communitarian Michael Walzer: “Liberalism is a world of walls, and each one creates a new liberty” (1984: 325).9 Liberalism sharply distinguishes between personal matters of the individual, and what concerns public and organizational life. In the context of a labor market this implies “purity” in the exchange relationship between individual and organization. By contrast, in the metaphor of the bond, the engaged, potentially self-sacrificing individual is praised, whose identity is tied, and emotions committed, to the organization and its identity and values. The bond is a pursuit of wholeness, unity, and identity, while the contract implies division and difference. The bond has often been associated with primary groups, family and kin, local communities and the church, and the people of a nation united in ethnicity. Thus, there is an affinity between the idea of the bond and communitarian and conservative thought, which have stressed the ideal of community.10 Table 3.1 summarizes the two ideal types (in Weberian fashion) for the relationship between individual and organization. As ideal types these are analytic constructions, constructed on the basis of modern intellectual traditions from political thought and classical sociology. Describing ideal employee–organization relationships was contested terrain in the mid-century struggles over market reformism, and may be said to reflect an inbuilt tension between individualism and the need for loyalty and commitment of cooperation. It also made manifest a more generic dividing line that can be found in late nineteenth-century controversies over market

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Table 3.1. Two ideal types representing the relationship between individual and organization Key parameters

Relationship between individual and organization Contract

Bond

Regulating principle

Individual, self-interest and exchange—quid pro quo

Community spirit, transcendence of narrow self-interests

Form of society

Gesellschaft

Gemeinschaft

Human nature

A rational being

A social being

Empirical appearances

Markets, law

Nation, people, family, church, association, commune

Ideological kinship

Liberalism and contractual thought

Ideologies stressing community above individualism

reformism as well as in a contemporary context, where the ideal relationship between the individual and the organization continues to be described as strong, family-like bonds—on contractual terms (cf. e.g. Bains et al. 2007).11 In mid-century discussions, however, wage labor in itself was generally no longer, as in the late nineteenth century, brought into question. Whereas one central conflict of mid-century market reformism revolved around the contract versus the bond as ideal relationships between employee and corporation, another continued to be capitalism’s capacity for selfregulation.

Galbraith’s Keynesianism and the concept of countervailing power John Kenneth Galbraith stands out as an all-important economist and public intellectual in the 1950s, and indeed throughout the second half of the twentieth century.12 In American Capitalism: The Concept of Countervailing Power, originally published in 1952 but revised and reprinted in 1956, Galbraith put forward a social-Keynesian theory of American capitalism that was critical of classical and neoclassical economic theory, and of free market liberalism.13 In this work, Galbraith tried to show that the “model of competition” had simply become antiquated with the new economic reality of American capitalism, both as a descriptive as well as a prescriptive model. To be sure, Galbraith’s criticism was first and foremost directed against conservatives and their belief in free markets. His “economic realism” suggested that corporations tended to pursue their own interests. His social-Keynesian criticism of free market liberalism stressed the limits and shortcomings of

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relying upon capitalism’s capabilities for endogenous recuperation, and instead urged an active role of government and of various organizations with “countervailing” power. His concepts of market power and, even more importantly, of countervailing power, sponsored a political reformism (presupposing a broader concept of politics), and stressed the necessary and positive role of a variety of organizations and social groups in achieving an overall institutional arrangement that can actively promote social change. Galbraith’s idea of countervailing power was, as explained by Ben Jackson, “eagerly adopted by the post-war pluralists as crystalizing their vision: a society where the power of capital was constrained and regulated by the state and by powerful civil society organizations such as unions and consumer groups.”14 Pluralism had been defended by people such as Clark Kerr, Reinhard Bendix, and Lloyd Fisher—whereas business creed-oriented writers such as Whyte and Drucker based their critique upon individualism. In a way, Galbraith’s concept could also be used retrospectively to describe a lasting ambition of those who had critiqued free market thinking and its closely related cousin, market reformism, as early progressives had also argued that powerful business should be countered by other institutions. Late nineteenth-century progressives such as Ely and Henderson had confronted the new currents of market reformism, and stressed the need for powers other than that of corporations to promote social protection; Henderson, for instance, emphasized what he saw as the history of progressive factory legislation. Galbraith contributed to a new conceptualization of power in the context of a regulatory capitalism where labor unions had become legalized and institutionalized via the system of collective bargaining. Galbraith’s political reformism and his concept of countervailing power—reminiscent of the constitutional concepts of checks and balances—were to become keynote in the history of political reformism. Late twentieth- and early twenty-first-century political reformists have, confronted with their contemporary forms of market reformism, frequently referred to Galbraith’s notion of countervailing power, as we shall see in Chapter 5. Galbraith above all faulted the inadequacies of the “competition model”— the model that assumes perfect competition and the self-curing capabilities of the capitalist market system. According to Galbraith, the model of competition constituted a red thread from the late eighteenth-century classical political economy to contemporary proponents—from Adam Smith, David Ricardo, and Jean Baptiste-Say, through John Stuart Mill to Alfred Marshal and, as the latest, Friedrich von Hayek. Galbraith observed that contemporary conservatives (free market liberals) as well as liberals (social-liberals) shared the same outdated economic ideas of this model. To be sure, Galbraith did not argue that the model of competition was completely outdated, but he argued that it should be partly superseded by new insights in economic theory, not least due to recent economic history. According to Galbraith, the Great Depression was evidence of a grand failure

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of the competitive model, as it could neither explain nor offer any cure against depression. Furthermore, war experience had shown that even a Republican government would support price and wage controls in order to prevent uncontrolled inflation, which supported Galbraith’s Keynesian interpretation, and was additional evidence for the lack of autonomous recuperation by market forces themselves. Added to this was the fact that American capitalism now had distinct oligopolistic features. As Galbraith reasoned, these economic developments had rendered the competition model increasingly nonsensical, calling for a new theory of American capitalism which would be up to date with the economic, organizational, and political developments of the New Deal era.

Against the uncontested principle of market self-regulation Understanding Galbraith’s dismissal of the competitive model is of crucial importance in understanding the new lines of conflict. By confronting the empirical validity of the competition model, Galbraith was in effect attempting to reconfigure the discourse of American capitalism and its critics, trying to reshape the language in which criticism and justification of American capitalism and its market (and also political) reform would be discussed. According to Galbraith, economics became, throughout its intellectual history, more and more rigorously occupied with competition. The competition model is characterized by self-regulation where prices function as the central mechanism for this regulation. Markets are integrated into one another, and changes in one market, say due to changes in consumer desires and preferences, will have effects on other markets, like, for example, the labor market. The model rests on the assumption that there are many buyers and many sellers on each market, so that no one has the power to set the prices of goods, labor, or capital. Furthermore, the model rests on the assumption that all prices are flexible, including the ones set on labor, assuming that labor is as mobile as goods and capital. Less demand for a good causes prices and production to fall, and thus employment in that particular trade to fall. This, in turn, will drive labor to other markets for production and, possibly, with lowered wages. Less demand for one product will mean that demand has been raised for another product, which will lead to raised employment in that trade (if technological improvements—efficiency improvements—are equal). In short, the competition model is an ideal system of equilibrium, constantly finding new equilibriums as a result of changes in supply and demand. Furthermore, it is assumed that there will be full employment, if only prices, including the ones set on labor, remain flexible, i.e. to be settled on the market. A central assumption for this system of perfect equilibrium that achieves full employment is that there are no channels, including savings, through

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which value can leave the system. In this particular sense, the system is a circuit. Of the utmost importance to the model of competition, Galbraith stressed, was Say’s law of markets, which in Galbraith’s interpretation “held that the act of producing goods provided the purchasing power, neither too much nor too little, for buying them” (1956: 13). In this model, production equals spending: if a car is sold, the money paid will be distributed in wages, other costs of production, and profits. The portion of the money that might be saved, i.e. some part of the wages or of profits that are not used for consumption, will be equalized with investment. To understand this, one needs to understand the decisive role of the interest rate in this system: if returns to capital fall, a person will be better off saving the money and receive the rate of interest. If returns to capital rise to a point higher than the interest rate, a person will be better off investing the money. As these forces work together, equilibrium will be reached where return to capital (plus calculation of risk) equals the interest rate. The central point is that value does not leave the system, but constantly re-enters. If the economy is left to itself, it will naturally lead to a state of full exploitation of productive powers, i.e. to full employment. In a model of competition, then, there is really not much for government to do except to keep its hands off and let the market forces work by themselves. The economy as a whole does not suffer from any endogenous tendencies toward depression and unemployment, but can only be disturbed by exogenous forces such as states and unions who interrupt the “natural” price setting on labor. From this perspective, then, the effect of a high-wages policy will be unemployment; whenever the natural market forces are interrupted in their workings, “forgotten men” will suffer. Furthermore, what is essential to the justification of the model of competition is the notion that it leads to the greatest social efficiency. This is the crux of the matter for the classical American business creed and the free market liberalism it rested upon. The idea of social efficiency is of great importance in Galbraith’s theory; it is a central “test” and ideal standard that the model of competition is measured according to.15 Galbraith criticized laissez-faire capitalism from a socioeconomic point of view, offering his own Keynesian alternative conjoined with his own distinct contribution of the theory of countervailing power. Curiously, a central argument for the competition model had been a political, not an economic one. A market society, i.e. a society whose production and distribution of economic resources are decided through markets and the price mechanism, will prohibit the concentration of power. This is because every economic actor, whether it is a customer, capitalist, employee, or a bank, will be subject to the price mechanism as the key force of regulation. No one has significant power, as the competition check secures that no one irrevocably decides much over someone else. Competition hinders concentration of power. It is in this sense that a key argument supporting the market society

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is political, not economic. Indeed, two of Galbraith’s contemporary midtwentieth century neoliberal economists, Hayek and Friedman, had put great stress on the idea that the market society basically was a free society in which power would be widely dispersed. By contrast, the realm of politics always involved someone deciding for someone else, which was why Hayek and Friedman wanted to limit the powers of state and government to an absolute minimum. And since there was, ostensibly, no power in the world of free competition, no public powers were needed to minimize or counter private power. Galbraith acknowledged the nineteenth-century free market liberalist’s skepticism of state power, as it was plagued by nepotism and particularism, but he insisted that the concept of power was absolutely necessary for understanding contemporary American capitalism. In theory, the competitive model would, as it has been presented here, secure social efficiency. In reality however, according to Galbraith, the model turned out to be severely handicapped. Galbraith’s critique of the competition model was based upon manifold elements. First, that most markets are actually characterized by conditions of oligopoly, i.e. that a few corporations are the powerful players.16 As a result, the firms develop a tacit agreement not to compete on prices. This, in turn, leads to the conclusion that those corporations will have substantial market power—contrary to the assumption of the theory of free competition.17 Galbraith vigorously documented the historical development of the American economy, showing how oligopoly arose, and referring to the work of other economists that had come up with similar conclusions, such as Harvard economist E.H. Chamberlin’s 1933 essay, Theory of Monopolistic Competition, and Cambridge economist Joan Robinson’s The Economics of Imperfect Competition from 1933. He then argued that the Great Depression, an all-important event in American history he ranked alongside on the Revolution and the Civil War, was a devastating event—not only to the country, but also to the competition model. Especially, the New Deal marked a total shift in expectations of government intervention, and was a nail in the coffin for the old belief in laissez-faire economics. Now, Galbraith assured, most Americans would look to the role of federal government with much less skepticism. According to Galbraith, the competition model could simply not explain the Great Depression nor provide an answer to its remedy. The model of competition had, based upon Say’s law of markets, assumed full employment and stable prices, and was neither capable of explaining inflation nor unemployment—except by blaming unions for making the labor market uncompetitive. Galbraith credited John Maynard Keynes, the famous Cambridge economist, pastime investor, and member of the Bloomsbury Group of intellectuals—among many other accomplishments—for demonstrating the deficiencies of the model of competition. According to Galbraith, Keynes had demonstrated how an economy could reach a level of equilibrium at levels of

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high unemployment, way below the real productive capacities of the economy. Central to his argument was the role of savings: unlike the model of competition and Say’s law, Keynes did not assume that rising savings would lead to an equivalent amount of investment. Instead, the amount of savings would depend upon the liquidity preference, i.e. people’s desire to hold money. Accordingly, the lowering of the interest rate would not automatically lead to an equivalent rise in investments. As a result, the economy would contract, and it would be possible to get stuck at a level of equilibrium at lower levels— which, according to for example Robert L. Heilbroner, was what happened in the Great Depression (Heilbroner 2000: 269, 268–74). Galbraith credited Keynes for bringing attention to the overall performance of the economy and linking it to the role of government, which would now have an active role in either increasing or decreasing aggregate demand, with fiscal politics as the primary means. Galbraith stressed that Keynes’ work “was solidly in the Anglo-American tradition of compromise which seeks progress by reconciling the maximum number of conflicts of interests” (1956: 83). But if this marked the end of an unqualified model of perfect competition, what was to come instead of it?

Building checks and balances into the economy What stands out as the most genuine, original contribution from Galbraith was his introduction of the concept of countervailing power. The concept was used to demonstrate the widespread factual existence of economic power, which attacked a major premise of the model of competition, namely that the economic realm was a sphere without concentration of power. Indeed, in accordance with his theory of significant “market power,” Galbraith insisted upon using the term “capitalism” as opposed to more neutral terms: For many years this term [capitalism], which denotes that the men who own the business, or those who are directly or indirectly their agents, have a major responsibility for decision, has been regarded as vaguely obscene. All sorts of euphemisms—free enterprise, individual enterprise, the competitive system and the price system—are currently used in its place. None of them has the virtue of being more descriptive and none is as succinct. (1956: 4, footnote).

By introducing the concepts of market power and countervailing power, Galbraith tried to show that markets had serious defects as self-regulatory mechanisms, and that the economic power of corporations could only be balanced by countervailing powers. Galbraith advocated the organization of social groups and new forms of collective power, as a bulwark against the shortcomings of the market. Countervailing power was a kind of power that came into being as a response to an original power (1956: 137). Thus, powerful

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unions had developed in markets with powerful corporations. Also important for Galbraith’s argument were large retailers: these were powerful buyers in markets which often only had a few sellers—and they thus countered the power of the selling corporations, because they were able to negotiate better prices for consumers.18 Like the unions, the large retailers had power to negotiate. The general role of countervailing power, then, was to be “a curb on economic power” (1956: 113).19 It was “organized either by buyers or by sellers in response to a stronger position across the market” (1956: 130). The idea of countervailing power thus showed that markets with oligopolistic characteristics could, after all, be held in check, as unions, retailers, and others arose as responses to great corporate power. Competition could no longer be assumed to hold corporations in check, but countervailing powers would effectuate a similar check on corporate power, and would thereby serve to increase the social efficiency of the system. American capitalism, then, would not simply degenerate into a malfunctioning monopoly, as, e.g., Baran and Sweezy would argue in their Monopoly Capital of 1966. Because of countervailing powers, it would be a system of checks and balances. Galbraith supported pluralism in the view of legitimate claims to power: On the whole, the appearance of countervailing power as a political issue cannot be considered especially unhealthy although it will almost certainly be so regarded. At first glance there is something odious about the notion that the poor and the excluded improve their lot in a democracy only by winning power. But so far there has been much less reason to regret than to approve the results. The position of great groups in the community has been notably strengthened and improved. Those who lost power cannot be presumed to have enjoyed their loss. There was much outward evidence that they regretted it exceedingly. Some, however, may have lived to see that, set against the loss of their authority, is their greater prospects for an agreeable old age. (1956: 152)

Galbraith still left a lot of room for private decision making in the economy. The role of the state was to secure an adequate level of aggregate demand, and to promote institutions of countervailing power. But within this system, Galbraith argued, there was a strong case for the administrative effectiveness of localized decision making. Both in terms of timing and quality of decisions (1956: 171). Like Keynes, Galbraith was not as such critical of private enterprise. As Galbraith noted: The modern case for capitalism is not, as so many would like to believe, based in the astonishing perfection of design. Nor is it based upon divine ordinance. Nor does it survive because those who would overthrow the system have been effectively routed out and exposed. It survives because there isn’t anything administrative workable to take its place. (1956: 175).

Leaving “private decisions over production, including those involving prices and wages” to private business decisions was in accordance with the Keynesian

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scope for intervention—“centralized decision is brought to bear only on the climate in which those decisions [private business decisions] are made [ . . . ] In this way the government, by influencing the total demand for goods, gets the pattern of decision which it seeks without at any stage intervening in the decision [a private business decision] itself” (1956: 178f., my emphasis).20 Government was assigned a key role in working on the overall milieu, such as in the areas of public spending and the stimulation or curbing of aggregate consumer demand, whereas price setting, production planning, quantity and quality of products, etc., should remain private business decisions. From Galbraith’s position it would make little sense to argue that capitalism by itself, and by the virtue of the ethical enlightenment of businessmen, would simply lead to increased social welfare. He could have argued, though, like Kaysen, that market power would also mean that corporations had a social responsibility. But, perhaps because of the assumption of “economic realism” that corporations would tend to maximize profits, his answer was instead that corporations should be held in check by countervailing powers, and not by moral self-restraint. For example, he then endorsed the state’s role in facilitating organized power for weak groups. Galbraith advocated a system of checks and balances built into the economy, not moral self-governance by corporations, managers, and an “elite of guardians.” Galbraith did not, at least in his American Capitalism, respond directly to ideas of market reformism. Curiously, by sharing the same kind of economic realism invoked by Galbraith, namely that corporations would still be inclined to pursue their own economic interests, both neoliberals as well as Marxists opposed the notion of a “soulful corporation,” albeit for very different reasons. To proponents of neoliberalism then, particularly as advocated in the writings of émigré and London School of Economics economist Friedrich von Hayek, and Chicago economist Milton Friedman, ideas of the “social responsibility of corporations” should not only be described as harmful, but indeed, in the words of Milton Friedman, as no less than “a fundamentally subversive doctrine” (Friedman 2002: 133).

Neoliberals against social responsibilities of business: on the sanctity of property rights Free market liberalism was unpopular in the aftermath of the Great Depression. Beginning in the 1930s, however, wealthy conservative businessmen personally financed free market economists, new organizations and think tanks were established that were devoted to spreading free market ideas, and political activism helped form what was later to become a strong conservative

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movement.21 To be sure, it did take a while before this conservative counterrevolution of ideas set in, not least in the 1980s, often symbolized in the elections of Ronald Reagan in the US (1980) and Margaret Thatcher in the UK (1979). But the comeback of free market liberalism had been underway for several decades. And one thing it did, as seen in the writings of Milton Friedman, was to heavily critique managerial market reformism. In a way, it could be read as a revolt of the classical business creed against the managerial business creed, with a return to the shareholder concept of the corporation. By the 1980s, the doctrine of maximization of shareholder value was hammered through in the United States (Lazonick & O’Sullivan 2000). Milton Friedman’s Capitalism and Freedom was published in 1962. It was heavily influenced by the writings of Hayek, who in his famous book The Road to Serfdom from 1944 had put forward a sharp dichotomy between the individualistic philosophy of nineteenth-century free market liberalism and the collectivistic philosophy of all kinds of socialism, including socialdemocratic forms. Hayek argued that the rise of Nazism and fascism was an outgrowth of socialism, not of capitalism. Hayek and Friedman both wrote within a tradition that fused economic and political philosophy with economics; on the one hand, particular normative ideals were suggested as guiding principles for society; at the same time, positivistic economic proof was often given to support these ideals, and very commonly also to show how the propositions of their opponents, socialists mainly, would lead to undesirable effects. As Sumner had done in the late nineteenth century, Friedman warned against progressive political reformists and their “good intentions.” For Friedman, there were two great threats to “the preservation and expansion of freedom,” namely the Soviet Union and “the other threat [which] is far more subtle. It is the internal threat coming from men of good intentions and good will who wish to reform us” (2002: 201). Hayek and Friedman both understood themselves as radicals, arguing that they advocated an increasingly unpopular notion of nineteenth-century true liberalism, and both regretting the twentieth century “corruption of the term” (Friedman 2002: 6). Whereas Hayek did not respond directly to market reformist ideas of the “social responsibility of business,” to human relations, or to cognate notions of a “soulful corporation,” his philosophy formed an important intellectual foundation for Friedman’s neoliberal stance against the notions of a socially responsive or otherwise publicly obligated corporation. Both Hayek and Friedman were highly skeptical of an increased role of government in society. In this respect, they should both be read first and foremost as advocates against ideas of political, mainly governmental, reformism, and the power of organized labor. But as staunch defenders of the “free enterprise system,” their version of liberalism would not “excuse” itself by resorting to market reformist notions of corporate charity, social responsibility of business, and similar

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ideas. To these neoliberals, capitalism was the superior arrangement of economic affairs as well as a necessary condition for liberty. Essential to Friedman, as to Hayek, was the idea that economic freedom is a necessary (but insufficient) condition for personal freedom. Economic freedom includes the freedom to labor, to engage in contracts, to freely dispose over one’s body and property. It is an end in itself. Without economic freedom, there can be no freedom. If freedom in “economic affairs” is violated, it means in effect that others are disposing over the most central aspects of an individual’s existence—where to live, where to work, how to spend one’s income, and so forth. But, as Hayek stressed as he tried to counter the devaluation of profit-making and of “economic man,” the idea was not simply that profits or money were ends in themselves (2005: 135, 202, 207f.). On the contrary, “Economic values are less important to us than many things precisely because in economic matters we are free to decide what to us is more, and what less, important” (2005: 94). If economic freedom is violated, this is a violation of autonomy, as individuals are deprived of the right to dispose of their own means for seeking the ends that they wish: The authority directing all economic activity would control not merely the part of our lives which is concerned with inferior things; it would control the allocation of the limited means for all our ends. And whoever controls all economic activity controls the means for all our ends, and must therefore decide which are to be satisfied and which not. This is really the crux of the matter. Economic control is not merely control of a sector of human life which can be separated from the rest; it is the control of the means for all our ends. (2005: 95)

Friedman and Hayek warned against socialist criticism of the idea of market neutrality—Hayek eschewed “the common complaints of Nazis and socialists of the ‘artificial separations of economics and politics’, and their equally common demand for the dominance of politics over economics” (2005: 113). Like Hayek, Friedman stressed what Isaiah Berlin famously dubbed a “negative concept” of freedom (Berlin 1969). Freedom is freedom from coercion. “Political freedom means the absence of coercion of a man by his fellow man” (Friedman 2002: 15). Politics, understood as the realm in which decisions are made over which rules and laws all are to be subject to, should be limited to an absolute minimum. Since individual liberty is an ultimate value, there should be as little collective coercion as possible, as this will only lead to a tyranny of the majority. Hayek outlined “the fundamental fact on which the whole philosophy of individualism is based,” namely: It does not assume, as is often asserted, that man is egoistic or selfish, or ought to be. It merely starts from the indisputable fact that the limits of our powers of imagination make it impossible to include in our scale of values more than a sector of the needs of the whole society, and that, since, strictly speaking, scales of value can exist only in individual minds, nothing but partial scales of values exist,

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scales which are inevitably different and often inconsistent with each other. From this the individualist concludes that the individuals should be allowed, within defined limits, to follow their own values and preferences rather than somebody else’s, that within these spheres the individual’s system of ends should be supreme and not subject to any dictation by others. It is this recognition of the individual as the ultimate judge of his ends, the belief that as far as possible his own views ought to govern his actions, that forms the essence of the individualistic position. (2005: 62–3)

Accordingly, freedom is understood as freedom under the law (2005: 82). If a person acts in accordance with the law and his or her own conscience, no higher ethical or moral standards can be raised against that individual, least of all with any substantial force or threatening sanctions behind them. To the free market liberal, freedom comes with responsibility, and one of the biggest vices is paternalism of any sort, since it deprives the individual of autonomy. The market and the law define the rules of the game. The economic system Friedman bluntly applauded as “competitive capitalism” is a system wherein individual freedom reigns; it is free from political, i.e. collective, decisions concerning production, organization, prices, and so forth. In an age that seemed endlessly to debate the question of the economic tendency toward monopoly, it is unsurprising that Friedman stressed that the ideal system he applauded is competitive, not monopolistic. As Campbell Jones (2007) has pointed out, Friedman did not distinguish between economy and society, or as Friedman wrote: “Competitive capitalism” is a “society organized through voluntary exchange” (2002: 13). Friedman defended capitalism on the grounds that it advances diversity, liberty, and the possibility for dissent. The market will enhance diversity, whereas politics inflicts conformity (2002: 23). Power is likely to be dispersed, due to the essential features of markets and competition. Freedom is secured as long as there is freedom of exchange. “The employee is protected from coercion by the employer because of other employers for whom he can work, and so on. And the market does this impersonally and without centralized authority” (2002: 14–15). But the free enterprise system will also be a bulwark against public or political power, because individuals will be independent. Unlike a totalitarian regime, political dissent is more likely in a capitalist society because the potential dissenters will not be economically dependent upon the state. Several other arguments for Friedman’s “competitive capitalism” run through the book: the increase of wealth; the protection of minority groups from discrimination (the market treats everyone the same, as acknowledged by Marx); the alleviation of poverty. To Friedman, “the great achievement of capitalism has not been the accumulation of property, it has been the opportunities it has offered to men and women to extend and develop and improve their capacities” (2002: 169). But he argued that true liberalism chooses

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“equality of rights and equality of opportunity” over “material equality or equality of outcome,” and insists that “equality comes sharply into conflict with freedom” (2002: 195).

“A fundamentally subversive doctrine” The basic composition of Friedman’s book was first to outline the principles of competitive capitalist society, and then to discuss whether pressing issues in relation to housing, minimum wages, a public education system, poverty, international trade, and so on were in accordance with these principles or not. Among these is the notion of a “social responsibility of business and labor” (2002: 133–6). As Friedman wrote: The view has been gaining widespread acceptance that corporate officials and labor leaders have a “social responsibility” that goes beyond serving the interests of their stockholders or their members. This view shows a fundamental misconception of the character and nature of a free economy. In such an economy, there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rule of the game, which is to say, engages in open and free competition, without deception or fraud. [ . . . ] Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible. This is a fundamentally subversive doctrine. (2002: 133)

Friedman specifically discussed corporate charity and funding of education (and the idea that corporations and unions should have a responsibility for avoiding inflation by “artificially” not raising their prices). To Friedman, this doctrine was subversive most of all because it violates property rights: “The corporation is an instrument of the stockholders who own it. If the corporation makes a contribution, it prevents the individual stockholder from himself deciding how he should dispose of his funds” (2002: 135). This is arbitrary use of private power vested in the hands of those who control the company, over the ones who own it. Friedman objected to the idea that management should make decisions about stockholders’ property, stressing that charity and donations should be given freely by individuals, not coercively forced upon them by others. Like Sumner, Friedman argued that while private charity was an individual matter, corporate philanthropy was not in accordance with private property rights. Consequently, Friedman opposed the tax deduction for these “responsibilities.” As Friedman observed: A major complaint made frequently against the modern business is that it involves the separation of ownership from control—that the corporation has

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become a social institution that is a law unto itself, with irresponsible executives who do not serve the interests of their stockholders. This charge is not true. But the direction in which policy is now moving, of permitting corporations to make contributions for charitable purposes and allowing deductions for income tax, is a step in the direction of creating a true divorce between ownership and control and of undermining the basic nature and character of our society. It is a step away from an individualistic society and toward the corporate state. (2002: 135–6)

Friedman argued that corporations did and should serve the interests of stockholders. Corporate social responsibility, involving some sort of corporate spending such as corporate philanthropy, was a subversive doctrine because it violates property rights, which form a cornerstone of a society that treats individuals as free and equal and under the law. Friedman could find support in the tradition of free market liberalism, such as Hayek, with arguments that property rights were essential to personal liberty. If property is taken away from its rightful owners, these owners are not just deprived of their property, but of the right to dispose of these means in order to achieve the ends that they wish. And a person who is deprived the right to seek their own ends with their own means is no longer free person. For neoliberals, the market reformist notion of a “socially responsible” or “soulful” corporation marked a threat to individual freedom. What they did was to try and shift the balance back toward the values of the classical American business creed, debunking managerial market reformism. Theirs was a justification for the business enterprise as a legal entity whose rightful purpose was to serve shareholders, also invoking the classical free market liberal hypothesis that this would result in a higher level of total economic welfare. In the sharpest contrast to various proponents of social-liberalism, the neoliberals, as they would later be called, denied any positive role of labor unions. As Ben Jackson notes: Unions, Hayek and his neo-liberal allies believed, were coercive institutions that forced individuals into collective action which they did not support, and were artificially propped up by partisan pro-union labor legislation enacted by the social democratic state. In this sense, neo-liberals saw unions as neither voluntary nor spontaneous.22

Unlike Galbraith, neoliberals only saw government and labor unions as coercive instruments of power, but not corporations. The managerial, market reformist ideas also received attention from Marxists, to whom the notion of a soulful corporation would be an equally “subversive doctrine.” Neoliberals as well as neo-Marxists, then, both critiqued the managerial version of market reformism which had become so widespread in the aftermath of the Great Depression. They both rejected it as a valid description of how American capitalism actually worked, as well as for a normative principle for how it should work.

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The “soulful corporation” and the Marxist argument against it The economists Paul A. Baran (1909–64) and Paul M. Sweezy (1910–2004) were among the best-known and influential American Marxists of the second half of the twentieth century. Baran was a Russian emigrant who had taught at Stanford University from 1949; Sweezy, educated at Harvard and at the London School of Economics, had together with Leo Huberman founded Monthly Review in 1949, a leading journal of socialist and radical dissent (from the beginning, Baran was also an active participant in the journal). Baran and Sweezy jointly wrote Monopoly Capital: An Essay on the American Economic and Social Order.23 In this book, central ideas concerning the modern capitalist economy and not least its corporate form were discussed and heavily criticized. Their book was a comprehensive criticism of American society and economy that was to become one of the most important books in American postwar Marxism. In the words of John Bellamy Foster (2004: 9), the book became “one of the fundamental texts” for “the New Left that emerged at this time.” Baran was, in the words of Galbraith in 1987, “the most noted American Marxist scholar” of the second half of the twentieth century.24 A key thesis of the book was that American capitalism was characterized by the condition of monopoly. As had earlier been observed by Galbraith and others, most industries had reached a stage where there would be a few dominant corporations as market leaders. Baran and Sweezy went further than Galbraith, however, as they described the corporate economy as monopolistic, whereas Galbraith had mostly spoken of it as being oligopolistic. As Baran and Sweezy stated in the introduction to the book: We must recognize that competition, which was the predominant form of market relations in the nineteenth-century Britain, has ceased to occupy that position, not only in Britain but everywhere else in the capitalist world. Today, the typical economic unit in the capitalist world is not the small firm producing a negligible fraction of a homogeneous output for an anonymous market but a large-scale enterprise producing a significant share of the output of an industry, or even several industries, and able to control its prices, the volume of its production, and the types and amounts of its investment. (Baran & Sweezy 1966: 19).

Unlike Galbraith, Baran and Sweezy did not think that countervailing powers were particularly successful in curbing the power of corporations. Instead, they wanted to demonstrate how massive amounts of surplus were being created within the economic system of capitalism and then was sucked up by capitalist consumption, spent on the military, or consumed in other places which were not in the interests of workers. The widespread existence of monopolistic capitalism, as opposed to competitive capitalism, had important theoretical implications for Marxism, Baran

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and Sweezy argued. Theoretically, it meant a departure, or a correction, of a key assumption underlying Marx’s work, which Baran and Sweezy thought had put too much emphasis on conditions of competition. Since competition works as a constraint on capitalism, competition would in turn be a central factor in causing the level of surplus to fall—and, simultaneously, a main cause for the constant revolution of the social organization and technology of production. With monopolistic capitalism, however, there would not be a general tendency of the surplus to fall, but rather to rise. A large part of Monopoly Capital was thus devoted to accounting for what happened with the enormous surplus constantly being created in the corporate economy.25 Baran and Sweezy brought attention to waste, conspicuous consumption, and, as sociologist Charles Wright Mills famously had done before them, the interlocking structure of government, business, and the military elite systems (Mills 1956). As Marxists, Baran and Sweezy addressed inherent contradictions in capitalism, stressing the direct relationship between wealth and poverty.26 Central to Baran and Sweezy’s general criticism was the notion of a growing contradiction between the rational parts and the irrational whole (Baran & Sweezy 1966: 328, 348f.). As Marx had stated, capitalism would be characterized by a constant revolution of social technologies, productive powers, and of social organization, leading to a greater rationalization. But at the same time, according to Baran and Sweezy, “the whole” was characterized by a society with great inequality, unequal opportunities, conformity of lifestyle, constant tendency to new wars and exploitation, and problematic commitments by the US to counter-revolutions in Latin America, Asia, and Africa. Throughout Monopoly Capital, Baran and Sweezy performed critical tests on society as a whole—on the “Quality of Monopoly Capitalist Society” as chapter 10 is called. The tests involve the extension of poverty, condition of the education system, and the ideal of equal opportunity, housing, and transportation; but also conditions of work, the role of the culture industry, the meaning of free time, family relations, sexual relations, and children’s upbringing. They argued against the idea of the US economy being a “free enterprise” system, because of the power of big corporations, and used the same argument to say that the US could hardly be described as a democracy (Baran & Sweezy 1966: 326f.).27

“Business is America’s national game” What is the truth of the modern corporation? Does it serve the public, or does it exclusively serve the interests of shareholders—or the interests of executives? To describe adequately the new corporate reality had become an all-important intellectual and rhetorical struggle. From a Marxist position, it was of the utmost importance to argue against the market reformist notion of a “socialized” or “humanized” big corporation. The idea that corporations were serving

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the community as a whole, and that they had simply stopped their behavior of maximizing profits, were dealt with from the very beginning of Baran and Sweezy’s book, bearing witness to the great importance they gave to deconstructing the myth of the soulful corporation.28 It was important to intervene in the moral, economic, and political discussion of the giant corporations, as the stakes in properly describing corporate behavior were high. Baran and Sweezy were aware that if the new notions of the behavior of corporations were true, it would have severe consequences for traditional economic theory: “if it [the notion of the soulful corporation] is accepted, the whole corpus of traditional economic theory must be abandoned and the time-honored justification of the existing social order in terms of economic efficiency, justice, etc., simply falls to the ground” (Baran & Sweezy 1966: 34f.). Here, they would in a way acknowledge the proposed consequences for economic theory as stated by diverse market reformists such as Mayo and Barnard, who both argued that standard economic theory and its notion of human as well as corporate behavior should be corrected by new findings in the expanding fields of organization theory and industrial social-psychology. The new market reformism, in this context encapsulated in the notion of the “soulful corporation,” would hold, against free market liberals, that capitalism could only be justified to the extent that it became more socialized, more adjusted to the needs of different stakeholders. Such a new justification of capitalism would be much too collectivistic in the ears of a true, free market liberal. To Marxists, the idea of the soulful corporation was equally disturbing, but for different reasons; namely because it would not only conceal the real behavior of corporations, but the whole composite of state, economy, and society. It gave the false impression that corporations were serving the common good. By contrast, Baran and Sweezy went for a complete account of the maladies and pathologies of American society, linking these to its capitalist economy.29 That American capitalism had become a capitalism that was characterized by big corporations was already a widespread notion at the time, and had been a central theme for writers such as Veblen or Berle and Means. It was Mills and his 1956 book The Power Elite that Baran and Sweezy credited for clearsightedness: Not great fortunes, but great corporations are the important units of wealth, to which individuals of property are variously attached. The corporation is the source of, and the basis of the continued power and privilege of wealth. All the men and the families of great wealth are now identified with large corporations in which their property is seated. (Mills 1956: 116)

The challenge was now how to interpret the transformation into the corporate form, and how the new corporate-industrial capitalism should be judged

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economically and politically. Was the new economy of big corporations a socially desirable economy? This was the question intellectuals of very different political stances struggled to give the most convincing answer to. Baran and Sweezy took a definite stance against any notion even remotely close to the idea of a “soulful corporation.” Thus, whereas they recognized “interesting and enlightening insights” from theories that claim that “the managements of big corporations form some sort of separate, independent, or ‘neutral’ social class,” these theories “all share a common defect: the basic idea is wrong” (1966: 46). Baran and Sweezy traced the idea of the soulful corporation back to Berle and Means’ seminal The Modern Corporation and Private Property; but in contrast to the latter’s hopeful prospects, Baran and Sweezy tried to demonstrate that corporate behavior could still best be understood as a drive toward maximization of profits, fiercely opposing new descriptions of a “soulful corporation” made by prominent businessmen as well as, for example, Harvard economist Carl Kaysen. Baran and Sweezy documented how top executives like Henry Ford II and the company manager of the Standard Oil Company of New Jersey, Frank Abrams, invoked a new ethos of “company men” and their “company loyalty.” Here, as Whyte, Bendix, Fisher, and Kerr had observed, being a company man was presented as being morally superior to having an individualistic drive toward the satisfaction of personal gain (Baran & Sweezy 1966: 42ff.). Which arguments, then, did Baran and Sweezy present against the notion of the soulful corporation? Above all, they tried to show that the Marxist analysis of profit maximization still held true. If corporations indeed maximized profits in order to enrich their private owners, capitalism did not serve public ends. Whereas Baran and Sweezy had replaced Marx’s assumption of competition with the assumption of monopoly, this theoretical shift did not have an effect upon the assumption of profit maximization. On the contrary: as competition works as a constraint on the ability to maximize profits (no real capitalist would like too much competition), the abolition of the assumption of competition does not change the behavioral pattern toward profit maximization, but facilitates its success. Baran and Sweezy argued that the assumption of profit maximization was even more likely in a context where the basic units of the economy were no longer individuals, but corporations. First, as corporations are controlled by managers whose economic interests, careers, and reputations are intrinsically linked to the corporation, it is very unlikely that they should not try to maximize the corporation’s wealth. Second, what counts in the corporate and management culture is the achievement of financial results, and this culture is nurtured and sustained through generations and through instruments of popular media, such as the constant financial ranking of corporations (just think of Fortune 500). The world of business recruits and socializes people to contribute to economic growth: “Management is a self-perpetuating group [ . . . ] Each generation of managers

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recruits its own successors and trains, grooms, and promotes them according to its standards and values” (1966: 28f). Third, as corporations become financially independent, they are not essentially controlled or in any decisive manner subject to outside pressures (1966: 28f). Baran and Sweezy argued that the real interest of the soulful corporation was to increase the wealth of powerful insiders. To back this claim they referred to a discussion paper written by University of Wisconsin professor of economics James S. Earley (1957). In his paper, Earley recognized the limitation of knowledge and resources in the firm, as these had been conceptualized by economist and organizational theorist Herbert A. Simon. As Hayek had put a great emphasis on the limited knowledge of human beings, with heavy consequences for the practice of government, especially planning, Simon was to coin the term “bounded rationality” to designate the limits associated with decision making—limits related to information, cognitive capacities, and availability of time.30 Earley argued that corporate behavior would still be characterized by “a systematic temporal research for highest practicable profits”. He claimed that a study of management literature showed the preoccupation with a “systematic focus on cost reduction, the expansion of revenue, and the increase of profits”—indeed, that “the exemplary man of management seems to have ‘More’! for at least one of his mottoes”. If corporations do not try to maximize profits and to reduce costs, then why are these concerns the main themes in management literature and in its different branches of investigation? Second, Earley claimed that his own earlier study of “excellent companies,” based upon questionnaires, yielded the same result, i.e. that managers try to make decisions that are directly in the companies’ best financial interests (1957: 333; cf. also Earley 1956). Third, the rapidly increased use of economists, market analysts, management consultants, and others also showed that the rationality of the corporation was to try to increase profits. Finally, this was also evident from the growing use of new analytical and managerial techniques such as operations research and mathematical programming (Earley 1957: 333f.). After quoting Earley at length, Baran and Sweezy concluded that corporate behavior was still characterized by an attempt to maximize profits, albeit without the old “assumption of omniscience” (1966: 39). Second, they noted that the big corporation was more, not less, “equipped to pursue a policy of profit maximization” than was the individual entrepreneur, due to the much more sophisticated economic and managerial technology. Indeed, Baran and Sweezy gave many reasons for deconstructing what they saw as the myth of the soulful corporation. The corporation had a longer time horizon and it was a “more rational calculator” (1966: 58); it could better manage risk-taking activities and use great power to buy up small innovative firms in new industries; it could have a tacit understanding with other big corporations about not lowering prices, for example, as had been observed by Galbraith.

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In contrast to market reformists such as Barnard who underlined the moral responsibilities of managers as a guardian class, Baran and Sweezy insisted that the world of business had the character of a system. Of course, this did not mean that managers or others did not have any scope for decision making besides satisfying the profit motive whatsoever, or that they could not, for example, engage more or less in different sorts of welfare activities, or that they may have had very different personal motivations for doing so. Although the advent of the “company man” may have led some to the conclusion that a new, more collectivistic ethics had arisen, Baran and Sweezy pointed out that what mattered was not individuals and their motives, but the “socio-structural” facts of corporate capitalism: “The real capitalist today is not the individual businessman but the corporation. What the businessman does in his private life, his attitude toward the getting and spending of his personal income— these are essentially irrelevant to the functioning of the system” (1966: 54). To illustrate their systems view, Baran and Sweezy drew an analogy between baseball and business: Baseball, it is said, is America’s national game. It would be more accurate to say that business is America’s national game: there are many more people engaged in it and the stakes are much higher. But the two operate on similar principles. In baseball the objective is to get to the top of the league; day-to-day policies are directed toward winning games by getting more runs than opposing teams; players are judged by their cumulative day-to-day performance. In business the aim is to get to the top of the corporate pyramid; day-to-day policies are directed to making the most possible profits; as in baseball, men are judged by their cumulative day-to-day performance. In both, those who refuse to play according to the rules get thrown out. Those whose performance is sub-standard sink toward the bottom. In neither are personal motivations important in so far as they may contribute to effectiveness in action, and in this respect they play their part along with many other factors such as physique, intelligence, training, and the like. (1966: 52–3)

Baran and Sweezy argued that with increasing wealth came both conspicuous waste as well as philanthropy; what was new was that both tendencies had become increasingly institutionalized, so that it was less the individual than the corporation that “has to maintain a high standard of living before the eye of the public” (1966: 56). They further noted that “it is in this area of philanthropy, and the public relations efforts which accompany it and are closely related to it, that we find a genuine kernel of truth in the ‘soulful corporation’ idea” (1966: 57). But they found no reason to conclude that widespread corporate philanthropy should change the general assessment of capitalism as a whole: Having maximized their profits, corporations do feel called upon to engage in activities of this sort and almost certainly will do so to an increasing extent. If

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these are emanations of the corporate soul, then the existence of that metaphysical entity can be taken to be a fact. But it is a familiar soul, not a new one. Escaping from the body of the dying capitalist philanthropist, it has migrated to the capitalist corporation. For the system as a whole, there has been no net increase of soulfulness. (1966: 58)

If profits are achieved through the exploitation of workers, corporate philanthropy seems to be an advanced form of theft from workers—more than it is a theft from stockholders, as argued by Friedman. Contrary to the expectations of a “socialized corporation” that would render the vocabulary of private property obsolete, Baran and Sweezy, following Mills, maintained that the accumulation of capital for private ends was still the key to understanding the behavior of corporations. Thus, management had not become a neutral ruling class ultimately placing its loyalty in the hands of the public; neither had it become a profession with especially high ethical standards or altruistic sentiments; and neither was it thus essentially focused upon “service” to the community. Daniel Bell wrote in 1960: “In the Western world, therefore, there is today a rough consensus among intellectuals on political issues; the acceptance of a Welfare State; the desirability of decentralized power; a system of mixed economy and of political pluralism. In that sense, too, the ideological age has ended” (1964: 373). But had it really? The 1950s were not characterized by an intellectual consensus and an “exhaustion of political ideas” as concluded in Daniel Bell’s essay, The End of Ideology, but by ongoing, lively debates concerning the economic, political, and social organization of America. A central part of these discussions revolved around how to understand and how to assess the economy of corporations, and not least how to interpret the new market reformist notions of moral, socially responsible, and “soulful” corporations that to an increasing extent nurtured policies of human relations and were committed to corporate philanthropy and similar notions.

Conclusion: contesting the image of the moral, social, and soulful corporation The classical American business creed had been supplemented with a managerial market reformism that stressed public and social responsibilities and human relations in industry. This chapter has shown how this particular business creed was soon to be met with criticism both from the right and from the left. Criticisms of organizational loyalty as a moral paradigm were voiced by social-liberals, by free market liberals and proponents of the classical business creed, as well as by socialists and neo-Marxists. Social-liberals argued

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that conflict in society can play a positive role, and they invoked ideals of pluralism and of individuals’ multiple memberships in social groups and organizations. The new bond between the individual and the organization in mid-century was critiqued for being paternalistic by social-liberals as well as by free market liberals, and the age-old free market liberalist theme of purely contractual relationships was invoked as a response to excessive corporate manipulation. Critics, however, measured managerial market reformism against different standards. Whereas leftists such as Bendix and Fisher specifically stressed the democratic and political deficit of market reformism, Whyte measured the new “social ethic” against the ideal of personal liberty and independence, judging it from the perspective of traditional values of the American business creed. Galbraith’s social-Keynesian criticism, his theory of American capitalism and of countervailing powers, was another argument against capitalism’s abilities for self-regulation and its capacity for social-economic efficiency. And neoliberals as well as Marxists reacted very strongly against the notion of a “soulful” corporation, the first because of the violation of property rights, the latter for several reasons, but not least because the system as a whole was irrational, unjust, and unequal. If this was an age of consensus, it was only on the surface. And against the commonly held view that corporate social responsibility and related concepts have only recently become important matters of public debate, this chapter has showed that critiques of the soulful corporation proliferated in midcentury. This does not only bear witness to the importance of these ideas (why else bother critiquing them?), but also to the often striking similarities with later lines of conflict. Table 3.2 concludes and summarizes much of the argument of Chapters 2 and 3, which have demonstrated that market reformism was debated as an alternative path to a “gentler capitalism” in mid-century, among other political and economic ideologies. Like late nineteenth-century market reformism, mid-century managerial market reformism had been criticized for exaggerating the mutual interests and industrial partnership of capital and labor. Furthermore, critics of market reformism in both periods tried to expose the limitations and insufficiencies of corporate philanthropy. In Ely’s study of the company town Pullman, a spearhead of the time’s market reformist industrial betterment and welfare capitalism, he critiqued the excessive concentration of power associated with this system, arguing that it did not enhance the political and economic autonomy of workers. Indeed, the triple deficits of democracy, of autonomy, and of conflict was to become recurrent themes in the mid-century, where the notion of loyalty to a singular organization, if not “bonding” to it and identifying with it, was polemically ranked alongside totalitarianism.

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Table 3.2. Rival views on social protection in the New Deal era (c.1930–70) Radical ideas (socialism, communism) (Chapter 3)

Political reformist ideas (unionism, welfare state) (Chapter 3)

Market reformist ideas (Chapter 2)

Problems identified

Inequality, rule of capital, worker alienation, critiques of US capitalism and its influence upon the developing world

Inequality, lack of social security, uncontrollable financial bubbles and business cycles

Industrial unrest Spread of socialism and conflict, lack of social cohesion, industrial capitalism’s failure to socially transform, worker alienation and lack of meaning, laissez-faire economic thinking

Solutions offered

Socialism (various forms)

New Deal (TVA, banking and finance legislation, labor market legislation) Welfarism Collective bargaining (at the federal level) Universal social rights (health care, education, etc.) Keynesianism

Human relations and human groups (Mayo) Industrial citizenship (Drucker) A free enterprise system for countering business cycles (Drucker) Corporate philanthropy (funding, e.g. education)

Diagnosis

“Technocracy,” “the power elite,” “corporate liberalism”

The socialized corporation (Berle & Means) Economy of “countervailing powers” (Galbraith)

Capitalism needs a Western societies human face, on a slippery slope business is a social toward socialism system

Social Through socialism, protection anarchism, international labor movements, etc. (“corporate liberalism” not enough)

Through the Through socially welfare state, labor responsible unions, and the businesses system of collective bargaining and labor market security

Economic “liberalism” and early neoliberalism (Chapter 3)

Self-critically acknowledges the state’s role in creating “free markets”

Individuals help themselves and their own families, a free market system generates most overall economic growth

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NOTES 1. In the following I concentrate on criticism of human relations and of the paternalistic, all-embracing organization voiced by writers of diverse academic and political orientation (Bendix & Fisher 1949; Fromm 1957; Kerr 1953; Whyte 1956). It should be stressed, however, that the criticisms treated here of course were not the only ones (cf. e.g. the discussion in Commentary from 1946–7; here Daniel Bell, John Dewey, and others discussed the new “The Study of Man” and moral issues concerning applied social science, especially with regard to human relations (Bell 1947; Dewey 1947; Glazer 1946)). I have concentrated upon the texts chosen here because they show how the new market reformism of human relations and related currents were debated at the time. 2. Kerr, a self-declared, proud “liberal economist,” had worked with Lloyd Fisher, and Kerr notes his debt to Fisher who had just deceased (Kerr 1953). 3. Kerr had his own experiences with the excessive demands of organizational loyalty. In 1949, all employees at the University of California were forced to sign an anti-communist loyalty oath; Kerr signed, but actively opposed the firing of those who did not wish to sign. Bendix also signed. 4. E.g. in management literature: Bartlett and Ghoshal 1999; organization theory: Czarniawska 1998; critical theory: Marcuse 1964 or Habermas 1996. 5. According to Whyte, the new management ideology was supported and legitimized by science, which only strengthened its power. The scientific ambition was a naturalistic positivistic unitary science of “man,” which for the sake of engineering the good society would try to make behavior as predictable as possible. A similar critical comment on the rising behaviorism is found in philosopher and emigrant from Germany, Hannah Arendt’s The Human Condition from 1958: “The unfortunate truth about behaviorism and the validity of its ‘laws’ is that the more people there are, the more likely they are to behave and the less likely to tolerate nonbehavior. Statistically, this will be shown in the leveling out of fluctuation” (Arendt 1989: 43). 6. According to Whyte, the organization also showed an interest in creating a standard personality. Whyte encouraged the individual to fight the organization, and at the end of the book he thus guided readers on how to cheat corporate personality tests, trying to expose how silly he thought they were. Whyte began by giving some general guidelines: “(1) When asked for word associations or comments about the world, give the most conventional, run-of-the-mill, pedestrian answer possible. (2) To settle on the most beneficial answer to any question, repeat to yourself: a) I loved my father and my mother, but my father a little bit more. b) I like things pretty well the way they are. c) I never worry much about anything. d) I don’t care for books or music much. e) I love my wife and children. f) I don’t let them get in the way of company work” (1956: 405). 7. Sumner stressed that the United States in particular is a society based upon contract relations: “In the Middle ages men were united by custom and prescription into associations, ranks, guilds, and communities of various kinds. These ties endured as long as life lasted. Consequently society was dependent, throughout all its details, on status, and the tie, or bond, was sentimental. In our modern state,

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and in the United States more than anywhere else, the social structure is based on a contract, and status is of the least importance. Contract, however, is rational— even rationalistic. It is also realistic, cold, and matter-of-fact. A contract relation is based on a sufficient reason, not on custom or prescription. It is not permanent. It endures only so long as the reason for it endures. In a state based on contract sentiment is out of place in any public or common affairs. It is relegated to the sphere of private and personal acquaintance and personal estimates. The sentimentalists among us always seize upon the survivals of the old order. They want to save them and restore them. Much of the loose thinking also which troubles us in our social discussions arises from the fact that many do not distinguish the elements of status and of contract which may be found in our society” (1883: 22f.) 8. The contract played a significant role in the shaping of modern political philosophy in the tradition of Hobbes, Locke, and Rousseau, but also in the tradition of natural law. Not least has the contractual tradition—whose premise can be said to be free, autonomous citizens—continued to be present within the liberal tradition (cf. for instance Rawls 1999). The contractual relationship between individual and organization has been met by criticism from other traditions of thought that, along with philosophers like Rousseau, Hegel, early Marx, and not least the Romantic movement, searched for a closer bond between individuals than the one solely determined by “cool” interests. Modern experiences of a fragmented life and world, a soulless nature and soulless state, and mere utility-based human relationships, gave rise to new philosophical currents. The cold and calculating, bourgeois community of interests, the “system of needs” as Hegel called it in his Philosophy of Right (1991), should, if not be replaced, be supplemented by a new and higher type of community. It was a quest for a community that made heroic and republican virtues possible, as well as the fulfillment of human potentiality. The social was not just an abstractly signed “contract,” but what made human beings human. In this tradition, which has its modern counterpart not least in communitarianism, it is the community that constitutes the identity of the human being as such, and it is in community with others that the individual reaches his or her true potential as a human being. 9. Walzer did not distinguish between different branches of liberalism such as social liberalism and free market liberalism. 10. Classical sociology was from its very beginning occupied with understanding the social, economic, and cultural dynamics and transformations that characterize modern industrialized and urbanized market societies. Besides contributions from other key figures of classical sociology, not least Karl Marx, Max Weber, and Émile Durkheim, the German sociologist Ferdinand Tönnies provided a path-breaking view of how to understand the transitions of modern societies by introducing the conceptual pair of Gemeinschaft and Gesellschaft. Both are concepts for describing ways in which individuals live in peace with each other, but in one form, Gemeinschaft, people associate with each other in a “profound” manner, help each other, etc., whereas in the other form, Gesellschaft, they each have their distinct interests and the social intercourse is decided by a quid pro quo logic. Or as Tönnies wrote: “The theory of Gesellschaft builds a circle of people who, as in Gemeinschaft, live and reside peacefully among each other, but who are not

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genuinely linked with each other, but substantially separated, and while in Gemeinschaft they are united in spite of all separations, in Gesellschaft they remain split in spite of all connections” (1979: 34, my translation). One social form is regulated by individual interests; in the other these are transcended in favor of the common good. Tönnies’ concepts Gemeinschaft and Gesellschaft are therefore parallel (but not identical) with the bond and the contract. On the one side the inner bonds between individual and organization are emphasized, drawing on the sense of an original community—the bond; on the other side mutual interests—the contract. According to Tönnies the process of modernization was characterized by a transition from Gemeinschaft to Gesellschaft—which translated into our terms suggests a transition from social forms primarily being regulated by bonds, to relationships between individuals and groups or organizations being regulated by contracts. 11. While the 1990s possibly led to yet another shifting from normative to rational rhetoric as a dominating current, with management concepts like strategy, lean production, business process reengineering, core competencies, benchmarking, agile strategies, and just-in-time (cf. Kunda & Ailon-Souday 2005), there seem, on the other hand, to be numerous examples showing that the articulation of the individual–organization relationship as a close and intimate bond was hardly decreasing—in fact, quite the opposite. While “commitment,” for example, can be said to be an object of study of relatively early date in management and organization theory (cf. e.g. Becker 1960), theoretical considerations as to how the relationships between individual and organization are to be secured and transcend the purity of the contract are also very common. This has not least been the case since the cultural turn of management and organizational rhetoric since around 1980 (Abrahamson 1997; Barley & Kunda 1992). Thus the concept of belonging reoccurs in a popular management book entitled Meaning Inc.: The Blueprint for Business Success in the 21st Century (Bains et al. 2007). The writing team for the book is the business psychological consultancy firm YSC, with clients such as ALJ, AOL, BP, Cadbury, Schweppes, Diageo, Goldman Sachs, J. Sainsbury’s, RBS, Starbucks, and more (2007: ix). Under the headline “Why is belonging important?” they wrote of successful companies such as Mars, P&G, and Coca-Cola, that they are organized as a “demanding family,” combining a strong culture with the support of individual performances—and more: “The development of robust and close relationships is a strong prerequisite for creating a strong feedback and coaching culture and for driving the cooperation and crossfunctional collaboration that is so vital to modern business success. In addition, these bonds helped develop cultural consistency and long-term commitment to the companies concerned” (2007: 243f.). 12. See e.g. Dunn 2011; Stanfield & Stanfield 2011; Parker 2005. 13. Galbraith’s entire opus is voluminous. Among his best-known works from the 1950s are, besides American Capitalism, The Great Crash, 1929 (1988, first published in 1954) and one of his most popular and debated books, The Affluent Society (1998, first published in 1958); from the 1960s, it is not least The New Industrial State from 1967 which received widespread attention. For the present purposes, I have chosen to concentrate upon American Capitalism because of the

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14. 15.

16.

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power, the role of the government in stimulating or reducing aggregate demand is an important one. The existence of countervailing power does not suggest that government intervention becomes unimportant. According to Galbraith, there were some circumstances under which decisions concerning production and prices should not be made privately. This was the experience of the war, where these decisions were frequently moved from businessmen to government. See, especially, Phillips-Fein 2009 and Burgin 2012. Jackson 2012: 121, 120–6. It was published in 1966 and finished by Sweezy, as Baran had died two years before. Galbraith 1987: 189, quoted from Foster 2004: 1. Baran and Sweezy investigated how the surplus was absorbed in capitalist consumption and investment (chapter 4), civilian government (chapter 5), and militarism and imperialism (chapter 6). Baran and Sweezy were not only preoccupied with inequalities within American society, but also turned their attention to asymmetrical relationships between the rich countries of the West and developing countries. They objected to what they saw as a highly problematic assumption of “bourgeois economics,” namely that the developing countries were simply at another point in the stage of development, instead of realizing that the relative poverty of these countries and the relative richness of the West were intrinsically linked, one part of the world exploiting the other. The harshness of their criticism is evident from Baran and Sweezy’s conclusion in which American capitalism was described as an “evil” and “destructive system,” which “maims, oppresses, and dishonors those who live under it, and which threatens devastation and death to millions of others around the globe” (1966: 353). The introductory chapter of Monopoly Capital was followed by a chapter on “The Giant Corporation,” which attempted to demonstrate that the rise of big corporations did not mean that they had developed into public-serving institutions. As Sweezy and Baran state by quoting Hegel on their first pages, they believe that “the truth is the whole,” which is why any description of economic reality must simultaneously take other essential features of society into account. See e.g. Simon 1957. The term “bounded rationality” was coined later.

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4 How to Do Well and Do Good The Spirit of Entrepreneurial Capitalism in the Age of the Second Great Transformation (1970s–2000s)

In 1971, John Kenneth Galbraith gave a talk at the Conference on Corporate Accountability. He used Lockheed, the nation’s largest defense company, as an example of the increasingly nonsensical idea of a purely private enterprise, as there were in fact many ties and couplings between the state and the company (Galbraith 1972). In so doing, he touched upon a theme which had been prevalent since Berle and Means, if not earlier. Galbraith may have hoped that his many redescriptions of American capitalism would, finally, knock out the props of the “competition model.” But instead, he was proven wrong as a triumphant capitalism and a re-energized free market thinking rose to centerstage in the years to come. By the 1990s, defenders of capitalism described it as being superior as well as being necessary, restating that sharp “capitalism versus socialist central planning” dichotomy which mid-century social-liberals had critiqued. Capitalism was justified on “classical grounds,” such as being the supreme economic system in terms of creating wealth, achieving social efficiency, and developing technology. Welfarism and organized labor were in crisis, neoliberalism was in vogue. But the new “spirit” of American capitalism in the 1990s cannot be reduced to neoliberalism. The argument for capitalism was about much more than economic doctrine. Rather, this was a new spirit of American capitalism which showed how markets were the very essence of freedom, democracy, consumer sovereignty, and individual self-actualization. Capitalism was cool as well as revolutionary, color-blind as well as anti-hierarchical, profitable as well as capable of moral self-governance. Whereas historians have detailed the history of neoliberalism, less attention has been given to show how this new spirit of American capitalism of the late twentieth century also drew upon ideas of personal development, revolutionary business, anti-bureaucracy,

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consumer sovereignty, cultural equality, and, not least, the idea of moral selfgovernance of corporations.1 This chapter shows the emergence of the new, entrepreneurial spirit of capitalism. After a very brief look at the time between the long New Deal era and the 1990s, it investigates this new spirit of American capitalism bit by bit: from “there is no alternative” capitalism to capitalism as being democratic, egalitarian, color-blind, revolutionary, and cool; from capitalism’s new capacities for moral self-governance to the rise of the entrepreneurial self. Tensions between these different characteristics could be interpreted as tensions between a classical and a managerial business creed, this time in the age of globalization. But they shared the basic premises of business being the key, progressive force in history, and that “doing good” and “doing well” could be combined.

From the New Deal era to triumphant capitalism: polarization, the crisis of Keynesianism, and the end of a bipolar world order (late 1960s–1990s) Mid-century market reformists had written in a period of crises for capitalism; they responded to the threats of social dissolution, unemployment, war, political reformism, and a frequently voiced criticism of self-centered, “economic man.” The 1960s was again a period of contestation of the existing social and economic order: marked, for example, by the political reform program of the “Great Society,” by racial struggles, citizenship rights movements and student demonstrations, and by the rise of the “New Left.” “Social” as well as “artistic” criticisms were widespread, and sometimes intertwined, turning the attention to themes such as poverty, racial inequalities, gender inequalities, and the boredom associated with an ordinary petit-bourgeois, suburban lifestyle. For example, the main thesis of Daniel Bell’s essay The Cultural Contradictions of Capitalism (1976) was that capitalism was in a crisis due to a change in the culture, i.e. counterculture movements endangering traditional work ethics. In 1972, sociologist Charles Perrow published the anthology The Radical Attack on Business which highlighted key criticism voiced against business by members of the New Left. Baran and Sweezy belonged to a growing chorus of “radical” critique in the 1960s. In short, the 1960s witnessed a massive questioning of the legitimacy of the existing order. The middle and the late 1970s marked a severe crisis for American socialliberalism and the post-capitalist vision (Brick 2006: 220ff.). From 1973–5 there was the greatest recession since the Great Depression of the 1930s. The combination of inflation and recession, “stagflation,” questioned the

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truthfulness of the Phillips curve’s alleged trade-off between unemployment and inflation. Social Keynesianism entered a period of crisis. What came instead was an increased polarization in which the concept of “capitalism” again became more used, from the New Left to the New Right. “Contrary to Parsons’ conviction that modern social evolution moved beyond ‘the capitalism/socialism dichotomy’, the trend of the times [the mid-1970s] seemed to run against him, as observers on all sides chose increasingly to dub contemporary society ‘capitalist’ indeed” (Brick 2006: 244). Like Parsons, Barnard had argued that the “capitalism/socialism dichotomy” had become obsolete, basing his argument upon the rise of “organizational society” in the context of a regulatory capitalism (Bowles et al. 2005: 160–4). On the one hand, there was a renewed radical, post-Keynesian social criticism, as evident from the New Left’s criticism of the Old Left, even though this gap was already manifest during the mid-1960s, not least sparked by the Democratic Convention of 1964 and the Vietnam War, when the New Left lost confidence in gradually reforming the capitalist market system (Brick 2006: 230–5, 244–6; Gitlin 1987: 178; Rorty 1998: 54–71). Baran and Sweezy’s Monopoly Capitalism was part of this context; its revolutionary appeal stood a long way from the Democratic Party. On the other hand, there was a revived right that strongly advocated free market capitalism. In theoretical economics, Milton Friedman became a pioneer in the critique of Keynesianism, although this criticism was already voiced in his 1956 book Studies in the Quantity Theory of Money (cf. Brick 2006: 237). The 1970s marked the introduction of a new “economism,” i.e. the tendency to describe and explain nearly all of human action in economic terms, as evident in University of Chicago economist Gary Becker’s 1976 book, The Economic Approach to Human Behavior (cf. Brick 2006: 238). Already in 1970, Albert O. Hirschman’s book Exit, Voice, and Loyalty (1970) had critiqued what Hirschman saw as a growing economism. The Harvard University political philosopher Robert Nozick published his free market liberal Anarchy, State, and Utopia in 1974, in which he, using Kantian terms, argued in favor of the absolute inviolability of property rights, in response to John Rawls’ more social-liberal A Theory of Justice from 1971.2 But the shift did not only take place in the realm of theory. Politically, the ability of government to intervene and to steer in the direction of increased social welfare came under heavy fire. According to Brick, “a growing chorus of concern about a ‘welfare crisis’ emerged on the American Right by the early 1970s,” which was also witnessed in a revival of that “greatest moral imperative” to “take care of oneself” (2006: 226). The shift in emphasis was clear around 1980, as witnessed in the elections of the new political leaders Ronald Reagan and Margaret Thatcher, the latter of whom simply declared that “there is no alternative” to market economics (Brick 2006: 246). At a

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political level, this new situation thus marked a serious challenge to expansive measures of political intervention in order to promote social welfare, and it significantly influenced the market-friendly “third way” policies of the US Democratic Party and the UK Labour Party. Indeed, the 1970s only marked the beginning of a conservative backlash (Jacoby 1997; Noble 1997; Rorty 1998; Sklansky 2002). From the time that the Nixon administration took over from L.B. Johnson’s “Great Society” and his “war on poverty,” inequality has generally risen in the United States, chances of social mobility, e.g. in terms of individuals from poorer social groups getting a college degree, have fallen, and it is increasingly difficult for middle-class families to get by (Noble 1997; 2003; Piketty 2014; Rorty 1998). Pressures from economic globalization have either directly resulted in, or have been used as arguments for, the lowering of costs of production, including labor costs, and in increasing the flexibility of the labor market.3 To economic historian Sanford Jacoby, the late 1990s looked like a rerun of key features from before the Great Depression: Immigrant restriction is again a national obsession; entrepreneurs are lionized by the media; and creationist biology is back in the schools. The labor market looks like an atavism. The United States once again has one of the lowest unionization rates and one of the most miserly social insurance programs in the industrialized world. As in the 1920s, the workforce increasingly is split between the “have-nots” and the “haves”, who will spend most of their careers working in modern manors [e.g. corporations with a comparatively high degree of welfare provision for employees] like S.C. Johnson or Microsoft. (1997: 9)

As Jacoby notes, deregulation of the labor market went hand in hand with a new surge of market reformism for the ones who work in “modern manors.” In the beginnings of the 1990s triumphant capitalism was a fact, as the Soviet Union and the Eastern bloc collapsed and the Cold War had come to an end. Whatever the impact of an existing socialism as a (real or imaginary) competitor for the provision of social welfare may have been, this particular aspect of the Cold War was now over. Therefore, a host of observers used the occasion to laud “free market capitalism” as the superior economic and societal system, and it had in a certain sense become a “monopoly,” enjoying the characteristic privileges of not having to compete with alternative grand arrangements of social organization. Increasingly, the capitalist market system of the 1990s was characterized as a global capitalism. Intellectually, it was lauded in books such as New York Times columnist Thomas L. Friedman’s 1999 book, The Lexus and the Olive Tree: Understanding Globalization, and, albeit somewhat ambiguously, in political scientist Francis Fukuyama’s 1992 book, The End of History and the Last Man (2006).

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TINA: the supremacy and necessity of capitalism “There is no alternative,” the British Prime Minister Margaret Thatcher famously said. In the 1990s capitalism was justified on the grounds that it was both the best economic system, as well as in fact the only possible system. Capitalism was defended both because of its supremacy as well as its necessity. Thus, an elegant rhetorical fusion had emerged: a synthesis of the real and the ideal. It would be difficult to name a person who propounded this view more influentially than did Francis Fukuyama. In Fukuyama’s 1989 article “The End of History?” and in his subsequent 1992 book The End of History and the Last Man (2006), Fukuyama argued that history had in fact come to an end in the sense that no viable alternative to “capitalist-liberal democracy” was any longer imaginable. Indeed, Fukuyama’s book constituted a keynote in the 1990s intellectual debate on capitalism.4 Revisiting Fukuyama, then, is a means for describing the new intellectual context in which a “free market” capitalism was triumphant compared to its fortunes in the years between the 1929 stock market crash and the crisis of the welfare state beginning in the 1970s, when it was attacked from both the right and the left (Brick 2006: 219–46). Perhaps no one advocated this view with greater impact than did Fukuyama, with his probably self-consciously provocative and attentionattracting title. However, on closer inspection Fukuyama’s book was not a totally unconditioned appraisal of the “capitalist-liberal democracy.”5 The central thesis of Fukuyama’s book was that history had come to an end in the respect that politically there were no longer any competitors to liberal democracy, and that economically there were no longer any competitors to free market economics and capitalism. Fukuyama did not imply that history had ended in the sense that significant events would not continue to occur; nor did he imply that the consensus of a “capitalist-liberal democracy” would not still be challenged, but he did believe that challengers would be rather marginal voices. For Fukuyama, a closure of political and economic thought and imagination had emerged: no one would could be expected to have success in seriously challenging the key political and economic principles that were the essence of capitalist-liberal democracy; history had ended in the respect that only one singular political and economic organization of human societies was now viable and acceptable: capitalist-liberal democracy. This did not mean that some newly democratized countries might not relapse into dictatorships, but it did mean that history seemed to have a clear direction toward capitalist-liberal democracies, and, it is important to stress, it also meant that this particular political and economic social organization (albeit referring to quite different countries such as the US, Germany, and Scandinavian welfare countries), was the only one that would be

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appreciated as justifiable for the majority: “As mankind approaches the end of the millennium, the twin crisis of authoritarianism and socialist central planning have left only one competitor standing in the ring as an ideology of potential universal validity: liberal democracy, the doctrine of individual freedom and popular sovereignty” (Fukuyama 2006: 42). The “end of history” was not an end of events and neither of the de facto existence of alternative regimes, but rather an end of the legitimacy of any political-economic alternative. Authoritarian governments, socialist and planned economies included, ceased to have legitimate authority (2006: 39). For Fukuyama, liberalism in its economic sense (and Fukuyama was, like Friedman, trying to take the term “liberalism” back from the twentiethcentury progressives’ appropriation of it) was characterized as “the recognition of the right of free economic activity and economic exchange based on private property and markets” (2006: 44). Whereas there were many differences between countries, especially concerning the size of the public sector, Fukuyama suggested that: rather than to set a precise percentage, it is probably more useful to look at what attitude the state takes in principle to the legitimacy of private property and enterprise. Those that protect such economic rights we will consider liberal; those that are opposed or base themselves on other principles (such as “economic justice”) will not qualify. (2006: 44)

Although Fukuyama also pointed to the shortcomings of a “capitalist-liberal democracy” seen from the perspective of his own peculiar neo-conservative stance, in “economic” matters he nonetheless strictly complied with Hayek and Friedman’s ideas of free market liberalism. Gone were any notions of a “socialized economy,” most of all in its more radical political reformist interpretation as in Berle and Means, who had opted for more economic democracy. What is perhaps most striking for any reader familiar with late nineteenth- and twentieth-century intellectual struggles over capitalism is which elements are simply left out of the debate as we approach the 1990s. Indeed, Fukuyama invoked what can rightfully be designated quite traditional arguments in the defense of capitalism.6 But he did so against the backdrop of the recent “liberal revolutions” and thus the triumph of the capitalist market system as a generalizable mechanism of social coordination. Global capitalism was defended on the grounds that it leads to global economic efficiency (through global division of labor and comparative advantages of nations), to maximum development and exploitation of technologies, and to prosperity. Fukuyama did, however, introduce the proviso that developing countries should be allowed to reach the state of mature industry before being made completely open to the global marketplace; free market liberal economic principles were promoted as the path to “adapting to the rapidly changing

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conditions of a global division of labor, under the conditions of a mature industrial economy” (2006: 91). Furthermore, free market economic principles were presented as preconditions for individual freedom. The new was not so much these arguments in defense of capitalism as such, but rather their new context of a triumphant and an increasingly globalized capitalism. Furthermore, the supremacy of capitalism was blended with the necessity of complying with it. This aspect was particularly present in one of the other of capitalism’s protagonists in the 1990s, New York Times columnist Thomas Friedman. Friedman’s 1999 book, The Lexus and the Olive Tree: Understanding Globalization was, however, a defense of capitalism that stressed the necessity of countries’ uniform adaptation to globalization to such an extent that justification of capitalism was almost rendered superfluous. In the introduction, Friedman tried to correct the view of him as globalization’s preacher, and instead argued that he was just responding to the fact of globalization. Friedman argued that as global capitalism works its way through the world like an iron, natural law, defense as well as critique of capitalism seems more or less to be a waste of time. Instead, the advice to politicians would be simply to adapt rationally to the inevitable unfolding of global capitalism. Indeed, the notion of an end of history and of no alternative to the capitalist market system only seemed to have augmented its momentum in Friedman’s book as compared to Fukuyama’s. Friedman presented but a later version of the thesis that there was simply no longer any workable alternative to free market liberalism. As Sumner had argued in the late nineteenth century, the essential goal of politics should be to comply with the natural laws of markets. In The Lexus and the Olive Tree, Friedman used the building of a luxury car, and a struggle in the Middle East about who owns which olive trees, as symbols of two aspects of globalization (1999: 25–38). The building of the Lexus car in a high-tech factory is a symbol of adaptation to globalization through success on the marketplace; olive trees symbolize roots and adherence to a certain place—belongingness. Living in the post-Cold War setting of globalization, then, people have to find the right balance of embracing globalization without becoming utterly rootless. Still, searching for a proper balance should not conceal which side is the most important. For Friedman, unwillingness to appropriately adapt to globalization was more or less a suicidal strategy. As with Milton Friedman, the dichotomy between free market capitalism and socialist central planning was drawn sharply, only now in the context of globalization. According to Thomas Friedman: once the three democratizations [of technology, finance, and information] came together in the late 1980s and blew away all the walls, they also blew away all the major ideological alternatives to free market capitalism. people can talk about

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alternatives to the free market and global integration, they can demand alternatives, they can insist on a “Third Way”, but for now none is apparent. (1999: 84–5)

Friedman maintained that any suggested alternative to capitalism would not work, and referred to the failures of “the centrally planned, nondemocratic alternatives” of “communism, socialism and fascism” (1999: 85). He confidently noted that: those people who are unhappy with the Darwinian brutality of free market capitalism don’t have any ready ideological alternative now. When it comes to the question of which system today is the most effective at generating rising standards of living, the historical debate is over. The answer is free-market capitalism. (1999: 86)

The necessity of adapting to global capitalism was also described as a curtailment of politics. The new world of global capitalism was, increasingly, an end of politics. According to Friedman, every country must adapt to what he called “the Golden Straitjacket,” which consists in leaving “advocates of the Great Society” and “traditional Keynesian economics” behind and instead following the “golden rules”: “making the private sector the primary engine of its economic growth, maintaining a low rate of inflation and price stability, shrinking the size of its state bureaucracy, maintaining as close to a balanced budget as possible, if not a surplus, eliminating and lowering tariffs on imported goods, removing restrictions on foreign investment, getting rid of quotas and domestic monopolies, increasing exports, privatizing state-owned industries and utilities, deregulating capital markets, making its currency convertible, opening its industries, stock, and bond markets to direct foreign ownership and investment, deregulating its economy to promote as much domestic competition as possible, eliminating government corruption, subsidies and kickbacks as much as possible, opening its banking and telecommunications systems to private ownership and competition, and allowing its citizens to choose from an array of competing pension options and foreign-run pension and mutual funds. When you stitch all of these pieces together you have the Golden Straitjacket. [ . . . ] As your country puts on the Golden Straitjacket, two things tend to happen: your economy grows and your politics shrinks. (1999: 86–7)7

The central argument in Friedman’s justification of unrestrained, unfettered free market capitalism was that it was simply a necessity. Either countries clothed themselves in the “Golden Straitjacket,” or they would become increasingly poor, isolated, and utterly fail to serve their populations. Such capitalism was in no need of “progressive politics”; instead, to fully unleash the market forces was the only way forward. This, then, was a capitalism advocated just so much on the grounds of its pure necessity as its desirability; it was a capitalism that bid a complete marketization in conjunction with a shrinking of politics.

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Adapting to capitalism and to the logic of markets out of sheer necessity, however, was not just an imperative directed at states, but also at corporations. It is, perhaps, not that surprising that Friedman’s rhetoric of imperatives resembles the rhetoric of the popular management gurus and managers of the 1990s whom he frequently referred to, such as Tom Peters or Andy Grove, former CEO of Intel. In a similar fashion, they advised corporations to outsource, to “revolutionize,” to make production flexible and the workforce temporary, and to bring market forces into every nook and cranny of the corporation (Peters 1992). Invoking the rhetoric of necessity, these authors offered pseudo-choices to key decision makers of contemporary society: either the leaders of states and managers of firms do what they recommended, or they would definitely fail. As these authors had “read the signs,” and not least observed “best practice” of “successful” states and corporations, there was really not much need for further reflection or scientific analysis. The future was already decided. The central idea of “coming as close” to the market as possible was also evident from Friedman’s remarks concerning the management of the corporation. In a similar fashion to the way in which management theorists like Sumantra Ghoshal and Christopher Bartlett advised managers to “individualize” the corporation, Friedman stressed the need to go from “a command and control leadership model” to a “command and connect” leadership model in which the boss still makes the strategic decisions, but where “you the employees gather the information, share the information and make as many of the decisions as you can, quickly and close to the market” (Friedman 1999: 71–2; Bartlett & Ghoshal 1999). Adjusting to the market was what it was all about, for states as well as for corporations—not completely forgetting the olive tree. By invoking a crude dichotomy between free market capitalism and socialist central planning, Friedman did not recognize any important differences and nuances between the countries that by and large complied with liberal economic principles, but still had decisive institutional variations in terms of welfare, public sector, and markets (Hall & Soskice 2001).

A return to the classical business creed? In the post-Cold War context of capitalist triumphalism, Thomas Friedman and Francis Fukuyama restated Hayek’s notion of a sharp dichotomy between capitalism and socialist central planning. Political reformism, such as New Deal liberalism, and ideas of, e.g., industrial democracy or even earlier ideas of profit sharing or cooperative worker movements, were entirely absent in their works. Measures of social-democratic political engineering were gone—or rather, as in Fukuyama, declared to be fundamentally in opposition to “true”

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liberalism. Thomas Friedman rearticulated for a new age what had been one of William Graham Sumner’s key themes: completely adapting society to the natural laws of the market. His policy recommendations were, somewhat ironically, anti-politics. As compared to, e.g., “New Dealers” Berle and Means and their idea of a “socialized corporation” which justified looking at the corporation as a means for societal ends (a view still optimistically upheld by Berle in 1967), the “language of debate” had changed significantly.8 Fukuyama and Friedman did not concern themselves with whether corporations had a “soul” or not, whether they were “socially responsible,” or whether they lived up to ideals of industrial or corporate democracy and citizenship, as had been advocated by Drucker in the aftermath of World War II. Their justifications for capitalism, then, much more resembled what Francis X. Sutton and his co-authors in their book of 1956 had described as the “classical” American business creed: free markets, rugged individualism, survival of the fittest, and sanctity of private property. The main values and propositions of the classical American business creed stems, just like neoliberalism, from nineteenth-century free market liberalism. Indeed, it is as if this discourse of the 1990s bore more resemblance to the late nineteenth century or to the 1920s—where free market capitalism, individualism, selfhelp, and hard work reigned—than it did to the kind of economic and political discourse which had characterized much of the long mid-century. Several kinds of political reformist ideas—of universal social and economic rights, of affirmative action, of government’s role in the economy, of state action against poverty, of public housing, of the securing and widening of public goods and the access to these, such as education and health care— came to a halt. Free market capitalism and neoliberalism was back in the saddle, if not in how the real world works, still very much characterized by giant corporations and a tight state–corporation nexus, then in ideology and thinking. For a while, it thus seemed as if the pendulum had swung back once more from a managerial business creed to a classical business creed— from decades-old ideals of “public service” and “social responsibility” to one which again openly celebrated that shareholder view of the corporation which Milton Friedman had cried out for in the New Deal era (Lazonick & O’Sullivan 2000). The key explanation for this shift is not only the different perspectives of these writers, but also a major change of context. In mid-century, and especially in the first decades of New Deal liberalism, free market thinking was unpopular, and the social legitimacy of business had to be fought for with a rhetoric that came close to, but was never identical with, social-liberalism. Thus, in managerial market reformism of the mid-century, the manager was cast as a “statesman” that ultimately should serve the public interest. By contrast, in the late twentieth century free market thinking had become popular again, whereas the era of “big government” and “big labor” was declared over.

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Still, the ways in which capitalism in this most recent era of globalization was legitimized, went far beyond classical free market liberal arguments. To understand the larger value-shift toward capitalism and free markets, however, and to explain why capitalism came in vogue again, we need to look for far broader ideological and cultural shifts and resources than those offered by the somewhat classical doctrine of free markets which was propounded by Thomas Friedman. Capitalism was not just described as necessary, or as the best economic regime to promote economic growth and technological innovation. The shift in the discourse about capitalism was much more significant than that. By the 1990s, capitalism had been redescribed as democratic, egalitarian, liberating, self-transcending (post-capitalist), and capable of moral selfgovernance.

Market populism As we know, the quest for securing the social legitimacy of business has a long history, as witnessed in the intellectual struggles of late nineteenth- and midtwentieth-century America. Thomas Frank, a Chicago PhD in history and then editor of the culture magazine The Baffler convincingly demonstrated the rise of a new type of justification for capitalism that gained widespread acceptance during the 1990s: market populism. In his 2000 book, One Market under God, Frank offered a compelling and impressively documented account of the rise of this new ideology of capitalism. Frank’s narrative is thus a valuable resource for charting the new market ideology of the 1990s.9 According to Frank, “market populism” was the new and powerful form of legitimation that arose in the 1990s: In addition to being mediums of exchange, markets were mediums of consent. Markets expressed the popular will more articulately and more meaningfully than did mere elections. Markets conferred democratic legitimacy; markets were a friend of the little guy; markets brought down the pompous and the snooty; markets gave us what we wanted; markets looked for our interests. (Frank 2000: xiv)

The central core of market populism is that markets are essentially democratic; they constantly revolutionize the world and deprive old elites of their privileges; they are open to everyone and will make everyone a winner; and they, unlike the social-liberal establishment and the “politically correct,” do not tell people what to do or command their lives, but just immediately respond to the needs and “votes” of “the people.” Now markets were being defended on the grounds that they supported the interests of the common man. It was no

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longer the people against the power of business, but the people and business fighting at the same side against “big government.”10 Populism and free market liberalism melded together in market populism. In Frank’s words: What emerged, by the middle of the 1990s, was a curious but ideologically potent cultural hybrid bringing together the antiauthoritarian strains of traditional populism with the most orthodox faiths of classical economics. Wall Street would accommodate itself to the language (if not the ideas) of its critics, would invent a vision of the nation’s banks, stock exchanges, and mutual funds as instruments of the common weal more representative and less corrupt than any government could ever be. (2000: 111f.)

At the same time as market populism lauded the market as an essentially democratic principle of social organization, it encompassed a staunch criticism of political reformism. Market populism, then, was not simply free market liberalism, but it encompassed a sort of egalitarian, democratic, and even revolutionary notion of capitalism which effectively linked it to ideas of a new capitalism constantly in flux, growth, and in the service of the common good. The ideology of “market populism” had its answers ready for critics concerned with equality, because it argued that capitalism treats everyone equally and that it uses less compulsion than political coordination of human action. Market populism thus both encompassed a defense of the “common man” as well as an idolatry of business and entrepreneurial heroes such as Bill Gates and Warren Buffett. Indeed, these were portrayed not as a new aristocracy, but as common people—“Both Bill Gates and Warren Buffett had legendary appetites for hamburgers, the food of the common man. Both men were said to work excessive hours” (Frank 2000: 10). Or as Fukuyama wrote about entrepreneurs, some of the heroes in his book: “They do not risk their lives, but they stake their fortunes, status, and reputations for the sake of a certain kind of glory; they work extremely hard and put aside small pleasures for the sake of larger and intangible ones.” It is only fitting, argued Fukuyama, that “the most talented and ambitious natures should tend to go into business, rather than into politics, the military, universities, or the church,” as their “restlessness” would probably make it too risky if they had political power. And then the trickle-down economics argument comes: the entrepreneurs “create wealth which migrates through the economy as a whole” (2006: 316). As Frank wrote, the rising inequality, the fortunes of the super-rich, and the gigantic wealth created on stock markets, were not to be conceived of as problems, but as what made America what it is (Frank 2000: 13, 96f.). According to Frank, market populism was pervasive among parts of the decade’s business people, management theorists, advertising and PR men, and politicians, and eventually became more and more influential in the public at

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large. Market populism was a particular kind of populism; it had little (if anything) to do with the Populist movement of the late nineteenth century, which opted for the nationalization of railroad industries and for an income tax; it had more to do with the revolt against elite, social-liberals; a revolt that became increasingly widespread in the aftermath of the turbulent years of the late 1960s (2000: 25f., 32f.). This populism was a revolt against the socialliberal elite and their social engineering—against the whole technocratic spirit of the New Deal era. One thing that had changed was thus a reconfiguration of classes: beginning in 1968 this primal set piece of American democracy seemed to change its stripes. The war between classes had somehow reversed polarity: It was now a conflict in which the patriotic, blue-collar “silent majority” (along with their employers) faced off against a new elite, the “liberal establishment” and its spoiled, flag-burning children. This new ruling class—a motley assembly of liberal journalists, liberal academics, liberal foundation employees, liberal politicians, and the shadowy powers of Hollywood—earned the people’s wrath not by exploiting workers or ripping off family farmers, but by showing contemptuous disregard for the wisdom and the values of average Americans. (Frank 2000: 25f.)

Whereas the original Populist movement had been a social movement against “big business,” the new market populism of the 1990s was a revolt against government and regulation, against interference with the wondrous workings of the free market. As markets were essentially democratic, government and regulation could be redescribed as being nothing less than undemocratic and “cynical” attempts to suppress the free will of the people. As the market boomed, the idea became widespread that everyone could and should be an owner of stocks and stock options. As Frank noted: “After all, since anyone could buy stocks, we had only ourselves to blame if we didn’t share in the joy [ . . . ] The argument was an extremely flexible one, capable to materialize in nearly any circumstances” (2000: 100). With everyone a shareholder, everyone would win, even if they got fired in the meantime; the middle class would be enriched, and each could become a millionaire (2000: 88–135). According to Frank, the transition into market populism “marked a fairly radical historical shift”: According to the old “consensus” ideas developed in academia in the decades after World War II, the distinguishing feature of American civilization was its great and evenly distributed wealth. Consensus intellectuals of the 1950s wrote fondly about the “People of the Plenty”, about the “Affluent Society”, imagining America as a land whose social problems arose not from deprivation but from abundance. From Henry Ford to the United Auto Workers our economic leaders imagined America as the land of the universal middle class. (2000: 12f.)

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Enter the “new economy” Central to the credibility of this new justification for capitalism was the notion of a “new economy.” The economic discourse of the 1990s was one of a booming information and communication technology-driven economy. Economically, the 1990s were thus characterized by what seemed to be a never-ending boom, with the new economy of Internet companies as the symbolic forefront. The idea of a new economy was intrinsically linked to the new information technology. As Frank noted: “the most powerful symbolic weapon in the arsenal of market populism was the astonishing new information technology of the decade” (2000: 57). Technological futurism entered into notions of a new economy. The Internet made the idea of economic democracy, associated with everyone being a stockholder possible; the Internet would be a fundamental democratizing technology and disseminate equal opportunities; and the economic bubble caused by the overly optimistic belief in dot.com companies supported the notion that there was no end to increased wealth (2000: 146). As in the days of “Gilded Age” American capitalism, the notion that “each could become a millionaire” again became popular. Sparked by new technology, a new vision of the near future arose; a future which would be much more democratic and humane. As in earlier examples of technology crazes such as that surrounding Henry Ford, new technology became an occasion for envisioning a near future without the worst features of the present. This is philosophy of history at the ground level: blending utopian dreams with exaggerated expectations of the promise of new technologies. At the same time, the new “market consensus” and the “Washington consensus” urged the connection between a politics of privatization and deregulation and, on the other hand, globalization and prosperity (2000: 16f.). As promised in the writings of Fukuyama and Thomas Friedman, economic globalization would trigger prosperity, if only countries would adapt to post-Keynesian free market liberalist principles.

Revolutionary business Furthermore, what also supported the new consensus was the new coolness and revolutionary spirit of business, manifest in advertising, PR, and in the increasingly popular management books (cf. also Frank 1997). The marketplace honored rebellious behavior and discredited established hierarchies and orders. In this respect, market populism was not essentially conservative. On the contrary, it was free market liberalist and antiauthoritarian, and able to catch a language of class war, in which markets were a vehicle for the constant revolt against unearned privileges, for the constant setting free of human creativity and potentials, as well as the possibility of being authentic.

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Perhaps nowhere were these aspects of the new market populism better encapsulated than in the popular management literature. Frank described this literature as: a perennially best-selling genre where celebrity thinkers ponder the problems facing business and its loyal upper-level executives. Management literature is the well-spring of nearly every element of the corporate ideology: It is the source of the metaphors and buzzwords that fill the ads, the annual reports, and the various public presentations that the rest of the world sees; it gives businesspeople their jargon, their concerns, their personal aspirations. Above all, it explains the ways of the mighty so they might be better honored, better imitated by us the lowly. (2000: 173)

Again, it was the language of market populism that would be used—“of democracy and popular consent as revealed by the mediums of exchange [ . . . ] to describe the operations of the corporation” (2000: 179).11 According to Frank, the resources for the new regaining of legitimacy for the corporation was not least to be found in Mayo and fellow human relations people’s revolt against Taylorism (2000: 183ff.; Frank also saw Mayo as an advocate of “enlightened management as an alternative to (if not a way of staving off) government intervention in the economy,” cf. 2000: 222). The solution to achieving legitimacy was, again, to present an ideal of a new type of manager that would listen to people, empower people, and make the corporation more “democratic,” i.e. democratic in the sense of creating an environment where everyone would join in with their thoughts and ideas. Such a recipe was surely present in Bartlett and Ghoshal’s aforementioned The Individualized Corporation (1999), which encouraged a look at each individual as the most important strategic asset of the corporation, and which depicted corporations as the most important institutions in society. As described in the magazine Fast Company, it was now business that was in charge of social change (Frank 2000: 217–18). Market populism informed the revolt against hierarchies, centralization, and grand-scale organizing, instead welcoming change, flexibility, and the networks-based organization. In the wild universe of Tom Peters, managers (and indeed everyone) were encouraged to embrace change and uncertainty, and to believe in a “marketization” of every single corner of the corporation. Everyone should take part in what was described as a “business revolution,” but which was in fact a return to some of the defining features of early industrial capitalism in the United States—labor plentiful, rights scarce, inequality rising rapidly. To Frank, almost the worst aspect of this was the way the new reality was sold: “Workers weren’t victimized by downsizing and job insecurity; these were the things they wanted, things they fought for, things they needed in order to realize their full humanity, to escape from the corporate conformity of yesterday” (2000: 199–200).

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The end of “the cultural contradictions of capitalism” Frank, as well as the social-liberal Richard Rorty and neo-Marxists Michael Hardt and Antonio Negri, explicitly pointed out that this spirit of 1990s capitalism seemed largely to have accommodated “cultural critique.” The new American business creed had fewer problems with demands for equal recognition for different skin colors and sexuality than demands for higher wages. What happened was that the new “spirit” of capitalism was able to accommodate large parts of the cultural critique directed against it in the 1960s. The market populism of the 1990s clearly embraced the rhetoric of equal “cultural” recognition. Capitalism, modern working life, and managing were presented as the embodiment of coolness, revolution, and creativity, for instance in management books by Peters—there seemed no longer to be any “cultural contradiction” between business and counterculture, as was observed by Daniel Bell in the 1970s (Bell 1976). For Hardt and Negri, the new corporate ideology or ideology of the world market was very much attuned to postmodernism; it celebrated difference, heterogeneity of lifestyles, multiculturalism, and so forth (Hardt & Negri 2000: 150–4). Hardt and Negri seem to have shared the observation made by Rorty and Frank concerning the accommodation of cultural criticism as a new justification of “postmodern” capitalism: In fact, the old modernist forms of racist and sexist theory are the explicit enemies of this new corporate culture. The corporations seek to include difference within their realm and thus aim to maximize creativity, free play, and diversity in the corporate workplace. [ . . . ] In this light, the corporations appear not only “progressive” but also “postmodernist”, as leaders in a very real politics of difference. (Hardt & Negri 2000: 153)

According to Hardt and Negri, it was the social movements and their progressive struggles of the late 1960s and 1970s in particular that effectuated a new “production of subjectivity” (2000: 269). The market populism of the 1990s encompassed a broad range of arguments and seductive promises: capitalism was redescribed as democratic, serving the people, egalitarian, non-compulsive, and at the same time a just distributer of wealth, rewarding the truly hardworking people. It was ascribed the qualities of being revolutionary as well as “cool.” As observed by Thomas Frank, the notion of everyone being a potential shareholder was a part of the new assemblage of arguments in favor of capitalism that were advocated during the 1990s. Drucker’s 1993 book, Post-Capitalist Society, is an interesting example in this regard. It took the thought to its extreme by declaring that capitalism was a bygone reality. Drucker belongs in that branch of market reformers who argued that the economic and social reality was already in a state of flux, transcending capitalism as we know it.

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We are all capitalists now In Post-Capitalist Society, Drucker argued that society was in the middle of a grand transformation; a transformation that to some extent had already taken place. The new society was described as “post-capitalist” (and also as an “information-capitalism” and a “knowledge society”). Drucker noted that knowledge and knowledge work have become primary creators of wealth. Accordingly, traditional economic theory, which would focus upon land, labor, or capital, had to be rethought. Knowledge was now the primary resource, which also relates to knowledge being used on knowledge, as in knowledge used to increase efficiency of work (i.e. as linked to management). Second, the new “post-capitalist” society was an “employee society” with no classes in relation to property (Drucker 1993: 61). In this society, classes as we knew them would disappear from the historical scene, only to re-enter in a “milder” form: as knowledge workers and service workers. Central to Drucker’s argument was the concentration of capital in pension funds; since these are owned by everybody, every employee is at the same time a capitalist. Hence, there was no longer a division between the propertied and the nonpropertied classes: in the knowledge society even low-skilled service workers are not “proletarians”. The employees collectively own the means of production. [ . . . ] Collectively, however, whether through their pension funds, through mutual funds, through their retirements accounts and so on, they own the means of production. (1993: 60)

To Drucker, “capital now serves the employee where under Capitalism the employee served capital,” and he thus urges us “to rethink to redefine the role, power and function of capital and ownership” (1993: 60).12 As Washington Gladden had done in his nineteenth-century vision of market reformism, Drucker made the argument that property relations in society were in the midst of a grand transformation in which everyone would become (or indeed already was) a capitalist. Third, almost in “Barnardian” fashion, Drucker argued that society had become a society of organizations, each of which was organized around a specialized purpose. He argued that businesses are social organizations, not political, and furthermore stressed that businesses did have some social responsibility, as for instance in taking appropriate measures against negative externalities, but that their first responsibility was economic performance (1993: 92). Like Drucker’s book of 1946, this book was not just a book on corporate management. It offered advice to politicians, trying to lay bare the new realities of the knowledge society. It redescribed the role of the nation-state in an era of what Drucker described as simultaneous “transnationalism,” “regionalism,” and “tribalism” (1993: 128–41); it redescribed the role of

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schools and argued for life-long learning; it advocated new institutional relationships between business, the “social sector,” and the state. Here, Drucker stressed the potentials of civil society—work on a voluntary basis—and he used different concepts to criticize the role of the state. Drucker thus warned against the “fiscal state,” the “nanny state,” the “pork-barrel state,” the “cold war state,” and finally against their compilation in “the mega-state.” In short, Drucker tried to strip the welfare state of any positive value, describing the state purely in unfavorable terms. Drucker looked to Schumpeter rather than to Keynes. He looked to the promising “social sector” of non-governmental organizations, volunteers, and good citizens who could help in the area of social problems earlier rubricated as “charity.” Like earlier market reformists, Drucker argued for the principles of voluntariness and selfregulation, in marked opposition to political programs for social welfare. Drucker advocated the need for changing the community and even the individual. As in the arguments of other conservatives such as Fukuyama, market society needs a constant moral source “outside” itself; whereas Christianity, but first and foremost American republican ideals, were given this role in Drucker’s 1946 book Concept of the Corporation, it was now civil society and community spirit which were necessary foundations for market society. Drucker was a reformist indeed, advocating the need for a complete “government turnaround” (1993: 142–51). Was post-capitalist society then “the end of history”? According to Drucker, what definitely should be abandoned is “the belief in salvation by society,” which he traced back to Rousseau, and which he saw in “Marxist Utopia” (1993: 6). As in other variants of a pro-capitalism, the notion of “society” was cast aside; on closer inspection though, society re-enters, but as a lively “civil society” much better equipped to handle social problems than any traditional politics of the state. Drucker belongs in that branch of market reformists that opted for a more far-reaching idea: that the socioeconomic order had simply changed into something profoundly new. Second, Drucker’s market reformism was at the same time evidently against democratic reformism (especially regarding the role of the state). Indeed, his ideas matched a surge of promarket ideology very well, which critiqued the state, celebrated the role of civil society, and stressed individual responsibility. In Brick’s words: Drucker’s “post-capitalist society” came loaded with a number of predilections quite consistent with the customary procapitalist policy of the resurgent post1970s market ideology. His was an antilabor, antistatist vision that built on the apparent primacy of organization, knowledge-based innovation, and teamwork to cast corporations as organic communities of order, inspired leadership, and deference. While hailing from the same historical moment, the 1930s and 1940s, that fostered much of the midcentury postcapitalist vision, he stood far apart from the main social-liberal current that had done the most to promote that vision in the United States. (2006: 266)

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Drucker’s “post-capitalist” vision did not have much in common with American social-liberalism; instead, it could easily fit into the new package of procapitalist arguments promoted in the 1990s. Among these was, again, the idea of moral self-governance of corporations, something which Drucker himself had played a major role in advocating in mid-century when neoliberal ideas lacked influence.

Moral self-governance in an age of globalization In the 1990s there was, seemingly, a remarkable surge of the idea of corporate social responsibility. Indeed, enthusiasm for corporate social responsibility and similar concepts has been abundant (Smith 2003: 53). In 1997, for example, economic historian Sanford Jacoby noted that there had been a renewed American “national debate about corporate responsibility” (1997: 10). Jacoby noted a new, “fascinating development of the mid-1990s where proposals from Democratic legislators” sought to “encourage companies to treat employees more like ‘stakeholders’” (1997: 265). According to Jacoby, the new quest for corporate social responsibility indicated that Americans maintained their faith in market solutions instead of political ones: “those who demand that corporations be responsible are not asking for anything outside the framework established by corporations themselves. Public outcry over corporate downsizing demonstrates that Americans retain their faith in welfare capitalism as an economic ideal” (1997: 265). Similarly, Robert B. Reich, Berkeley economist and former United States Secretary of Labor in the Bill Clinton administration, wrote that “in recent years, ‘corporate social responsibility’ has become the supposed answer to the paradox of democratic capitalism” (2007: 168). This has been the case globally, as well as in the US. It was not only the concept of corporate social responsibility that rose to prominence, however, but also concepts such as corporate citizenship, social entrepreneurship, and social businesses. Common to these is the idea about doing business and being virtuous at the same time. As Archie B. Carroll, a leading scholar on corporate social responsibility wrote in 1991: “The CSR firm should strive to make a profit, obey the law, be ethical, and be a good corporate citizen” (1991: 43). The discourse construes corporations as responsible “citizens” in an increasingly globalized economy; citizens who nurture their own immediate economic interests but who also take on a wider responsibility, exhibiting a willingness to “care” for their global social and natural environment. This surge of market reformism is, again, about transcending pure self-interest toward taking on a social responsibility. In a word, this could be called “civic capitalism,” as it fuses together two powerful ideals: making

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profits and being a virtuous citizen in a global society. As Philip Selznick articulated the idea of a “corporate conscience”: A corporate conscience is created when values that transcend narrow self-interest are built into the practice and structure of the enterprise. This can be done in several ways; by clarifying policies and making them public; by practicing sensitive recruitment of staff; by inculcating appropriate attitudes and habits; by establishing special units to implement policies affecting the well-being of employees, or environmental and consumer protection; and by cooperating with relevant outside groups, such as trade unions and public agencies. All this becomes an “organizational culture”, a framework within which the main goals of the enterprise are pursued. Although self-interest is by no means rejected, the realities of interdependence are accepted, the benefits of belonging acknowledged. Self-interest is moderated and redirected, not forgotten or extinguished. (Selznick 2002: 101, quoted in Shamir 2008a: 9)

According to Frank, the idea of the higher synthesis of profit-making and virtue was a new “pseudo-leftist imagination of the business revolution,” where the management thinkers “imagined themselves filling the historical role of the traditional victims of red-baiting: the American left,” concerned with democracy, authenticity, racism, multiculturalism, the environment and the Third World (2000: 213). Achieving the new business legitimacy was also about changing the public image of the role of corporations in society (2000: 220–51). For example, according to Frank, management authors James Collins and Jerry Porras had departed from the usual track of many popular management books and distanced the truly visionary companies from the excessive preoccupation with profits in their Built to Last: Successful Habits of Visionary Corporations (Collins & Porras 1994). Instead, these companies were worried about core strategy and long-term goals: But they [Collins & Porras] can’t just walk away from it [profits]. Having downplayed profit, Collin and Porras then turn around and use those “visionary” companies’ fantastic delivery of shareholder value as the ultimate proof of their excellence. The paradoxical moral seems to be that companies which concentrate on their “ideology” rather than short-term profits will eventually do better for their shareholders than the companies that concentrate strictly on shareholder value. (Frank 2000: 401f. (footnote); cf. also pp. 227–8)

Frank argued that there was a familiar occurrence of a “paradoxical moral” here, which had only become more prevalent: solely to strive for profit is not as such praiseworthy, but if instead there is a focus upon “higher” goals, profits will be even larger. As we have seen in previous chapters, however, this synergy of profits and benevolence dates back many decades, and has been a defining feature of what has here been termed market reformism. Strikingly, the idea that ethics pays was also widespread in the last decades of the nineteenth century. Rather than

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seeing this phenomenon as something entirely new, then, it should rather be seen as a resurfacing of familiar historical themes which are known from, for example, the managerial business creed of mid-century, earlier notions of businesses being devoted to serving the public, or even earlier forms of business ethics. It is probably here, i.e. in relation to the social responsibility of corporations, that the most outspoken tension between a “classical” and a “managerial” business creed can be found, only now in the context of globalization. According to sociologist and legal scholar Ronen Shamir, globalization is a situation characterized by a “widening gap between the transnational character of corporate activity and the availability of both national and transnational regulatory regimes that may be invoked to monitor and restrain corporations irrespective of the territory in which they operate” (2004a: 637). In a situation of an increasingly globalized economic system where capital, money, goods, and corporations are highly mobile, and regulation and international legislation is notoriously difficult, moral governance of corporations becomes an alternative form of an attempt at governance. This, together with criticism of economic globalization and of multinational corporations during the 1990s, such as lawsuits against corporations, consumer boycotts, and demonstrations, may help explain the recent flourishing of notions of responsibility (Shamir 2004b). Different actors (corporations as well as individuals) are being discursively constructed as responsible, self-reliant agents. Being responsible, these agents are not just subject to the law, but encouraged to take on responsibilities that surpass the requirements of formal law. A broad variety of actors engage in debates about the responsibility of business: management writers, business ethicists, sociologists, philosophers, politicians, corporations, business interests groups, international organizations, NGO’s, states, labor unions, human rights organizations, etc. (Shamir 2004a). The American Academy of Management, the most important singular management association of the world, for example, has in the recent years held conferences on “Doing Well by Doing Good” (2007), “Green Management Matters” (2009), and “Dare to Care: Passion and Compassion in Management Practice and Research” (2010). Business and management schools increasingly concern themselves with the subject of corporate social responsibility; new consultancy activities, public relations strategies, and social branding notions emerge; alongside these developments, “a whole commercial market develops around shaping, assessing, and consulting on the desired dimensions of social responsibility” (Shamir 2004b: 678). To understand the background of this field, and of how, especially, corporate social responsibility became an essentially contested concept— used by as well as against business—we may briefly look upon how corporations reacted to a growing criticism and lawsuits against them in the 1990s (Shamir 2004b). In the aftermath of lawsuits filed against corporations such as

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Unocal, Texaco, Royal Dutch Shell, Coca-Cola, Talisman Inc., etc., corporations and business-sponsored interest organizations in particular have tried to opt for an understanding of corporate social responsibility that celebrates a principle of voluntary action and “soft law” initiatives, codes of conduct, mission statements, etc., instead of a legally enforced regulatory framework.13 In the aftermath of the ACTA-lawsuits, corporations undertook a dual strategy: on the one hand, they typically rejected their responsibility in the law suits filed against them, lobbied for the notion that these lawsuits were “imperialistic” in the sense of overruling national law, and thus tried to avoid an enforceable legal framework. On the other hand, they proactively pursued new measures for adopting a corporate social responsibility stance based upon “a host of voluntary and nonenforceable instruments” (Shamir 2004a: 659; cf. also Shamir 2004b: 675). Shamir has argued that corporations to some extent have been held in check by social struggles sponsored by such countervailing powers as civil society groups, activists, corporate watch groups, consumers (boycott potentials), NGOs, and legislators, but that they have also actively shaped the ongoing discussion and interpretation of corporate social responsibility, especially by trying not to lose power in relation to other institutions, such as avoiding increased state regulation (2008a: 3).

Doing business in the service of Christianity, the nation, or humanity and life itself Several proponents of the social responsibility of business management particularly direct their critique at free market liberalism and economics, Milton Friedman style. The target of their critique is some foundational values of the classical business creed: individualism, the idea that individuals and corporations pursuing their own interests will lead to the greatest social good, and the shareholder model of the firm. In the context of spectacular corporate scandals such as Enron’s in October 2001, members of the management community voiced their moral and epistemological criticism of an unrestrained profit motive, and suggested rethinking business education or the role of the business schools in society (Khurana 2007; Ghoshal 2005). Sumantra Ghoshal, a leading management scholar, wrote a seminal article in which he heavily critiqued the prevalent moral and epistemological foundations of business, foundations that Ghoshal identified as neoclassical economics (2005). Under the heading “Bad Management Theories Are Destroying Good Management Practices,” Ghoshal claimed that during the last thirty years, management knowledge in business schools has been dominated by neoclassical economics and what according to Ghoshal is its amoral paradigm. “Business schools have actively freed their students from any sense of moral responsibility,” Ghoshal wrote, making a plea for bringing

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“humanism” into management by introducing pluralism into the epistemological and moral foundations of management education (2005: 76). The education and the world view of managers as a professional group thus again became a matter of debate, as it had been, for example, in the 1930s. Then, however, it was related to the role of the management profession in creating a social-democratic society, whereas in the present it is concerned with creating a more responsible free market liberalism (for the debates concerning the management profession in the 1930s, cf. Brick 2006: 133). Ghoshal’s criticism of the contemporary malfunctioning of capitalism sought to explain this by relating it to the scientific and moral foundations of business. First, Ghoshal faulted what he here saw as a “pretense of knowledge”: keen on turning management into a science by importing key assumptions from neoclassical economics, this has led to an “exclusion of any role for human intentionality or choice” (2005: 76). Expanding on the ideas of philosopher of science Jon Elster, Ghoshal presented a dichotomy between the natural sciences and the humanities, placing management in the latter category, as it leaves room for human intentionality, decisions, and pluralism (2005: 78). Second, Ghoshal argued that management theories are based on the “ideology-based gloomy vision” of Milton Friedman and the Chicago school (2005: 76, 83f.). According to Ghoshal, it was Friedman’s version of liberalism which had been colonizing all management-related disciplines over the last half-century (2005: 84). This, then, was yet another example of the tension between the classical, shareholder view of the corporation, and the progressive, stakeholder view held by Ghoshal and others who reacted against the shareholder view. Ghoshal argued that the market liberalist paradigm entailed negative assumptions about human behavior and human nature, namely that they are self-interested and imperfect; with these assumptions as starting points, the problem of social organization is mostly about hindering bad people from doing bad, instead of enabling them to do good actions (2005: 76, 84). By contrast, liberalism to Ghoshal must assume human freedom and responsibility. Ghoshal was not introducing a new and favorable term into the debate here, but trying rather to alter the criteria of the use of the existing term of liberalism, opposing it to Friedman’s liberalism. According to Ghoshal, passing this “ideology-based gloomy vision” on to generation after generation of business students had resulted in a self-fulfilling prophecy. This was the cause of a “dehumanization” of practice. Ethical and moral considerations were left out, and management affairs and decisions were then conceived of as mere products of social forces and of market demands (2005: 79, 84). For Ghoshal, the nature of the foundation of management education was thus a key explanation for irresponsibility and greed, and Ghoshal proposed to “fundamentally rethink the corporate governance issue,” starting with more “pluralism” in business school research (2005: 81,

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86ff.). Ghoshal argued that the practices of global capitalism could be changed for the better if the teaching of management in business schools changed. If the aspirations to resemble natural science and to cling on to strict shareholder capitalism could be loosened, there would, eventually, be a change in corporate behavior, as managers came to be guided by another set of norms. To sum up, Ghoshal critiqued neoclassical economics and the idea of market laws, almost eliminating the scope for management’s decision making beyond market compliance. We should note, however, that Ghoshal’s “managerial” critique of Friedman’s free market liberalism bears much resemblance to earlier debates. For example, in the late nineteenth century writers such as Gladden and Henderson stressed that managers or capitalists have a choice to make, that they are not just mere puppets of market forces, and that they should not use free market economics to try to legitimize immoral actions, arguing that they have simply followed the natural laws of supply and demand. For these late nineteenth-century writers, it was Christianity that was called upon as a higher moral system than economic thinking. For mid-century market reformers, it was often the idea of public service to the nation which was invoked as a moral compass. To Ghoshal and many of his contemporaries, it was humanism and his idea of what liberalism truly is. “Humanism” and non-fatalism (agency as opposed to complying with market laws) is the basis of the argument. As in, for example, Barnard, the moral constitution of managers is stressed as a key factor. We do not, however, learn from this text about the position taken as regards to other major institutions of society, the state, labor unions, interest groups, etc., but it is clear that Ghoshal, as in other variants of market reformism, places the onus on progressive change in management. Ghoshal was, of course, not alone in advocating a renewed moral selfgovernance of corporations, and neither was he alone in referring to humanism as a central, foundational normative concept. Examining the anthology Humanism in Business in some detail will illustrate this. This book gathered together contributions from a group of authors who sought to grapple with key challenges for the current reality of economic globalization. Humanism in Business should not simply be read as a way of legitimizing current practices, but also as an attempt to develop a new “test” in which humanism ranks higher than economic goals.14 Authors of this anthology shared the observation of an increased focus upon business responsibility. For example, President of the Novaris Foundation for Sustainable Development and professor for development sociology Klaus M. Leisinger observed that “companies are increasingly being assigned moral responsibility” (2009: 200); Leisinger also showed that some companies go beyond what is legally required: whereas in 2005 all the major industrial countries rejected a UN proposal of “Draft Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises” as not having any legal standing, “a group of enlightened

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companies took the material content [ . . . ] as a basis [ . . . ] and looked for practical ways to implement minima moralia (2009: 175). Harvard professor of business administration Lynn Sharp Paine argued that “the moralization of the corporation provides the key to understanding the recent turn to values,” and that there was simply now a “new standard of performance” (Paine 2009: 210, 216); the editors of Humanism in Business noted that “more and more companies of all sizes and in all corners of the world are rethinking their role in society” (Spitzeck et al. 2009b: 426); business ethics and leadership researchers Thomas Maak and Nicola Pless argued that “there is a widespread acceptance that it takes responsible leadership to build and sustain a business in society” (2009: 358); economist Muhammad Yunus, who received the Nobel Prize together with the Grameen Bank in 2006 for the invention of microcredit, observed that “in recent years, initiatives that make profit seekers aware of social responsibilities while maintaining their profit-maximizing objective have gained momentum. These sometimes take the form of self-imposed restrictions on activities and/or of the creation of a philanthropic window with profit” (2009: 405). The key theme that runs through the book and unites the contributors is the shared conviction that “humanism in business” is a moral ideal worth supporting. Humanism was chosen because of the need for a normative framework that can be accepted globally, not relying on any particular culture or religion. A much-quoted reference is economist Amartya Sen’s capability approach to development (Sen 2008). Sen has written on economic development, economic theory, and ethics, and not least his human capability approach has been a major source of influence, for example on UN thinking about economic development. A main agenda for Humanism in Business was to elaborate this theme as a powerful yardstick for measuring whether economic practice in fact supports or hinders the positive development of human beings (and the natural environment). With humanism as the overarching theme, the key topics discussed as instrumental for furthering humanism were corporate social responsibility, corporate citizenship, democratization of the corporation, inclusion of stakeholders, sustainability, ensuring human rights, business ethics, ethical codes of conduct, positive organizational scholarship (humanistic psychology and related fields applied to business organizations), supporting the development of human capabilities, social entrepreneurship, and moral leadership. Humanism was opposed to “economism.” Having humans and their development as the ultimate yardstick for judging the moral value and legitimacy of economic affairs was opposed to serving the traditional master—profits. In a central passage in the introduction, the editors wrote: Just as the Age of Enlightenment “civilized” the state in order to serve its people, we would like to see a renewed liberalization—one that is based on similar notions, but that will allow us to “civilize” the economic system. Don’t get us

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wrong here: we are not advocating some socialist Utopia, nor are we anti-market or anti-globalization sentimentalists. We gratefully acknowledge the tremendous progress that has been brought about by free-market economies in terms of human development. We believe in the power that markets have to unleash individual creativity and to allocate goods and services more efficiently than any centrally planned process could. We also believe that tremendous opportunities arise for humankind from an economy that is inter-connected and interdependent on a global scale. However, like early humanists, we are not ready to accept the given order without inquiring into potential variations on this given order. [ . . . ] The debate that we believe needs to be held is not about free markets vs. centrally planned markets, but about the need to decide when and where we have other, more appropriate tools to find a life-serving solution. A free market is amoral, indifferently creating great wealth, as well as great hardship. Consequently, moral beings should use it wisely and responsibly, rather than blindly trusting a “one-size-fits-all” approach. (Spitzeck et al. 2009a: 2–3)

What was rejected was an economic rationality of shareholder capitalism based upon profits and GDP growth; proposed instead was one in which “humanity” and “life” would be served instead (2009a: 3, 10). Key challenges were identified as evidence of the “functional as well as moral challenges” of the “current shareholder model of capitalism”: environmental destruction and increasing inequality; decreasing levels of stakeholder and employee trust and commitment (at the organizational level); decoupling of GDP growth from individual happiness (2009a: 3–6). A recurring suggestion of Humanism in Business was thus that corporations should embrace corporate citizenship and value-based leadership (Leisinger 2009), and that corporations should develop new measures and techniques for social accountability and integrate them into their core strategy as well as their management systems. The editors argued that corporations try “to seek social legitimacy beyond the boundaries of legal and regulative compliance” (Spitzeck et al. 2009b: 426). By reintroducing the notion of humanism, a new test was invoked that could be used to criticize or to justify economic practice, asking whether it is “life-serving” or not. It was an attempt to reconstruct what in prolongation of Max Weber’s economic sociology could be called a substantive economic rationality, i.e. the overall purpose of the economy (Swedberg 2008). What Christianity and the idea of public service meant to earlier generations of reform movements, “humanism” means here—it is a key normative term of orientation. As compared to earlier times, the emphasis upon environmental issues and sustainability is new. By embracing the rhetoric of “humanism,” however, the editors were on a par with a generic tendency of market reformism, which is to show how a new, enlightened capitalism will be in the interest of all parties involved. It is also useful briefly to compare the notion of “humanism in business” with post-capitalist visions in twentieth-century US social thought. Humanism in business invokes a post-capitalist vision, but whereas some

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argued that a transition is already taking place, changing capitalism as we know it, others argued that more radical means would be needed for a genuine transition to take place. This indicates, however, a cleavage within the business responsibility discourse, which we will return to shortly. It is common for advocates of humanism in business or corporate social responsibility to argue against a strict separation of social and economic realms. Indeed, proponents of corporate social responsibility have, historically, typically advocated that the two realms cannot be totally separated. Muhammad Yunus argued that “many of the problems in the world remain unresolved because we continue to interpret capitalism too narrowly” (2009: 402). If, by contrast, the one-dimensional image of man was left behind, a route would be open for conceptualizing “social business entrepreneurs” whose overarching goal was a social goal, but who could still make profit (2009: 406). One of Yunus’ central ideas was to “create the right environment,” i.e. institutions such as a separate stock market making social business entrepreneurs visible to investors, or new ranking systems, new educations, and new finance systems (2009: 406ff). In conclusion, “if we create the right environment, social business entrepreneurs can use market mechanisms significantly and make business an exciting place for fighting social battles in ever more innovative and effective ways” (2009: 410). Proponents of humanism in business often referred to empirical examples of good practice. For example, Thomas Maak and Nicola Pless presented evidence of three successful stories of business leaders who were “responsible change agents” that wanted to enrich the many instead of the few (shareholders, managers, themselves) (2009: 365).15 This is reminiscent of similar “best practices of socially responsible business” stories that were widespread in, for example, the late nineteenth century. Furthermore, Maak and Pless referred to philosophers Alisdair MacIntyre and Charles Taylor for a “reconstruction of the moral ontology of leadership” (2009: 363), arguing that: leadership research needs to [ . . . ] rediscover the proper role and true calling of leadership in promoting humanism in business, not egoism, and in weaving sustainable relationships to serve the common good. The idea of servant leadership might prove to be helpful in this endeavor; being authentic in this endeavor is indispensable. (2009: 364)

As we know, the idea of service and of business being a servant to the public goes back to the 1920s and probably further, has been a central part of the market reformist idea, and is articulated in opposition to the profit motive. This was central to the rise of the managerial creed. But unlike the midcentury managerial creed which, as for example in the writing of Chester Barnard (which distinguished between a “private” personality and a professional “organizational” personality), displaying “authenticity” is here invoked as a particularly appreciative feature. Against the ethos of bureaucracy and of

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“organizational man,” this new managerial creed owes much to earlier “cultural critiques” and a politics of difference which embraces authenticity, personality, and individuality.16 Some proponents of humanism in business, though, seemingly go longer than others, critiquing not only the classical business creed, Friedman style, but also what they see as mainstream and traditional business ethics. Philosopher Claus Dierksmeier, for example, sought to contribute to a new kind of “humanistic business ethics” that was to be based upon a new “economic philosophy.” In an environment of increasing uncertainty and where “a limited scope of national jurisdiction faces a transnational traffic of goods, services, and persons,” the “visionary deficit” of traditional business ethics and neoclassical economics offer little guidance (Dierksmeier 2009: 69, 72). Second, Dierksmeier stressed that empirical research shows that “business can do well by doing good” (2009: 73). Third, Dierksmeier argued that neoclassical economics could not explain the success of fair trade (2009: 76). Fourth, Dierksmeier stressed that where a traditional business ethic is reactive, case-based, individualizing of moral responsibility, relying on conditional premises, eclectic, and “cut off from philosophical discourses about the good” (2009: 70), a humanistic business ethics is proactive, principleoriented, endorsing systematic problems and unconditional adherence to principles, and capable of articulating “optimal direction of societal change” (2009: 70). In Dierksmeier’s presentation of different organizational and management techniques for implementing norms in practice, he argued that moral principles have an effect upon the range of actions for managers and for other employees. One kind of example is normative symbols, which are tools for reflecting upon gaps between ideals and practice. As Dierksmeier noted: In the same way that individuals are driven ahead by the tensions between their own ideals and how they are being perceived by others, a corporation relates to itself through idealistic symbols and a careful consideration of its image in society. (2009: 71)

A central assumption of Dierksmeier’s economic philosophy, and thus of any humanistic business ethics founded upon it, was human agency. This also implied certain latitude for corporate decision making. And it presupposed scope for agency. Like Ghoshal, Dierksmeier argued that the concept of freedom has suffered from “libertarian ideologues” and their “propagation and failure of laissez-faire policies around the globe,” but added that “the crisis for liberalism also harbors a chance” (2009: 79). Against the “quantitative” concept of freedom in Anglo-American philosophy, which centers on “the protection of private autonomy and property,” and on “‘more choices’, ‘being unrestrained’, ‘infinite growth’, [and] ‘profit maximization’,” Dierksmeier invoked the notion of a “qualitative freedom” (2009: 79f.). “In order to

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conquer the problems of global governance, we must reform the idea of freedom in pursuit of a self-reflective and self-constraining notion of liberty” (2009: 79). Qualitative freedom is thus “liberty in boundaries that are conducive to universal freedom”; and this concept of liberty “becomes clear when we understand our right to liberty as encompassing the obligation to empower everyone with an autonomous life” (2009: 80; cf. also Dierksmeier 2007). Dierksmeier referred to economist and social philosopher Amartya Sen’s concept of freedom and the development of humans’ capabilities, their “substantive freedom” (2009: 159). According to Sen, “the organizing principle that places all the different bits and pieces into an integrated whole is the overarching concern with the process of enhancing individual freedoms and the social commitment to help bring that about” (2009: 172). This concept of freedom Dierksmeier then linked to a positive assessment of democratic politics. Resting upon his notion of a “qualitative freedom,” then, which carries with it a self-restraint in linking personal freedom to universal freedom, Dierksmeier supported attempts for global frameworks against “the race to the bottom,” such as the UN Global Compact and the Global Marshall Plan, and notions of “economic fairness” and “ecological sustainability” (2009: 80). These notions of democratic politics then, are not working against liberty, as the neoliberals would argue, but for it: The idea of qualitative freedom allows us to understand such endeavors as attempts to realize the true meaning of freedom—and not, as neoliberals constantly clamor, as assaults upon it. For moral as well as for political reasons, therefore, we must undertake a reform of the idea and the politics of freedom. As the principle of freedom has to limit itself, the critique of the free-market society must proceed from the very idea of economic liberty, and not from an adversarial external viewpoint. This is why the debate about the right concept of freedom is not just an academic skirmish, but instead an intellectual battle of truly global importance. (2009: 80)

In sum, Dierksmeier argued that it was possible to incorporate (new) moral perspectives into business, and that they would make a difference; he argued against neoclassical economics and traditional business ethics on the grounds that they offer little explanatory nor normative value for understanding and directing corporations’ responsibility; and he invoked a normative principle of “qualitative freedom” which can be used to “test” whether practices by and large are supporting universal freedom or only particular freedoms. Finally, Dierksmeier’s perspective stressed both corporate reform as well as democratic politics. To be sure, this position could hardly be said to characterize the mainstream. It more seemed to be a European attack on it. But still, at this point it should be acknowledged that the new market reformers—the advocates of corporate social responsibility, enlightened management, or “humanism in business”—were actually quite a varied bunch when it came

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to actual reform proposals. This again bears testimony to a tension between a more classically oriented shareholder value-maximization business creed, against more “progressive” versions of business ethics—and also, perhaps, to a clash between American and European conceptions of business ethics.

A divided reform movement? The anthology Humanism in Business can also be used to demonstrate the point about a divided reform movement. Some reformers were entirely devoted to moral self-governance of corporations (i.e. “reform from within”) and the “ethics pays” argument; others had more far-reaching reform proposals (e.g. changing the power or ownership forms of corporations) (Aktouf & Holford 2009; White 2009); some argued that business could simply not “civilize capitalism” on its own, but needed strong help from nation-states (e.g. in creating the right institutional framework), international organizations, international movements, and—perhaps—also labor movements (Dierksmeier 2009; Lehmann 2009; Rapf 2009; Sen 2009; Ulrich 2009; White 2009; Yunus 2009); and some openly acknowledged that sometimes it would not pay to act more socially responsibly, but that it would actually cost (Ulrich 2009).17 Reformers thus diverged as regards what is required of corporations—from submitting to minimum requirements, e.g. having a loose commitment to human rights in grey zones of jurisdiction, to breaking down the economic and political structure of the corporation as we know it. Suggestions that specifically target the principles of existing private property rights and private command can hardly be said to characterize the mainstream. There was also a continued discussion about the relationship between profits and social responsibility. For example, organizational psychology researcher Miguel Pereria Lopes and others in their contribution on “positive organizational scholarship” took note of concerns raised by “critical management scholars” such as Mats Alvesson (1982), and stated that “whether this humanistic resurgence is the output of a managerial rhetoric to cope with certain socioeconomic environments and attain organizational productivity, or is really concerned with the pursuit of employee happiness, health, and personal betterment as an end in itself is still a question of debate” (Lopes et al. 2009: 286). On this basis, they instead resorted to a “pragmatic humanistic perspective” (2009: 293). In similar vein, professor in business ethics Domènec Melé argued that as regards a “first wave of humanism in business,” ranging from Mary Parker Follett, Chester I. Barnard, and Elton Mayo to Abraham Maslow, Douglas McGregor, Frederick I. Herzberg, and Chris Argyris,

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it could be questioned whether this first wave of humanism in business was actually humanism or a masked form of economism. Obviously, it depends on the intentionality. But we must not forget that business needs to make profits, and there is nothing wrong in considering how dealing with people in a more humane way can contribute, in certain conditions, to increased performance. (Melé 2009: 130).

Although Melé did not use the word, it would not be unfair to also call this a pragmatic humanism. Ghoshal, Dierksmeier, and others may have brought into the open that the reform-oriented business discourse had tensions between staunch believers in moral self-governance and advocates of external reform. But still, what was shared were mostly two basic ideas: first, that in the final instance ethics would pay, and second that business was given the central weight as the most progressive institution in globalized society.

The entrepreneurial self The management author Stephen R. Covey’s (1932–2012) personal development creed stressed the potential of every human being, along with a vision in which personal development and economic growth were fused. What capitalism of the late twentieth and early twenty-first centuries promises individuals is not just that it is superior in creating wealth, that it is necessary, and that it is essentially democratic, but also that it is a facilitator of personal development. Covey’s credo encompassed a host of well-known market reformist themes: it critiqued materialism and selfishness and stressed “higher” purposes than just material or pecuniary motives; it described the individual’s best approach to the social world as one based on the belief that it is a world governed by mutual interests, not by conflict. Like other contemporary versions of market reformism, its message revealed an inbuilt paradox: only if individuals cease to strive for immediate material “success” and instead strive for “higher purposes,” will they become “successful.” Thomas Frank had observed a “paradoxical moral” in which striving for profits was not as such praiseworthy, whereas if higher goals were sought, profits would be even higher. At an individual level, this same “paradoxical moral” was advocated by Stephen Covey who urged that in order to become “successful,” one needed to refrain from the desire for “success,” and focus upon character. Covey’s teachings praised individual responsibility to the same extent as did late nineteenth-century commentators such as Sumner. Like earlier market reformists, Covey’s conception of the social was conservative in the sense that it is mainly oriented toward harmony; furthermore, it was strictly unpolitical

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and did not offer any critical descriptions of structural problems and challenges in contemporary economies and social systems. Unlike some mid-century managerial market reformists, Covey cannot be accused of neglecting individualism. Indeed, Covey’s doctrine took the singular existing individual as its starting point and aimed at an existential awakening. In Covey’s moral universe a person of great worth (to use the terms of the sociology of critique) was one who was able constantly to renew her self (Boltanski & Chiapello 2002: 7–11). Consequently, whoever cannot or will not renew themselves was ascribed little moral worth.

No limits to individual growth In 1994 president Bill Clinton spend his Thanksgiving holiday at Camp David in the company of the 1990s’ most popular management and self-management writer, Stephen R. Covey. Shortly after the holiday Clinton announced that American productivity would skyrocket if every American would just incorporate Covey’s seven habits into their work-life. In 1989 Covey had published The Seven Habits of Highly Effective People: Restoring the Character Ethic (1989) that has sold in tens of millions of copies and been translated into at least twentyeight languages. The book was about how an individual can effectively try to achieve personal goals, and live after almost timeless values. It was about how an individual can achieve personal effectiveness and a strong moral character, but it also claimed that an organization will obtain a remarkable development if “its” employees would only embrace the theory of effective habits. The book was written into a long tradition, into centuries of self-help and self-improvement literature that gives the individual guidance in leading his or her life (see e.g. Foucault 1985a; 1985b; 1997). It is a literature that is popular in a double sense: first because it is addressed to a wide audience, and second because some of history’s bestselling books have belonged to this genre. In a short time Covey’s credo had become widespread, not just in the US, but also globally, and it had apparently done so faster than any newer religion has accomplished. The 1990s, and the 1990s US in particular, ostensibly strongly “needed” Covey.18 Covey articulated a seducing rhetorical vision in which individuals by their own striving constantly reach higher levels of personal efficiency, which in turn affects the organization positively. This development perspective makes individuals bear the full responsibility for what is, or what is not, accomplished, including the dismantling of socially acquired habits. The book seems resistant to any critique that faults the book for not holding its promise, as it can always be stated that the individual has simply not tried hard enough. Covey’s theory combined elements from positive thinking, cognitive psychology, logo therapy, existential analysis, a metaphysic of universal and natural laws for

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human behavior, management and leadership theory, and personal time management. The remarkable interest in Covey’s writings and teachings spawned an academic interest in explaining the cause, or causes, of the popularity of Covey, including business literature (cf. e.g. Smith & Hadjian 1994; Wooldridge & Kennedy 1996). The literature on Covey has been especially preoccupied with the connection between Covey’s religion (Covey was a devout Mormon) and his theory (Wolfe 1998); with relating his theory’s psychological and anthropological basic premises to the increasingly turbulent world of work (Rifkin 1995); and more broadly with investigating the increasing influence of management gurus and popular management books (Guthey 2005: 455; Jackson 1999). The most comprehensive work that places Covey in a larger historical context is management and organizational historian Roy Stager Jacques’ monograph on the history of the employee in the US, Manufacturing the Employee (1996). Jacques argued that Covey’s popular book on the seven habits basically amounts to an anachronistic moral discourse on the character of individual persons that belongs in the historical period before American industrialization and the historical construction of an employee society. According to Jacques, the “character ethic” propagated by Covey corresponds to ideas that belong to a pre-industrial past (until c.1870) that differs decisively from industrial reality, as well as from the present increasingly postindustrial American reality. In pre-industrial society the economy was by and large embedded in local and domestic contexts and relations—in spite of some amount of production for overseas sale. In these networks of personal relations, and in a society that was far less legally institutionalized as compared to later, there was thus an intimate connection between a person’s moral character and the willingness of others to engage in business with that person. In order to receive credit, for instance, one had to probe one’s worthiness: “the central measure of a person’s worth as a supplier, contractor or source of credit was that person’s ‘character’” (Jacques 1996: 26). Jacques noted that in this period it would make little sense to discriminate between business literature and literature of self-improvement: business literature was self-improvement literature. Key examples of this literature are Benjamin Franklin’s autobiography from the end of the eighteenth century, Freeman Hunt’s work from the 1850s, and the works of the Englishman Samuel Smiles from around 1900. Character was only to a minor extent a personal and moral affair, claims Jacques, while it constituted to a much greater degree the “language” for the times; a social and economic “language” a person had to learn in order to get by in business and trade. According to Jacques, the ideal of the “self-made men” who had to cultivate their personal character in order to achieve economic success, broke down when wage labor became the most important source of income during the

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process of industrialization. Around the 1920s the new, industrial order of an employee society was a reality, brought to life through frequent violent encounters between laborers and protégés of the capitalist class. With the widespread coming into being of industrial wage labor, it became evident that the individual person was no longer an independent economic actor, but an employee. In industrial society, cultivating one’s character became economically much less relevant than it was in pre-industrial society, argued Jacques. If what an employer needs is someone who can carry a huge amount of pig-iron, finding the best man to do the job is not much dependent upon that person’s individual moral character. Furthermore, as scientific management, including Taylorism, gained ground during the early twentieth century, it caused a deskilling of workers and declining degrees of autonomy in relation to work (Braverman 1974; Guillén 1994: 41–58). However, this did not cause a complete disappearance of the discourse of personal character. Taylor’s rhetoric attempted to justify scientific management by describing it favorably in the still prevalent normative vocabulary of personal character. Jacques probably hit the nail on the head when he stated that industrial society was in less need of “men with character” than was pre-industrial society. Efficiency at the assembly line is not related to a person’s moral character. Still, it needs to be explained why Covey’s ideas became so widespread during the 1990s. The answer is that Covey’s book must have had certain qualities as compared to other books, and that certain contextual factors were instrumental in promoting the book. Although pointing out a singular cause should be avoided in such complex affairs, it must be stressed that since the 1980s there has been a growing interest in the economic importance of “human resources” (Barley & Kunda 1992; Guest 1990). Indeed, Covey’s book offered a “new deal” between employees and their organizations, in which personal development and organizational and economic growth would go hand in hand. The popularity of the habit paradigm was not least due to economic reasons, which, it must be underlined, does not exclude other reasons.

Covey reads Franklin: the return of the “self-made man” What were the distinguishing features of Covey’s popular ideas? If one briefly compares Covey’s ideas to other concepts of management, it is first of all clear that most popular programs for organizational development in the 1990s, such as Excellence, Total Quality Management, and Business Process Reengineering, did not in the same sense take individuals as the starting point and the key to organizational development (Jackson 1999: 353). Unlike these, the core of Covey’s theory was that changing individual human beings’ mode of living and efficiency was the most important condition for creating efficiency and

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synergy at the overall organizational level. The basic—and intuitively logical thought—was that development starts with improving individuals’ capabilities for affectivity and self-management, which then causes a “spiral of growth” throughout the entire organization. Or as Clinton said: if every American becomes increasingly effective the whole nation will too. According to Bradley G. Jackson, the “niche” that Covey captured was the thought of personal development from the inside out (Jackson 1999: 368). Covey combined two popular American genres in one, as business and management literature are woven together with self-development literature. The central dimension for the management and leadership aspect as well as the self-development aspect is a person’s work in cultivating their own character. According to Covey, individuals had to be able to manage themselves, which in turn requires having a strong character, in order to skillfully lead others.19 What is required is a high degree of self-discipline which is upheld through personal values and goals. Indeed, what marked out Covey’s book compared to traditional self-help literature is that it did not offer easy solutions, but demanded persistent work that the individual has to do with him or herself, and this demanding aspect enhances the trustworthiness of the book as a personal work tool. The break with the quick road to success and happiness is clearly expressed through Covey’s theory of habits. According to Covey, a person always already has habits—gradually acquired ways of thinking and acting accumulated through family, school, relationships, and different institutions. Habits are repetitive behavioral patterns. They have a great effect upon a person’s life. But they are not “consciously chosen,” and they are not necessarily in accordance with the individual’s ideal desires and wishes for life. Therefore the existing habits must be replaced by new habits that to a far higher degree are instrumental in helping individuals accomplish their goals and life wishes. The seven habits are “effective” in the sense that they are means for achieving higher personal goals.20 It is a far-reaching personal transformation that is at stake, and which promises to lead to increased personal affectivity, presupposing that the individual works hard for transformation. Alongside Covey’s theory of habits and the personal work on these, he introduced his key distinction between “personality ethics” and “character ethics.” The character ethics claims that human success and lasting happiness can only be accomplished by living according to fundamental principles such as justice, integrity and honesty, human dignity, helpfulness, quality, and “excellence,” as well as by pedagogical principles of development, patience, and encouragement (Covey 1989: 32–5). By contrast, the personality ethic is the “quick road” to personal success and happiness, accomplished by acting opportunistically in relation to other people, exhibiting an artificial interest in their spare-time interests, in short to change one’s personality strategically according to changing situations.

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The basic premise of the book was that a life of happiness is a life of virtue, in which a person develops a habit of acting morally, through a focus upon character, rather than a focus upon singular actions as the quick road to “success,” or simply by pretending to have a “moral” personality. According to Covey, whereas the main part of the self-development and self-help literature since 1776 was centered on character as the cause of success, around World War I a transformation took place in which the discourse of character was now marginalized in comparison to the “personality ethics.”21 This thesis does have some plausibility, which shows up by briefly comparing Covey’s character ethics with one of the most popular success books ever, Napoleon Hill’s Think and Grow Rich from 1937, estimated to have been sold in more than thirty million copies (Hill 1988). The book was republished in 1988, a year before The Seven Habits of Highly Effective People, but has not had a breakthrough compared to its original status, nor compared to Covey’s book. In short, Hill’s idea was to extract general principles for getting rich through learning from the experiences of Gilded Age new riches. With suggestions for how individuals should affect their own subconsciousness, Hill wrote within the tradition of the so-called “new thought” movement that had a breakthrough in the late nineteenth- and early twentieth-century US. As Bendix wrote in Work and Authority in Industry, the movement was rooted in the central doctrine that certain thoughts in themselves would lead to wealth and success (Bendix 1963: 259ff.; Guillén 1994: 30–4).22 As one of the many writers of the movement wrote: “Anything is yours if you only want it hard enough. Just think of that. Anything. Try it. Try it in earnest and you will succeed. It is the operation of a mighty law” (the original quote is from Griswold 1933: 313, here quoted from Guillén 1994: 34). In Hill, the ability and will to change one’s way of thinking and focus was the most important requisite for success. While Hill’s book shares many features with Covey’s (such as giving practical hints and guidelines; suggesting questions that the reader should ask him or herself; using the concept of habits; suggesting thinking in a “constructive” and “positive” way), there seems to be a quite extensive focus upon the achievement of material wealth, whereas the development of moral character does not play a similar role. If one accepts Covey’s distinction between character ethics and personality ethics, Hill’s book belongs under the latter category. Indeed, Covey’s thinking was more indebted to Benjamin Franklin’s than it was to Napoleon Hill’s. In the second part of “The Autobiography” Franklin narrated how he, without devoting himself to any particular religious belief, arrived at the wish to achieve moral perfection (1989: 1383).23 According to Franklin, this endeavor requires suppressing immediate and natural propensities, as well as the influence of tradition and of the associations a person enters into, and instead striving for a firm character (1989: 1384). Natural habits should be broken down and replaced by new habits of virtue. These are to be acquired through self-discipline and practice (1989: 1384, 1386, 1390).

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As Weber demonstrated in his classical account, this “spirit” of capitalism did not least mean the capability of restraining impulses, as evident in many of Franklin’s virtues such as temperance, silence, frugality, industry, moderation, chastity, and humility (1989: 1384f.; Weber 1930: 47–78).24 Franklin arrived at a catalogue of thirteen moral virtues (1989: 1384f.). Afterwards, concrete techniques were presented for how to live a life adhering to the virtues. Franklin suggested concentrating on virtues one at a time, and to have a daily and a weekly account book in which it is noted when one leaves the path of virtue. Covey’s practical exercises are very similar to these suggested by Franklin, with each of Covey’s chapters on the seven habits being rounded off with techniques for how to integrate the particular habit into life.25 This can be compared to Franklin’s statement that he had planned to call his book the Art of Virtue “because it would have shown the Means & Manner of obtaining Virtue; which would have distinguish’d it from the mere Exhortation to be good, that does not instruct & indicate the means” (1989: 1392). A pure speculative wish about moral perfection was, according to Franklin, not enough; it had to be supported by concrete directions for how an individual can integrate this endeavor into his or her life conduct. This aspect in particular—the practical guide and the exercises toward an improved conduct of life—was central in Covey’s theory.26

Lessons from Dachau: Covey with Frankl The second important source of influence on Covey’s thinking is the Austrian psychiatrist Viktor E. Frankl, whose work was introduced in the American postwar context by the Harvard psychology professor Gordon W. Allport. Frankl was Jewish and had lost almost all of his family during the persecution of Jews: on the basis of his own experiences, especially from the Dachau concentration camp, he developed a new psychological theory, the so-called logo therapy (Frankl 2006). Logo therapy focuses on the level of consciousness and on the meaning of life as keys to human motivation. It was developed as a “re-humanized psychiatry,” and as an alternative to Freudian psychotherapy and theories of the subconscious. Frankl especially highlighted human beings’ ability to interpret and to give meaning to events, to suffering, guilt, life, and death. To Frankl a fundamental part of freedom consisted in this ability for new interpretations, and for giving new meanings.27 According to Covey, it was one of Frankl’s key insights that persons themselves always have an influence upon how to interpret external influences. The implication for Covey was that even in the most extreme circumstances there would still be freedom: Anytime we think the problem is “out there”, that thought is the problem. We empower what’s out there to control us. The change-paradigm is “outside-in”—

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what’s out there has to change before we can change. The proactive approach is to change from the inside-out: to be different, and by being different, to effect positive change in what’s out there—I can be more resourceful, I can be more diligent, I can be more creative, I can be more cooperative. (1989: 89)

From Frankl’s psychological humanism and existential analysis Covey inherited the notion of an inalienable freedom and the thought that human motivation is created through having a clear sense of purpose and meaning, if not concrete goals. The original context of Frankl’s thought was how to preserve some kind of human dignity in concentration camps. It was a tribute to the beautiful creative powers of the human mind, imagination, and sense-making. Covey used the same argument about an individual’s capacity for finding meaning and light even in darkness, but the context is shifted to the everyday of late twentieth-century society. However bad things are, individuals can always find some meaning and hope. This message of individual sense-making and hope, however, can then become an apologia for even the worst structural conditions. The superhuman always falls back on his or her own self, never on structural conditions.

It’s the economy, stupid! Bradley Jackson was right to stress that Covey offered a seducing rhetorical vision of seemingly endless personal and organizational growth and harmony (Jackson 1999). Covey’s world was one in which there seems to be no fundamental conflicts of interests, but ever-widening possibilities of “synergy.” It is not surprising that business, including many of the largest American companies, as well as key figures of American politics and the central administration, advanced the ideas in relation to corporations as well as the national economy (Wooldridge & Kennedy 1996: 52, 56). Covey’s popularity can thus not be adequately explained by referring to the special religious, existential, or spiritual needs of the late modern human being, which is implied in parts of the academic literature on Covey (Jackson 1999: 353; 372–4). It is obvious that economic, organizational, and ideological factors have to be included in accounting for the popularity of the book. First and foremost, Covey’s peculiar mix of ideas should be seen as an extension of key economic and organizational developments of the 1980s. The rise and spread, at the rhetorical level, of so-called “human resources management” (HRM), was a decisive factor. With the spread of HRM, individual, human resources were now being credited with an all-important strategic economic value. Among the reasons for the spread of HRM ideas during the 1980s were external pressures to American industry, particularly the competition from Japan, combined with low growth and productivity

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and outdated change management models (Guest 1990). In this context, in which there was much focus on Japanese corporate culture and corporate spirit, human resources were conceptualized as a possible comparative advantage, and therefore their cultivation to be a strategic and important choice to make for corporations (Barley & Kunda 1992). In the 1980s, HRM—a market reformist notion which traditionally encompasses ideas such as job enrichment and variation—was used in many places as a rhetorical smokescreen that removed attention from harder methods and restructurings, and was thus often part of a two-legged strategy in which the second part consisted in a strong resistance to unions (Guest 1990: 388f., 392f.). HRM also became widespread because it expressed, as did Covey’s ideas, an ever-present potentiality: we all have great potentials for growth. Finally, as David Guest observed, HRM became popular because it could be linked to the “American dream” of the US being the land of opportunities “in which any individual, through hard work and self-improvement, can be a success” (1990: 390); where there is a faith in progress and growth; where it is an individual’s own responsibility to seize opportunities; and where there is a prevalent individualism and entrepreneurs are lauded together with the consciousness of a new “frontier” that needs to be conquered. As Karl Moore wrote back in 1969: “In the American ideological baggage, the man who professes to be satisfied has ‘given up’. He has left the rat race and entered the treadmill, where progress is foredoomed. Contentment is not a permissible goal; in fact it is downright immoral” (Moore 1969, quoted in Guest 1990: 391). Covey’s ideas should clearly be seen as furthering the aims of HRM, as they vehemently stated that individual persons’ development is the key to organizational development. Indeed, Covey’s ideas seemed—to a higher degree than earlier theoreticians within HRM such as Douglas McGregor and Abraham Maslow—to be a theory that offered practical guidance on individuals’ development (Covey 1989: 391), as well as to touch upon well-known themes of American mythology and history. Furthermore, Covey’s paradigm of habits was seemingly attractive from the perspective of employees as well as employers. For employees, it offered an opportunity for exploring self and identity, which Bradley Jackson has described as one of the fastest-growing leisure pursuits of the US (1999: 369); it offered the promise of personal balance, also in private affairs; a sense of inclusiveness, because it taught that everybody can (and according to the theory should) be included, no matter what rank or function; and because the theory and its rhetorical vision promised people that they can focus upon what is most important for them in life (Jackson 1999: 369). For employers, it was attractive because employees are encouraged actively to increase their “sphere of influence” and to take on responsibility; personal development and

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organizational development were described as being in a harmonious relationship with one another. Indeed, Covey’s book expressed ideals similar to those that were articulated in influential business management books from the 1990s. The book stands as a possible solution to the reshuffling of structures and ideals of work and organization wherein the “proactivity” and creativity of the singular person were typically stressed as being the most important “assets” in a successful organization. Management writers Christopher Bartlett and Sumantra Ghoshal in their influential book The Individualized Corporation (1999), described how successful organizing of business now consisted in releasing as much individual energy as possible, which would take place through the increased visibility of individual employees; through increased involvement in the work process; but also by creating an awareness that the individual to a far higher degree was inclined to take care for their own job security, and to understand themselves as entrepreneurs who constantly had to strengthen their employability.28 Critics suggested that employees, from this perspective, do not blame corporations for, e.g., downsizings, but rather seek to focus upon what they themselves can do to secure their own employment situation. For this reason the theory has been described as “conservative” (Jackson 1999: 368–9), just as others point to the fact that Covey’s psychological model fits perfectly to a flexible and short-termed, unsafe market economy, in which employees can use periods between jobs to enhance their skills and productivity (see Wooldridge & Kennedy 1996: 56).29 Jacques rightfully warned about the implications of Covey’s theory: “Exhorting the worker to greater moral fortitude is a universally available excuse to forego analysis of social systems, their failures and inequities” (1996: 28). Indeed, Covey’s manual on individuals’ life conduct fitted neatly into the assemblage of pro-capitalist arguments of the late twentieth and early twenty-first centuries. It offered advice, orientation, and guidance to individuals and employees in what sociologist Ronen Shamir has dubbed the “age of responsibilization” (2008a). By combining management and selfdevelopment with a theory about the realization of freedom, Covey touched upon classical American themes. His book fitted well into an economic and organizational situation that was described in terms of fierce competition and constant change, and where human development was being described as a source for economic growth. Covey’s message was far-reaching, making the individual responsible in the context of a great polarization of the labor markets. Covey was an inventor of a new technology of the self. In some ways, his thinking may have been empowering or even liberating. But it was undeniably a one-sided ideology of individual responsibility in a world in which institutions of collective action and responsibilities were filled with more and more cracks.

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Conclusion: entrepreneurial market reformism in the age of globalization Resurgence of a classic and a progressive business creed: tension or contradiction? In this chapter we have seen how new ideas of market reformism were articulated in response to the major changes of the 1960s, 1970s, 1980s, and 1990s: the new “cultural” politics of a new equality of race, gender, and sex; the new economic politics of markets, monetarism, and, in brief, neoliberalism; and, eventually, the changed economic landscape of globalization. These developments constitute the primary background of the kind of market reformism which came to the fore in the 1990s. Capitalism was described as natural, supreme, and necessary, but also as democratic, cool, revolutionary, egalitarian, liberating, anti-hierarchical, self-transcending, and, not least, capable of moral self-governance. The “spirit” of American capitalism around the end of the twentieth century had incorporated parts of the critique of New Deal liberalism (and the organizational regime) coming from the New Left and from neoliberalism. It argued that business (and civil society) would bring about prosperity, efficiency, personal fulfillment, and welfare, but it was fiercely pro-market, anti-government, anti-labor, and individualistic, strongly supporting private property, private command, and the principle of voluntariness as regards corporations’ responsibilities. It was a spirit that both saw a re-emergence of values of the classical business creed, stressing economic efficiency, growth, personal freedom, consumer sovereignty, and individualism. It also, however, carried some notions associated with the managerial creed of the midtwentieth century, such as some ambivalence toward profits. There was, then, a tension in this new business discourse of the 1990s and 2000s. It was a well-known tension, as it clearly resembled the earlier tension between the classical and the managerial business creed in the mid-century. It was a tension between a classical view of the corporation as a pure instrument for shareholder value-maximization, and a “progressive” view of the corporation as one which should be socially responsible, have a “corporate conscience,” and publicly display its care for life and humanity itself in the new era of globalization. The insistence upon markets being inherently good, and government being almost inherently evil, was exactly a feature of the classical American business creed. So was the attack upon social-liberal “do-gooders,” which in strikingly familiar ways resembled how William Graham Sumner revolted against the do-gooders of his time. The idea of consumer sovereignty, also a part of the traditional creed, had a comeback in market populism’s insistence upon “one dollar one vote.” This “democratic capitalism” did not have much in common

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with earlier ideas about what constituted a democratic capitalism, such as those put forward by Berle and Means, by Galbraith and other social-liberals of the long mid-century, or by socioeconomists with their ideas of industrial democracy. Instead, it made a rhetorical move by which markets and democracy were made identical, markets being the true kind of democracy, whereas political democracy was being cast as a hindrance and an obstacle for human freedom. Political power was cast as restraining individual freedom; markets, in contrast, as places to fulfill one’s freedom. Employees should even think of themselves as being firms and “their own employers” in constant competition with one another. This was evident in someone like Peter F. Drucker’s writings that stressed self-management of individuals as well as ideas of a civil society that should become more vibrant and take on voluntary tasks, instead of expecting the “nanny state” to step in. The very idea of security could be rejected as being out of sync with the foundational values of America. And yet, there was also something distinctly new about this “spirit” of late American capitalism—something which smacked of lot more of progressivism.30 For one thing, the struggles for equal “cultural” recognition of race, gender, and sexuality were critiques from the 1960s and 1970s that could well be accommodated by the new business ideology. The age-old principles of universalism and rewards based strictly upon individual effort, fitted nicely with the struggle for equal recognition regardless of race, gender, and sexuality. Also in this “cultural” sense, the new business creed was democratic: in the system of free enterprise, each receives what he or she has rightfully earned. Other criteria are irrelevant. Furthermore, the old principles of job security and single-organization career tracks were described as being dull and loaded with conformity. Some popular management authors even spoke of “revolution” and heavily critiqued authority as such. There was an “aesthetic critique” of the New Deal regime, lauded for being dull, boring, inauthentic, hierarchical, and uncool. Furthermore, there was seemingly a remarkable surge of awareness about the responsibility of business from the 1990s. This happened partly in response to growing criticisms of globalization and of corporations’ practices, as for example seen in law suits against corporations for their violation of human rights. A discourse of doing good to do well has spread, with concepts such as corporate social responsibility, corporate citizenship, sustainability, social entrepreneurship, and humanism in business. Overall, this can be seen as a discourse of “civic capitalism,” as it construes the role of corporations as responsible citizens in a global society. It should be acknowledged, though, that some of the participants in what they describe as a reform movement do acknowledge that business cannot raise the bar on its own, and call for government action and regulation, protection of human rights, public–private partnerships, redistribution, etc. They hardly, however, characterize the mainstream, which, historically, has been mostly anti-statist and anti-labor.

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Was this tension, then, so strong that it should rather be called a contradiction? I believe not, for two main reasons. First, the more “classical” and the more “progressive” parts of the business creed shared the premise that private business enterprises were seen as the all-important, progressive institutions in society. Either as creators of wealth, new technology, and hallmarks of efficiency, as the classical creed would stress, or as key institutions in fighting against a broad variety of evils, such as human rights abuses, poverty, pollution, etc., as the progressive creed would stress. There may have been tensions between the classic and the progressive business creed, but, in the end, there was more that united than divided them, as the new promise was that corporations could maximize profits (do well) and save the planet (do good) at the same time.

Entrepreneurial market reformism What, then, was significant about those ideas about the moral self-regulation of business and the self-reforming potentials of capitalism, which we have seen in recent decades? What was significant about the most recent surge of progressive business? Table 4.1 highlights the main characteristics of market reformism during the most recent globalization era. As shown in Table 4.1, the notion of social responsibilities became more differentiated, and at the same time more abstract, during what has here been termed the Second Great Transformation. Responsibilities of corporations were now described as also being global responsibilities, not least in respect to responsibilities for the condition of workers in underdeveloped countries, as in, e.g., commitments to community development, or in attempts at broadening corporations’ responsibilities down the global supply chain. A central battle concerning responsibilities of corporations also revolved around the environment and sustainability (cf. also Chiapello 2013).31 Market reformismprogressive business- went global, and it went green. This is not to claim that businesses actually “care” more about global society and the environment (or that they do not), but that the discourse and normative terms which form part of their environment have changed. Market reformism also embraced a spirit of creativity, describing capitalism and entrepreneurship as creative processes and institutions, which are able to transform themselves, to take on new forms, and to become more socially responsible. The world as such was described as being constantly in flux. Market reformism embraced a culture of diversity, in which people’s skin color, their religion, or their sexuality, is irrelevant. Capitalism was described as cool, creative, and inclusive. Against the backdrop of the celebration of markets, the free and private initiative, and the freeing up of capitalist processes as the only way toward economic development, market reformism adds

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Table 4.1. Market reformism in the Second Great Transformation (c.1990–2000s) Key reform ideas: what is to be done?

Corporate social responsibility (CSR) Codes of conduct Social (ethical and green) accountancy and reporting Corporate citizenship Community development programs “Social business entrepreneurs” (Yunus) Value-based leadership “Shared value” (Porter) UN Global Compact (based upon voluntariness) Consumption of product directly linked to charity Fair trade Corporate charity/philanthropy

Social justifications and key normative terms: why social responsibility?

Social responsibility Sustainability and sustainable Third World economic development Corporate citizenship: the corporation as “a good corporate citizen” (e.g. Carroll) “Corporate conscience” (Selznick) “Humanism” in business, a common humanity, “life” “Creative capitalism” (e.g. Bill Gates)

Economic justifications of social responsibility?

The business case for CSR

What is being rejected?

A “dehumanization” of practice through the world view offered by neoclassical economics, in which it is “natural” to pursue one’s self-interest in a world governed by market “laws” (Ghoshal) Omitting thinking about moral and social responsibilities Critiques of Milton Friedman-style liberalism Economic development which is not life-serving

Who has a responsibility?

Corporations Employees are their own “managers,” responsible for their own employability and human capital Consumers

Responsibility toward whom, or what?

Multiple “stakeholders” The environment Global supply chain and conditions for suppliers (only sometimes emphasized)

Ideal type example

A global corporation with distinct CSR profile and code of conduct, communicating its community development efforts in underdeveloped countries as part of its corporate image

that markets and capitalism can change and become more morally and socially responsible. Everyone is part of a free, creative economic project, in which value can be shared for the benefit of all (Porter & Kramer 2011). It is an end of contradictions—or in the words of popular management author Rosabeth Moss Kanter (2010), you can learn to “do well and do good.”

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Individuals were urged to take care of themselves, think of themselves as their own managers and entrepreneurs, and to develop their own human capital. This chapter has explained why the paradigm of self-help became immensely popular again, which can be seen in the context of grander changes in the American political economy as well as in the rise of neoliberal thinking. The philosophy of individualism fitted well into an American political economy that had departed from the New Deal and organizational regime, which had stressed long-term career horizons, labor unions, expanding welfarism, and progressive taxation. Now, these older political and democratic institutions as well as bureaucracies were described as hindering free, creative processes of markets, self-responsibility, and vibrant civil societies. Whereas mid-century critics of managerial market reformism had critiqued notions of organizational loyalty, belongingness, and “bonding” for compromising individualism, individualism was back in the running in the 1990s. To a large degree, excitement now seemed to be created around personal development, whereas the market reformism of the mid-century had emphasized being part of a social group. Whereas Americans in the long period of the New Deal regime, of “embedded” social-liberalism, seem to have expected social protection from the market through welfarism, labor unions, and job security in private sector organizations, this now appeared to be vanishing. Instead, social protection, in the sense of the protection of some kind of social and economic security for individuals, was, at least in the business discourse investigated here, tied to individuals themselves. What emerged was an ideology of free markets, anti-statism, anti-labor, anti-bureaucracy, and individualism. Employees’ abilities for self-renewal, flexibility, and personal growth were celebrated—trying to secure their own “employability” in a world of a more flexible capitalism, which denounced the old, rigid world of employment security, labor unions, and welfarism. Individual responsibility was also on the table for consumers—individuals, again—who were personally responsible for the ways in which the world develops through the consumer choices they made, and the charity organizations etc. they themselves chose to support (Jones 2010). The world’s poor were to be integrated into the world economy through encouragement to entrepreneurship (Prahalad 2005). Responsibility was, at the same time, totalized, individualized, and tied to corporations. It is useful briefly to compare these findings with those of Boltanski and Chiapello in their book The New Spirit of Capitalism (2007). There are a number of plausible indicators that their analysis of the new, (third) spirit of capitalism in France would bear some resemblances to a post-1989 spirit of capitalism in the US. Their analysis of the new spirit of capitalism was constructed upon the basis of management texts from 1989–94, mainly addressing professionals. Some of these texts were American, which is one of several indications that similar developments—in terms of ideas about the

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role of business in society, about how to organize work, about how capitalism as a broader whole achieves the common good, etc.—were taking place in America. In fact, Boltanski and Chiapello themselves believed that developments in France were, although likely to have country-specific characteristics, far from unique.32 To this we may add another indication, however cautiously; namely that American thinking about management seems to have been very dominant and influential globally (itself a reason for why American texts were chosen as sources). Boltanski and Chiapello (2007: 103–64) concluded that the new spirit of capitalism was a project-oriented value system (justification regime). Central features of this new spirit of capitalism are that it describes the world as being in constant change, and that it praises networks, projects, flexibility, personal commitment to work, innovation, creativity, self-management, and willingness to improve one’s employability. It praises activity and the constant shifting around from existing projects to ever more new projects. It rejects hierarchy and bureaucracy, and instead praises equality as well as “liberation” from old and rigid institutional structures. In brief, my analysis shows that the same values were espoused by American writers on business and management. By looking further than 1994, however, I have highlighted the vital role of ideas about corporate social responsibility and moral self-governance of corporations—partly in response, perhaps, to new critiques in the late 1990s, which could help explain a new, strengthened surge of market reformist ideas—that is, as a way in which capitalism can self-regulate and self-reform. Boltanski and Chiapello did not, originally, specifically address issues concerning the social responsibility of corporations. This is in contrast to the findings here, and also those of others, who have suggested that notions of “corporate social responsibility” and related concepts today constitute a key way in which late capitalism is being justified (Banerjee 2008; Kazmi et al. 2008; Reich 2007: 168–208; Vogel 2005). I would add, however, that such justification has been around ever since that late nineteenth century, when the key institutions of capitalist and industrial modernity were established. Our goal here is to find an empirically grounded concept which can highlight the most salient features of market reformist thinking in the Second Great Transformation. Perhaps the most adequate term is that of entrepreneurial market reformism. It captures how individuals should think of themselves, to some extent, as entrepreneurs; how the world’s poor should become more entrepreneurial; how the firm itself should be flexible, project-oriented, adaptive, and entrepreneurial. It captures the addressing of new ideals of social entrepreneurship, the creation of “shared value,” the constant innovation and development of new, market-based technologies for addressing the common good, and also the concrete, super-rich entrepreneurs such as Bill Gates, who are at the forefront of today’s “philanthrocapitalism” (Thorup 2013).

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The entrepreneur is pragmatic as well as being someone with an eye on the future. It is not in the ethos of the entrepreneur to care about people’s skin color, sexuality, culture, or gender, as long as they add value. The entrepreneur is footloose and equipped with a global, cosmopolitan mindset. To see opportunities where others see risk also suggest that the entrepreneur is a figure constantly able to transcend him or herself. To be sure, one could rightfully object that entrepreneurs were also lionized in the late nineteenth century. First and foremost, however, the word can capture how one’s whole thinking about capitalism and its key workings is that it is creative, innovative, and entrepreneurial. Already half into the future, the entrepreneur knows how today’s failings of capitalism can be better dealt with tomorrow through selfrenewal and self-reform. Entrepreneurship today, then, is not just about developing new products, technologies, or firms; it is about seeing and developing new ways to achieve the common good. It is about using markets and business, but not always accepting their “traditional” logics, and instead harnessing them to create “shared value.” It is also about not resorting to the stiff, welfarist, laborist, universalist, bureaucratic politics and institutions of yesterday’s “organizational society.” Before ending this chapter, however, there is one caveat to be made, namely that more work could be done to create a more fine-grained analysis of the late 1960s, the 1970s, and the 1980s, than the one which this narrative offers. My account primarily focuses upon ideas of self-regulation and of self-reform of business and capitalism in the 1990s and beyond, in an era whose selfunderstanding was to be an era of globalization. I have tied together different threads that ran together in the 1990s, in order to characterize the kind of market reformist ideas we see there. It does not exclude the possibility that some of these threads—such as business embracing the rhetoric of being environmentally friendly—predate the 1990s. More work could be done as regards investigating how market reformist ideas responded to the critiques of business of the late 1960s, and then comparing it with new critiques of capitalist globalization which emerged in the 1990s, looking at how profoundly the economy and workplace was changed during the 1980s, or reflecting more upon which role the turn to finance played. The key overall argument, however, remains the same. In Polanyian terms, the “counter-movement” of neoliberalism, free markets, globalization, and financialization hit the New Deal era regime, and it hit it hard. But, in this age of free markets, globalization, and neoliberalism (which is not to say that any of these terms fully describe or determine our world), ideas about the moral self-reforming and self-regulating (potentials of) capitalism continued to play a vital role. Basically, these ideas addressed how a kind of social protection would still be doable without really giving up on free markets and, certainly, without returning to too much welfarism and laborism. Whether concerning the protection for humans (labor), the climate, the

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environment, or—as we shall see—finance, there was a market reformist response to it, that is, an idea about how these problems could be dealt with by progressive business, enlightened management, or enlightened philanthropy, who would fill out the gaps and the holes in the world of capitalist globalization with weak global governance structures and hard times for welfarism and unionism. Whether dealing with pollution, global warming, child labor, inequality, poverty, sexism, or racism, the message was that markets, business, and capitalism can morally self-regulate and self-reform. Free market capitalist globalization may have been critiqued (and this critique is the subject of Chapter 5) but, in the face of critique, it offered to reform—if not transcend—itself.

NOTES 1. See e.g. Burgin 2012; Harvey 2005; Jackson 2010; Peck 2010; Phillips-Fein 2009; Mirowski & Plehwe 2009. 2. Nozick argued that it in no way could be justified to tax the rich, except as a means for upholding the minimal state that they themselves were dependent upon for security and other vital issues, invoking his famous example of the talented basketball player. This may be said to be a very convenient example to use from a free market liberalist point of view, for the following reason: it bypasses the much more widespread economic process of cooperation that we know from corporations. Here, the size of the profits of shareholders, as well as the salaries of managers, are intrinsically linked to the size of workers’ pay slips; unlike the example with the talented basketball player, who receives money through tickets bought by freely consenting workers (although they would quite surely prefer lower prices on tickets), the distribution of economic surplus in corporations are contested terrain, in which it in no way can be assumed that the end result and end distribution is simply a work of perfect freedom and natural laws. What Nozick’s argument conceals is not least the simple possibility that the richness of some people, e.g. managers of large corporations, is intrinsically linked to the exploitation of workers within the same firm. To say that workers work as an act of freedom is only a half-truth; it only makes sense from the perspective of a choice between working and not working, where the latter possibility seems utterly unattractive to most people. In effect, Nozick’s argument concerning the basketball player supports inequality of wealth in contexts (i.e. ordinary economic processes of society) that not just differ significantly from the one of the basketball player, but also are much more relevant in a discussion of the distribution of wealth, as ordinary economic processes of society are surely to be of much larger importance in a society largely consisting of wage earners working for corporations, rather than the marginal example of basketball players and their fans. 3. Although some states officially commit to minimum wages, they do not necessarily enforce them; California would be one example, as I learned from visiting the Garment Workers Union in Los Angeles in August 2008.

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4. A standard search in the research database “Web of Science” for book reviews of The End of History and the Last Man yielded no less than thirty-nine results. 5. His criticism, however, will be saved until Chapter 5, in which I explore some of the central criticisms of capitalism voiced in the 1990s and 2000s. 6. Boltanski and Chiapello identified recurrent arguments in support of capitalism that form “a relatively stable set of arguments, most of which have been shaped by economic theory. There are essentially three types of arguments. Their logic stresses: a) a type of progress that cannot be dissociated from the current state of technology or the economy; or b) the efficiency and effectiveness of competition-driven production; or c) the fact that capitalism is supposed to be an auspicious regime for individual liberties (which can be economic and also political in nature)” (2002: 3). 7. Friedman did not explain how this policy would affect countries at different levels of industrial and economic development, or how such a policy obviously is likely to promote foreign ownership of industries in less developed countries (in economic and industrial terms), whereby asymmetrical relationships in terms of economic distribution and power can be the consequence. This does not necessarily imply, of course, that such countries are, in any simplistic way, better off without foreign capital being invested. 8. As Berle wrote at the end of his 1967 conclusion to the revised introduction to The Modern Corporation and Private Property: “We are well underway toward recognition that property used in production must conform to conceptions of civilization worked out through democratic processes of American constitutional government. Few American enterprises, and no large corporations, can take the view that their plants, tools and organizations are their own, and that they can do what they please with their own. There is increasing recognition of the fact that collective operations, and those predominantly conducted by large corporations, are like operations carried on by the state itself ” (Berle 1967: xxvi). 9. With appraisal of Galbraith’s concept of countervailing power, Frank is a clear proponent of a left-wing, social-liberal, democratic reformism, advocating the power of government, unions, and social movements as important agents of progressive social change, and revitalizing the well-known social-liberal theme of acknowledging the positive role of conflict. Turning the attention to the flipsides of the rhetoric of the “new economy myth,” Frank did not concentrate on explaining to the reader why a democracy that includes some measure of economic and industrial democracy is better than the kind of democracy the market offers. Instead, Frank simply refers to the negative facts of rising inequality etc. Frank’s sharp polemical style does not cancel out the fact that his narrative was well documented. 10. Intellectually, the new market populism found support in a host of different authors. Business journalists Daniel Yergin and Joseph Stanislaw argued that although business had won over government and unions in commanding the economy, it would still be necessary to win the cultural battle, explaining why markets were in the interest of all (Frank 2000: 20f.). George Gilder had in his 1981 book, Wealth and Poverty, explained how the mistrust of entrepreneurs, their wealth, and in general free markets, were the cause of any economic disorder, and

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that entrepreneurs in a sense were the true class warriors (Frank 2000: 21, 34f.). In Hayek’s The Fatal Conceit from 1988, he warned against the victimization of businessmen (Frank 2000: 36). Jeffrey Bell, former adviser to Ronald Reagan, argued in his 1992 book Populism and Elitism that Reagan was a populist (in a positive sense) because he entrusted people with disposing of their own money, whereas the believers in regulation were elitists (Frank 2000: 45f.). Banker Walter Wriston’s 1992 book, The Twilight of Sovereignty, was a key note in the new market populism, celebrating the power of markets, their fundamental attribute of democracy, and the free movement of capital (Frank 2000: 53f.). The New York Times columnist Thomas L. Friedman’s The Lexus and the Olive Tree celebrated the virtues of economic globalization (Frank 2000: 63ff.). Editor of the free market liberalist magazine Reason Virginia Postrel neatly divided the world into “dynamists” and “statists,” the true believers in people and the believers in government regulation in her 1998 book, The Future and Its Enemies (Frank 2000: 342–3). Frank traced the new ideas in the writings of popular management books such as Peter Senge’s The Fifth Discipline (1990) and Dance of Change (1999), Charles Handy’s Age of Unreason (1989), The Empty Raincoat (1994), and The Hungry Spirit (1997), Guy Kawasaki’s Rules for Revolutionaries (1999) and Spencer Johnson’s Who Moved My Cheese? (1998). Most “outstanding” in this respect is Tom Peters, a former McKinsey & Co. management consultant, whose books were entitled In Search of Excellence (1982, co-authored with Robert Waterman), but also more regal names such as Thriving on Chaos (1987), Liberation Management (1992), and The Circle of Innovation (1997). However, evidence of the new moral economy of the 1990s was also found in more academic management theories such as Gary Hamel and C.K. Prahalad’s Competing for the Future (1994) and Christopher Bartlett and Sumantra Ghoshal’s The Individualized Corporation (1999). The argument was effectively criticized by Frank (2000). Drucker did not reflect upon what effect there would be of continuing the huge disparities in income and wealth. The fact that a fraction of a low-paid worker’s wage might get invested through pension funds and thus make that person a “capitalist” does not change the fact that there are still classes, that a relatively small percentage of America owns a large amount of the nations’ wealth, and that a difference in class equals a difference in opportunities. Ronen Shamir (2004a) has investigated a series of trials against multinational corporations for violating human rights, brought about in the 1990s and made possible due to the so-called US Alien Tort Claims Act, a law dating back to 1789 that in effect made it possible even for foreigners to use US courts in trials concerning the violation of certain rights, also violations committed outside US territory. The book was intended as a significant contribution to debates concerning how business can take a more active social role, facing challenges of sustainability, poverty, etc. The authors are, in terms of academic background, mainly economists, management and organization theorists, philosophers (typically working within business ethics), and psychologists, but also policy advisers and consultants to business as well as states and international NGOs such as the UN. They seek to

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15. 16.

17.

18.

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Progressive Business develop theories for understanding and evaluating moral dimensions of contemporary socioeconomic arrangements, but just as much for purposes of practical influence. The book offers a very suitable case study for examining market reformism in its contemporary form. For information on the network behind the book, see . Ray Anderson, CEO of Interface; Anita Roddick, founder of The Body Shop; Tex Gunning, president of Unilever Bestfoods Asia (Maak & Pless 2009: 365–9). In a way that is somewhat typical for the “humanistic” embracement of notions of “authenticity” and of “true personalities,” what happens when people (such as managers) have personal features they should rather leave at home, or how much scope or relevance there actually are in different organizational contexts for exhibiting “authenticity”, is not reflected upon (cf. also e.g. Kirkeby 2000 for a management philosophy that calls for authenticity). Allen L. White’s proposal of “democratization of the corporation” is an interesting case in point because the basic idea is to reform the governance structure of the corporation by giving mandate power to stakeholders, and thus in effect to socialize the corporations’ power structure. White listed eight central stakeholders: future generations, shareowners, employees, unions, governments, customers, communities, and suppliers (2009: 234). Covey’s teachings were not limited to this one book, but encompassed a broad array of courses and consultancy activities, other products (including other books and audio books), and merchandise such as tools for personal time management. But the book on the seven habits sold by far the most, and it has since been the key foundation for the international consultancy business that Covey originally founded in 1984, when he also resigned from his position as professor in organizational behavior at Brigham Young University in Utah. That a large number of people bought this book does not, of course, necessarily mean that they have all read it with unlimited enthusiasm and become true followers (Jackson 1999: 363f.). But, then again, who would argue that everyone who has read another perennial bestseller, the Bible, has read it with equal enthusiasm? The thought is ancient and can be found in comparable forms in ancient Greek philosophy, where the idea that the condition for becoming a good ruler is the ability to “take care” for one’s own self was often emphasized (cf. Foucault 1997: 293). There are three groups of habits, arranged hierarchically according to where to start with the program of change, and to the inside-out principle. The first group is instrumental in achieving “private victory” (1, be proactive; 2, begin with the end in Mind; 3, put first things first); the second group of habits helps to achieve “public victory” (4, think win/win; 5, seek first to understand, then to be understood; 6, synergize); finally, the third concerns the objective of “renewal” and encompasses one habit (7, sharpen the saw) (Covey 1989: 11). The relationship between happiness and living virtuously was justified either by implying that there is simply a “natural” relationship between the two, or by anecdotic evidence, i.e. referring to empirical examples. Covey’s PhD dissertation on American self-help and success literature since 1776 formed the background for his distinction between “character ethics” and “personality ethics,” and for his identification of a shift that occurred around World War I.

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22. Bendix compared how industrialization and bureaucratization were legitimized in England, Russia, the US, and the GDR (Bendix 1963; originally published 1956). His work is today recognized as a classic, cf. Barley & Kunda 1992: 363. 23. Franklin’s famous account from his Autobiography of how to live a virtuous life seems distinctively modern (as compared to many Puritan writers from the previous century, such as Cotton Mather (2001)). It is modern in the sense that it is the individual who makes an individual choice about the virtues that he or she wants to live in accordance with, and that are not rooted in any particular religion. The individual and individual choice has moved into the center. But, paradoxically, this happens at the same time as virtues and habits are described, by both Franklin and Covey, as being universal. Whereas Covey described his seven habits as the general habits to be acquired by everyone interested in achieving personal effectivity, he recommended articulating a “personal constitution,” a set of guiding principles that an individual chooses to live by. 24. Weber stressed this as a general point: “Unlimited greed for gain is not in the least identical with capitalism, and is still less its spirit. Capitalism may even be identical with the restraint, or at least a rational tempering, of this irrational impulse. But capitalism is identical with the pursuit of profit, and forever renewed profit, by means of a continuous, rational, capitalistic enterprise. For it must be so: in a wholly capitalistic order of society, an individual capitalistic enterprise which did not take advantage of its opportunities for profit-making would be doomed to extinction” (1930: 17). 25. Franklin also suggested arranging each day according to a certain scheme in which mornings and nights are used to focus upon what good should be done and has been done during the day, in the tradition of Phythagoras’ Golden Verses (Franklin 1989: 1386; cf. also Foucault 1985b: 50f.). 26. Another parallel to Franklin is the idea about adjusting one’s language to these virtues, and thereby gradually to build a “habitus” in accordance with the virtue. That Covey’s book has practical exercises and poses questions to the reader, is to some extent a common feature of popular psychological literature, just as other characteristics of the genre are prevalent in Covey’s book, such as the use of personal anecdotes and examples and the self-staging of the author as an expert (Bloch 2000: 20ff., 13ff.). 27. A claim that resembles Jean-Paul Sartre’s position, also advocated in the aftermath of World War II, but here based upon psychological theory and clinical experience, rather than a philosophy. 28. This tendency toward an increased accentuation of individuals’ responsibility and the individual’s constant participation and creativity, was also described in the French context by Luc Boltanski and Evé Chiapello (2007). 29. Anthropologists have stressed that Covey’s idea of being “proactive” leads to an excessive individualization of responsibility and guilt, where, for example, stress is only looked upon from a subjective or individual perspective. This is an approach that may easily result in the suggestion (in cases of stress) that an individual should learn to manage his or her stress and to work better, instead of raising the question of whether stress might have a more objective character and relate to the amount of work or, for example, to the dedifferentiation between work time and

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free time (Bovbjerg 2007). According to anthropologist Kirsten Marie Bovbjerg, adopting a governmentality perspective to these issues shows how modern work life relates to the process of constructing subjectivity (2007: 63). This critique emphasizes the problems inherent in systematically teaching people to think in such way that they only have themselves to blame for shortcomings, faults, and problems of diverse, potentially “objective,” character. 30. I use the term “late capitalism” simply to signify the historical period from the beginning of the 1990s until the present day. The usage of the term is thus not related to, e.g., that of socialist economist Ernest Mandel or literary critic and political theorist Fredric Jameson (cf. Brick 2006: 248). 31. Other authors, however, have recently pointed out that business’ responsibility for the environment dates back to the early twentieth century (Abend 2013; 2014). 32. As they explain in the preface to the English edition of the book, after justifying the choice of France and the role of national characteristics, “we are also persuaded that basically rather similar processes have affected the principal industrialized countries in the Western world” (Boltanski & Chiapello 2007: xxi).

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5 Corporations are Not Set Up to be Charities Critiquing Entrepreneurial Capitalism (1990s–2000s) A revival of critique In response to the triumphant capitalism of the 1990s there was a growing social criticism: from popular protests against the World Trade Organization (WTO) in Seattle in 1999, to consumer boycotts of garment producers such as Tommy Hilfiger and Nike revealed of using child labor, to lawsuits filed against several multinational companies charged with the violation of human rights during the 1990s, to a growing social critique of rising global inequality between nations and within them. Finance, capital, and corporations were said to have become much more mobile, flexible, and footloose, giving them more power and bargaining power vis-à-vis nation-states and labor unions, frequently resulting in a “race to the bottom” effect in which production would be outsourced to where labor is cheapest, regulation most lax, corporate taxes and inflation lowest, and labor unions weak. By contrast, the globalization of political governance structures remained limited. Authors of opposing political orientations, however, drew very different conclusions for how to deal with globalization. As social critics deciphered the new American capitalist spirit of democracy, personal development, and cultural inclusiveness, however, it was clear to them that the social protection which New Deal liberalism and subsequent political reforms such as the “war on poverty” had offered were still worth fighting for. Furthermore, this critique was not just leveled at a crumbling American progressivism, but also at global capitalism. Whereas Chapter 4 showed the ingredients in the new, entrepreneurial spirit of American capitalism, this chapter shows how it was critiqued. It first looks at more general critiques of capitalist globalization, and then at critiques dealing specifically with the new surge of a “progressive” business creed. As capitalism at the end of the Cold War was lauded as both supreme, necessary, democratic, and as a vehicle for personal development, it was also

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an object for renewed criticism. Following Boltanski and Chiapello’s typology of criticisms, there was a renewed social criticism, i.e. a criticism which tends to rely on equality as its main source for criticism (Chiapello 2013). This criticism was voiced by a host of different writers of social-liberal, socialist, or Marxist orientation (cf. e.g. Ehrenreich 2001; 2008; Frank 2000; Hardt & Negri 2000; Krugman 2007; Noble 2003; Rorty 1998; Sennett 2006). In spite of their many internal differences, these social critics shared the view that capitalism causes too much inequality of life conditions, and that it needs to be held in check by different measures—by the countervailing powers of government, labor unions, or other NGOs. Unlike market reformists, they stressed political reformism as the right path to social development. Expectations associated with triumphant capitalism and the “new economy” were challenged, as critics drew attention to rising inequality and questioned the new “culture” of capitalism that had been lauded for furthering flexibility and personal growth. Market failures and weaknesses were pointed out, and the “correct” interpretation of the corporation again became a matter of strife, as it indeed had been throughout most of the century. Against the 1990s notions of capitalism as being inevitable, supreme, depoliticizing, developing, and essentially democratic, critics began to question the validity of these descriptions, and advocated a curbing of market forces through politics. As political scientist Charles Noble argued in an unambiguous defense of political reformism, capitalism simply “needs the Left” (2003). What was also new was that social criticism was being voiced at a national American level, as well as directed against economic globalization. To be sure, Baran and Sweezy had already incorporated a criticism of American capitalism in relation to the “developing” world, but now globalization moved to the center of the struggle over capitalism. Economic globalization and policies in newly marketized economies led to the formation of antiglobalization movements and highly critical studies of quick adaptations to “capitalist-liberal democracy” (e.g. Klein 2007; Stiglitch 2002). During the 1990s, multinational corporations were increasingly being held accountable for the violation of human rights (Shamir 2004a). Another important development was the increasingly voiced ecological criticism of capitalist practice (Chiapello 2013).

A neo-conservative’s critique: revisiting Fukuyama Capitalism was also, however, criticized from the right for its tendency to produce self-centered persons and thus to destroy virtue in the public sphere (Fukuyama 2006). Whereas social critics stressed the need for politics to

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mitigate capitalism and promote what they saw as economic and social justice, and also equal recognition, writers of a conservative orientation such as Fukuyama advocated a new culture of unequal recognition, of community spirit, and of national unity as a means for holding some of the undesirable consequences of capitalism in check. In contrast to the renewed social criticism, Francis Fukuyama’s criticism focused primarily upon the culture fostered by a capitalist market system. The then neo-conservative Fukuyama argued that the cries for equal recognition needed to be supplanted by an inegalitarian culture that was better to appreciate differences of worth. Fukuyama invoked Friedrich Nietzsche’s image of the self-satisfied, petit-bourgeois “last man,” now situated at the “end of history,” unable to distinguish between what is worthy of recognition and what is not. Fukuyama may have pointed out a weakness of capitalist society, namely that it can undermine a republican “spirit” of caring for the common. But his declaration of death to the modern egalitarian political project stood in stark contrast to the social critics’ rallying cry for acknowledging the harsh facts of life for a large number of the population living in the realities of transnational capitalism. Fukuyama’s message in The End of History and the Last Man was not, then, uncritical of the free market liberalism of a Hayek or a Milton Friedman variety. Fukuyama’s own liberalism was a neo-Hegelian liberalism that also drew on insights from Alexis de Tocqueville and Friedrich Nietzsche, both of whom Fukuyama used to stress the limits and dangers of a capitalist-liberal democracy, especially regarding its incapacity to nurture human greatness and civic virtue.1 Like other conservatives, Fukuyama would stress that “capitalist-liberal democracy” needed a cultural anchoring in a source different from free market liberalism. But unlike earlier generations of conservatives, Fukuyama’s conservatism was of a secular orientation that strongly advocated “civic virtues” such as participation in public affairs, celebration of “public glory,” and fighting until death to defend the core ideas of a capitalistliberal democracy. For Fukuyama, the great threat of capitalist-liberal democracy was its tendency to produce people who are overly preoccupied with their private affairs, and do not seek greatness and excellence in public life. Whereas he explicitly rejected the need for increased social criticism, his own critique partly belongs under what Boltanski and Chiapello have dubbed “artistic criticism” (Chiapello 2013). This is a criticism whose source of indignation is conformity and the advance of mass society and which uses personal autonomy and the cultivated life as values in its critical test. However, another central part of Fukuyama’s critique cannot easily be classified within Chiapello’s scheme, albeit that it comes closest to conservative criticism. This was Fukuyama’s insistence upon capitalism’s tendency to destroy the civic foundations of society and the community spirit, and his insistence that capitalism needed something other than itself to uphold a society that would satisfy human needs for public glory.

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Like Boltanski and Thévenot, we might dub this a “civic criticism,” because its main source of critique is that of republicanism, which ultimately ranks the citizen’s role of participating in public affairs higher than an individual’s pursuit of self-interest in the marketplace (Boltanski & Thévenot 2006). Without a spirit of citizenship and public duties, the society of the self-interested “bourgeois” becomes too cold and mechanistic. Fukuyama and others exposed the “republican deficit” of capitalism and the petty bourgeois who only cares for his or her own life-situation. Without claiming any direct linkages whatsoever, perhaps it was not that surprising that the new, entrepreneurial spirit of capitalism was one that spoke of corporations’ duties as citizens in global society. Or as Klaus Schwab, Executive Chair of the World Economic Forum annually held in Davos, Switzerland, wrote in Foreign Affairs, corporate social responsibility was now too narrow a term to encompass, e.g., social entrepreneurship and not least the “new imperative for business,” namely “global corporate citizenship,” where corporations themselves are “stakeholders” “alongside governments and civil society,” confronting global challenges of climate change, health care, etc., and where “global corporate citizenship” is “in a corporation’s enlightened self-interest” and therefore “is sustainable” (2008: 108). Fukuyama invoked a traditional liberty versus equality dichotomy, and he simplistically classified a host of different political-economic regimes with very different forms of social structure and social welfare systems under the same category. Whereas Fukuyama used a standard notion of the United States as a middle-class society as described by the likes of Peter F. Drucker, social critics of different orientation such as Barbara Ehrenreich, Richard Rorty, and Thomas Frank denied the middle-class (often implying no class) description. A decade later than Fukuyama’s The End of History and the Last Man, political scientist Charles Noble took stock of the social-economic development: “contemporary America is a class society”; “the top 1% of American households own nearly 40% of all of the nations wealth” (2003: 16); as of 2003 the half of American families that earn less than $ 50,000 a year cannot help but struggle to meet simultaneously the costs of food, clothing, and shelter, let alone medical and elder care while saving for college or retirement. In this world, a week without work is a serious shock; a month of unemployment a major loss; a prolonged family illness a catastrophe that is almost impossible to recover from. With an average after-tax income of less than $11,000 a year, the poorest fifth of Americans are living in truly dismal circumstances. (2003: 17–18)

It was in this context of rising inequality of opportunities that Fukuyama saw the greatest need for a reinvigorated Nietzsche and a celebration of the entrepreneur as someone who simply works much harder than other people.

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Social criticism: inequality, shortcomings of markets, and the need for countervailing power Fukuyama had argued that the primary threat to whether his “end of history” “capitalist-liberal democracy” would be truly satisfying to “man as man” was identified by the right, not the left, arguing that there was more need to further enhance liberty than to promote equality. Social critics of late capitalism had the opposite view. What was different was that the new struggle for equal recognition had a distinct economic sense, occupied with inequality, distribution of wealth, equality of opportunity, and economic security. The struggle over capitalism to an increasing degree became one concerning economic and social justice, distribution, and rights. The struggle for equal recognition of “cultural” differences would no longer be particularly directed against business, but rather against the attitudes of racism, sexism, and homophobia themselves. As explained by historian Thomas Borstelmann (2012), the business discourse of the post-1960s would stress “cultural” egalitarianism, not economic and social equality of rights and income. Social critics typically shared the conviction that markets have to be held in check by political forces, here invoking a broader understanding of politics than politics at the state level. Thomas Frank, for instance, pointed to government, unions, and other social movements as potential sources for progressive social change, referring to movements like the Populist movement, the labor movement, to the anti-WTO protests in Seattle in December 1999; and to people such as Galbraith, Green Party politician and social activist Ralph Nader, and social critic Vance Packard. Indeed, Galbraith’s formula of countervailing power seemed to be a guiding thought for Frank’s ideas of a democracy that encompasses economic and industrial democracy, gives room to conflict, and supports the idea of a democracy that works as a mitigating force against the power of markets. As Galbraith had stressed the role of countervailing power, in a similar vein social critics pointed to different ways of constraining market forces. It should be noted, however, that Galbraith had also used the concept of countervailing power to demonstrate to critics of capitalism that capitalism did work in spite of monopolistic tendencies. This aspect was perhaps most clear in Galbraith’s analysis of large retailers, which showed that their market power could hold the market power of monopolistic or oligopolistic corporations in check. Furthermore, whereas Galbraith had written American Capitalism in the context of a “regulatory capitalism” in which labor unions were relatively strong, social critics confronted with the transnational, triumphant capitalism of the 1990s wrote in a period in which labor unions were relatively weak. Galbraith’s and others’ pluralism was one that emphasized the need for strong interest groups other than corporations in order to achieve at least some kind of democratic society.

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For Frank, market populism was not democracy: Tom Friedman’s formula, “one dollar, one vote”, is not the same thing as universal suffrage, as the complex, hard-won array of rights that most Americans understand as their political heritage. Nor does it mitigate the obscenity of wealth polarization one whit when the richest people in history tell us they are “listening” to us, that theirs are “interactive” fortunes, or that they have unusual tastes and work particularly hard. Markets may look like democracy, in that we all are involved in their making, but they are fundamentally not democratic. [ . . . ] The logic of business is coercion, monopoly, and the destruction of the weak, not “choice” or “service” or universal affluence. (Frank 2000: 86–7)

In sharp polemical style Frank turned the market populism notion upsidedown. Furthermore, Frank contrasted the myth of the “new economy” with the facts: the growing inequality, the growing income disparity between upperlevel managers and blue- and white-collar workers, the enrichment of the already rich by the stock market of the 1990s (2000: 96f.), the devastating effects of the blow to the unions in the 1980s and 1990s (2000: 183), the harsh reality for the many on the new “flexible” labor market (cf. also Ehrenreich 2001; Parker & Slaughter 1994), “the destruction of the social contract of midcentury, the middle-class republic itself,” “the atrophy of the idea of conflict,” “the casualization of work, [and] the destruction of the social ‘safety net’” (Frank 2000: 357–8). Just as mid-century social-liberals such as Bendix had warned against the one-sided dismissal of the positive role of conflict in society by market reformism, so Frank critiqued the neglect of conflict in the ideology of market populism. Perhaps the most telling fact concerning the revival of social criticism was that it also spawned an interest in explaining why it had been weakened in the first place. According to Frank, the emergence of the new ideology of market populism was a key explanation for why there had been a worsening condition for ordinary wage earners without much critique. In short, it was market populism and the revolutionary and cool capitalism of personal development that had “clouded the issue,” making the world difficult to decipher for social critics. Especially since capitalism had been able to accommodate parts of the “cultural criticism” of the 1960s, the world of business of the 1990s now seemed much more inclusive. Furthermore, “human resources management” and Covey and others’ personal development credo gave the impression that the same autonomy and existential fulfillment which had frequently been said to be lacking in industrial and organizational society, was now available to everyone in the new knowledge society, as described by Drucker. The new spirit of American capitalism which emerged only in the aftermath of the “cultural” struggles of the 1970s, as described in Chapter 4, and which celebrated the new transformation of globalization, had been so powerful in its

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rhetoric of democracy, freedom, growth, and inclusiveness, that it, for a while, left social critique perplexed. Whereas Frank focused upon the rise of a new ideology of business in his explanation of the worsened condition for ordinary wage earners, Richard Rorty focused upon the history of the American left in his. In Richard Rorty’s book Achieving Our Country (1998), he advocated the need for a new, “reformist left” in the tradition of social-liberalism. Indeed, Rorty devoted much energy into tracing when and why there was a shift from social criticism to cultural criticism, as this shift according to Rorty was a central key in explaining the worsening socioeconomic conditions of average Americans. The answer was not least to be found in the gulf that emerged between the “old” reformist left and the New Left. A main reason for the conservative backlash and a worsening of social and economic equality was the eclipse of the “reformist left”—a broad umbrella label Rorty pragmatically used to encapsulate the American left from around 1900 until 1964.2 For Rorty, the eclipse of the reformist left was the loss of a left that historically is to be credited for the grand reform programs in the 1910s, 1930s, and 1960s: The conviction that the vast inequalities within American society could be corrected by using the institutions of a constitutional democracy—that a cooperative commonwealth could be created by electing the right politicians and passing the right laws—held the non-Marxist left together from Croly’s time until the early 1960’s. But the Vietnam War splintered that left. (Rorty 1998: 54)

Intellectually, it was especially the writings of the then very influential socialists C.W. Mills and Christopher Lasch that paved the way for an American New Left, because of the revolt against twentieth century liberalism and “managerial liberals” (Rorty 1998: 65). In the aftermath, there was a shift from a “political left” toward a “cultural left,” a shift from the interest in political economy toward culture. Rorty acknowledged the struggle for rights for women, homosexuals, and African Americans, and ultimately for the development of a less sadist country (1998: 77–83). But he linked the development to a decreasing concern with socioeconomic issues. The dark side of the cultural wars was that “During the same period in which socially acceptable sadism has steadily diminished, economic inequality and economic insecurity have steadily increased” (1998: 83). According to Rorty, the central division line between the American right and the American left had been the question of the role of the state in redistribution (1998: 98). Rorty scorned the idea of giving up on the state and of relying on a linear philosophy of history; for him, “the current leftist habit of taking the long view and looking beyond nationhood to a global polity is as useless as was faith in Marx’s philosophy of history, for which is has become a substitute” (1998: 98). Rorty argued that the radical left of the late

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1960s developed into a spectatorial left, leaving no possibilities for identifying with the nation. In his view, however, identifying with the nation and having a sense of national pride were preconditions for “achieving” the country. In marked contrast with Fukuyama’s then neo-conservative stance, Rorty’s sense of national pride was connected with the political promotion of social welfare; pride of country was intrinsically linked to living in a country that embraced real, not just symbolic, equality of life conditions. Rorty did not share any warm feelings concerning past or future prospects of reforming industry: Power will pass to the people, the Sixties Left believed, only when decisions are made by all those who may be affected by their results. This means, for example, that economic decisions will be made by stakeholders rather than by shareholders, and that entrepreneurship and markets will cease to play their present role. When they do, capitalism as we know it will have ended, and something new will have taken its place. But what this new thing will be, nobody knows. (1998: 102f.).

Rorty did not seem particularly interested into the long history of alternative ideas for democratizing corporate power and the distribution of corporate wealth. Instead, Rorty supported “piecemeal reform within the framework of a market economy,” but at the same time acknowledged the difficulties brought by economic globalization in upholding social welfare standards (1998: 105). As for other social critics of the time, the challenge of globalization had moved into the center of the debate.

What markets cannot achieve: securing primary goods and public goods Social critics also directed more principal arguments against the hegemony of markets, explaining what markets cannot achieve themselves. According to professor of political science Charles Noble of California State University, there were many limits to what free markets can bring that are of benefit to society. In “Why Capitalism Needs the Left” (2003), a chapter excerpted from Noble’s 2004 book The Collapse of Liberalism: Why Progressives Need a New Politics, Noble stressed the need for the left and for “stewardship,” advocating political reformism and demonstrating what only governmental and external pressures can accomplish, as opposed to laissez-faire capitalism. As Galbraith had done in the mid-century, Noble highlighted the state’s positive role in influencing the overall performance of the economy; like Galbraith, Noble underlined the need for countervailing powers to balance corporations’ market power. Examining his argument shows how social critics were again rising and insisting upon various ideas of pluralism and democracy as central means

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by which capitalism could be tamed and driven toward more social and economic justice (see also, e.g., Crouch 2004). As progressives such as Richard Ely or Charles Henderson had responded around a hundred years earlier to their American “Great Transformation” with ideas for progressive politics, Noble and many others reacted against the recent global transformation and the ideology of neoliberalism. Perhaps for little other than rhetorical reasons, Noble started out by appraising what capitalism, free markets, and corporations actually do accomplish in this world: capitalism creates amazing wealth and turns individual interests “into the motor of social progress”; free markets “maximize economic efficiency” and “stimulate technological change,” produce and distribute “vital goods and services with minimal central direction”; market capitalism has been central to developing “personal freedom and political democracy,” giving people relatively more room to maneuver both in terms of working, owning, and consuming, and laying the “foundation for the expansion of democratic decision-making” (so far there has been no surviving political democracy without first having a market capitalist system, although the latter is no guarantee for the former, as witnessed in the cases of, e.g., Nazi Germany or China) (Noble 2003: 1). Furthermore, “the large corporation” is “the essential intermediary in the modern economy, linking financial capital, expertise, technology, managerial skill, labor and leadership”; “corporations are spreading everywhere in the world not only because they are powerful, but also because they work better than any known alternative” (2003: 1–2). Noble seemed almost to repeat an argument put forward by Galbraith, namely that the best argument for capitalism is an “administrative one”: decentralized decision making. Furthermore, the globalization of the economy and of corporations’ activities was here also granted a positive role as seen from a consumer perspective. But enough with praise—after having explained what a capitalist market system and corporations can do, it was time to state what they, according to Noble, cannot do. As suggested by the title, capitalism needs the left, or perhaps Noble could have made his point even clearer by stating that a society with a capitalist market economy needs the left. After all, Noble’s intention was not to save capitalism from itself, but rather to consciously guide and steer it so that it better suited the needs of the people. To answer how and why, Noble invited his readers through a comprehensive list of reasons and evidence, pointing out market failures and weaknesses, and emphasizing the historical accomplishments of the American left. Noble argued that markets cannot themselves set the minimum rules of a capitalist market system, i.e. establishing laws and the preservation of private property. Markets cannot regulate trade, i.e. decide what should be traded and what should not (slavery is a good example). Nor can they efficiently regulate the money and credit supply. Markets fail to produce public goods such as

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defense and clean air, as this will be too expensive individually, and are likely to result in “free rider” problems. Instead, markets produce negative externalities such as pollution and excessive use of natural resources, which again are against the common interest and only favor the “private” interest of the corporation. So much for the “Druckerian” argument that individual economic actors, especially corporations, seeking to maximize their own interests “naturally” lead to a harmonious outcome for society. Furthermore, markets tend to “under produce” what are essential goods in a society: infrastructure, research, and education. All of which in turn are often to the substantial benefit of private companies (for example, Noble documents rigorously how American biomedicine companies have benefitted tremendously from what was originally public research (2003: 7f.)). Neither do markets naturally lead to a distribution of primary goods such as health care, education, clothing, food, or housing. As demand is a function of desire and purchasing power, and the latter in turn is a function of income and wealth, there is no reason to expect that markets distribute goods to everyone. To be sure, “few political philosophers would spill much ink arguing for the equal distribution of plasma screen televisions or Armani leather jackets,” but the point is that “primary goods” such as education, health, etc. “shape how people live their lives, the choices that they have, and even their life spans” (2003: 8–9). Touching upon a well-known Keynesian and Galbraithian theme, Noble stated that markets cannot secure the overall performance of the economy. This is evident in times of rapid inflation, rising unemployment, supply bottlenecks, recessions, etc., and it must be remembered that the government is simply the largest economic actor, and capable of having a more long-term horizon of concerns. Furthermore, free markets actually become a burden in terms of decision making (as in issues of highly technical character, or where it is hard for the individual consumer to find good, reliable information); Noble argued that “others can and should decide questions in areas where the requirements of technical expertise are high and the costs of delegation low” (2003: 9–10). Finally, Noble argued that the idea of a realized “equality of opportunity” was indeed a myth, as Baran and Sweezy had similarly sought to show in the 1960s, although their evaluation of society as a whole was more negative (Noble 2003: 14–18). Against conservatives (free market liberals), Noble claimed that free markets are simply not enough to ensure equal opportunity. The problem, Noble asserted, stems from the fact that the conditions from which people start are simply unequal: The bottom line is that people cannot compete on an equal footing when their “initial conditions” are radically unequal. No one would judge fair a footrace in which only some runners showed up at the starting line rested, in shape, and professionally trained, in other words, ready to compete, while others hobbled there, malnourished, sick, ignorant of the track or the rules of competition, having bad or no prior experience or training in the sport. (2003: 14)

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Critiquing the power of corporations As in the late nineteenth-century critiques and mid-twentieth-century critiques of the power of corporations, Noble called for a renewed check on capitalism and corporations through democracy. Noble documented why corporations should not just be left on their own and to “free markets.” He exposed the excessive surveillance in American companies, touching upon well-known themes in struggles over capitalism, namely control and manipulation. Without any forces working against the market, there would be no resistance to job degradation (deskilling), worsening of pension agreements and control of pension funds, deteriorating health care arrangements, increased use of temporary and flexible jobs, and the decline of unions’ influence. Furthermore, corporations have often had a negative impact on the communities they settle in. Although they create jobs and income, they also enforce a “race to the bottom” competition nationally as well as internationally, demanding a lowering of wages, a loosening of working and environmental standards, the raising of tax exemptions, or, if that latter are not forthcoming, they simply move tax payments to other countries.3 Furthermore, America has long suffered from the linkages between economic and political power through the donation system, as well as by the fact that any nation with large corporations depends upon these very same companies. Noble also warned that corporations were active in creating a “corporate culture,” endlessly trying to market products, which works against the country’s political culture of participation in the discussion of political affairs. The corporation is not a neutral entity, simply serving its customers, but tries also to serve its own interests by creating new desires and needs. (In retrospect, Vance Packard, in his 1957 book The Hidden Persuaders (2007), brought attention to how advertising increasingly relied upon psychology in the attempt to marketize products). In short, ideas of neutrality, freedom, and choice were overstated: corporations function as “mini-states,” “exercising power over workers, employees, consumers, local communities, national governments and global culture” (Noble 2003: 13). Labor is not nearly as mobile as assumed in theory, and for good reasons (2003: 14; cf. also Sennett 2006).

“If laissez-faire conservatives had had their way” Like other social critics of capitalism, Noble advocated political power to curb market power. Noble argued that governments, not markets, can promote equality of opportunity. First, the historical record shows that philanthropy has in no way covered nor is likely to cover what is needed in order to secure social welfare (2003: 15). Noble reiterated a criticism that highlights the

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inadequacies, limitations, and to some extent the arbitrariness of relying upon philanthropy. Philanthropy has, as seen in both the late nineteenth century, the mid-twentieth century, and in the late twentieth century, traditionally been strong in the United States, where influential businessmen from Andrew Carnegie to Alfred Sloan and Frank Abrams in mid-century, to Bill Gates today, have praised the positive historical role played by private philanthropy, and often critiqued the statist alternative. Second, according to Nobel, studies document that countries with larger public sectors in general have less inequality. Third, the typical conservative counter-argument of singular successstories of the ones who actually make it from “bottom” to “top” does not justify that “fairly ordinary people who are making a reasonable effort” should be offered few opportunities (2003: 16). Throughout history, according to Nobel, it was the American left and “resistance from below” which have fought for progressive change: History shows that capitalism has been made to meet human needs because progressives have challenged many of the basic principles upon which the system is premised, including the idea that private property rights are sacred, free markets are always efficient and fair, and corporations inevitably serve the public interest. In the 20th century, it was the left that fought for racial justice, worker rights, equal opportunity, women’s liberation, environmental justice, consumer protection, civil liberties, and anti-discrimination laws—the whole panoply of social and political changes that made America a better society. If laissez-faire conservatives had had their way, America would still be living in the Gilded Age. (2003: 3)

Noble’s attack upon laissez-faire conservatives is of course somewhat polemical, but the intellectual struggles over capitalism frequently do show that free market liberals have been against government interference in the “natural system of liberty,” as seen, for example, in Sumner’s or Milton Friedman’s writings. According to Noble, it was the left that worked for the different reforms and interventions, whereas conservatives typically worked against them. In the early twentieth century: against child labor legislation, against maximum hours legislation; during the New Deal: against social security legislation, and wages, hours, and labor legislation; during the Great Society: against enforcement of health, safety, and environmental standards, “arguing that corporations were eager to voluntarily clean up the air, water, and work, and that strict standards would make things worse, not better” (2003: 18, my emphasis). Noble pointed to numerous examples of conservatives being against higher environmental, racial, and health standards (2003: 19–20). Noble here exhibited a consistent dividing line between political reformism and market reformism throughout the history of American capitalism: the struggle over whether capitalism should be regulated through legislation to promote social goals, or should exclusively rely upon the principles of

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self-regulation and voluntariness. From this perspective, the prospects of leaving our problems to the moral self-governance of business would indeed be bleak. Whereas conservatives once encompassed at least an idea of stewardship, from the 1980s the right “abandoned whatever commitment it once had to making capitalism work for everyone, at least if that involves any sort of political intervention” (Noble 2003: 2). Unlike Rorty, Noble acknowledged the positive role of the radical left in American politics. He restated in conclusion that “progressives can take heart from the history: people want more than capitalism alone can deliver,” albeit that globalization has made it more difficult (2003: 22). In sum, then, what Noble did was to perform the critical tests of a social critic, and to argue in favor of government, stewardship, intervention, and social movements that promote the social goals of equality and the bettering of life conditions. Here, not much hope was left invested in the idea that markets and improved moral standards among managers would do the trick—instead, progressive legislation, rights, and a system which balances the power of markets and corporations and holds them in check was advocated.

Neo-Marxist social criticism of a global—and total—capitalism To understand the reach of the new social critiques mounted against the new global capitalism and its proponents, we should note that there was a resurgence of Marxism. Neo-Marxists Michael Hardt and Antonio Negri suggested more radical measures to curb—if not even demolish—the power of capital. They also invoked what should be seen as a new post-capitalist vision, primarily based upon a diagnosis of a fundamentally changed economy of immaterial labor. Their celebration of spontaneity, of “bodily resistance,” of anti-bureaucracy and anti-hierarchy, the latter of which were reminiscent of the 1960s New Left, however, was accused for being The Lexus and the Olive Tree of the far left. Across the almost diametrical opposite political implications, then, the free market liberal Thomas Friedman and the neo-Marxists Hardt and Negri were accused of having given a somewhat similar portrait of globalization. One of the absolute most widely discussed books written from the perspective of a radical left in recent years was Hardt and Negri’s book Empire (2000). The book was the first in a trilogy of writings, succeeded by Multitude (2004) and, most recently, Commonwealth (2009). For our purposes, I will concentrate on Empire, as this was the first book, and it laid out the key thoughts informing the succeeding works. Hardt and Negri’s social criticism shared features with more moderate criticism; besides the criticism of rising

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inequality and of exploitation, they shared an insistence upon political power to curb capitalism. And yet, their critique differed in that it was more decisively directed against global capitalism, and in that it advocated going further in “reappropriating” the means of production. Furthermore, it used a mixture of philosophical and sociological theories to describe a capitalism that was fundamentally “totalizing.” In comparison to an earlier version of neoMarxism, Baran and Sweezy’s concepts were more straightforward and less metaphysical, perhaps as a consequence of the significantly different backgrounds of the two pairs of authors, Baran and Sweezy as economists, Hardt and Negri as a literature theorist and a political philosopher, respectively.

Global capitalism as “the sovereign power that governs the world” Hardt and Negri reinterpreted Marx, looking at power structures in their description of global capitalism. They used the concepts of empire and sovereignty in a diagnostic way: Empire is materializing before our very eyes. Over the past several decades, as colonial regimes were overthrown and then precipitously after the Soviet barriers to the capitalist world market finally collapsed, we have witnessed an irresistible and irreversible globalization of economic and cultural exchanges. Along with the global market and global circuits of production have emerged a global order, a new logic and structure of rule—in short, a new form of sovereignty. Empire is the political subject that effectively regulates theses global exchanges, the sovereign power that governs the world. (Hardt & Negri 2000: xi).

These were the opening lines of Empire. The diagnosis went something like this: the post-bipolar world is characterized by economic globalization; it is a system which is only to a very small degree ruled by a sovereign political power as traditionally conceived, and yet the system has a certain logic, a certain way of constantly reproducing itself and its power. International law is not developed to a high degree, not to speak of global law; international and global institutions and organizations such as the UN do not in any way constitute a strong framework for global governance and law. The US continues to play a leading role in the world as one of the only powers sanctioned to engage in “just wars” and thus to perform “moral interventions,” along with humanitarian NGOs; there seems to be a permanent state of exception—a state in which there is no international legal framework effectively upheld by global agreements and truly global powers, wherefore key actors are called upon to intervene on moral terms. And yet, in spite of the lack of effective global law, the globe is dominated by a much more comprehensive logic and order. This is the regime of economic globalization, the globalization of capital, or in Hardt and Negri’s terms,

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empire. It is empire which explains why nation-states are losing their power, Hardt and Negri wrote, leading to the well-known “race to the bottom” effects and the constant displacements of economic activity to where labor costs as well as legal standards are at the lowest. Empire is indeed ordered, but contrary to earlier forms of imperialism, such as the Roman Empire, it is an order which has no center. It is organized around networks, increasingly global flows and exchanges of commodities, people, capital, information, technology, and culture. Empire is, like older forms of imperialism, essentially conquering in nature; it constantly conquers new spaces for accumulation. The new world opened for capitalist globalization after the fall of the Soviet bloc was the opening up of new territories. In Hardt and Negri’s characteristic prose, it is a process of “deterritorialization”; “Empire is an ou-topia, or really a non-place” they wrote (2000: 190). The driving force is capital’s quest for further expansion, for capitalization and for what in a Marxist phrase can be coined as “real subsumption,” not least made possible through the rise and increased significance of so-called immaterial labor (on capitalization and real subsumption see 2000: 225, 243, 272). Ultimately, however, Hardt and Negri seemed to place the driving wheel of history in the hands of the proletariat, since it is the countermovements and social struggles against capitalist domination that force it to seek new fields of opportunity.

Resistance: the multitude against empire Central to Hardt and Negri’s narrative was the dialectical processes of, on the one hand, capitalist expansion, and, on the other hand, responses and countermovements to the development of capitalism, spawning new types of constraints on the process of accumulation. In this, they seemed to follow the same basic conceptual scheme as Karl Polanyi, whose own work had inherited some things from Marx and discredited others (see, e.g., Block & Somers 2014: 73–97): The history of capitalist forms is always necessarily a reactive history: left to its own devices capital would never abandon a regime of profit. In other words, capitalism undergoes systemic transformation only when it is forced to and when its current regime is no longer tenable. [ . . . ] The power of the proletariat imposes limits on capital and not only determines the crisis but also dictates the terms and nature of the transformation. The proletariat actually invents the social and productive forms that capital will be forced to adopt in the future. (Hardt & Negri 2000: 268; cf. also p. 208)

It is the proletariat which is the source of progressive social change, forcing capitalism to reform. Hardt and Negri piled together a list of “international cycles of struggles” throughout the nineteenth and twentieth

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centuries which best express “the practice of proletarian internationalism” (2000: 50, 49–57). (When, however, Hardt and Negri describe, for example, the history of the New Deal, they refer to more subjects than the proletariat.)4 Empire, i.e. capitalism in its globalized, current formation, is met by a “counter-empire”—the multitude. The latter was used just as much to describe the potential of uprising against empire, and of a possible unified political subject, as an actually already existing political subject. As in other variants of newer leftist thought, discussions concerning what constitutes the political subject and which are the proper tactics or strategies involved in mobilizing it were also prevalent in Hardt and Negri’s Empire (cf. e.g. Laclau & Mouffe 2001). To Hardt and Negri, globalized capitalism offered the historical chance for the development of a globalized consciousness, a common humanity united against a common enemy. Like Marx, they acknowledged the progressive advantages brought about by the historical development of capitalism, investing no nostalgic desires in the return of a pre-capitalist past of closely knitted communities, in contrast to conservative-oriented criticisms of capitalism (2000: 43f., 115). Furthermore, they explicitly “refuse any political strategy that involves returning to that old arrangement, such as trying to resurrect the nation-state to protect against global capital” (2000: 43). At the same time, the acknowledgement of “progress” inherent in the development of capitalist forms was accompanied by an analysis of some of the worst features of capitalism in its different historical formations.

Immaterial labor as “deep capitalization” and as foundation for a post-capitalist reality If Hardt and Negri’s trilogy of books advanced an optimistic vision, it was not least due to their diagnosis of an economic production that has fundamentally changed. It was not just that there had been an expansion of economic exchanges across the globe, or what we could call a quantitative change; it is also that there had been a qualitative change in what is being produced, and how. Like Drucker, Hardt and Negri observed a fundamental change in the economy; and like Drucker, this concerned what is being produced and who produces it. Here, Hardt and Negri introduced one of their other key terms: “immaterial labor”—“that is, labor that produces an immaterial good, such as a service, a cultural product, or communication” (2000: 290). The importance and potential of the rise of immaterial labor could hardly be underestimated according to Hardt and Negri: Today productivity, wealth, and the creation of social surpluses take the form of cooperative interactivity through linguistic, communicational, and affective

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networks. In the expression of its own creative energies, immaterial labor thus seems to provide the potential for a kind of spontaneous and elementary communism. (2000: 294)

Hardt and Negri rearticulated an idea of an enhanced socialized production, which had earlier been espoused by socioeconomists such as Berle and Means. But whereas the fact that capitalism had become dominated by the large corporation was the occasion for Berle and Means to make the observation of an increasingly socialized capitalism, Hardt and Negri based their observation of socialized capitalism upon the rise of immaterial labor. Relying on concepts mainly derived from Michel Foucault, but also from Gilles Deleuze and Félix Guattari, Hardt and Negri claimed that production was essentially biopolitical production (2000: 28, 403). There is no outside, since social activity and communication re-enter, or take place alongside, economic production; life itself is constantly formed and shaped. Indeed, even personal identities and subjectivity are included in this process; a process in which institutional power takes an active part in maintaining the whole system. Value created in production cannot be traced back to the actual production time. An effect of the condition of socialized capital, Hardt and Negri claimed, is that the concept of private property is becoming increasing nonsensical. To be sure, however, “the conceptual crisis of private property does not become a crisis in practice” (2000: 302). As for Berle and Means, the fact that production had become socialized did not mean that the concept of private property was brought into question in practice. Hardt and Negri’s idea of a socialized capitalism stood in stark contrast to Drucker’s pro-capitalist idea of a post-capitalist society in which the distinction between labor and capital had already broken down, in the concrete sense that every wage earner had already become a shareholder. By invoking the notions of immaterial labor, of biopolitical production, of collective intelligence, of cooperation always already being inherent in production, and of the breakdown of any reasonable way of measuring value, Hardt and Negri tried to make a strong case for identifying a now further socialized capitalism. To be sure, Hardt and Negri were definitely not suggesting that an era of “post-capitalism” had already arrived; instead, they identified the elements within the current order which pointed toward the termination of this very order. Here, a key thought was the idea that workers themselves were bearers of the means of production, i.e. their own brains and skills, which could make the transition to another regime of property more feasible and swift.

A radical postmodern republicanism against capitalism As we have seen, Hardt and Negri observed that the powers of nation-states were withering away due to the logic of empire. According to Hardt and Negri,

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there was not too much to regret about this fact, and they largely dismissed the accomplishments of a nationalist left. Hardt and Negri insisted that “big government is over” (2000: 348). As noted, their main emphasis concerning agents for social change was social movements and uprisings. They underscored the importance of the new work that acknowledged the economic power of cultural movements (e.g. Butler 1998; Laclau & Mouffe 2001). But they also drew attention to labor movements. In particular, Hardt and Negri pointed to Industrial Workers of the World (IWW) as exemplary—an American labor organization which was successful in the beginning of the twentieth century, able to unite workers across the nation, across different nationalities, and across the various languages of the immigrant workers. “Taking our cue from the IWW, [ . . . ] we could cast our political vision in line with the radical republican tradition of modern democracy” (Hardt & Negri 2000: 208). Continuing along these lines, Hardt and Negri therefore asked: “what does it mean to be republican today? [ . . . ] if we are consigned to the non-place of Empire, can we construct a powerful non-place and realize it concretely, as the terrain of a postmodern republicanism?” (2000: 208). At the end of Empire, then, Hardt and Negri articulated three distinct political proposals from this perspective of a postmodern radical republicanism: global citizenship (“The demand is simply that the juridical status of the population be reformed in step with the real economic transformations of recent years” (2000: 400)), “a social wage and a guaranteed income for all” (2000: 403), and besides these two political objectives they insisted upon the right to “re-appropriation,” i.e. the right to take back the means of production (2000: 400–6).

The Lexus and the Olive Tree of the far left? Hardt and Negri’s work spawned an intense debate and comments from both the left and the right (cf. e.g. Amin 2005; Anderson 2009; Laclau 2001; Reitan 2007). According to Paul Thompson, professor of organizational analysis at the University of Strathclyde, the notion of immaterial labor was highly problematic (2005). Thompson wrote a critique of Hardt and Negri from the perspective of labor process theory and of critical workplace studies. The best-known and most influential theoretical contribution to this field is Marxist Harry S. Braverman’s Labor and Monopoly Capital (1974). In this seminal work, Braverman wrote a critical analysis of Taylorism and linked it to capitalist development; most importantly, Braverman articulated the famous “deskilling” thesis associated with the decoupling of the work of hands and brains as a result of scientific management and similar schemes for the organization of work.5 According to Thompson, Hardt and Negri’s work carried an “unhealthy and uncritical dependence on mainstream business and management writings on the knowledge economy and knowledge work”

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(2005: 75).6 In this sense, Hardt and Negri seemed to be victims of the new economy ideology they themselves wanted to criticize; as for example historian of technology David Edgerton demonstrated in his book The Shock of the Old, industrial production is more widespread today (as of 2006) than ever before (2006: 52–74). A second discussion revolved around institutional means for social change. Hardt and Negri largely eschewed attempts to redirect nation-states and to have new expectations for improved social justice stemming from these organs; on top of this, most of the NGOs Hardt and Negri deal with are claimed to be in effect merely making moral interventions that somewhat paradoxically only seem to enhance empire. One problem, according to their critics, was that unless capitalism as such was overturned, including the capitalist state, the “moral” interventions of NGOs and moderate forms of political intervention or of market reformism would in effect only strengthen “the system.” Paul Thompson noted that “in its romantic obsession with autonomy, Empire rejects the traditional mechanisms of social change and is suffused with hostility to the welfare state and ‘big government’” (2005: 91). Other commentators on Hardt and Negri’s work of very different political persuasions similarly reproached their work for underestimating the potential powers of large-scale institutions for effectuating social change. Gopal Balakrishnan wronged Hardt and Negri for their interpretation of NGOs as they “question the notion that even the most blameless NGOs are agencies of a global civil society pitted against the established powers” (2000: 145). For Balakrishnan, Empire fell short of the accusation that it “can be read as The Lexus and the Olive Tree of the Far Left,” as “Both books argue that globalization is a process powered from below” (2000: 148). Empire and The Lexus and the Olive Tree both took the description of a networks-based invariable globalization as their starting point, and both books thus assumed that economic globalization cannot be subject to substantial political regulation at the state and interstate level. Just as Balakrishnan noted the surprising similarity between Hardt and Negri and neoliberalism so too did Malcolm Bull (2001). From what I also take to be a Marxist perspective, Bull, under the heading “You Can’t Build a New Society with a Stanley Knife,” critiqued Hardt and Negri largely for their idea of autonomy and the way “it has come substantially to overlap with the Neoliberal idea of negative liberty” (2001: 2). According to Bull, what the poor and the powerless need instead of “autonomy” and movements that develop pockets of non-capitalist space, was rather “some form of totalitarianism” and an “intensive social regulation needed to limit all the risks of a global society” (2001: 7). From an entirely different angle, Francis Fukuyama faulted Hardt and Negri’s work for providing “an imaginary solution to the real problem” (2004). Fukuyama stressed that hierarchies are indeed inevitable forms of social organization, as witnessed in nation-states, university

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departments, corporations, left-wing movements, etc. Fukuyama urged the strengthening of institutions at the national level: Indeed, the powerlessness and poverty in today’s world are due not to the excessive power of nation-states, but to their weakness. The solution is not to undermine sovereignty but to build stronger states in the developing world. [ . . . ] Any project, then, to fix the ills of “empire” has to begin with the strengthening, not the dismantling, of institutions at the state level. This will not solve the problems of global governance, but surely any real advance here will come only through slow, patient innovation and the reform of international institutions. (2004: 12).

Sociological and political critiques of moral self-governance of business As seen in the writings of Frank, Hardt and Negri, and others, some of the critics of capitalism took particular notice of the discourse of moral selfgovernance of corporations. The new surge of a “progressive” business which was in business to do good, to take on social responsibilities, create shared value, act as “corporate citizens,” etc., attracted attention from a host of different observers. One critique was that corporate social responsibility and related concepts had been actively and strategically used by corporations to increase the power of business vis-à-vis governments, and to support neoliberalism. For example, one much referenced critique was organizational researcher Subhabrata Bobby Banerjee’s work (Banerjee 2007; 2008). In his Corporate Social Responsibility: The Good, The Bad, and the Ugly, Banerjee documented how corporate social responsibility and stakeholder theory, despite the win–win rhetoric, have often been used exclusively to further corporate interests; that it had accommodated business and promoted neoliberal policies; and that it had been used proactively by corporations to keep government regulation and legislation at bay (Banerjee 2007; 2008). Another critique linked the popularity of corporate social responsibility to a crisis of democracy. For example, Robert B. Reich claimed that “to view it [corporate social responsibility] as a new form of democratic capitalism is to fail to understand the logic of supercapitalism” (2007: 168). According to Reich, the widespread rhetoric of corporate social responsibility did not lead to a new, democratic capitalism, but was instead “related to the decreasing confidence in democracy” (2007: 169). As capitalism invades democracy through intense lobbyism and as capitalism is presented as democratic through the rhetoric of corporate social responsibility, the need for making laws and rules for capitalism tends to become downplayed. “The message that

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companies are moral beings with social responsibilities diverts public attention from the task of establishing such laws and rules in the first place” (2007: 207). Instead of proposing new regulatory frameworks, politicians would then frequently resort to moral criticism voiced at singular corporations (2007: 186). Reich argued that “corporations are not set up to be charities” (2007: 206); and further that: Corporate executives are not authorized by anyone—least of all by their consumers or investors—to balance profits against the public good. Nor do they have any expertise in making such moral considerations. That’s why we live in a democracy, in which government is supposed to represent the public in drawing such lines. (2007: 197)

Reich argued that the purposes of capitalism and of democracy are fundamentally different, and that late “supercapitalism” exists to satisfy the demands of investors and consumers. It is through democracy, Reich argued, that it is possible to set up the right institutional framework which can balance interests of different groups; it is democracy that makes it possible to compensate for the inadequacies of the market; it is democracy which makes grand deliberate social action possible against the random play of market forces—not moral self-governance of businesses.

The potentials and the limitations of “really existing CSR” From among a vast literature on corporate social responsibility, business ethics, morality and markets, and related fields, I have found the writings of sociology professor and legal scholar Ronen Shamir particularly useful for present purposes (Shamir 2004a; 2004b; 2005; 2008a; 2008b; 2010; 2011). Mainly indebted to a Foucauldian form of analysis, Shamir offered an analytical interpretation of what he described as the recent “moralization” or “responsibilization” of the market. Shamir argued that corporations are subjected to demands that earlier were more exclusively directed toward governments and states, and that new negotiations arose concerning “externalities” to the corporation. Or as Colin Crouch (2006: 1534) defined corporate social responsibility, it is “behavior by firms that voluntarily takes account of the externalities produced by their market behavior, externalities being defined as results of market transactions that are not themselves embodied in such transactions. CSR is essentially ‘corporate externality recognition’.” According to Shamir, social actors who were formerly seen as being exclusively economic were now being spoken of and addressed as responsible moral agents, i.e. agents that have moral responsibilities beyond compliance to the law, something which “presupposes one’s care for one’s duties and one’s un-coerced application of certain values as a root motivation for action.” “As a technique

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of governance, responsibilization is therefore fundamentally premised on the construction of moral agency as the necessary ontological condition for ensuring an entrepreneurial disposition in the case of individuals and sociomoral authority in the case of institutions” (Shamir 2008a: 7). In line with Reich’s and Banerjee’s reasoning then, Shamir observed that this new emphasis upon corporate social responsibility and business ethics arose in the context of the spread of global capitalism. In Shamir’s words: Private forms of social regulation—namely regulating the market to act in accordance with socially accepted standards—have been rapidly expanding in recent years, precisely at a time when the economization of social life in general has also reached unprecedented levels. [ . . . ] an intense interest in ethics and morality has mushroomed alongside the triumphant ascendance of market rationality as a general principle for conducting social relations. (Shamir 2008b: 372)

The question, however, was what to make of this development and the rise of a new moral discourse of the social responsibilities of business and similar concepts, whose content was outlined in Chapter 4. Shamir acknowledged some of the positive effects of the focus upon corporate social responsibility and business ethics. On the one hand, this development could be interpreted as the result of trying to civilize capitalism, constraining corporations in their search for pure financial gains by making them socially accountable. In this respect, the new legitimacy which stems from an active social responsibility would come with a price for corporations. It would render some forms of economic production legitimate and others illegitimate. To be sure, there is also the possibility that claims to social responsibility remain nothing but rhetoric. But a discourse of social responsibilities does condone some forms of economic production and condemn others. This, then, is the critical potential of corporate social responsibility and related concepts concerning the new reconciliation between capitalism and civic virtue: Commercial enterprises are increasingly expected to proactively prevent harms previously treated (in economic theory and in practice) as “externalities” for which they were not accountable. And corporations are hard-pressed to dispense social goods other than profits to constituencies other than their shareholders. In short, the moralization of markets may compromise a core element of the logic of markets, namely the drive for financial goals. (Shamir 2008b: 373)

On the one hand, then, it is likely that this moral discourse can work as a constraint upon pure financial goals. Or in Shamir’s words, “the moralization of the market thus has a critical potential in that the demand for socially responsible market actors—typically exerted through social struggles in the form of consumer boycotts and public shaming campaigns—may somewhat restrain their drive for financial gains” (2008a: 3). On the other hand, Shamir argued that there are several dangers connected with this development. For the purposes of our analysis, three such critiques

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can be highlighted: the argument that moral self-governance may be a tradeoff vis-à-vis alternative (democratic) political modes of governance, thereby in fact strengthening instead of undermining neoliberalism or market fundamentalism; the “hostile worlds” kind of argument about the dangers of businesses dealing with ethical and moral concerns in calculating, riskmanagement terms; the critical narrative about a “deradicalization” of corporate social responsibility.7

Critiquing moral self-governance: neoliberalism, hostile worlds, and deradicalization Shamir argued that there is strong affinity between the discourse of business responsibility and neoliberalism. The latter had invoked responsibility of individual actors, whereas principles of self-regulation and self-reliance have been promoted alongside a criticism of centralized power. Thus, it is not just corporations who are called upon to be more responsible. Individuals are discursively constructed as self-reliant, responsible, entrepreneurial entities, both in the context of the labor market as well as for instance in discussions concerning the governance of crime (Shamir 2008b: 379). As Shamir notes, following Thomas Lemke, a governmentality sociologist (2001), “neo-liberal responsibilization, directed at both individuals and institutions, is unique in that it assumes a moral agency which is congruent with attributed traits of economic-rational actors as autonomous, self-determined, self-sustained, entrepreneurial subjects” (Shamir 2008b: 380). Indeed, not least the reading of Covey has shown this call for individual responsibility. It is one of Shamir’s key points that the discourse on market responsibility seems to strengthen rather than to undermine market fundamentalism, i.e. the primacy of market rationality as a principle of social organization (2008a: 1). There is no contradiction between the discourse on responsibility of market actors and neoliberalism. On the contrary: the responsibilization of markets is a set of practices, unleashed through regulatory models, business education, academic discourse and organizational incentives. It neatly fits the neo-liberal principle of private and self-regulation and, moreover, successfully grounds the very notion of moral duty within the rationality of the market: doing good is good for business and the responsible corporation thus at once also becomes no less than a moral authority. (2008a: 13)

The inherent political implications are that: “moral governance” should replace top-down regulation and juridical accountability. The governance-based logic of the market, applied to the moral duties of corporations, works to defuse regulatory threats by suggesting that such external intervention would “stifle innovation” and “business enthusiasm” for the

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“discipline”, push compliance “to the lowest common denominator” and destroy the moral flexibility which is needed in order to ensure both efficiency and sensitivity to “cultural diversity.” (2008a: 13)

Shamir’s point that the turn toward the responsibility discourse goes hand in hand with neoliberal principles was further underlined by looking at processes of privatization, deregulation, and marketization. Neoliberal principles have sparked the economization of the political, i.e. the increasingly privatized and economized governance of state, government, and public services.8 Governments and public sector areas are increasingly organized in ways that resemble those of private businesses—marketization, cost–benefit analysis, risk management, etc., as seen in areas such as health care, education, security, and warfare. Within the governance structures associated with this political rationality, then, there is an attempt to universalize the market as a form of social organization. As Thomas Lemke notes: “government itself becomes a sort of enterprise whose task it is to universalize competition and invent marketshaped systems of action for individuals, groups and institutions” (2001: 197). It is on this level that the economization of the social, the state, and NGOs can be observed (Shamir 2008a: 6). According to Shamir, then, the two processes of discursively construing market actors as responsible and the economization of the political can be seen as a structural coupling. On the one hand, market actors traditionally understood are being ascribed a social responsibility and are contracted for political goals; on the other hand, the governance of the state and public sector is brought closer to a market model. Furthermore, the turn to responsibility of economic actors opens the door for further economization of the formerly political: “The dialectical implication of governance-through-responsibilization is that the restructuring of authority as a market of authorities also facilitates the responsibilization of market entities to assume the caring and welfare duties that were once assigned to civil society and governmental agencies” (2008a: 10). A “market of authorities” arises where public and private entities increasingly compete for authority. Shamir noted that if we want to understand the present transformation of the political and economic realm, we need to be aware of the transition from “government” to “governance” (2008b: 377ff.). Instead of seeing governance as only stemming from one source, e.g. governments who hierarchically define the duties and limits of responsibility, mostly through law, Shamir sees an evolving “market of authorities” in which different actors, institutions, and organizations are constructed as (competing) authorities. In the new market of authorities the supremacy of public institutions in providing not only different forms of welfare, but also securing certain rights and enforcing particular rules, is no longer taken for granted. Public authority instruments change: from laws to guidelines, from legalism to self-regulation and reflexive

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regulation, from central, top-down bureaucratic obedience structures to horizontal, localized, market-like diffusion of responsible actors, and to processes of “facilitating” rather than regulation from above. “In a nutshell, it may be said that, while obedience had been the practical master-key of top-down bureaucracies, responsibility is the practical master-key of governance” (Shamir 2008a: 4). And this restructuring of authorities is in accordance with neoliberal principles of self-regulation. Ultimately, argued Shamir, what is at stake in these dual processes of a discourse on responsibility of market actors and economization of the political and social, is a current triumph of a neoliberal epistemology. This epistemology breaks down the distinction between society and economy (cf. Shamir 2008b: 376; Lemke 2001). The turn to market responsibility is marked by the tendency to “ground and reframe socio-moral concerns from within the instrumental rationality of capitalist markets” (Shamir 2008a: 3). According to Shamir, one of the results is therefore politics through markets. By contrast, but intimately related to this development, “democratic politics, addressing structural conditions and redistributive arrangements, is in decline” (2008a: 13). Democratic politics loses ground to market rationality. “Welfare governance seems to be perfectly compatible with the neo-liberal epistemological dissolution of the distinction between society and market, de facto ‘cancelling’ any notion of contestation between social interests and economic imperatives” (2008b: 389).9 As concluded by Robert Reich, there is thus not a trade-off between a market rationality and corporate social responsibility—on the contrary. A second and crucial critique of the discourse regarding responsibility of market actors is that ethical and moral questions lose their “intrinsic” character when they are dealt with from a business perspective. According to Shamir, moralization involves socio-moral questions being recoded as business opportunities (and risks), using an economic rationality. The meaning of the mainstream “ethics pays” argument being critiqued is that ethics becomes a business opportunity. Similarly, the possible violation of human rights, for example, or other incidents, can be calculated as risks with certain economic costs.10 Or in the words of Shamir, “applying the competitive imagery of the market to the newly founded moral agency of commercial entities, the political and cultural context within which corporations adopt socio-moral practices is recoded as a business opportunity” (2008a: 12). This moralization is not just to be seen as an “externally” imposed constraint on the market; what happens is that moral issues are framed through an epistemology that favors self-regulation. In effect: Moral considerations thus “lose”, so to speak, their transcendental attributes or at least their character as liabilities and re-emerge as business opportunities. [ . . . ] The result is a shift from deontological ethics to teleological (consequentialist)

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ethics that subordinate socio-moral sensibilities to the calculus of possible outcomes, to the test of cost–benefit analyses and to the criteria of reputational risk-management. The moralization process thus entails a set of practices that contribute to a constantly evolving and adapting neo-liberal imagination and, moreover, to the further economization of the political. (2008a: 14)

A third, main critique of Shamir’s was that there had been a “deradicalization” of corporate social responsibility (see also Sklair & Miller 2010). Shamir demonstrated in his ethnographic study of a corporate-friendly non-profit organization that trains mid-level corporate executives that corporate social responsibility is “transformed into a managerial tool, designed to enhance employee loyalty and to improve brand loyalty” (2005: 229). In the teachings of corporate social responsibility Shamir investigated, the philanthropic side was given great weight, whereas the conflicts and pressures that had led to the demand for corporate social responsibility in the first place were left out. As Shamir stressed: most of the meanings attributed to CSR associate it with corporate selfregulation, whereby corporations, out of their goodwill, engage in substantive “responsibility” projects, adhere to various voluntary codes of conduct, and display their social performances through annual reports, social auditing schemes, and a set of managerial tools and systems. Accordingly, CSR is often performed through displays of charity and community empowerment programs (overwhelmingly concentrated on “education”). (2005: 250)

The result is a deradicalization of the concept of corporate social responsibility. It is a process in which “CSR is by and large robbed of its radical political implications and reappears as an altruistic supplement to both civil society and government. Thus framed, CSR contributes to a meta-definition of the situation in which corporations decisively appear as benevolent good citizens who step in to fill the gaps that are left by governments who undergo privatization and deregulation” (2005: 250).

Republican liberalism: putting society and economy in the right order Throughout the history of intellectual struggles over capitalism, republicanism of some sort has frequently been invoked as a normative source for taming the excesses of market forces. Added to the catalogue of different critics of mainstream corporate social responsibility and similar notions, then, it is important to understand that business ethics as an academic, philosophical discipline is also about critiquing existing practices, not justifying them. One

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example, then, will demonstrate this, and will be helpful in understanding for which reasons business ethicists were critical of “really existing CSR.” Professor of economic and business ethics Peter Ulrich advocated a republican liberalism, a social-liberalism of rights.11 As with Dierksmeier, Ulrich’s was a philosophical attempt to try to construct a theory that is critical of contemporary capitalism. Moreover, both attempted to rearticulate an alternative version of liberalism against the one typically associated with Milton Friedman. A republican liberalism focuses upon “social and economic citizenship rights as a means of ‘civilizing’ the market economy” (Ulrich 2009: 149). Ulrich warned against neoliberalism’s failure to make a distinction between economy and society. Concerned with an “integrative economic ethics,” Ulrich made a plea for a new economic rationality that does not, like “conventional ‘pure’ economic rationality,” run “the risk of conflicting with the basic ethical rationality of a well-ordered society of free and equal citizens” (2009: 144). This republican liberalism relies upon a Kantian “unconditional reciprocal respect and recognition of human beings as persons of equal dignity” (2009: 145). From this Kantian perspective, ethical concerns enjoy lexical priority over the profit principle. This rests upon the imperative not to treat individuals as mere means. In this respect, Ulrich can be read also as a critic of mainstream market reformism, because his theory tried to explicate the limitations, seen from an ethical point of view, of the widespread tendency to found “virtue” upon the contingent premise of profitability. Ulrich’s position seemed somewhat close to John Rawls’ political liberalism, but Ulrich objected that: both political liberalism (in the Rawlsian sense) and radical market-based neoliberalism (libertarianism) hardly provide any motives for individuals to be interested in a just and unified, or at least a “decent” society, rather than in the sole pursuit of private interests [ . . . ] it is impossible to establish a better societal order without citizens who really want it, who understand it, and who are able to recognize their resulting self-responsibility as well as their co-responsibility for the res publica. (2009: 148).

For republican liberalism then, “the empowerment of people for both integration into and partial emancipation from the market is essential if we regard the enlargement of real freedom for all citizens as the essence of human development” (2009: 153). Ulrich argued that ethically, a society that does not support human freedom and dignity cannot be justified; hence, the market should be “civilized” by economic and social citizenship rights that preserve human dignity and freedom. Ulrich stressed that “a comprehensive concept of economic reason will include the legitimacy proviso, i.e. the categorical subordination of private benefit or profit seeking to the normative precondition of societal legitimacy” (2009: 145). In Ulrich’s ethics, societal legitimacy comes first.

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The myth of amoral business Ulrich argued that economic rationality and ethics cannot really be separated. Even when proponents of free market liberalism tend to “purify” the economic from ethical concerns, they still justify their principles and explain why strict individualism contributes to the common good. In prolongation of Richard de George, Ulrich confronted the “myth of amoral business” (de George 1990: 3ff.; Ulrich 2008: 376). As Ulrich noted: according to the myth of the amoral business it is precisely the strict observance of the so-called profit principle by the entrepreneur which ensures that the private economy serves the general interests of society in the best possible way. [ . . . ] Even the most radical advocates of a private economy “free” of ethics implicitly or explicitly seek to legitimate their standpoint by claiming that this focus best serves the public interest. (Ulrich 2008: 376f.)

In consequence, “no matter what position we adopt toward the ‘business is business’ formula, we are automatically involved in an economic-ethical discourse about the correct social role of entrepreneurial activity” (2008: 377). If an ethical stance is indeed inescapable, the task for an integrated economic ethics is to articulate principles that are justifiable from a moral point of view. From Ulrich’s perspective of republican liberalism, the profit principle cannot be endorsed as the highest: The strict maximization of profit cannot, in principle, provide a legitimate orientation for entrepreneurial activity, as it directly involves the subordination of all value standpoints or claims that conflict with the pursuit of profit. Every approach of corporate ethics which does not categorically make entrepreneurial orientation on success or profit dependent upon reservations to their legitimacy must be regarded as an economistic simplification. The legitimate pursuit of profit is always a morally bounded pursuit of profit” (2008: 397).

Ulrich further stated that profits cannot be the “criterion for justifying business activity,” as “the whole point of corporate ethics is precisely the unreserved critical examination of ethical aspects that might deserve priority over the pursuit of profit” (2008: 397, my emphasis).

Ethical limitations of corporate philanthropy and of the business case for ethics For Ulrich, ethical concerns enjoyed lexical priority over profits. This principle runs through Ulrich’s discrimination between four types of corporate ethics: instrumentalist, charitable, corrective, and integrative corporate ethics (2008: 398ff). He placed these on a continuum along which principles other than profit

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are weighted more and more heavily, and in the final “integrative corporate ethic” these outrank the search for profit. “Republican corporate ethics” thus “takes a position beyond the profit principle as its starting point” (2008: 398). As Ulrich stated, “attitudes towards the ‘profit principle’ play such a fundamental part in the discussions on the foundations of corporate ethics that the most important approaches can be ordered systematically in accordance with the degree to which they relate to this principle and its underlying economistic premises” (2008: 398). Ulrich’s discrimination of four types of corporate ethic was an attempt to conceptualize which of these types places the greater weight on the priority of profits and which on the priority of ethical concerns. In “instrumentalist corporate ethics” it is typically stressed that “ethics pays,” that ethics can be a good investment, and that there is “no necessary conflict between the acceptance of ethical considerations and the pursuit of profit and success” (2008: 398f.). This “business case” argument had also been put forward by Dierksmeier, but it is indeed a very common argument used in favor of various market reformist notions throughout the history here investigated. Furthermore, it is often argued that ethics is good for the corporate image as well as for employee motivation. But for Ulrich, this was not an ethical maxim properly understood, but “a kind of strategic intelligence” (2008: 400). In the words of Ulrich: Let it be clearly understood: neither the realistic content of such soft strategies is in dispute here, nor is the possibility that company managers can develop principles of behavior from such considerations which can also in part be welcome—so to speak as accidental side effects—from an ethical standpoint. [ . . . ] Yet we cannot overlook the fact that in instrumentalist corporate ethics the pursuit of success enjoys lexical priority, so that “ethics” is subordinated to the economic precondition that it “pays off” in the long run. Conditional ethics is not ethics at all, as it violates the inherent value of knowable moral duties, which provide the very foundation for the primacy of ethics. And what about all those conflictual situations in which ethics does not pay off in the long run? (2008: 401)

In sum, an instrumentalist corporate ethics is a conditioned ethics and is thus not really an ethics, as it suspends “knowable moral duties.” While Ulrich saw no reason to object to “building the ‘business case’ for corporate ethics [ . . . ] this cannot be the sum total of an unconditional and critical corporate ethics” (2008: 402). The second variant Ulrich explored is “charitable corporate ethics” or “ethics ‘post festum’” (2008: 402ff.). Here, profit is donated “after the competitive battle on the market has been brought to a successful conclusion” (2008: 402). The problem with this kind of corporate ethic, however, is that it fails to recognize that essential natural and socio-cultural preconditions or qualities of the good life and just social coexistence which are affected or harmed by the strict pursuit of

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profit maximization (e.g. irreversible ecological damage or the psychosomatic consequences of inhuman working conditions for the working population) do not have the character of purchasable goods. (2008: 403)

Ulrich pointed to the typical metaphor of the cake—first the cake has to be made, then it can be divided. The problem is, however, that “what lies behind the cake metaphor is, once again, the utilitarian fiction of an ethically neutral formal goal of maximum profit (or social product), from which all ethically justified claims subsequently can be met” (2008: 403). As is the case for most claims to corporate social responsibility (where this responsibility is conditioned upon the question of whether it can be afforded), Ulrich argued that this is not really a “radical antithesis” to profit maximization but merely “a partial revision of the old economistic position” (2008: 404). Third, Ulrich explored the idea of “corrective corporate ethics” and the “situative self-limitation of the entrepreneurial pursuit of profits” (2008: 404ff.). This stance incorporates the notion that ethics indeed can cost. But arguments coming from this position mainly point this out on an ad hoc basis (not in principle), and thus offer no true ethical orientation. Finally, Ulrich presented his own, fourth alternative of an “integrative corporate ethics” and its “fundamental critical reflection on the entrepreneurial pursuit of profit,” stressing that the profit principle must be “abandoned as a basic norm for corporate ethics”; he referred instead to the principle that pursuit of profit should always be subordinated to “the normative precondition of legitimacy” (2008: 408). Further: Integrative corporate ethics sees itself as a permanent process of unconditional critical reflection and the shaping of sound normative foundations for entrepreneurial activity in the service of life. The corporation should willingly commit itself to securing its existence and achieving its commercial success exclusively with competitive strategies of value creation which are socially legitimate and meaningful. This general basic norm of integrative corporate ethics can be termed business integrity. (2008: 409)

At the end of Integrative Economic Ethics, Ulrich then listed concrete “elements of an integrative ethical programme for corporations” (2008: 437–42). In sum, Ulrich articulated a philosophical argument in favor of “republican liberalism,” supporting citizenship rights. Republican liberalism is a normative philosophical theory concerning the good and just society and the good and just corporation. Ulrich’s integrative economic ethics involves an idea of “corporate citizenship” where ethics, properly understood (deontological ethics), is only characteristic of the “integrative corporate ethics,” since other conceptions of corporate ethics are, in the end, instrumental and conditioned, and/or ad hoc, as is seen in the business case for virtue and in corporate philanthropy. Ulrich’s philosophy supports both corporate reform as well as democratic politics. Unlike the mainstream, market reformist variant, it underlines the possibilities

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for conflict between profit maximization and ethics. Furthermore, it points to the limits of corporate philanthropy from an ethical point of view. By stressing citizens’ rights it does not, as with many market reformists, put the onus on societal change only on corporations and management.

Conclusion: triumphant global capitalism in an age of a new “great transformation” is countered by social and conservative critiques Globalization has been seen as a new, great transformation, comparable to that kind of great transformation which took place in the late nineteenth century, when the US industrialized at rapid speed, and where this movement toward a market society was met with a variety of responses for how to secure social protection. Both were contexts in which regulation of capitalism was understood to be weak or weakened. Both were contexts in which writers argued about what to do with a pure market regime, and with the pressures for a market economy becoming a market society. And both are contexts in which there were intense debates about how to create social protection for labor. In the late nineteenth-century US, market reformism arose as one kind of response, one way of offering social protection that was different from the kinds of social protection against market forces offered by, for example, progressives, and their incipient empowering of the state, or by labor unions. In the same way as progressives and others in the late nineteenth century responded to their ongoing transformation toward market society, so the great transformation of our age—globalization and the dismantling of “big government” and “big labor”—was met with a growing critique. The triumphant capitalism of the 1990s was met with an increased social critique, focusing upon inequality, poverty, and social and economic justice. As in the late nineteenth century, problems concerning the movement toward a market society were raised, with an increased critique of free market liberalism. And, as in the great American transformation of the late nineteenth century, both political reformist (and revolutionary) as well as market reformist responses arose, the latter being an alternative way in which social protection against unregulated capitalism could be offered. Across these political spectrums, then, there were different ways of conceiving of the new reality of capitalist globalization, and for ways in which to try and offer new kinds of social protection. The radical left, the reformist left, the “progressive” business creed, and neoliberals each had their different ways of conceiving the new reality of capitalist globalization—the problems, solutions, diagnosis, and forms of social protection, from radical and liberal

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republican ideas of global social and economic human rights, to neoliberal ideas about speeding up capitalist globalization toward a liberal future where all nations would (eventually?) enjoy prosperity through business, trade, and development. Table 5.1 sums up much of the historical argument in Chapters 4 and 5.

Critiquing the progressive business creed This chapter has also described how a host of different authors critiqued the new discourse of progressive and socially responsible business. A broad spectrum of authors, such as Thomas Frank, Michael Hardt and Antonio Negri, Robert B. Reich, and several sociologists, organizational researchers, and business ethicists, became interested in understanding and often critiquing ideas about the social responsibility of corporations and some of the possible side effects of the new, “progressive” discourse on capitalism and moral selfgovernance. In different ways, several of these tried to decipher what in Chapter 4 was termed the new entrepreneurial spirit of American capitalism. These critics argued that the discourse of capitalist moral self-governance would actually serve to strengthen market governance, and further weaken the belief in democracy. By assuming that corporations can take on ever more responsibilities, act as public charities, and take on welfare tasks, etc., “progressive business” says to people that private market agents can do things that political democracy used to do, and do it better. It says that we do not need old democratic institutions, the state, or labor unions to achieve a more socially responsive society, because business corporations are capable of taking on these social responsibilities. Critics have thus argued that the discourse of moral self-governance and progressive capitalism is actually rather on par with neoliberalism, not against it. It may, perhaps rhetorically, be opposed to unrestrained profit maximization. It may offer a critique of traditional business values. And it may be more closely associated with that kind of “managerial” business creed which we have found strongly represented in mid-century, and which we also saw closely related examples of in the late nineteenth century. But to the extent that it relies firmly upon the central values of individual responsibility and of limited government, “progressive business” or “entrepreneurial market reformism”, as its current embodiment has been called, is not too different from neoliberal governance. Rather, according to critics, it supplements it, because it can be seen as a response to criticisms of unchecked profit maximization in an age of globalization. Critics have thus argued that the mainstream business discourse on responsibility does not break with the principles of self-regulation and voluntariness.

Table 5.1. Rival views on social protection in the Second Great Transformation (c.1990–2000s) Political reformist ideas (unionism, Market reformist ideas (Chapter 4) Free market liberalism (late welfare state) neoliberalism) (Chapter 5) (Chapter 5)

Problems identified

Inequality, insecurity, bad working conditions, global inequality, destruction of environment (ecological criticism) Rejection of nation-states as proper and/or realistic mode of handling capitalist globalization

Inequality, insecurity, flexibility of labor market, market externalities, deskilling and corporate surveillance of employees (Noble) “Race to the bottom” leading to less regulation, lower taxes, corporations moving taxable incomes abroad, etc. Ecological criticism Markets create negative externalities (Noble)

Lack of responsibility of business, lack of public’s trust in business, business shaming campaigns, threats to environment Market externalities Lack of higher meaning of work and the corporation Corporations charged with violating human rights

Socialist, social-democratic, interventionist, and Keynesian welfare states stifle economic growth and development Bureaucracies, public sector, inefficiency

Solutions offered

International labor movements Global citizenship, social wage, and guaranteed income for all Socialize means of production Anti/alternative globalization movements Communism, radical republicanism, anarchism Multiple (extra-parliamentary) forms of resistance

Social protection and lessening of inequality through the institutions of constitutional democracy, the national welfare state, and redistribution (Rorty) Countervailing powers vis-à-vis market forces, including labor unions and the right to conflict (“pluralism”) (Frank, Noble) Rights: social, economic, labor, welfare rights, social safety net “Progressive” legislation and policies, e.g. new environmental standards

Corporate social responsibility (CSR) Codes of conduct Social (ethical and green) accountancy and reporting Corporate citizenship Corporations supporting community development “Social business entrepreneurs” (Yunus) Value-based leadership “Shared value” (Porter) UN Global Compact (based upon voluntariness)

Markets and “coming as close to the market” as possible: individualization, empowerment, decentralization (Bartlett & Ghoshal, Friedman, Peters) Competition Private property Natural markets, order, and spontaneity versus artificial government Survival of the fittest (T. Friedman) Innovation and entrepreneurship (the entrepreneur as hero, cf. Fukuyama) (continued )

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Radical ideas (socialism, communism) (Chapter 5)

Table 5.1. Continued

Diagnosis “Empire” “Immaterial labor” means that capitalism in its production practice is socialized (but not in its property forms)

Political reformist ideas (unionism, Market reformist ideas (Chapter 4) Free market liberalism (late welfare state) neoliberalism) (Chapter 5) (Chapter 5) “Golden straitjacket”: private not public sector, low inflation, downsize state, balance budget, remove barriers to trade and foreign investment, eliminate monopolies and subsidies, privatize (also e.g. banking and telecommunication), deregulate (economy, capital markets, pension systems, etc.), outsource, reduce taxes (T. Friedman) Social efficiency through global division of labor (Fukuyama) Shareholder value-maximization (see Lazonick & O’Sullivan 2000) Network “Embrace change” (Peters) Trickle-down economics (Fukuyama)

Functions of state which markets cannot perform, e.g. provide laws, protect property, regulate, mitigate business cycles, provide public goods (defense, clean air) and fair access to essential goods (infrastructure, research, education, health care, clothing, food, housing) (Noble)

Consumption of product directly linked to charity Fair trade Corporate charity, philanthropy Self-management, workers as their own entrepreneurs/managers, responsible for own employability and human capital (Bartlett & Ghoshal, Covey, Drucker) Self-transformation, self-help, personal development and “growth,” personal and organization “growth” combined (Covey)

Rise of “cultural criticism” and demise of “social criticism” part of explanation for increased inequality (Rorty) Rise of “new economy ideology” part of explanation for demise of social criticism (Frank)

Post-capitalism, knowledge society No alternative to capitalist (Drucker) globalization Social protection through strong Middle-class society (Fukuyama) civil society (Drucker)

Social Global rights, international labor The welfare state, labor unions, protection movements, socialism various social and economic rights—social-liberal pluralism

“Progressive business”: corporations taking on social responsibilities, consumers buying in a socially responsible way

Everyone can take care of themselves—through hard work and self-improvement Capitalism leads to economic growth

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Radical ideas (socialism, communism) (Chapter 5)

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According to critics, this does not mean that it does not have “positive” effects or that it might not be a useful alternative in some contexts of under-regulation; but it does mean that it is frequently advocated as an alternative to political reformism (democratic legislation, labor unions, welfare politics, welfare rights, etc.). Several critics did concede that this might also mean that financial goals are sometimes actually moderated or supplemented by other goals and rationalities—that not all forms of trade, market transactions, capital accumulation, etc. are equally legitimate—and that capitalism in this respect is “civilized” by its new responsibilities (Boltanski & Chiapello 2007: 24–7; Shamir 2008a). The consequence however, according to critics, is still a weakening in the belief of democracy, and in the belief of that kind of pluralistic society which is based upon a variety of strong institutions and a broad range of human rights. Furthermore, critics have argued that corporations are not democratic institutions. Compared to a representative democracy, they do not have democratic elections, and no inbuilt mechanism to secure a public responsibility toward a broad constituency in which all interests, in principle, should be represented, and where people would be able to vote for a new management of corporations. Finally, critics have argued that corporations often do not practice what they preach, i.e. that there is a gap between their professed ideals and commitments to corporate social responsibility, and their actual practices, and that their humanistic and social responsibility rhetoric is too often mere window dressing. They have argued that the moralization of the market means that moral questions are reframed from within a market perspective, and that there has been a deradicalization of the concept of corporate social responsibility. Across this very varied field in which different actors engage in struggles about defining, interpreting, criticizing, and evaluating the kinds of business– society relationships and market–democracy relationships that define our time, some general issues are at stake. First, key concepts such as corporate social responsibility are concepts that are used to describe, to justify, but also to criticize, current practices. They do not belong to any one side of these debates. This makes it difficult to argue that they are simply an ideology of a ruling business class, since they are concepts which are also used against immediate economic business interests. Furthermore, human rights, environmental issues, and sustainability are now part of the discourse on business responsibility, and to a much larger extent compared to previous business responsibility discourses examined in this book. Having come so far, we may ask whether market reformism in the era of globalization marks a historical rupture, in the sense that this was a completely novel way of thinking about capitalism. The answer is no. It should rather be seen against the historical backdrop of continuous struggles over the contested legitimacy of capitalism, where comparable market reformist notions have played a key role.

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1. In revisiting Fukuyama, we shall pay less attention to the “liberal revolution,” i.e. the actual spread of democracies in the aftermath of 1989 (Fukuyama 2006: 49–50), as well as to Fukuyama’s neo-Hegelian philosophy of history. Rather, I shall concentrate upon his critique of capitalist-liberal democracy. 2. A non-exhaustive list of important intellectuals from Rorty’s reformist left includes: Walter Lippman, John Dewey, Upton Sinclair, Herbert Croly, Michael Harrington, Arthur Schlesinger Jr., Richard T. Ely, and John Kenneth Galbraith. (Rorty generally discredits the Marxist left and the way the “real left” eschews social-liberals and social-democrats.) According to Rorty, referring to Gitlin (1987), it was the crucial events of 1964 that lead to the break with the reformist, participatory left to the formation of the New Left (i.e. the Tonkin Gulf Resolution and the Democratic Convention that year). 3. In the context of congressional Republican politicians as well as corporate executives speaking warmly of the virtues of the free market, Noble argues that tax subsidies and special benefits are often given to those very same politicians’ states and the executives’ companies (Noble 2003: 4–6). 4. It seems quite peculiar that although struggles as diverse as “the Tiananmen Square events in 1989, the Intifada against Israeli state authority, the May 1992 revolt in Los Angeles, the uprising in Chiapas that began in 1994, and the series of strikes that paralyzed France in December 1995, and those that crippled South Korea in 1996” (Hardt & Negri 2000: 54) are thought to be “incommunicable” and thus incapable of being translated into other contexts and struggles, it is nonetheless implied that “in fact they all [the events listed here] directly attack the global order of Empire and seek a real alternative. Clarifying the nature of the common enemy is thus an essential political task” (2000: 56–7). But can all these struggles really be seen as a common rise against “Empire,” disregarding the nature, the context, and not least the understandings of the different historical actors themselves? Can the student uprising at the Tiananmen Square be interpreted as a struggle against “Empire,” not to speak of a struggle against capitalism? 5. Indeed, as highlighted in Chapter 2, one of Taylor’s arguments was that his system would “liberate” the worker from the burden of doing tiresome brain-work. 6. Thompson’s critiques were many; among others it was stressed that “Even for the most highly skilled and knowledgeable workers, capitalist forms of ownership and control still provide the context in which commodities are created and exchanged, and thus employment and work organized”; and further, that “the idea that the labor process and labor time are no longer significant areas of contestation is belied by a substantial body of research that identifies a rising tide of labor intensification associated with new forms of work organization and management” (Thompson 2005: 83, 85). Whereas authors as diverse as Boltanski and Chiapello, Frank, and Rorty, all mainly stressed the need for a revival of the “social” critique of capitalism, i.e. a critique working for more social justice in terms of economic distribution, economic security, and social rights, critical perspectives have also engaged with critical workplace and labor studies, confronting the image of the romantic, joyful, and exciting workplace with real-life working conditions.

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7. See Zelizer (2000) for an account of the argument about “hostile worlds.” Of course, I have not claimed here that Shamir wrongly points to the dangers of businesses dealing with ethical problems from an economic, cost–benefit point of view. 8. Shamir invented yet another neologism here, “corporization,” to describe when public institutions are reconstructed as corporate-like entities. 9. Perhaps too deterministically put, Shamir casted an eye on the relationship between capitalism and legislation in relation to corporate social responsibility: “the field of CSR tells us something important about the relationship between latter-day global capitalism and law. This relationship, inasmuch as it manifests itself through schemes of governance, brings about the privatization of law in the deepest sense of the term: the decentralization of the sources of law and the transformation of rules into a multiplicity of instruments indicate the ability of latter-day capitalism not only to constantly revolutionize the means and relations of production but also to fundamentally transform the means and relations of political authority” (Shamir 2010: summary; cf. also Shamir 2011: 20). 10. A vast amount of literature concerns the financial effects of “being ethical,” seemingly endlessly discussing (sometimes in ambiguous terms) the “value” of morally sound behavior (see e.g. Vogel 2005). Simultaneously, the same measures are being discussed within a framework of risk-management—what will happen if we do get caught engaged in unethical behavior? Is it worth the risk? (Shamir 2008a: 11). 11. Ulrich’s article “Towards a civilized market economy: economic citizenship rights and responsibilities in service of a humane society” (2009) summarizes some of the key points from his Integrative Economic Ethics: Foundations of a Civilized Market Economy (2008). The latter is a major work in contemporary business ethics.

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Conclusion Progressive Business and its Critics in Retrospect

This book has mapped an intellectual history of ideas about the moral selfgovernance of corporations, and ideas about the self-reform and renewal of capitalism. Its main emphasis has been on the United States. Its key aims have been to demonstrate the long-lasting continuity of these ideas; to show how they have changed in the course of time; to show how these ideas were critiqued and for what reasons; and to show how they were part of their historical contexts. Some of the book’s main contributions have been conceptual, producing empirically grounded concepts for how to distinguish between different periods in the history of the idea of the moral self-governance of business. In the First Great Transformation, market reformist ideas can be summarized under the heading paternalistic market reformism, in the New Deal era as managerial market reformism, and during the Second Great Transformation as entrepreneurial market reformism. We started this book by taking notice of the widespread ideas about the responsibility of business in contemporary society, and about visions of a new, “gentler” capitalism—one that is greener, more socially responsible, less polluting, and fairer; one in which corporations submit to the UN Global Compact, where businesses support community development in developing countries in which they operate, and where consumers buy fair trade products. Expectations about a sea change in the moral fabric of business may, once again, have been shattered in the aftermath of the most recent financial crisis (although, as I argue at the end of this Conclusion, the financial crisis triggered a new surge of market reformism, specifically in relation to finance). But this does not mean that it is not important to understand these ideas, where they came from, what their functions have been, and how they have been critiqued. I conclude this book by addressing three questions. First, returning to the Polanyian theme of social protection outlined in the Introduction, what are some of the book’s main historical explanations? What did we gain from looking at the history of market reformist ideas as a whole? Second, what have

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been the most recurring critiques of market reformism, i.e. what have critics mostly emphasized as being wrong with the idea of moral self-regulation of business? Third, what is the wider analytical significance of the concept of market reformism—how can it, for example, shed light on the latest financial crisis? Finally, the Conclusion offers further comparisons with other people’s work and reflections on limitations of this book—suggestions for further research will be offered along the way.

Social protection through business? Concluding remarks This is, at bottom, a history of ideas. I have mapped developments and trajectories of different modes of thought and of intellectual interventions in historical and contemporary debates about the role of business in society, the nature of capitalism, and the ethical responsibilities of business. Taking a cue from Karl Polanyi, I have tried to show how market reformism—moral selfgovernance of business—can be seen as an alternative offer of social protection: one that is offered by “progressive businesses,” and very often (but not always) in opposition to those kinds of social protection which were offered by labor unions or the welfare state. To be sure, I have not made strong claims about how these ideas have influenced the path of history, and about the role of institutions, but rather looked at discourse and interpretive struggles. These discourses follow, however, a somewhat similar pattern: critique lays bare specific risks or injustices in capitalism, opening up a “space” with negotiations and power plays about how to handle these problems (if at all). This raises issues about which institutions and actors are responsible (the state, labor unions, businesses, NGOs, employers, employees, etc.) and for what, and it touches upon much broader ideological concerns about, for example, the role of business in society, the role of the state, property rights, the relationship between employers and employees, etc. In the face of critique, market reformism becomes one such solution, a promise—or a request—about internalizing externalities. The historical discourse on moral self-governance of business bears witness to this “contested space”—a power play with different actors, tactics, and strategies. One thesis of this book is that especially when core ideas of free market liberalism have been threatened, “market reformism” has been another battleground for the social legitimacy of business. Core ideas of free market liberalism—free markets, private property, private command, limited government—were not in vogue in the Progressive Age, and not in the New Deal era. Whenever the moral sources of free market liberalism dry out, the social legitimacy of business and its substantive rationality must be grounded

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in something different, and here market reformist ideas have played a key role. Why did late nineteenth-century employers engage in profit sharing, everything else being equal, if not to preserve as much decision making and economic power as possible, in a “hostile” environment? Why do so many corporations today speak of their social responsibilities, if not to give their business a social legitimacy that is not provided for by ideas of free market liberalism? One ideological role that ideas such as Bill Gates’ “creative capitalism” seems to play, is to show how capitalism can continue to accommodate critique and to improve global well-being more effectively and efficiently than labor unions and the state. Market reformism helps explain why the balance of power between the state, labor, and business did not shift even more toward the two first during times when private business and free market economics and ideas were severely challenged. It helps explain the continuing social legitimacy of business especially in times when free market ideas were less popular. Market reformism has shown how business ideology could: (1) respond to criticisms (which also mean that it can be used, critically, against businesses); (2) offer an alternative kind of social protection than labor unions and the state; and (3) achieve social legitimacy based upon ideological sources other than free market thinking. So, for example, in Chapter 1 on industrialization from the Gilded Age until the Progressive Age in the US, then, the thesis was that market reformist ideas arose as responses to a largely unregulated capitalism with very low levels of institutionalized social protection. It represented another kind of response to problems and strains associated with a movement toward market society. In that era of unregulated capitalism, market reformist ideas mattered. They have sometimes been a deliberate business strategy in order to accommodate criticisms and to gain social legitimacy, often to curb the power of labor unions and, later, of welfare politics. It represented a “soft” response in comparison to the traditional hard line toward employee resistance. With the coming of New Deal liberalism, and in the context of the crisis of free market liberalism as well as of democracy in the interwar period, market reformist ideas represented a way in which capitalism would be civilized, but without handing over more power than absolutely necessary to the federal state and to labor unions. Such views have here been represented by Barnard, Drucker, and Mayo. They were part of what Francis Sutton and his co-authors back in 1956 described as the “managerial creed”—a new variant of the American business creed, differing from the classical business creed, but agreeing on salient points: limited government, private property, and private command. Later, the New Deal regime started crumbling, giving way to neoliberalism. But, during globalization, and with the renewed social and ecological criticisms, market reformism rose to the fore again, offering another kind of social protection in a global context in which, according to many

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observers, welfarism, social goods, and organized labor are under pressure, and where there is a very limited global framework of regulation and of enforceable legislation against capitalism’s “race to the bottom” effects. Market reformism is a way in which the social legitimacy of business is fought for especially when free market liberalism is critiqued. When political reformism or revolutionary thoughts are on the rise and free market liberalism discredited, market reformism is a viable alternative strategy. Business interests may respond to growing criticism, and business protagonists may seek to preserve influence and power, and “to save capitalism against itself.” Such was, grossly put, the kind of rhetoric in the writings in the late 1930s and beginning of the 1940s, when ideas of laissez-faire were almost dead, when “neo”-liberals were in favor of welfare rights, and when market reformists such as Drucker and Mayo thought that the spirit of free enterprise could only be saved if industry became more socialized. Neoliberal ideas are the responses preferred by business when the welfare state is in “crisis”; market reformist ideas are the response when business and free market ideas are in crisis. This should only be taken as a broad statement which needs to be qualified empirically and historically, as, e.g., when it is pointed out that the corporate social responsibility concept is also used against corporations, or when the idea of “partnership” between business and the state is underlined, stressing the need for regulation and not only moral conduct of business. In the end, then, one further explanation for the attractiveness of moral selfgovernance of business is that it shares something with the appeal of free markets, namely that politics becomes unnecessary. As Block and Somers (2014: 34f.) explain in their book on Polanyi, “distaste for politics is deeply rooted in the modern Western tradition,” one reason being that “the practice of politics is almost always conflict-ridden and ugly.” If the market fails, moral self-regulation promises an alternative to the messy affair of political polarization, hostility between rival camps, ungraceful compromises, and careerdriven political actors. Table 6.1 juxtaposes the three identified forms of market reformism (comparing Tables 1.1, 2.1, and 4.1). As stated in the Introduction, a shared characteristic across the different forms of market reformism has been to criticize that imagery of the business corporation which is given by different versions of “liberalist” economics. Throughout, the idea of economic man, the naturalness of pursuing ones self-interest, and the idea of the profit-maximizing firm, are, if not critiqued or even outright rejected, treated with some ambivalence. It is striking that authors as different as Washington Gladden, writing at the end of the nineteenth century, and Sumantra Ghoshal, writing at the beginning of the twenty-first, both argue against liberalist economics as a moral world view. The market reformers reject the view that this world view is neutral. Instead, it is a moral and a prescriptive ideology, naturalizing the pursuit of self-interest. Throughout, they have emphasized social and moral responsibilities beyond

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Table 6.1. Comparing market reformism in the First Great Transformation, the New Deal era, and the Second Great Transformation

Key reform ideas: what is to be done?

First Great Transformation: paternalistic market reformism (Chapter 1)

New Deal era: Second Great managerial market Transformation: reformism (Chapter 2) entrepreneurial market reformism (Chapter 4)

Cooperative movements Profit sharing Industrial partnerships Industrial betterment Welfare work Owenism and “enlightened employers” Company towns Company unions Cleaning up factories Private charity/ philanthropy

Human relations and human groups (Mayo) Industrial citizenship (Drucker) A free enterprise system for countering business cycles (Drucker) Corporate philanthropy (funding e.g. education)

Corporate social responsibility (CSR) Codes of conduct Social (ethical and green) accountancy and reporting Corporate citizenship Corporations supporting community development “Social business entrepreneurs” (Yunus) Value-based leadership “Shared value” (Porter) UN Global Compact (based upon voluntariness) Consumption of product directly linked to charity Fair trade Corporate charity/ philanthropy

Importance of workers’ sense of individual and social purpose (Mayo) A corporation “lives in society”; it is a social institution, not just an economic one; it is larger and more permanent than shareholders (Drucker) Christianity (e.g. Drucker) “Cooperation” (Barnard) Importance of noneconomic motives and of “service” (Barnard) The social responsibility of business The “soulful corporation” (Kaysen)

Social responsibility Sustainability and sustainable Third World economic development Corporate citizenship: the corporation as “a good corporate citizen” (e.g. Carroll) “Corporate conscience” (Selznick) “Humanism” in business, a common humanity, “life” “Creative capitalism” (e.g. Bill Gates)

Early twentieth century: Welfare capitalism Corporate pension funds Americanize, discipline, and morally improve workers (e.g. Taylor) The “class passers”: reforming the workplace from within Social justifications and key normative terms: why social responsibility?

Responsibility “beyond wages” Responsibility beyond the laws of supply and demand Laws of Christianity rank above liberalist political economy “Service” (e.g. Ford)

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Economic justifications of social responsibility

“Business case” for “philanthropy” (e.g. Ely on Pullman)

Business case for The business case for human relations and CSR industrial psychology Business case for CSR: divided opinions (e.g. Kaysen)

What is being rejected?

Liberalist political economy and the principle of maximizing own self-interest as a superior moral doctrine

“Economic man” The profit motive “Natural order” and “laissez-faire”: capitalism needs a new social ethic

A “dehumanization” of practice through the world view offered by neoclassical economics, in which it is “natural” to pursue one’s self-interest in a world governed by market “laws” (Ghoshal) Omitting thinking about moral and social responsibilities Critiques of Milton Friedman-style liberalism Economic development which is not life-serving

Who has a responsibility?

Primarily individuals Capitalists and individual entrepreneurs, owning and managing companies Workers themselves: through self-discipline, self-help and “economy” they can create their own industrial partnerships and move beyond “the wages system” (Gladden)

Corporations and managers of corporations The manager balances between multiple responsibilities (Kaysen, Sutton et al.)

Corporations Employees are their own “managers,” responsible for their own employability and human capital Consumers

Workers Responsibility toward whom or Workers’ families what?

Employees Consumers Stockholders The general public: community and nation Suppliers and other business contracts (only sometimes emphasized, cf. Sutton et al.)

Multiple “stakeholders” The environment Global supply chain and conditions for suppliers (only sometimes emphasized)

Ideal type example

A manager of a big corporation with multiple responsibilities, funding public education

A global corporation with distinct CSR profile and code of conduct, communicating its community development efforts in underdeveloped countries as part of its corporate image

A benevolent factory owner, offering recreational facilities to employees

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legal and economic compliance. They have argued that the economic world and its business logics should not constitute a sphere or world of its own, separated from common moral norms and claims. We may ask how significant the ideas of, e.g., management writers have been. But the fact that the ambivalence toward the profit motive was not just shared by management writers and other authors examined in this book, but also by American business associations, has been shown in recent research in economic sociology (Spillman 2012). As also stated in the Introduction, the history of the social responsibilities of business and of business ethics goes further back than its alleged midtwentieth-century rise, or its alleged late twentieth-century “revolution.” In Chapter 1 we saw that ideas about reforming business “from within” were widespread in the late nineteenth-century. And throughout the late nineteenth century until the present day, ideas of social responsibilities of business have been discussed, whether in the terms of responsibility “beyond the law,” “beyond wages,” “beyond the economic laws of supply and demand,” or as the insistence that the “business enterprise” is part of a wider social system. Ideas of social responsibilities have, throughout, been part of the struggles about defining the true and the proper workings of American capitalism.1 Similarly, economic justifications for social responsibilities beyond the law also predate the late twentieth century. Throughout, we were able to find examples of the argument that taking on extra social responsibilities or “being ethical” pays—that it is, simply, good business to act more ethically. For example, we found evidence of the “economic argument for virtue” being discussed in Richard Ely’s critique of the factory town of Pullman in the late nineteenth century, and in the embracement by American employers’ associations of “human relations” on purely economic grounds in the midtwentieth century. This finding is also supported by recent research which shows that the “business case for virtue” was indeed very widespread in the late nineteenth and the early twentieth centuries (see, in particular, Abend 2013; 2014). Since social responsibility from its earliest days was justified on economic grounds—i.e. with a strategic interest—the narrative about a historical development from a purely altruistic corporate social responsibility to a strategic version of corporate social responsibility is inadequate (Banerjee 2008: 60; Carroll 1999; Shamir 2008a; Vogel 2005). Second, even if market reformist ideas were not justified in economic terms, they may very well have been equally strategic. My point is that an idea of strategy which confines itself to dealing with economic goals only is much too narrow, as strategic action encompasses much more than economic motives. As Pierre Bourdieu (1990; 1992; 2005) reminded us, different actors may have different interests and stakes in a particular social field, with each of their expressed or tacit strategies. The written texts studied in this book are each and all speech acts, with purpose, intention, and use. They are interventions in

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debates. The ideas of social responsibility occur in contexts in which various objectives may have been pursued: to combat industrial unrest, to provide a viable business alternative to labor unions or to the welfare state, to avoid public shaming campaigns and consumer boycotts against corporations, to secure and to bolster the social legitimacy of capitalism through the funding of education, to advocate moral self-regulation of business in order to avoid regulation of business by the state, or to secure one’s own recognition and reputation as a social reformer. All such goals may be seen as strategic. The story told here suggests that different corporate persona, whether it was industrial capitalists in the late nineteenth century, corporate managers in the mid-twentieth century, or the corporate social responsibility officer of a global firm today, may have themselves engaged in social responsibility for economic or for other reasons. The quest for social legitimacy of business, and in a wider sense capitalism, then, is to be seen in this wider political context about the struggle to define the way forward for industrial modernity. In brief, the readings here suggest that there was not a historical shift from social responsibility in an early form of “pure altruism,” to a newer form of “pure self-interest.” Market reformist ideas have been articulated and discussed in an institutional field composed of different key institutions—businesses, the state, labor unions, employers’ associations, church associations, etc.—in which different actors and different organizations have had different stakes in the game (see, e.g., Shamir 2004a). Whereas other research methods would be necessary to follow this through, the implication of this study is that different forms of market reformism can be seen as being part of broader institutional fields, with particular kinds of actors and strategies. It would be very misleading only to speak of strategy in cases where a particular economic interest is manifest. Such historical fields could be delicately reconstructed by future historical and sociological research.

What is wrong with market reformism? Historical critiques in retrospect If this is what, overall, constitutes some of the main historical trends of three different periods of market reformism, what about the ways in which this kind of thinking has been critiqued? What are the crucial similarities, and differences, of the ways in which ideas of benevolent business, enlightened capitalism, etc., have been critiqued? Table 6.2 summarizes leftist critiques of market reformist ideas. It does not distinguish between the many different strands from within the left, spanning late nineteenth-century progressives to

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Table 6.2. Comparing leftist critiques of market reformism in the First Great Transformation, the New Deal era, and the Second Great Transformation First Great Transformation (Chapter 1)

New Deal era (Chapter 3)

Second Great Transformation (Chapter 5)

Undemocratic, insufficient and institutionally unbalanced

Particularistic, opportunistic, arbitrary (as opposed to universalism and the rule of law and rights) Does not allow everyone to benefit from society’s progress Social responsibility too contingent Too much concentration of corporate power Too little room for individual autonomy Rejection of big businesses as a mere “private affair” Paternalistic: demands too much loyalty, allegiance, and commitment

Neglects the freedom to conflict (versus “liberal pluralism,” “checks and balances,” and “countervailing powers” (Galbraith)) Neglects differences of interest between labor and capital Too much concentration of corporate power Neglects independence, freedom, personal liberty, and privacy Paternalistic: demands too much loyalty, allegiance, and commitment

Corporations are not democratic and do not represent the public interest (Reich) Lack of universal rights: does not secure rights (human, welfare, social, economic (e.g. Ulrich) Philanthropy insufficient for “social protection” (Noble) Lack of pluralism: neglects the role of the state and other organizations in securing rights and social protection

Displaces critique

The rhetoric of benevolent capitalism needs to be tested as regarding whether it represents a way forward for industrial civilization (Ely)

Hypocritical/false: corporations still optimize self-interests (Galbraith) Capitalism as a culture and as a system promotes profit maximization, also behind the “soft” rhetoric of “the soulful corporation” (Baran & Sweezy); the idea of “the soulful corporation” is a powerful, ideological description which distorts social criticism (Baran & Sweezy) Manipulative: manipulates workers in the name of their own welfare, using industrial psychology (in the name of value-free science) as a means, possibly leading to stronger alienation (Fromm)

Hypocritical/false: behind the new business ideology, the business of business remains business, i.e. profit maximization (Banerjee, Frank); social responsibility ideas part of “new economy,” “market populism” ideology (Frank) By offering a vision of more socially responsible business, it strengthens market fundamentalism/market governance (Banerjee, Frank, Reich, Shamir) CSR and stakeholder theory often used as a smokescreen for furthering corporate interests, deregulation, and neoliberal policies (Banerjee)

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Unethical: it is a conditional ethics

Unethical (instrumentalist ethics) “Philanthropy” based upon an “ethic pays,” “quid pro quo”-logic, is not ethical in a stronger sense (e.g. Christianity and an unconditional ethics, cf. e.g. Ely or Gladden)

I did not, in the texts examined from this time period, directly encounter critiques of practical business ethics for being a conditional (consequentialist) ethics. Given the history and continuity of these debates, however, as they have been investigated in this book and for example in Abend (2014), it is more than likely that they were articulated (historically, they have often been underpinned by a Christian or a Kantian moral philosophy). Hopefully, others will continue research in this area.

Unethical (instrumentalist ethics) The idea that “ethics pays” is an instrumentalist ethics (Ulrich) “Charitable corporate ethics” relies upon a “utilitarian fiction” (Ulrich) “Hostile worlds” argument: socio-moral concerns are reframed as business opportunities and risks (Shamir)

Diagnosis: strengthens market selfgovernance

Represents a kind of neo-feudalism in which corporations/capital is the new master (e.g. Ely)

Represents paternalism, “neo-feudalism,” or even totalitarianism, suppressing liberal pluralism and/or a truly socialized economy

Social responsibility ideas part of neoliberal project/governance (e.g. Shamir) Diverts attention away from democratic governance (legislation and rule-setting) Related to the “crisis of democracy” (Reich)

mid-century New Dealers and Marxist critics, to late twentieth-century socialdemocratic critiques. The table has been constructed by tracing critiques of market reformism throughout the book. The arguments which run through the critiques of market reformist ideas cluster around four major allegations: first, that market reformism is unsatisfactory in terms of democracy, solidarity, and pluralism in the core institutional fabric of society; second, that market reformism may distort social criticism, as it redescribes capitalism in more morally favorable terms (and if not capitalism itself then its potentials for future development); third, that market reformism is, by “higher” ethical standards, unethical; fourth, that from a diagnostic point of view, market reformism strengthens market self-governance at the expense of democratic governance (in the two first

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periods it was critiqued for being paternalistic and neo-feudalistic, and in the third time period it was charged with being a perfect supplement to neoliberal governance, rather than being in true opposition to it). To be sure, any such critiques were contextual; they appeared in particular historical contexts, in which particular ideas were discussed. What I have done in the following, however, is to highlight continuities in the history of critiques of market reformism.

Market reformism’s failure in respect to democracy, universal welfare, and institutional pluralism According to critics, market reformism is insufficient in terms of democracy, the provision of welfare, and institutional pluralism. The very idea of the business corporation as the primary driver of public interest and of overall welfare has been a repeated point of critique from the left. In various ways, leftists have instead opted for pluralism. That is, a society which relies upon several key institutions, not least labor unions, the state, legislation, and democratic institutions in general (there are, of course, crucial differences within “the left,” if at all it makes sense to speak of one left). The health and power of these non-business institutions are a means for achieving public interest and welfare, for securing a system of checks and balances and upholding independence against the power of business, and for providing social protection, rights, social security, and equality through various means, ranging from redistribution through the tax system, provision of public goods, factory and child labor legislation, and collective bargaining. According to critics, some businesses might indeed practice more extended forms of social responsibility, and act as progressive employers. But at the end of the day, the strong reliance upon these two institutions—a free market system combined with ethical business—is dangerous and undemocratic, leaving too much power to corporations, which can become paternalistic and manipulative. Throughout, critics have argued that corporations are not democratic institutions, and that they cannot support universal rights and welfare. Critics have argued that corporations, if left to moral self-regulation instead of legislative regulation and a system of checks and balances by other institutions in a democratic society, will behave very differently: whereas some corporations might work for better working conditions and wages for employees, others will not. Against the idea of progressive employers in a free market system as the two most important institutional pillars of society, then, critics have opted for pluralism, democracy, and universalism. In brief, free markets combined with benevolent capitalism do not bring enough social and economic equality and justice.

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Market reformism provides an ideological smokescreen for capitalism, leaving social critics in the dark Critics have for a long time raised the concern that market reformism may lead social criticism astray. Indeed, a striking feature of the history of leftist critiques of the idea of progressive employers is the repeated seriousness by which they have dealt with the rhetoric of “soft capitalism,” and with the concern that it leaves social critics in the dark. From Richard T. Ely, writing in the late nineteenth century, to Paul Baran and Paul Sweezy writing in the midtwentieth century, to a host of contemporary critics, there has been an awareness that the rhetoric of soft capitalism, whether that of the benevolent factory owner, the soulful corporation, or as the corporate social responsibilityembracing global firm, may, intended or not, serve to strengthen the social legitimacy of capitalism. “Questionable activities,” as intellectual historian Quentin Skinner (2002: 145–57) once called early modern commercial practices in his account of Max Weber, are in this way described in a more positive moral light. And this potentially leaves the public with the impression that capitalism has, really, become more socially responsible. If the corporation is more soulful, more benevolent, or more socially responsible, there is less need for regulation and for other institutions to check and balance the power of corporations, or to provide welfare to citizens. The redescription of capitalism by market reformism, then, may lead social criticism astray. This is one of the reasons why it was important for Ely to show the world that benevolent/ philanthropic capitalism, as in the Pullman town, was not the way forward for society to make progress toward more solidary distributions of welfare; for Baran and Sweezy to start their book by critiquing the notion of the “soulful corporation;” for Thomas Frank to write a critical book about “market populism;” or for Boltanski and Chiapello to investigate the new “spirit” of capitalism. In each their different ways, the idea that the ideology of market reformism might lead criticism astray was given high priority in their work.

Market reformism: an instrumentalist kind of ethics Sometimes distinctions are drawn too hard. But whereas the first two critiques were most of all critiques of market reformism for political reasons—which had to do with its insufficiencies in respect to democracy, welfare, institutional balance, power mechanism, and the distribution of power—the third criticism is mainly an ethical critique. A persistent critique of market reformism has been that it constitutes an instrumentalist kind of ethics, and that this kind of ethics is not ethics proper. The very idea that it is good business to act more ethically or to be more socially responsible—sometimes referred to as the “business case for virtue”—has been critiqued throughout the history of

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market reformism. It has been critiqued for being unsatisfying from a “stricter” ethical point of view, and for being an instrumentalist kind of ethics. In the First Great Transformation, for example, Richard T. Ely critiqued the idea of “philanthropy” in the company town of Pullman, which was based upon the idea that it was in the economic self-interests of industrialists to offer better living and working conditions. Similarly, Washington Gladden argued that the ethic of Christianity enjoyed what today’s moral philosophers would call “lexical priority” over the laws of supply and demand. They shared the conviction that there are certain moral duties which should not be conditioned upon whether they make economic sense or not. Ethics was to be seen as more than just sound business. At this point, their critique resembles that of some of the business ethicists and sociologists that analyze the “business case for virtue” in the contemporary era. Business ethicist Peter Ulrich (2008), for example, argued that the “ethics pays” argument is an instrumentalist ethics which relies upon a utilitarian fiction, and sociologist Ronen Shamir (2008a) argued that ethical concerns in corporations today are reframed and calculated as business risks and opportunities, whereby they lose their intrinsic worth. The late nineteenth-century figures examined here first and foremost ground their critique in Christianity, whereas business ethicists such as Peter Ulrich base their critique upon Immanuel Kant’s moral philosophy. In both cases, however, there is a conflict between their deontological, duties-based ethics, and then a consequentialist or instrumentalist, utilitarian ethics. The Christian and the Kantian versions of business ethics share something in their critique of “virtue as good business.” Or as Abend (2014: 119) writes, “like Kant, Christian business ethicists generally tell businesspeople that they should act morally from a moral motive. Even if empirical claim (1) [acting ethically pays] were true, normative claim (2) [act ethically because it pays to do so] would be morally hideous.” Business ethics is not simply business’ apologist. Some versions of it have been used to critique the “act ethically because it pays” argument. Some forms of business ethics are not about justifying, but critiquing more mainstream views. More work could be done here to differentiate between different kinds of business ethics and critiques in the different time periods, especially in the long mid-twentieth century. But we have learned that the accusation that the “act ethically because it pays” argument does not fulfill stricter ethical criteria is at least one of the repeated forms of critique, whether in its Christian or its Kantian forms.

Diagnostics: market reformism as paternalism or as part of neoliberal governance? Throughout its history, critics have tried to grasp the wider social and political significance of market reformism. They have tried to come up with a

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“diagnosis,” that is, a judgment about the overall state of things (the overall medical condition of health or illness, to stay with the metaphor), of how various kinds of market reformism fit into the state of society as a whole. These diagnoses are intrinsically linked to the above-mentioned critiques. The idea of free markets combined with benevolent, social responsible business as a way of offering social protection for citizens has been critiqued for being a way of governing society which simply puts too much emphasis upon corporations, business, and managers. But, as with the other “stylized” critiques mentioned here, the kinds of diagnostics offered by critics of course change over time. Curiously, we learned that mid-century writers repeated a critique put forward in the late nineteenth century, namely that the idea of the “soulful corporation” or of “welfare capitalism” was a return to a kind of feudalism or paternalism. The corporation was thought to be given too many powers. Too much of individuals’ lives would depend upon the moral sentiments of the new (business) lords. To critics, and in contrast to the old liberal imagination, feudalism and its paternalistic mode of governance did not die with capitalism and wage labor. Instead, it underwent a metamorphosis. We also learned that this was a critique shared by leftists and writers who were of a more conservative political orientation. They voiced their concerns over the tension between the ideals of individual independence and of the corporation as a new kind of community. Market reformism surged to a new kind of high in the aftermath of economic globalization. One central concern for critics has been that, overall, while the renewed interest in the social responsibility of corporations, sustainability, etc., may have positive effects such as more awareness of human rights, higher non-pollution standards, less use of child labor, etc., there is the concern that these “more enlightened” forms of self-governance of corporations may have the side-effect of strengthening neoliberal governance. The concern of these critics (and many more critical views could be examined) is that market reformism, although frequently couched in terms that are negative toward neoliberalism and especially an economistic view of the corporation, does not really critique neoliberal governance, but may actually reinforce it. In other words: the invention of “neoliberalism with a human face” lessens the urge to develop a tighter regime of e.g. global governance and human rights.

Free market liberalism and its critique of market reformism So far the key critiques of market reformism that I have summarized originate predominantly from some kind of leftist position. To come full circle, I will now briefly look at some of the critiques that have been articulated by those who were first and foremost believers in free markets, free enterprise, and free

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capitalism. Do we also find some patterns here, across the two Great Transformations and the intermediate New Deal era period? A recurrent theme in the critique against market reformism coming from a free market liberalism perspective can be stated with the terms “the business of business is business.” This doctrine, however, by far predates the name who is perhaps today most commonly associated with it, Milton Friedman. We were able to locate that point of view in the late nineteenth century. It was also stated that labor and capital did not have shared interests as such, and that such views might confuse the natural economic order arising out of individuals pursuing their own interests. In mid-century in particular, we saw the argument that market reformism may endanger the rights of shareholders, and, furthermore, that it could become too manipulative and paternalistic in the way in which it ties up the individual to the corporation. More work could be done here to differentiate between the different ways in different time periods by which free market liberalism has been critical of market reformism. The common perspective, however, in the critique of market reformism coming from free market liberalism, is one that typically rests upon the principles of individual liberty, private property rights, free contracts, and a separation of the sphere of markets and business from others spheres of life. Closely associated with this is of course the view that businesses have no “moral” responsibility beyond that of the law, one reason being that it puts them on an uneven playing field vis-à-vis their competitors.

The profit-maximizing firm Critics—especially leftists, but also free market liberals—have questioned and tried to unmask the rhetoric of progressive business, challenging or denying its description of the world. But they seem to have differed with regard to their view about what corporations really do. This leads us to yet another important distinction in this mapping of the history of critics of market reformism and about the critics’ view of the corporation. One option has been to say that what corporations really do is to maximize profits and that they, at bottom, are driven by nothing but strict economic selfinterest. Such a view seems to have characterized some forms of Marxism (as well as some forms of economics). One thread in the history of the critique of “soft” business and corporate ideology, then, has been to insist that, at bottom, behind the lofty rhetoric, it’s all about the money, all about “greenwashing,” all about economic motives. The assumption is that everything corporations do they do to maximize profits. This point of view has been criticized for being too “economistic,” targeting some forms of Marxism as well as some forms of economics, in what their critics sees as a surprisingly shared view of the corporation as a mere profit-maximizing entity. This kind of critique has, as

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we have seen, been addressed by the market reformists: from the First to the Second Great Transformations, from Gladden to Drucker to Ghoshal, from writers on management to writers on business ethics. The economistic view has been critiqued, but there is a crucial difference between this argument when it is found in, for example, popular management books or sermons that sometimes have nothing but a normative plea about how business should behave, and then scientific, empirical work, which describe how corporations actually work and which motives people have. The idea about the profit-maximizing firm has, to some degree, been brought into question in the history of thinking about the corporation (as when, for example, Albert O. Hirschman claimed that it was mistaken to assume that corporations were always already maximizing the use of their resources in the pursuit of profits), as well as by recent studies in economic sociology. For example, in her study of American trade associations, Lynn Spillman (2012: 370) has argued that “forms of disinterested solidarity, as well as self-interest, are intrinsic in orientations to economic action even of capitalist business.” Her explanation for why critics may have held strongly on to the “economistic” view of the firm, is that the “normative risks of questioning the idea that action in capitalist economies is simply strategic and self-interested might seem high” (2012: 368). Somewhat similar to the economistic view of the corporation is perhaps the view that market reformism is, at bottom, all about power and control, using (or misusing) the works of Weber or Foucault.

“In the final instance . . . ”? Renewing ideology critique Another avenue for critique of “soft business”, however, was made possible with developments in the critique of ideology. With the rise of poststructuralism, post-Marxism, and discourse theory there was a shift in the critique of ideology. People like Chantal Mouffe and Ernesto Laclau (2001), for example, explicitly rejected Althusserian Marxism and the idea that “in the final instance” economy explains everything. From then on there would no longer simply be a “superstructure” reflecting a “base.” And with Foucault (1998), a society’s key normative concepts could now be seen as having a “tactical polyvalence”: instead of simply reflecting the interests of a particular class, they could also be used against it. These renewed ways of thinking about ideology has also had some influence on how critics have assessed the rhetoric of progressive business. To be sure, it is easy to make a caricature of older forms of ideology critique: Baran and Sweezy, for example, did argue that the corporation of the midcentury may indeed have become “more soulful,” but that the very idea was still very unsatisfactory when thought of in a larger context. Perhaps partly due to fatigue with those ideology critiques which assume, a priori, that market

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reformist ideas can be reduced to be nothing but justifications of pure economic interest, other critiques have argued that social legitimacy may indeed come with a “price,” meaning that the professed ideals and norms by businesses may in fact be “costly” for these (such as upholding better environmental or human rights standards than other competitors in the field). This kind of thinking is, for example, to be found in the work of Boltanski and Chiapello. In their theoretical framework, the “capitalist spirit” both “legitimates and constrains the accumulation process” (Boltanski and Chiapello 2007: 24). The capitalist “spirit,” if internalized by capitalism’s actors, constrains capitalism, and thereby weakens it (but simultaneously justifies capitalism, and in this sense strengthens it). If a practice is described as legitimate or even morally good, this constrains possible courses of action to the extent that they are supposed to be accepted as legitimate. To be sure, the level of “costs” depends upon which normative principles and concepts are invoked as tests that a practice has to “pass” in order to be accepted as legitimate. If an idea of the “social responsibility” of corporations is confined to meaning maximizing profits for shareholders, for example, this normative justification is not particularly costly. If, by contrast, “social responsibility” is used in the sense of socializing corporate power and profits, this ideal is more costly for the common practice of shareholder capitalism.2 The point here is that a critique of the ideology of market reformism does not have to take the “economistic” view as an a priori starting point. The critique of market reformism that corporations are only in it for the money has been refined and made more nuanced, and market reformism has been critiqued for a number of (additional) reasons other than assuming that corporations and their actors are only driven by economic interests. In brief, you may find that some corporations (be it only an absolute minority) might actually have stretched themselves quite a bit when they have redescribed themselves as providers of “public service,” as having a “corporate soul,” or as being serious about human rights. You may also find it hard to believe that all of these actions can simply be explained by economic motives (although the true motives are indeed very difficult to decipher). But this does not leave out other options for a critique of market reformism, such as all those described in this book that relate to democracy, universalism, welfare, and pluralism.

Market reformism in the aftermath of the financial crisis What, then, are the further implications and analytical significance of the concept of market reformism? Can it be applied to other cases and/or contexts? One striking example here is reactions to the financial crisis of 2008. In its aftermath a very recognizable pattern of responses evolved: the

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ones on the American right, representing free market liberalism, who claimed that the financial crisis was basically the result of too much regulation (e.g. the bank bailouts and perceived “safety net” being a “moral hazard” that incentivized wild speculation); the ones on the left, social-liberals, who argued that the crisis was basically due to too little regulation (indeed, there was a flood of deregulatory policies from around the late 1990s); and those, such as financial historian Niall Ferguson, who argued that the crisis should not lead to renewed regulation, but that it instead was time to remind the financial sector of its moral responsibility (2009). Instead of a renewed political regulation of the financial sector, targeting the systemic risks of a tightly coupled system, there was a discourse of responsibility, asking questions about who was to be blamed for the crisis, who had been the most greedy, and who was responsible. As a bulwark against future financial meltdowns, Ferguson argued that “bankers need morals” (2009; cf. also Schiller 2012). What is problematic about such moralization, and in a larger context the greed explanation of the financial crisis, is that it does not have much to say about the systems and the institutions which make people act in particular ways. The moralistic critique puts the blame on particular individuals. They are the “subjects supposed to care”—but they are also, we may note, subjected to heavy social, institutional, and ideological pressures and control (cf. e.g. Ho 2009). In an interview in 2008 with philosopher Jürgen Habermas in the German magazine Die Zeit by Thomas Assheur, Habermas also warned against mere moralization as a reaction to the crisis. Habermas even said it is no less than hypocrisy to blame one-sidedly a greedy financial sector: Pointing the finger at scapegoats strikes me as hypocritical. The speculators, too, were acting consistently within the established legal framework according to the socially recognized logic of profit maximization. Politics turns itself into a laughing stock when it resorts to moralizing instead of relying upon the enforceable law of the democratic legislator. Politics, and not capitalism, is responsible for promoting the common good. (2009: 184)

Now that we are familiar with the history of “market reformism,” we may appreciate that the turn toward the moral responsibility of market actors is often a way of negotiating struggles that can also involve proposals for political regulation, new legislation, and government interference. One of its functions is to offer an alternative, private form of governing social risks. And while it is critical of blunt individualism, it supplies arguments for non-intervention, as it says that free markets will work if only actors live up to their responsibilities. No regulation please—all that is needed are new ethical codes of conduct. Market reformism, not political reformism. Ethical, progressive business and finance—not progressive politics.

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1. Indeed, recent historical studies have shown that ideas about the ethical and social purpose of business or the proper ethical codes of tradesmen predate industrial modernity; a perspective which also lays bare the need for understanding more specific historical and contextual differences (see, in particular, Abend 2014). 2. Others who have been working in the tradition of a Weberian “spirit of capitalism” approach, such as Quentin Skinner, have also tried to show how social norms and values embedded in language work as a constraint upon what can count as legitimate action (Skinner 2002: 147–57, 173–4; cf. also Palonen 2004: 95ff. on Skinner’s linguistic reinterpretation of Weber). According to Skinner, early protagonists of commercial life in seventeenth-century England were legitimizing commercial life by showing how it was basically compatible with the prevailing normative vocabulary of a Protestant set of religious beliefs. Although the merchant’s real motives and his publicly professed ideals may have differed significantly, it was not just any course of action that could be described using the prevailing normative vocabulary. The merchant thus faced “the problem of tailoring his projects in order to make them answer to the pre-existing language of moral principles”; he could not just be “tailoring his account of his principles in order to fit his projects” (2002: 173, my emphasis). To be sure, Skinner was not addressing the justification of contemporary economic actions, but his work illustrates the shift toward a study of discourse and societies’ normative culture in their own right.

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Index Abend, G. 10 Abrams, F.W. 82–3, 88, 131 Absentee Ownership and Business Enterprise in Recent Times (Veblen) 62 Achieving our Country (Rorty) 201–2 American Academy of Management 162 American Business Creed, The (Sutton) 85–90, 151 American Capitalism: The Concept of Countervailing Power (Galbraith) 115–22, 199 American Dream 50, 180 American Revolution challenge of industrial capitalism 26 Pullman’s failure 38–9 American Social Science Association 35, 52n7 amoral business 222 anthropology, cultural 13, 62–4, 81 artistic criticism 7, 143, 197 “Bad Management Theories Are Destroying Good Management Practices” (Ghoshal) 163–4 Balakrishnan, G. 213 Banerjee, S.B. 214 Baran, P.A. 128–34, 141n26, 208 Barnard, C.I. 64–71, 98n27, 99n33, 100n38, 168 Bartlett, C.A. 156, 181 Bell, D. 134, 143, 157 Bendix, R. 105–7 Berle, A.A. 63, 85, 131, 211 big business 57, 76, 78 big government 88, 90 big labor 88, 90, 92, 94 bill of rights, Kerr’s proposed 108–9 Blyth, M. 8 Boltanski, L. 6, 7–8, 17n7, 17n8, 49, 93–4, 186–7, 196, 197, 248 bonds compared with contracts 113–15, 115t present day 139n11 bounded rationality 132 Braverman, H. 212 Built to Last: Successful Habits of Visionary Corporations (Collins and Porras) 161 business case for virtue 10, 36, 238, 243–4 business creed 85–90 critique of the progressive 226–9

description of 85–90 resurgence of classic 182–4 return to classic 150–2 tensions between classical and managerial 162 business cycles, Drucker’s view 80–1 business enterprise 86–7, 127 business ethics business opportunities 219–20 change in ideas 95 critique 243–4 history and strategy 9–10, 233–9 humanistic 169–70 “Business Men and Social Theorists” (Henderson) 45 business owners 87 Callahan, D. 1 capital according to Sumner 42–4 Marx’s critique 52n3 capitalism challenges to legitimacy 3, 5–8, 54 characteristics 17n7 competitive 22, 125, 128–9 concepts 15–16, 104–5 creative 234 entrepreneurial see entrepreneurial capitalism France 7, 93–4, 186–7 free market 4, 144–5, 146–52 gentler 1–3, 232 global 145, 147–52, 208–9, 216 history of ideas 10–13 ideological smokescreen 243 industrial 19–20, 21–3, 23–7, 34, 52n3 justifications 5–7, 17n7 limits 203–4 managerial see managerial capitalism monopolistic 128–9 1920s 59–60 1960s 143 1970s 143–5 1990s 145 paternalistic 19–20 postmodern republicanism 211–12 regulated 54, 56, 61, 83 self-reforming 1–5

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Index

capitalism (cont.) self-regulating 94–5 socialized 150–1 socially responsible 1–2 spirit 7–8, 17n7, 49–50, 93, 248 supremacy and necessity 146–50 triumphant see triumphant capitalism 143–5 welfare 47–8, 60, 245 Capitalism and Freedom (Friedman) 123 capitalist globalization 225–6 capitalist-liberal democracy 146–8, 196, 197–9 capitalist spirit 7–8, 17n7, 49–50, 93, 248 Carding and Spinning Master’s Assistant (Montgomery) 26 Chandler, A.D. 57 charitable corporate ethics 223–4 charity 32, 39, 43, 49–50, 126–7 Chiapello, È. 6, 7–8, 17n7, 17n8, 49, 93–4, 186–7, 196, 197, 248 Christianity civilizer 27–34 economic affairs 35 ethics critique 244 reform movements 26 and Sumner 45 Christian Protestantism 26 civic criticism 198 civil society as moral source 159 classical view American business 87–8 business creed tensions 184 corporate social responsibility 162 loses appeal 90 class passers 59, 96n15 class society 198 Clinton, B. 173 Collapse of Liberalism: Why Progressives Need a New Politics, The (Noble) 202 Collins, J. 161 Commonwealth (Hardt and Negri) 207 communism 52n3 community spirit as moral source 159 company man 131, 132, 133 company towns 34–9 competition 88 Galbraith’s critique 116–20 competitive capitalism 22, 125, 128–9 Concept of the Corporation (Drucker) 76–7, 93, 101n50, 159 conflicts Bendix and Fisher’s view 106 Kerr’s view 107–9 conservative criticism 197

contracts compared with bonds 115t cool 113–15 modern philosophy 138n8 society 137n7 Cooperation and Competition among Primitive Peoples (Mead) 63 cooperation theory Barnard’s appraisal 64–71 Ely’s abstract view 36–7 Gladden’s idea 28–33 Mayo’s vision 72–4, 105–6 cooperative movements 24 corporate citizenship 160, 166–7, 183, 224 corporate conscience 161, 182 corporate ethics 221–5, 243–4 corporate liberalism thesis 6–7, 16n6 corporate philanthropy ethical limitations 222–5 form of theft 133–4 private property rights 126–7 Pullman company town 244 unreliable 205–6 corporate social responsibility concept 17n10 crisis of democracy 214–15 critique 226–9 definition 215 deradicalization 220, 229 divided reform movement 171–2 economic justifications 238 furthering corporate interests 214 history and strategy 9–10 ideal of 84 moral self-governance 160–71 narrow term 198 potentials and limitations 215–17 Second Great Transformation 184, 185t strategy 233–9 surge of idea 160 violates property rights 127 Corporate Social Responsibility: The Good, The Bad and the Ugly (Banerjee) 214 corporate taxation, Drucker’s proposal 80 corporations Barnard’s vision 64–6 critique of all-embracing 105–13 Drucker’s critique 109 economy 83 ideals and practices 229 Kerr’s view 108–9 living in society 78–9 management 150 Marxist view 129–32 moral, social and soulful 134–5 Noble’s critique 205

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Index profit-maximizing 246–8 social 55, 91–5 soulful 82–5, 128–34, 134–5, 245 undemocratic 229 corrective corporate ethics 224 Council for Financial Aid to Education 83 countervailing power 116, 120–2, 128, 140n19, 199, 202 Covey, S. 172–81 Creating the Corporate Soul: The Rise of Public Relations and Corporate Imagery in American Big Business (Marchand) 57 creative capitalism 234 cultural anthropology 62, 63, 81 Cultural Contradictions of Capitalism, The (Bell) 143 cultural criticism 157, 200–1 dehumanization of business practice 164 deliberate social action 36–7, 46 democracy capitalist-liberal 146–8, 196, 197–9 and corporate social responsibility 214–15 danger according to Sumner 41 fragile in 1930s 55 market reformism’s failure 242 Demos think tank 1 deradicalization of corporate social responsiblity 220 Dierksmeier, C. 169–70, 223 divided reform movement 171–2 Drucker, P.F. 6, 75–82, 93, 101n50, 109, 158–60 Durkheim, E. 74 Earley, J.S. 132 economic freedom 124–5, 136t economic globalization 196, 208–9 economic independence 26 economic justifications, for social responsibilities 238 economic theory, Barnard’s attack 67–8 economism 144, 166–7 view of corporation 246–7, 248 economy, post World War 1 concept 61–3 Ely, R. T. 34, 35–9, 50, 62, 84, 116, 238, 243, 244 embedded liberalism 54 empire 208–9, 230n4 Empire (Hardt and Negri) 207–17 employee society 158 employment Drucker’s proposal for full 80 funds 80 stability 83 End of History and the Last Man, The (Fukuyama) 146–8, 197–9

269

End of Ideology, The (Bell) 134 entrepreneurial capitalism corporate social responsibility 160–71 critique 195–229 critique of moral self-governance of business 214–20 critique of triumphant global capitalism 225–9 divided reform movement 171–2 entrepreneurial self 172–81 market populism 152–7 moral self-governance 160–71 neo-conservative critique 196–8 neo-Marxist social critique 207–14 new spirit 142–3, 182–9 post-capitalist society 158–60 republican liberalism 220–5 return to classic business creed 150–2 revival of critique 195–6 social criticism 199–207 supremacy and necessity 146–50 towards triumphant 143–5 entrepreneurial market reformism 187–8 comparison with other market reformism 236–7t Second Great Transformation 232 entrepreneurial self 172–81 entrepreneurship 187–8 equality vs liberty 198 of opportunity 204–7 rising inequality 198–202 ethical concerns, over profit 221–5 ethics see business ethics; corporate ethics Europe, influence and ideas 25–6 everyone’s business 45–8 extreme individualism 69 factory legislation Henderson’s view 46 Sumner against 44 Ferguson, N. 249 feudalism, Pullman as new type 38 financial crisis (2008), reactions 248–9 First Great Transformation business as everyone’s business 45–8 challenges of industrial capitalism 21–3 Christianity as civilizer 27–34 company towns 34–9 laissez-faire 39–45 leftist critiques of market reformism 240–1t paternalistic market reformism 48–51, 232 reason for choice as time period 12 responding to industrial capitalism 23–7 social protection 51t

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Index

First Great Transformation (cont.) spirit of paternalistic capitalism 19–20 summary of market reformism 49t, 234, 236–7t Fisher, L.H. 105–7 Ford, H. 58, 131 forgotten man 41, 44 formal organizations 65–6, 67 France, capitalism 7, 93–4, 186–7 Frank, T. 152–7, 161, 172, 199–201 Frankl, V.E. 178–9 Franklin, B. 177–8 freedom, concept 169–70 free enterprise system classical and managerial view 88 Drucker’s defense 77–82, 102n51 social welfare 87 transformation from within 90–1 free market capitalism revived right 144–5 skepticism of market reformism 4 triumphant 146–52 free market ideology, challenged by Great Depression 60 free market liberalism comeback 122–3 concept 15–16 critique of market reformism 245–6 Ghoshal’s critique 163–5 ideas of social protection 227–8t ideology 86 market populism 153, 235 no alternative 148 social legitimacy of business 233–4 taxation 189n2 Friedman, M. 16, 123–7, 144, 151, 164 Friedman, T.L. 148–52 Fromm, E. 112–13 Fukuyama, Francis 146–8, 150–1, 153, 196–9, 213–14 Functions of the Executive, The (Barnard) 64 Galbraith, J.K. 115–22, 142, 199, 202 General Motors 77–8 General Theory of Employment, Interest, and Money, The (Keynes) 60 gentler capitalism 232 towards a 1–3 Gentler Capitalism, A (Callahan) 1 George, H. 42 Ghoshal, S. 156, 163–5, 181, 235 Gilded Age 21 Gladden, W. 26–34, 50, 235, 244 global capitalism defense 147–52 governing the world 208–9

leading to corporate social responsibility 216 1990s 145 global corporate citizenship 198 globalization business creed tensions 162 capitalist 225–6 characterization 162 defense 148–52 economic 196, 208–9 great transformation 225 market reformism 229 moral self-governance 160–71 prosperity 155 social criticism 196 Golden Straitjacket 149 governments like private businesses 218–19 managerial view 88 Great Depression challenge to free market ideology 60 failure of competition model 116–17, 119–20 great transformation, globalization 225 Great Transformation, The (Polanyi) 8, 81 Habermas, J. 249 Hardt, M. 157, 207–14 Harris, S.E. 85 Hawthorne Experiment 72, 74, 101n44 Hayek, F.A. von 123–4, 127, 132 Henderson, C.R. 45, 116 Hill, N. 177 historical contextualism 11–12 Homans, G.C. 71 human capability approach 166, 170 Human Group, The (Homans) 71 humanism, higher moral system 165–72 Humanism in Business (Spitzeck) 1, 165–72 humanistic business ethics 169–70 Human Problems of an Industrial Civilization, The (Mayo) 73 human relations 100n43 Fromm’s critique 112–13 New Deal era 91–3 theory 71–6 Whyte’s critique 110–12 human resources management (HRM) 179–80 ideology American business 85–90 critique 247–8 immaterial labor 212 importance 210–11 incentives, Barnard’s theory 68, 100n38

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Index individualism Barnard’s theory 68–70 conflict with managerial capitalism 113 Covey’s doctrine 173 extreme 69 Individualized Corporation, The (Bartlett and Ghoshal) 156, 181 individual responsibility 172, 217 industrial betterment 24–6, 47, 60 industrial capitalism challenges 21–3 reactions 52n3 reform from within 34 responses 23–7 rise 19–20 industrial citizenship 79–80 industrial partnerships, Gladden’s view 31 inequality of opportunity 204–7 rising 198–202 information technology, and the “new economy” 155 instrumental corporate ethics 223, 243–4 integrative corporate ethics 223, 224 Integrative Economic Ethics (Ulrich) 224 internal reform, stressed by market reformism 4 international events, impact 59 international law 208 Internet, and the “new economy” 155 Jackson, B.G. 176, 179, 180, 181 Jacoby, S.M. 160 Jacques, R.S. 174–5, 181 Jeffersonian liberalism 26 Kant, I. 244 Kaysen, C. 83–5 Kerr, C. 107–9 Keynes, J.M. 60, 119 Keynesianism, Galbraith’s 115–22 Khurana, R. 2–3 knowledge as primary resource 158 labor history 21–3 immaterial 212 organized capital against organized 107 Labor and Monopoly Capital (Braverman) 212 Laboratory of Industrial Psychology 73 labor unions denied positive role 127 heyday 60 responding to industrial capitalism 23

271

laissez-faire abandonment 37 defense 39–45 laissez-faire conservatives, Noble’s attack 206–7 laissez-faire liberalism 16 loss of appeal 55 law international 208 sociology 67 leadership critique of Mayo’s vision 106 and humanism in business 168 leftist critiques, of market reformism 240–1t Lexus and the Olive Tree: Understanding Globalization, The (Friedman) 148–50, 207, 213 liberalism economic sense 147 embedded 54 Ghoshal’s view 164 problems and solutions 136t liberty according to Sumner 42–3 vs equality 198 notion of 169–70 Lockheed 142 logo therapy 178–9 management corporation 150 profession 57, 82 responsibility 83–4 scientific 58–9, 72, 96n8, 110–11, 175, 212 management education 163–5 management literature 156–7, 161, 173–81, 191n11 management revolution 57 managerial capitalism American business ideology 85–90 background trends 56–64 Barnard’s appraisal of corporation 64–71 contested concepts 104–5 cool contracts or unbreakable bonds 113–15 critique 104–35 critique of all-embracing corporation 105–13 development in New Deal era 54–6 Drucker’s concept of the corporation 76–82 Galbraith’s Keynesianism 115–22 Mayo’s rhetoric of human relations 71–6 neoliberals against market reformism 122–7 New Deal era 54–6

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272

Index

managerial capitalism (cont.) social corporation 90–5 soulful corporation 82–5, 128–34, 134–5 managerial market reformism comparison with other market reformism 236–7t New Deal era 232 managerial organization 78 managerial view American business 87–90 corporate social responsibility 162 rise 89 Manufacturing the Employee (Jacques) 174–5 Marchand, R. 57 market of authorities 218–19 market populism 152–7, 190n10, 200 market power 119, 120 market reformism alternative 50 alternative offer of social protection 23–7, 233–9 approach to history 10–13 book overview 13–15 concepts 15–16 definition 4–5 era of globalization 229 examples 5 First Great Transformation 49t historical critiques in retrospect 239–49 ideas of social protection 227–8t ideology leading criticism astray 243 importance in historical discourse on capitalism 1–3 intellectual history of American 1–16 key characteristics 4t leftist critiques 240–1t New Deal era 92–3, 92t vs political reformism 206–7 problems and solutions 136t responding to industrial capitalism 23–4 rise of industrial capitalism 19–20 Second Great Transformation 185t market responsibility 217–20 markets, limits 203–4 Marxist argument, against soulful corporation 128–34 Mayo, E. 71–6, 105–7 Means, G.C. 63, 85, 131, 211 Mill, J.S. 19–20, 26 Mills, C.W. 130 Modern Corporation and Private Property, The (Berle and Means) 63, 131 monopolistic capitalism 128–9 monopoly, characterizing American capitalism 128

Monopoly Capital: An Essay on the American Economic and Social Order (Baran and Sweezy) 128–9 Monthly Review 128 moralization 249 moral obligation, Gladden’s belief 33 moral organization 71 moral philosophy, ethics critique 244 moral responsibilities, change in ideas 95 moral self-governance 2–3 alternative offer of social protection 233–9 business 160–71 critique 226–9 market reformism belief 5 role of ideas 6 sociological and political critiques 214–15 moral self-regulation, approach to history 10–13 multitude, uprising against empire 210 Multitude (Hardt and Negri) 207 nation-states, weakness of 209, 211, 213–14 Negri, A. 157, 207–14 neo-conservative critique, entrepreneurial capitalism 196–8 neoliberalism 16 and corporate social responsibility 217–20 governance reinforced by market reformism 245 history 5–6 against market reformism 122–7 and market reformism 235 moral self-governance similarity 226–9 problems and solutions 136t and republican liberalism 221 neo-Marxist social criticism, of entrepreneurial capitalism 207–14 New Deal era American business ideology 85–90 background trends to managerial capitalism 56–64 Barnard’s appraisal of corporation 64–71 development of managerial capitalism 54–6 Drucker’s concept of the corporation 76–82 ideologies problems and solutions 136t leftist critiques of market reformism 240–1t managerial capitalism see managerial capitalism managerial market reformism 232 market reformism 92–3, 92t market reformism comparison 236–7t market reformism summary 234 Mayo’s rhetoric of human relations 71–6

OUP CORRECTED PROOF – FINAL, 7/9/2015, SPi

Index reason for choice as time period 12 social corporation 90–5 soulful corporation 82–5 new economy, 1990s 155 New Spirit of Capitalism, The (Boltanski and Chiapello) 6, 7–8, 17n8, 186–7 New View of Society, A (Owen) 26 NGOs 213 Noble, C. 198, 202–7 Nozick, R. 189n2 oligopoly, characterizing most markets 119, 120 One Market under God (Frank) 152 On Revolution (Arendt) 25 organizational loyalty, critique 107–13 organizational theory, Barnard’s 64–71, 98n27 organization man 109–12 Organization Man, The (Whyte) 109–11 Owen, R. 25–6 Pareto, V. 66 Pareto’s General Sociology (Henderson) 66 paternalism Drucker’s critique 109 Whyte’s critique 109–10 paternalistic capitalism, First Great Transformation 19–20 paternalistic market reformism 48–51 comparison with other market reformism 236–7t critique 244–5 First Great Transformation 232 Whyte’s critique 110–12 pension funds 158 Perrow, C. 143 personal character, importance 174–5 personal development, Covey’s teachings 172–81 Peters, T. 157, 191n11 philanthropy see corporate philanthropy Phillips curve 144 pluralism 74, 199 market reformism’s failure 242 Polanyi, K. 8–9, 11, 54, 81, 102n54, 209 political economy, Gladden’s critique 29–30 political liberalism, and republican liberalism 221 political reformism absence 150–1 alternative 229 concept 15 defense 196 divide with private means to social reform 42

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gained ground following Great Depression 60 ideas of social protection 227–8t vs market reformism 206–7 problems and solutions 136t Progressive Age 54 politics, distaste for 235 populism, market 152–8, 190n10, 200 Porras, J.I. 161 post-capitalist society 158–60 Post-Capitalist Society (Drucker) 158 post-capitalist vision 61 postmodern republicanism 211–12 Power Elite, The (Mills) 130 private initiatives, responding to industrial capitalism 23 professionalism, management 57, 82 profit, Barnard’s view 68 profit maximization assumption 131–2 profit-maximizing firm 246–7 profits ambivalence of market reformism 4 Drucker’s view 81 synergy with benevolence 161–2 profit sharing 25, 26 Gladden’s view 31 Progress and Poverty (George) 42 Progressive Age characteristics 54 origins 35 progressive business critique 226–9 critique in retrospect 232–3 critique of market reformism 239–49 examples 47 ideas 47 and its critics in retrospect 232–3 social protection 233–9 tension with classical view 184 proletariat, forcing capitalism to reform 209–10 property rights 126 violated by corporate social responsibility 127 protective tariff, Sumner’s contempt 41 protoprogressive reform, opposition 39 public institutions, more like private business 218–19 “Pullman: A Social Study” (Ely) 36 Pullman company town 34–9, 50, 238, 243, 244 qualitative freedom 169–70 Radical Attack on Business, The (Perrow) 143 radical ideas

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274

Index

radical ideas (cont.) problems and solutions 136t social protection 227–8t radical left, work for reform 206–7 recession (1973–1975) 143–4 reformist left 201–2 reform movements, and rise of industrial capitalism 19–20 regulated capitalism 54, 56, 61, 83 Reich, R.B. 214–15, 219 republican deficit, capitalism 198 republicanism, against capitalism 211–12 republican liberalism 220–5 revolutionary business 155–6 Road to Serfdom, The (Hayek) 123 Roosevelt, F.D. 60 Rorty, R. 201–2 Ruskin, J. 26 savings, role according to Keynes 120 Say’s law of markets 118 scientific management 58–9, 72, 96n8, 110–11, 175, 212 Second Great Transformation corporate social responsibility 184 entrepreneurial market reformism 187–8, 232 leftist critiques of market reformism 240–1t market reformism 185t market reformism comparison 236–7t market reformism summary 234–5 reason for choice as time period 12 rival views of social protection 227–8t self, entrepreneurial 172–81 self-governance of business see moral self-governance self-help paradigm 186 self-ownership, First Great Transformation 50 self-reforming capitalism ideas 1–3 market reformism belief in potential 4–5 self-regulation change 94–5 Drucker’s support 159 principle 117–18 self-rule, First Great Transformation 50 self-transformation of capitalism, role of ideas 6 Sen, A. 166, 170 service, as purpose of industry 58–9, 65, 68 Seven Habits of Highly Effective People: Restoring the Character Ethic, The (Covey) 173–81 Shamir, R. 162–3, 181, 215–20, 244

Simon, H.A. 132 Sloan, A.P. 88 social action, deliberate 36–7, 46 social change, through private initiative 37 social corporation 55, 91–5 social criticism entrepreneurial capitalism 199–201 neo-Marxist 207–14 New Left 144 shift to cultural criticism 199, 201 triumphant capitalism 195–6 social Darwinism 39, 52n3 social efficiency in Galbraith’s framework 140n15 secured by competition model 118–19 Social Gospel movement 27, 35 social harmony, stressed by market reformism 4 social health, critique of Mayo’s vision of 105–7 socialism America 53n13 Barnard’s view 69 Ely and 35 Gladden’s opposition 32 reaction to industrial capitalism 52n3 socialist central planning, dichotomy with capitalism 150–1 socialist enterprise 85 socialized capitalism 211 social legitimacy of businesses 233–4 costly 248 strengthened by soft capitalism 243 social-liberalism, concept 15 socially responsible capitalism, transformation towards 1–2 social organizations, businesses as 158 Social Problems of an Industrial Civilization, The (Mayo) 73 social protection 17n10 First Great Transformation 51t free market environment 188–9 ideas 24–5 impact of Great Depression 60 and market reformism 4 market reformism as alternative promise 8–9, 23–7 market reformism response for provision 24 and Protestant church 27 rival views in Second Great Transformation 227–8t through business 233–9 social reform Henderson’s view 47

OUP CORRECTED PROOF – FINAL, 7/9/2015, SPi

Index Sumner’s attack 40 Sumner’s critique 41 Sumner’s ideological critique 39 Social Responsibilities of the Businessman (Bowen) 17n10 social responsibility 126–7 see also corporate social responsibility businesses 158 social sector, role 159 Social Security Act 1935 56–7 social welfare classical view 87 managerial view 87 perception of crisis 144–5 society new following World War 161–3 organizations 66–7 socioeconomics, interwar trend 62–3 Sociologie Générale (Pareto) 66 sociology classical 138n10 law 67 Sumner’s 40–1 soft capitalism, rhetoric strengthening social legitimacy 243 soulful corporation 82–5 contesting the image 134–5 critique 245 Marxist argument against 128–34 spiritual revolution, advocated by Gladden 31–2 Spitzeck, H. 1 stagflation 143–4 state, role 54, 56–7, 159, 202 state intervention 33 following Great Depression 60 Gladden’s opposition 33 strikes 107 Sumner, W.G. 39–45, 50–1, 123 survival of the fittest 39 Sutton, F.X. 85, 89, 151, 234 Sweezy, P.M. 128–33, 208 system, character of business 133 taxation corporate 80 free market liberalism 189n2 Taylor, F.W. 58

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technology, and the new economy 155 Thatcher, M. 144 “The Autobiography” (Franklin) 177–8 theological liberalism 27 there is no alternative 144, 146–50 Think and Grow Rich (Hill) 177 Thompson, P. 212–13 Tobin, J. 85 trade unions, Sumner’s support 44 Transcending Capitalism: Visions of a New Society in Modern American Thought (Brick) 97n20 triumphant capitalism 145 ecological criticism 196 social and conservative critiques 225–9 social criticism 195–6 towards 143–5 Ulrich, P. 221–5, 244 University of California, student unrest 109 Veblen, T. 62 virtue, business case for 10, 36 Visible Hand: The Managerial Revolution in American Business, The (Chandler) 57 voluntariness classical and managerial view 88–9 Drucker’s support 159 Wagner Act 1935 60, 61, 97n19 wealth ownership 198 welfare capitalism 47–8 critique 245 undermined by Great Depression 60 welfare provision, market reformism’s failure 242 welfare work 24 What Social Classes Owe to Each Other (Sumner) 39, 40–2 Whyte, W.H. 109–12 working class, percentage of population 22 Working People and their Employers (Gladden) 28, 33 Young Men’s Christian Associations (YMCAs) 24