Sunday, May 26, 2013

John Kenneth Galbraith's "Age of Uncertainty: The Big Corporation"

Continuing with John Kenneth Galbraith's 1977 documentary series, The Age of Uncertainty, Episode 9, The Big Corporation:

The functioning of corporations and their effect on economics and politics is the topic of some of Galbraith's most interesting work. In the companion volume, he writes, "Because corporations differ, no single enterprise fully exemplifies corporate history and personality. All, when studied, revert, except in unguarded moments, to their myth. The exercise of power so central to corporate personality is at least partly concealed."

He uses a fictional corporation, the Unified Global Enterprises (UGE) to discuss the functioning of the corporations. He includes the important Berle-Means study on corporate power:

In 1932, the two noted Columbia University professors, Adolf A. Berle and Gardiner C. Means, studied the control of the two hundred largest nonfinancial corporations in the United States. Nearly half, they discovered, were controlled by their management. No power remained with the owners to hire or fire the managers; the management appointed the directors who represented the stockholders. The directors did not appoint the managers.
He eventually switches his discussion from the fictional UGE to the Phillips electronics corporation:

Philips ... is a creature of its technostructure. In this respect, too, all corporations are alike. Whether in Eindhoven, New York or Houston the quality of the corporate performance depends not on individual brilliance but on organizational competence- on the success in choosing and combining the efforts of the men, and the rare woman, who fill the rings.

These men of the technostructure are the new and universal priesthood. Their religion is business success; their test of virtue is growth and profit. Their bible is the computer printout; their communion bench is the committee room. The sales force carries their message to the world, and a message is what it is often called. Alcohol is under interdict as an intoxicant but allowed as an adjunct of communion and as an instrument of friendly persuasion. Recreation is for regeneration of the business spirit, for a widened range of business contacts. Sex is for better sleep. The Jesuits of this austere faith are the graduates of the Harvard Business School.
Galbraith posed the problem of the multinational corporation in a form that is different from how advocates of neoliberal ideology today would prefer to see it posed:

The large corporation is here to stay. Those who would break it up and confine its operations within national boundaries are at war with history and circumstance. People want large tasks performed - oil recovered from the North Sea, automobiles made by the million to use it. Large tasks require large organizations. That is how it is.

Nor can the individual decisions of corporations be too extensively second-guessed. There can and must be rules; but within the rules there must be freedom to decide. More than an individual, an organization , if it is to develop and be effective, must have autonomy and ability to act. The one thing worse than a wicked corporation is an incompetent one. The one thing as bad as a wrong decision is a decision that is greatly delayed.

The ultimate answer for the multinational corporation is multinational authority - government that is coordinate in scope with the corporations being regulated. The decline in national identity is paving the way for this solution. There is no danger, however, that it will come too soon. In Europe international authority is distantly in sight. Elsewhere it is not.
It's not so much the words that the advocates of the neoliberal ideologues would find objectionable. It's the democratic substance of what Galbraith is talking about: "Meanwhile for national governments and national corporations the only answer is a strong framework of rules that align the exercise of corporate power with the public purpose." Because in the neoliberal ideology, the only "public purpose" that deserves serious consideration is identical with "the exercise of corporate power."

The following is also an important Galbraithian point:

The modern corporation also exercises power in and by way of government. This too is agreed. Its payments to politicians and public officials are believed by no one except the recipients to be acts of philanthropy or affection. And less mentioned but more important is the naturally advantageous relationship between the modern corporation and the public bureaucracy - between those who build cars and those who build highways, between those who make fighter aircraft and those who guide the Air Force. Between the modern corporation and the modern state there is a deeply symbiotic relationship based on shared power and shared reward.
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