ATTACK OF AMERICAN FREE ENTERPRISE SYSTEM — PART ONE
DATE: August 23, 1971
TO: Mr. Eugene B. Sydnor, Jr., Chairman, Education Committee, U.S. Chamber of Commerce
FROM: Lewis F. Powell, Jr.
This memorandum is submitted at your request as a basis for the discussion on August 24 with Mr. Booth (executive vice president) and others at the U.S. Chamber of Commerce. The purpose is to identify the problem, and suggest possible avenues of action for further consideration.
Dimensions of the Attack
No thoughtful person can question that the American economic system is under broad attack.1 This varies in scope, intensity, in the techniques employed, and in the level of visibility.
There always have been some who opposed the American system, and preferred socialism or some form of statism (communism or fascism). Also, there always have been critics of the system, whose criticism has been wholesome and constructive so long as the objective was to improve rather than to subvert or destroy.
But what now concerns us is quite new in the history of America. We are not dealing with sporadic or isolated attacks from a relatively few extremists or even from the minority socialist cadre. Rather, the assault on the enterprise system is broadly based and consistently pursued. It is gaining momentum and converts.
Sources of the Attack
The sources are varied and diffused. They include, not unexpectedly, the Communists, New Leftists and other revolutionaries who would destroy the entire system, both political and economic. These extremists of the left are far more numerous, better financed, and increasingly are more welcomed and encouraged by other elements of society, than ever before in our history. But they remain a small minority, and are not yet the principal cause for concern.
The most disquieting voices joining the chorus of criticism come from perfectly respectable elements of society: from the college campus, the pulpit, the media, the intellectual and literary journals, the arts and sciences, and from politicians. In most of these groups the movement against the system is participated in only by minorities. Yet, these often are the most articulate, the most vocal, the most prolific in their writing and speaking.
Moreover, much of the media — for varying motives and in varying degrees — either voluntarily accords unique publicity to these "attackers," or at least allows them to exploit the media for their purposes. This is especially true of television, which now plays such a predominant role in shaping the thinking, attitudes and emotions of our people.
One of the bewildering paradoxes of our time is the extent to which the enterprise system tolerates, if not participates in, its own destruction.
The campuses from which much of the criticism emanates are supported by (i) tax funds generated largely from American business, and (ii) contributions from capital funds controlled or generated by American business. The boards of trustees of our universities overwhelmingly are composed of men and women who are leaders in the system.
Most of the media, including the national TV systems, are owned and theoretically controlled by corporations which depend upon profits, and the enterprise system to survive.
Tone of the Attack
This memorandum is not the place to document in detail the tone, character, or intensity of the attack. The following quotations will suffice to give one a general idea:
William Kunstler, warmly welcomed on campuses and listed in a recent student poll as the "American lawyer most admired," incites audiences as follows:
"You must lean to fight in the streets, to revolt, to shoot guns. We will learn
to do all of the things that property owners fear."2
The New Leftists who heed Kunstler's advice increasingly are beginning to act -- not just against military recruiting offices and manufacturers of munitions, but against a variety of businesses:
"Since February, 1970, branches (of Bank of America) have been attacked 39
times, 22 times with explosive devices and 17 times with fire bombs or by
Although New Leftist spokesmen are succeeding in radicalizing thousands of the young, the greater cause for concern is the hostility of respectable liberals and social reformers. It is the sum total of their views and influence which could indeed fatally weaken or destroy the system.
A chilling description of what is being taught on many of our campuses was written by Stewart Alsop:
"Yale, like every other major college, is graduating scores of bright young men
who are practitioners of 'the politics of despair.' These young men despise the
American political and economic system . . . (their) minds seem to be wholly
closed. They live, not by rational discussion, but by mindless slogans."4
A recent poll of students on 12 representative campuses reported that:
"Almost half the students favored socialization of basic U.S. industries."5
A visiting professor from England at Rockford College gave a series of lectures entitled "The Ideological War Against Western Society," in which he documents the extent to which members of the intellectual community are waging ideological warfare against the enterprise system and the values of western society. In a foreword to these lectures, famed Dr. Milton Friedman of Chicago warned:
"It (is) crystal clear that the foundations of our free society are under
wide-ranging and powerful attack — not by Communist or any other conspiracy but
by misguided individuals parroting one another and unwittingly serving ends they
would never intentionally promote."6
Perhaps the single most effective antagonist of American business is Ralph Nader who — thanks largely to the media — has become a legend in his own time and an idol of millions of Americans. A recent article in Fortune speaks of Nader as follows:
"The passion that rules in him — and he is a passionate man — is aimed at
smashing utterly the target of his hatred, which is corporate power. He thinks,
and says quite bluntly, that a great many corporate executives belong in prison
— for defrauding the consumer with shoddy merchandise, poisoning the food supply
with chemical additives, and willfully manufacturing unsafe products that will
maim or kill the buyer. He emphasizes that he is not talking just about
'fly-by-night hucksters' but the top management of blue chip business."7
A frontal assault was made on our government, our system of justice, and the free enterprise system by Yale Professor Charles Reich in his widely publicized book: "The Greening of America," published last winter.
The foregoing references illustrate the broad, shotgun attack on the system itself. There are countless examples of rifle shots which undermine confidence and confuse the public. Favorite current targets are proposals for tax incentives through changes in depreciation rates and investment credits. These are usually described in the media as "tax breaks," "loop holes" or "tax benefits" for the benefit of business. * As viewed by a columnist in the Post, such tax measures would benefit "only the rich, the owners of big companies."8
It is dismaying that many politicians make the same argument that tax measures of this kind benefit only "business," without benefit to "the poor." The fact that this is either political demagoguery or economic illiteracy is of slight comfort. This setting of the "rich" against the "poor," of business against the people, is the cheapest and most dangerous kind of politics.
The Apathy and Default of Business
What has been the response of business to this massive assault upon its fundamental economics, upon its philosophy, upon its right to continue to manage its own affairs, and indeed upon its integrity?
The painfully sad truth is that business, including the boards of directors' and the top executives of corporations great and small and business organizations at all levels, often have responded — if at all — by appeasement, ineptitude and ignoring the problem. There are, of course, many exceptions to this sweeping generalization. But the net effect of such response as has been made is scarcely visible.
In all fairness, it must be recognized that businessmen have not been trained or equipped to conduct guerrilla warfare with those who propagandize against the system, seeking insidiously and constantly to sabotage it. The traditional role of business executives has been to manage, to produce, to sell, to create jobs, to make profits, to improve the standard of living, to be community leaders, to serve on charitable and educational boards, and generally to be good citizens. They have performed these tasks very well indeed.
But they have shown little stomach for hard-nose contest with their critics, and little skill in effective intellectual and philosophical debate.
A column recently carried by the Wall Street Journal was entitled: "Memo to GM: Why Not Fight Back?"9 Although addressed to GM by name, the article was a warning to all American business. Columnist St. John said:
"General Motors, like American business in general, is 'plainly in trouble'
because intellectual bromides have been substituted for a sound intellectual
exposition of its point of view."
Mr. St. John then commented on the tendency of business leaders to compromise with and appease critics. He cited the concessions which Nader wins from management, and spoke of "the fallacious view many businessmen take toward their critics." He drew a parallel to the mistaken tactics of many college administrators:
"College administrators learned too late that such appeasement serves to destroy
free speech, academic freedom and genuine scholarship. One campus radical demand
was conceded by university heads only to be followed by a fresh crop which soon
escalated to what amounted to a demand for outright surrender."
One need not agree entirely with Mr. St. John's analysis. But most observers of the American scene will agree that the essence of his message is sound. American business "plainly in trouble"; the response to the wide range of critics has been ineffective, and has included appeasement; the time has come — indeed, it is long overdue — for the wisdom, ingenuity and resources of American business to be marshalled against those who would destroy it.
Responsibility of Business Executives
What specifically should be done? The first essential — a prerequisite to any effective action — is for businessmen to confront this problem as a primary responsibility of corporate management.
The overriding first need is for businessmen to recognize that the ultimate issue may be survival — survival of what we call the free enterprise system, and all that this means for the strength and prosperity of America and the freedom of our people.
The day is long past when the chief executive officer of a major corporation discharges his responsibility by maintaining a satisfactory growth of profits, with due regard to the corporation's public and social responsibilities. If our system is to survive, top management must be equally concerned with protecting and preserving the system itself. This involves far more than an increased emphasis on "public relations" or "governmental affairs" — two areas in which corporations long have invested substantial sums.
A significant first step by individual corporations could well be the designation of an executive vice president (ranking with other executive VP's) whose responsibility is to counter-on the broadest front-the attack on the enterprise system. The public relations department could be one of the foundations assigned to this executive, but his responsibilities should encompass some of the types of activities referred to subsequently in this memorandum. His budget and staff should be adequate to the task. Possible Role of the Chamber of Commerce
But independent and uncoordinated (sic) activity by individual corporations, as important as this is, will not be sufficient. Strength lies in organization, in careful long-range planning and implementation, in consistency of action over an indefinite period of years, in the scale of financing available only through joint effort, and in the political power available only through united action and national organizations.
Moreover, there is the quite understandable reluctance on the part of any one corporation to get too far out in front and to make itself too visible a target.
The role of the National Chamber of Commerce is therefore vital. Other national organizations (especially those of various industrial and commercial groups) should join in the effort, but no other organizations appear to be as well situated as the Chamber. It enjoys a strategic position, with a fine reputation and a broad base of support. Also — and this is of immeasurable merit — there are hundreds of local Chambers of Commerce which can play a vital supportive role.
It hardly need be said that before embarking upon any program, the Chamber should study and analyze possible courses of action and activities, weighing risks against probable effectiveness and feasibility of each. Considerations of cost, the assurance of financial and other support from members, adequacy of staffing and similar problems will all require the most thoughtful consideration.
1. Variously called: the "free enterprise system," "capitalism," and the "profit system." The American political system of democracy under the rule of law is also under attack, often by the same individuals and organizations who seek to undermine the enterprise system.
2. Richmond News Leader, June 8, 1970. Column of William F. Buckley, Jr.
3. N.Y. Times Service article, reprinted Richmond Times-Dispatch, May 17, 1971.
4. Stewart Alsop, Yale and the Deadly Danger, Ncwsweek, May 18. 1970.
5. Editorial, Richmond Times-Dispatch, July 7, 1971.
6. Dr. Milton Friedman, Prof. of Economics, U. of Chicago, writing a foreword to Dr. Arthur A. Shenfield's Rockford College lectures entitled "The Ideological War Against Western Society," copyrighted 1970 by Rockford College.
7. Fortune. May, 1971, p. 145. This Fortune analysis of the Nader influence includes a reference to Nader's visit to a college where he was paid a lecture fee of $2,500 for "denouncing America's big corporations in venomous language . . . bringing (rousing and spontaneous) bursts of applause" when he was asked when he planned to run for President.
*. Italic emphasis added by Mr. Powell.
8. The Washington Post, Column of William Raspberry, June 28, 1971.
9. Jeffrey St. John, The Wall Street Journal, May 21, 1971.