The civilized market corporations, conviction and the real business of capitalism

Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the relevant copyright, designs and patents acts, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers The Civilized Market Corporations, Conviction and the Real Business of Capitalism Ivan Alexander Copyright © Ivan Alexander 1997 First published 1997 by Capstone Publishing Limited Oxford Centre for Innovation Mill Street Oxford OX2 0JX United Kingdom All rights reserved Except for the quotation of short passages for the purposes of criticism and review, no part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the publisher British Library Cataloguing in Publication Data A CIP catalogue record for this book is available from the British Library ISBN 1-900961-12-1 Typeset in 11/15 pt Palatino by DP Photosetting, Aylesbury, Bucks Digital processing by The Electric Book Company, London, UK, www.elecbook.com Contents ACKNOWLEDGEMENTS VI INTRODUCTION 1 CAPITALISM AND THE HORN OF PLENTY CAPITALISM AND PROGRESS 27 CAPITALISM AND THE IDEA OF FAIR PROPERTY 49 THE ETHOS OF SUCCESS 71 THE ETHOS OF CONVICTION 87 CORPORATIONS: THE POACHER BECOME GAMEKEEPER 105 THE PROFIT OF MAXIMAL PROFIT 121 THE CIVILITY OF CORPORATIONS 141 TOLERANCE AS A PRINCIPLE OF COMPETITION 163 10 COMPETITION: THE REFORMATION OF THE BUSINESS SYSTEM 183 11 COMPETITION AND THE COMMON PURPOSE 197 CODA 219 NOTES AND REFERENCES 229 INDEX 239 That’s a brilliant idea But how could it possibly work in my organization? How often you think as you read a business book that if only you could ask the author a simple question you could transform your organization? Capstone is creating a unique partnership between authors and readers, delivering for the first time in business book publishing a genuine after-sales service for book buyers Simply visit Capstone’s home page on http://www.bookshop.co.uk/capstone/ to leave your question (with details of date and place of purchase of a copy of The Civilized Market and Ivan Alexander will try to answer it Capstone authors travel and consult extensively so we not promise 24-hour turnaround But that one question answered might just jump start your company and your career Capstone is more than a publisher It is an electronic clearing house for pioneering business thinking, putting the creators of new business ideas in touch with the people who use them Acknowledgements Thanks go to Porter Henry, whose long experience and quick understanding are unmatchable on either side of the Atlantic To Ben Hooberman, for wise advice as always To Ronnie Lessem, indefatigable examiner of the business mind, for his critical encouragement To Dick Taverne, classicist, man of law, political affairs and business, whose incisive reading of an early draft was of great value to me To Dr Richard Burton for good steersmanship, robust good sense and friendship Profound thanks go to Richard Koch, my able editor, whose many cogent suggestions transformed jottings into a book Introduction “The dollar is innocent.” Henry David Thoreau, Civil Disobedience The business system — capitalism — envelops our lives, and we have become used to it It has been startlingly successful in the second half of this century in the West and is now enriching Asia However obscured this fact may be by arguments, dissatisfactions, recessions and sometimes major failures, business has delivered higher living standards to millions By so doing it has added not just to the wealth but to the self-esteem of many By intent or consequence, the “materialism” of productive corporations has also brought non-material gains — easier and more varied lives The sustenance (though not the essence) of democracy is another of the gains It has condensed space: an acre of factories, banks, shops, malls and office towers yields more than large tracts of fields, farms and forests — not by extension but by intensification It is by now evident that the business system will not soon be superseded by radically different economic orchestrations It will continue to be the envelope of life, but it will not itself be the content of the envelope Why? Because the capitalist mechanism is a procedure but not, like democracy, a value system The Civilized Market Capitalism and business were scarcely the products of prior consensus They were, on the contrary, always the products of passionate contentions, of grudging reconciliations, or, if these were not possible, of acceptable rules of engagement Capitalism is a consequence of buffered opposites: management versus labour or employees; owners, shareholders or community versus management; corporation versus corporation; large corporations versus small businesses; rule-making corporations versus rule-making government; consumers’ interests versus producers’ interests; high returns for the shareholder versus low prices for the consumer; exploitation of resources versus conservation; cost versus social cost; an Ethos of Success versus an Ethos of Conviction; protectionism versus free trade; national cultures versus the transnational rationale of trade and money; monopoly or oligopoly versus competition; the need for versus versus efficiency the need for humanity; humanism humanitarianism; the fairness of equality versus the spurs of inequality; tough rationality versus compromise Added to these is the reality that the administration of individual wealth has now acquired many of the characteristics of corporate administration Add also that the concepts on which the business system is based — ideas which are the subjects of this book — owe more to force followed by reasonable compromise than to coherence imposed by reason and by logic These conflicts and contradictions will be encountered and reviewed So the business system is not, historically or practically, a product of coherent theories Vigor and unceasing thrust, but also tolerance and compromise, made it They continue to make it possible Business is not an island of self-contained sufficiency It has always been a permitted mechanism with economic functions and a measure of social utility Yet it has not defined its own social locus in society or in the fellowship of nations Business, even humane business, has no explicit humanitarian role That role has been assumed by the Introduction welfare provisions of the modern state Though business is a natural carrier of humanism and has a humanistic role, it has not assumed it Dualism persists: business is still seen as a strange and sometimes alien incubus, with separate ways, mentality and mind from the rest of society It is not understood, not loved, not even liked This separateness of the world of business from society-atlarge cannot comfortably continue in a world of foreseeable, ineluctable and increasing closeness and density This book is about the becoming and foundations of the business system and suggests a more acceptable coherence It advocates a civilized intent by corporations and their managements This page intentionally blank The Civilized Market The Corporation Take-Over, ed Andrew Hacker, New York, 1964 Introduction by Andrew Hacker, p 13 236 Harper & Row, Chapter J.M Keynes, The General Theory of Employment, Interest and Money, Macmillan, London, 1947, p 374 Charles Darwin, Voyage of the Beagle, 1839, chapter on “Slavery.” J.M Keynes, The General Theory of Employment, Interest and Money, Macmillan, London, 1947, p 379 A distinction is to be drawn between individual “rationality” and the “rationality” of the market as a whole As long ago as 1936, J.M Keynes (in The General Theory, Macmillan, London, p 155) noted that while the social object of skilled investment should be to “defeat the dark forces of time and ignorance which envelop our future,” the actual, private object of the most skilled investment in his day was to “‘beat the gun’“ and “outwit the crowd.” Such is still the case sixty years later — whether the guesswork is called “street smarts,” or “rational expectations,” or “adaptive expectations.” Some economists, notably George Akerlof in California and Frank Hahn in Britain, have tried to examine the effects of “near-rationality” with the aid of related sociologies But this does not help to answer the following important questions: Can rationality at one level result in irrationality at another level? Is the sum of many rational individual decisions necessarily rational? Is the outcome rational after the market has smeared out faulty individual decisions? In other words, is The Market rational as a whole? To that, there are two answers One often-given answer is, Yes, the market is always right This, however, amounts to no more than an assertion that “that that is, is;” or, extended, “that that is, is right.” Unfortunately, the corollary of this Notes and References 237 extended assertion is that “that that was, was right.” The proposition is thus a piece of circular reasoning, and meaningless The second answer is, unsurprisingly, that we have not yet found complete answers And so, if it turns out (as seems likely) that the answers lie within Game Theory (see Chapter 2), we shall have to forgo perfection and settle for optimizing policies — a not unreasonable outcome Fernand Braudel, Grammaire de civilisations, 1987 Trans Richard Mayne as A History of Civilizations, Allan Lane, London and New York, 1994, p 168 W.W Rostow, “Reflections on Political Economy,” in Eminent Economists, ed M Szenberg, Cambridge University Press, Cambridge and New York, 1992, p 226 Kenneth J Arrow, “I Know a Hawk from a Handsaw,” in Eminent Economists, ed M Szenberg, Cambridge University Press, Cambridge and New York, 1992, pp 46/7 Jacques-Bènigne Bossuet, VIe Avertissements aux protestants, III, ix, 1689-91 Elisabeth Labrousse, “Toleration,” in Dictionary of the History of Ideas, Scribner, New York, 1973, vol IV, pp 112/3/4/7 10 Maurice Cranston, Encyclopaedia of Philosophy, Macmillan, New York and London, 1967, vol 8, p 143 Chapter 10 Anthony Sampson, The Seven Sisters, Viking, 1975, pp 71-9, The better account I have however used Berle’s for its fifties flavor and its ambivalence Adolf A Berle, The Twentieth Century Capitalist Revolution Macmillan, London, 1955, pp 116/127 Ford on Management, Intro R Lessem, Basil Blackwell, Oxford, 1991 (reprint of Henry Ford’s My Life and Work, 1922, and My Philosophy of Industry, 1929), p The Civilized Market 238 Chapter 11 John Rawls, A Theory of Justice, Clarendon Press, Oxford, 1972, p 291 Charles Darwin, Voyage of the Beagle, 1839, chapter on “Slavery.” Quoted by Michael Oakeshott in Morality and Politics in Modern Europe, Yale University Press, New Haven and London, 1993, p 66 T.S Eliot, The Hollow Men, 1925 T.V Houser, Chairman Sears Roebuck, Big Business and Human Values, 1957 J.F Oates, Chairman Equitable Life, Business and Social Change, 1968 C.H Greenewalt, Chairman DuPont, The Uncommon Man, 1959 Published by McGraw-Hill, New York (McKinsey Foundation Lectures) The phrase is William Pfaff’s, International Herald Tribune, early November 1993 I.S Shapiro, America’s Third Revolution — Public Interest and the Private Role, Harper & Row, New York, 1984 I.S Shapiro was chairman of DuPont from 1974 to 1981 Elton Mayo, The Social Problems of an Industrial Civilization, Harvard University School of Business Administration, Boston, 1945, p xi Ivan Alexander, Foundations of Business, Basil Blackwell, Oxford and Cambridge, MA, 1990, pp 177, 189 10 At some point, molecular engineering and artificial photosynthesis may invent and produce foods on an industrial scale in factories The world’s problem would then not be hunger but the displacement of millions of smallholders in many poor countries — with major consequences for social stability 11 J.M Keynes, The General Theory of Employment Interest and Money, Macmillan & Co., London, 1936, p 120 12 Alfred North Whitehead, Adventures of Ideas, Cambridge University Press, 1933 Index Note: ‘n.’ after a page number indicates the number of a note on that page Abelard, Peter 32 accountancy 149-50 Achnacarry Agreement 186-9 Acton, Lord 233n.3 Adams, John 232n.5 administration of individual wealth AEG 13 agricultural sector 22 Akerlof, George 236n.4 Albania 129 Albert, Michel 169 Alembert, Jean le Rond d’ 90 Alexandria 180 Allende, Salvador 160 Algemeine Elektrizitäts-Gesellschaft (AEG) 13 Amrou, Emir 180 Amsterdam Insurance Company 109 analysts, symbolic 146 ancient Greece 31, 59, 82-3 Anglo-Iranian Oil Company 189 anti-trust laws: 127, 183, 184; Achnacarry Agreement 188; diamond industry 112; Gillette’s views 18 apparatchiks 98 apprenticeship system 170-1 Aquines, St Thomas 59 Aristotle 74, 173 Arrow, Kenneth, J 175-6 associativity 95 Augustine, St 31, 65, 221 Australia 56 Bacon, Francis 32, 207 balance sheets: corporations 78, 156; government installations 115 bankruptcy proceedings 156 banks as prefects 135-7 bargaining 177 Bayle, Pierre 182 beauty 37 Bell, Daniel Berle, Adolf A 41, 133, 157, 186-9, 212 Berlin, Isaiah 35, 73 Blackstone, William 64 BMW 128-9 Bossuet, Jacques-Bốnigne 179 Breton, Andrộ-Franỗois Le 91 Bretton Woods Agreement 199 British Aerospace 220 bureaucracy 12, 81, 133, 135, 149-50 The Civilized Market Burger King 58 Burke, Edmund 141 Burnham, James Bury, J.B 29, 30, 31, 42-3 Bush, George 123 business cycles 41 California 138 Campbell, Joseph 29 Canada 99-100, 127, 195 Cardozo, Benjamin Nathan 62 Carlyle, Thomas 94 Carnegie, Andrew 17, 85 cartelization 189-90 certainty, scientific 42, 43-4 Chandler, Alfred, Jr 41, 133-4, 145, 149 channelling 190-1 Channel Tunnel 111-12 charity 8, 9-10 Charlemagne 174, 180 charters 107, 109-12, 113 Chesterton, G.K 30, 99 Chile 159-60 China 171, 172, 221 Chinese Eastern Railway 10 Churchill, Winston 99, 109 civility of corporations: 141-2, 160-2; ad hoc associations 145-7; cutting labor costs 143-5; enduring corporations 157-60; knowledge 152-3; ledgers as managers 149-51; mixed economies 151-2; service without kindness 153-6; subcorporations 148-9 class, social 74, 75 Clough, A.H 163 Coca-Cola 58 collectivity 171-4 240 collusion 184, 186 colonialism Commerz Bank 135 communism: 200; ends and means, incompatibility of 75; fading significance 7-8, 30-1, 221; humanism and humanitarianism 83; Lenin’s views 20; Old Testament’s resonances 40; property 67 competition: 103, 133-7, 183-4, 196; anti-competitive behavior 190-2; and change 132; and common purpose 197-202, 212-17; conviction, ethos of 207-8; corporate mor(t)ality 209-12; futurology 202-4; ideologies and cultures 204-7; two cultures 208-9; Ford’s views 17; Fourier’s views 21; Gillette’s views 17; inside information 194-5; and labor costs 143-4; planning 196; restraint of trade 185-90; Schumpter’s views 163; tolerance 163-4, 192-3; natural and social competition 165-6; unpredictability of “economic man” 176, 177 competitive analysis 194 Competitive Exclusion, Principle of 192 complementarity, principle of 43 computers and computer industry 23, 43, 196, 205 conspicuous consumption 11 conspicuous waste 11 consultants 145 consumer class 213 control of property rights 56-7 Index conviction, ethos of: 71-2, 87-9, 104, 207-8, 217; and ethos of success, conflict between 77, 79, 102-4; nationalism 95-7; natural cultures versus global capitalism 101-2; pluralism 97-101; pluralism versus nationalism 102-4; political romanticism 89-95; reason 89-91 copyrights 55, 137 corporate culture 128-30, 223-4 corruption 109, 113, 159 covetousness 15 credit 113 cultural evolution 38 culture: 224-5; corporate 128-30, 223-4; national 101-2 cummins, ee 87 cycles, business 41 d’Alembert, Jean le Rond 90 Darwin, Charles: 37, 163, 175; competition 165, 166; poverty 167, 197 Darwinism 37, 38, 165 Davis, John P 92, 114-15, 117 death 38 Defoe, Daniel 112, 113 democracy: and boredom 81; humanism 82; justice and fairness 177; principle 108; success and conviction, conflict between 102; and utilitarianism 66 derived power 58 Deterding, Sir Henri 187 Deutsche Bank 135, 136, 137 diamond industry 112, 190 Diderot, Denis 49, 83 241 discounts 125, 193 Disraeli, Benjamin 208 Divine Right of Kings 61, 71, 173 Donne, John 228 downsizing 147 Dresdner Bank 135 Drucker, Peter 85, 146 Dryden, John 28 Dutch East India Company 111 Dutch West India Company 110-11 East India Company (Dutch) 111 East India Company (English) 110, 112, 113, 114, 117 economic rationality 168-9 economic simplifications 174-6 education 61, 96 efficiency: industrial 24; private enterprise 126-7 Elizabeth I, Queen of England 110 Ellul, Jacques 63, 232n.8 Emerson, Ralph Waldo 208 employment: 23; see also unemployment encyclopaedists 90-1 enduring corporations 157-60 Engels, Friedrich 67-8, 83, 150 England: banking industry 144; chartered companies 109, 110; competition with Netherlands and Venice 144; control of property rights 57; credit 113; limited liability 107; pluralism 99; Quaker traditions 85; see also Great Britain; United Kingdom Enlightenment: collectivity 173; The Civilized Market elite leadership system, origins 100; humanism 83; liberty 114; and progress 33; and property 61; reason 79-80, 90 entrepreneurs 12 equality and inequality: 37; of opportunity 37; of property 52, 54, 57-61 ethnic cleansing 76 euro 10 European Currency Unit 10 European Unit 125, 138 Eurotunnel 111-12 evolution 37-8, 163 exclusiveness of ownership 54 factory system 64, 65 fair property 62-4 family 13 feel-good factor 147 feudalism 173 fixity of nature 43 Ford, Henry: 16-17; competition 193; corporate culture 130; individualism 6; labor costs 143; similarity of views to Rathenau’s 15 Fourier, Charles 21 France: bankruptcy proceedings 156; chartered companies 110; Channel Tunnel 111-12; Civil Code 62; collectivity 171; efficiency of private enterprise 127; Enlightenment 90, 100, 173; incorporation 108; indicative planning 138; mentality 101; 242 moral personality of corporations 117; pluralism 99-100 freedom see liberties freshness, sustenance of 132 fresh thinking 157 Freud, Sigmund 59 Galbraith, John Kenneth game theory 33-6, 166, 193, 237n.4 Garibaldi, Giuseppe 100 Gauze’s Hypothesis 192 General Agreement on Tariffs and Trade (GATT) 125, 144 General Motors 23, 123 German Edison Company 13 Germany: anti-competitive behavior 191; apprenticeship system 170; banking 135-7, 224; bankruptcy proceedings 156; change 178; Codetermination Act 131-2; collectivity 171; conduct of corporations 169; corporate culture 129; discount law 125; experimentation 201; incorporation 108; labor costs 143; mass-production 23, 75; mentality 95, 101; pluralism 99; rationality 169; romanticism 91, 92-4; steel pipe industry 190; Volksgeist 66, 94, 95 Gibbon, Edward 29, 32-3, 88, 227, 228 Gierke, Otto von 117 Gillette, King C 6, 15, 17-19 Gilson, Étienne 39 Gödel, Kurt 44 Index gold 112-13 gold ruble 10 good will 53-4 Gorbachev, Mikhail 30 Gorky, Maxim 9-10 Great Britain: Achnacarry Agreement 188-9; anti-competitive behavior 191; Australia declared a res nullius 56; bankruptcy proceedings 156; change 178-9; Channel Tunnel 111-12; conduct of corporations 169; East India Company 114; efficiency of private enterprise 126; experimentation 201; humanism 82; incorporation 108; monetary and fiscal policy 158-9; nationalization 179; Owen, Robert 85; profit 122, 123-4; see also England; United Kingdom growth 32, 33 Haecker, Theodor 22, 87 Hahn, Frank 236n.4 Hale 231n.10 Harding, Warren G harmony, social 108 Harvard Business Review 199-200 Hawking, Stephen 42, 44, 45 Hazlitt, William 34 Hegel, Georg Wilhelm Friedrich 66-7 Heilbronner Robert L 150-1, 229-30n.8 Heisenberg, Werner Karl 43 hell 172 Henle family 136, 137 Herzen, Alexander 7-8, 92 243 Hewlett-Packard 128 high-definition television 138 Hitler, Adolf 77, 94, 95 Holmes, Oliver Wendell 61, 87 Homer 40 Hoover, Herbert 9-10 horticulture 22 humanism: 174, 216, 225; capitalism, changed nature of 102; compatibility with business 200; and progress 28, 33; role of business 3; stakeholding 119; success, ethos of 81-4 humanitarianism: 216, 225; capitalism, changed nature of 102; roles of business and state 2-3; stakeholding 119; success, ethos of 81-4 Hume, David: attitude towards Jews 90; civilization 161; industrialization 10; mercantilism 113; property 65, 66; reason 78-9, 92; service without kindness 153 Huntington, Samuel 223 Hutcheson, Francis 83 Hutchins, Robert 129 Huxley, Julian 41-2 Huxley, T.H 38, 167 incorporation 105, 107-8 India 102, 114, 172, 187 indicative planning 138 individualism 6, 17, 126, 171 Indonesia 108, 110, 111, 160 industrial policy 138-9 inequality see equality and inequality The Civilized Market inflation 13 information and knowledge: 131, 137, 146, 152-3, 205; insider 194-5 insider dealing 109, 194-5 insurance 109, 152 intellectual property 138 intelligentsia 98 international aid 8, 9-10 investment 22, 23-4, 145, 167 invisible hand 41, 133, 135 irredentism 92, 96 irrigation systems 172 Islamic irredentism 92 Italy 100, 101, 159, 171, 173 Jacobs, Jane 103 Japan: apprenticeship system 170-1; bankruptcy proceedings 156; beliefs 113; change 178; collectivity 171; collusiveness 184; conduct of corporations 169; consensus 171; culture; corporate 128, 224-5; “duty” 102; experimentation 201; keiretsu 136, 170; management density 149; mass-production 23, 75; mentality 95, 101; Ministry of Trade and Industry (MITI) 136, 191; modernization 205; popular ethos 76; profit 124, 133, 134; rationality 169; social harmony 108; steel pipe industry 190, 191, 195; subcorporations 148; tolerance 175 Java 111 244 Jefferson, Thomas 60, 123 Jehovah’s Witnesses 40 Jews, attitudes towards 89-90, 180 Johnson, Samuel 153 Joseph II 180 Joubert, Joseph 100 justice 50, 68 Justinian, Emperor 204 Kahn, R.F 214 Kant, Immanuel: 35; on crooked timber of humanity 35; property 66; reason 79-80; romanticism 91; Universal Moral Law 88; on virtue 93 Kedourie, Elie 95-6 keiretsu 136, 170 Keynes, John Maynard: competition 133; economic rationality 236n.4; mercantilism 112; multiplier mechanism 214-15; optimism 166; savings and investments 167; unemployment 168 Klöckner incident 136-7 knowledge see information and knowledge Kropotkin, Prince Peter Alexeyevich 83 Kumaratunga, Chandrika 223 labor costs, cutting 143-5 Labor Theory of Value 63-4, 66, 68 labor unions 131 Lamarck, Jean Baptiste de 38 language, industrialization of 22 Leibniz, Gottfried Wilhelm 34, 45 Index Lenin, Vladimir Ilyich 9, 16, 19, 20-1 Lessing, Gotthold Ephraim 90 level playing field 124-6, 151 liberties: 174; corporations 105, 114-15; and property 59, 61 limited liability 105, 107 Lipson, E 114 lobbyists 145 Locke, John 63, 64, 181-2 loyalty 131 Luther, Martin 93 Maine, Sir Henry Sumner 51-2, 116 Maitland 62 Malthus, Thomas Robert 165-6, 167 management: 133, 199; by accountancy 149; density 149; roles 118 Mandeville, Sir John 206 Marathon Oil 150 Maria Theresa, Empress of Austria 180 Marshall Plan 8-9 Marx, Karl: ends and means, incompatibility of 75; humanism and humanitarianism 83; immiseration caused by capitalism 167; principle of temporality 7; property 63, 67-8; reason 222; resonance in Gillette’s view 19; romanticism 94; selective justice 74 masculine corporations 131 mass-production: 11-13, 25; Germany 23, 75; Gillette’s views 18; Japan 23, 75; Lenin’s views 20, 21; philosophes 91; post-industrialism 21-3; and property 65; Solvay’s 245 views 19 mathematics 44 Mazzini, Giuseppe 100 McDonald’s 58 Means, Gardiner 41, 133, 157 Melanchthon, Philip 63 merchantilism 109, 112-14, 173 Mercedes-Benz 128-9 Merton, Robert 129 Michelet, Joules 99-100 Microsoft 128, 221 Middle Ages 31-2, 33, 62, 92 migration 110 Mill, John Stuart 65-6 minimum state 176-7, 214 Ministry of Trade and Industry (MITI), Japan 136, 191 mixed economies, corporations as 1512 money 64, 85, 131, 152-3 monopolies: 112, 137, 138; “one percent” 191 Montaigne, Michel 73 Montesquieu, Charles-Louis de Secondat 90 morality: corporations 117; ends and means 76-7; humanism and humanitarianism 83, 84; and patriotism 88; progress 30-1, 36; and property 65 Morgan, John Pierpont 149, 150 Morgenstern, Oskar 35 Motorola 220 multiplier mechanism 214-15 Muslims 180 The Civilized Market myth 39-42, 97 Napoleon I 14 nationalism 93, 95-7, 102-4 nationalized industries 56, 126-7, 150, 151, 179 natural acquisition 63 natural evolution 37, 38, 163 natural rights to property 59-60, 62-3 natural selection 37 natural species 37-8 Naziism 67, 94 Netherlands apprenticeship system 170 chartered companies 110-11 competition with Venice and England 144 flower industry 22 wealth 144 Neumann, John von 35 New York 111 Nietzsche, Friedrich Wilhelm 94 Nisbet, Robert 29-30, 31 North American Free Trade Area (NAFTA) 125 oil industry 186-9 Old Believers 40 oligopolistic pricing 193 Omar, Caliph 180 opportunity, equality of 37 Organization of Petroleum-Exporting Countries (OPEC) 186 Orthodox Church, Russia 40 Orwell, George 76 Other People’s Money (OPM) 154-5 Owen, Robert 85 ownership see property 246 Paradox of the Virtues 77 Pascal, Blaise 40 patents 55, 137-8 patriotism: 121; English 99; Gibbon’s views 88; Haecker’s views 87; and profit 123-4 Penrose, Roger 231n.14 PepsiCo 58 perfection 37 philosophes 89-90, 91 Pinochet, Augustino 159 planning 158, 196 Plato 74 pluralism: 80-1, 97-101, 132; versus nationalism 102-4 political romanticism 91-5 Pollock, Frederick 53 Portugal 110 possimism 207, 222 postal services 126-7 post-industrialism 21-4, 25 potential liability insurance 152 Priestly, Joseph 65 Prigogine, Ilya 174-5 prisoner’s dilemma 36, 193 private property see property privatization 108 productivism 20 profit-and-loss statements 78, 156 profits: 121-2, 130-3, 139, 152; competition 133-7; corporate culture 128-9; ends and means 76, 77; Ford’s views 17; knowledge 137-9; “level playing field” 124-6; mankind as God-kind 129-30; patriotism 123-4; and property rights 70; stagnation capitalism 126-8 Index progress: 27-9, 46-7; evolution and social Darwinism 37-9; game theory 33-6;idea of 29-33; and myth 39-41; Rathenau’s views 15, 27; and science 41-6; Solvay’s views 19 property: 49-50, 70; equality, arguments for 58-60; fair 62-4; inequality, arguments for 60-1; intellectual 138; maze of 51-4; nature of 68-9; and pragmatic sanction of history 69-70; Rathenau’s views 15; rights 54-8; natural, arguments for 62; social utility as justification for 64-6; state and socialism 66-8 propriety 75 protectionism 185 Proudhon, Pierre-Joseph 67, 83 Quakers 40, 85 Québecois 99-100 Rathenau, Emil 13 Rathenau, Walter 6, 13-16, 154 on progress 15, 27 rationality, economic 168-9 Rawls, John 80-1, 197 Reagan, Ronald 74, 123, 158 reason 78-81, 89-91, 93, 222 reciprocity 59 Reformation 173, 175 Reich, Richard 146 religion and religious faith: division into two papacies 173; ends and means 78; hell 172; nationalism 96; Pascal’s Wager 40; progress 30, 32, 45; property 54, 57, 63, 232n.8; 247 reason 80, 90; tolerance 179-80, 181-2 Renaissance 82-3, 173 responsibility: 105, 114, 115-19, 226, 227; as motive force 15 Ricardo, David 168 risk 148 Roche, William 147 Roman Republic 53, 55, 59, 63 romanticism, political 91-5 Roosevelt, Franklin 127 Rostow, W.W 10 Rousseau, Jean-Jacques 67, 83 Royal Dutch Shell 129, 187 ruble, gold 10 Russell, Bertrand 40, 44 Russia: errant virtues 30; myths 40; national culture 102; Orthodox Church 40; pluralism 98-9; progress 31; property rights 70; romanticism 92; Salomon, Ernst von 14; Sampson, Anthony 186, 191 Savigny, F.K von 66, 94 savings 167 Saxons 180 Schleiermacher, Friedrich Ernst 93 Schrödinger, Erwin 43 Schumpeter, Joseph A.: 12; on capitalism 139; on competition 163; future of business system 150; mass-production 12-13; on socialism 20-1; stationary feudalism and stationary capitalism science 32, 39, 41-6 The Civilized Market self-interest 34 separation in time, as ownership prerequisite 54-5 service sector 21-4, 25 Severy, M.L 17 Shapiro, Irving S 85, 157, 238n.7 shareholders 118-19, 153, 155 Shell 129, 187 Sherman Act 18, 112, 188 Siemens 13 Siemens, Werner von 13 simplifications, economic 174-6 sincerity 77 Singapore 108, 143 skilled labor 170 slavery 110 Smith, Adam: competition 103, 165, 166, 183, 196; changing attitudes 206; fair property 63; humanitarianism 83; impartial spectator 59; “invisible hand” 41; market 74; mercantilism 113; other people’s money 154; Russian apparatchiks 98; self-interest, logic of 34; sympathetic feelings 198; tolerance 175; wealth 54 Snow, C.P 208 social acceptance of ownership rights 55 social definition of ownership 55-7 social harmony 108 social inequality 57-8 socialism 13, 127, 168 socialization 151, 169 social responsibility 105, 114, 115-19, 226, 227 248 social service leave 220 social utility, property justified by 64-6 Socony-Vacuum Oil Company 187 Socrates 40 Solomon Brothers 130 Solvay, Ernest 19-20, 189 Sombart, Werner 16, 127 Sophocles 29 South Africa 112 South Sea Company 109 Soviet Union and former Soviet Union: aid from America 9-10; Chinese Eastern Railway 10; collectivity 171; diamond industry 112; equality, complexities of 60; game theory 35; lapse of communism 7, 8, 30-1; Lenin’s views 20, 21; nationalism 95; need and want, complex relationship between 68; planning 196; pluralism 99; restraint of trade 185; structure-domination 150; see also Russia space: economic 46; meaning of 33 Spain 110, 173 Spanish Inquisition 180 stagnation capitalism 126-8 stakeholders 119, 153, 155, 207 Stalin, Joseph 10, 19, 74, 185 Standard Oil Company 18 Starover sect 40 steel pipe industry 190-1 Stiglitz, Joseph E 199 stock exchanges 114 sub-corporations 148-9 Index success, ethos of: 71-3, 85, 207, 217; ends and means 73-6; bad means for good ends 76-9; and ethos of conviction, conflict between 77, 79, 102-4; humanism and humanitarianism 81-4; reason 7981; unarrested eye 84-5 super-ego 59 Sweden 179 Switzerland 24, 125, 170, 180, 214 symbolic analysts 146 synderesis 59 syndicalism 16, 17 talent 60, 61 Tawney, R.H 33 taxes 54, 81 technology 21, 43, 168, 204-5 Telefunken 13 temporality, principle of Thatcher, Margaret 74-5, 123, 179 Theory X 199 Theory Y 199 Thoreau, Henry David 1, 85 time: compression of 46; separation in, as ownership prerequisite 54-5 tolerance: 80, 96, 163-4, 178-9, 182; collectivity, varieties of 171-4; domestication of the absolute 17980; economic rationality 168-9; economic simplifications 174-6; free enterprise 181-2; national varieties of capitalism 169-71; natural and social competition 165-6; nature of society and nature of nature 167; necessity 192-3; philosophes 89-90; of risk 148; tradition 84-5; unemployment 249 167-8; unpredictability of “economic man” 176-7 torture 75 trades unions 131 training 201-2 Troeltsch, Ernst 92-3 truth 77 uncertainty 43-4 unemployment 167-8, 202-3, 204, 206, 226-7 Union of Soviet Socialist Republics see Soviet Union and former Soviet Union United Kingdom: quick-profit mentality 101; stakeholding 119; see also England; Great Britain United States of America: Achnacarry Agreement 188-9; aid to Soviet Union 9-10; bankruptcy proceedings 156; beliefs 113; business culture 223; change 178; competition 183; conduct of corporations 169; consensus 16970; courts, damage caused by 1512; efficiency of private enterprise 127; experimentation 201; humanism 82; immediacy 134; incorporation 108; industrial policy 138; justice and fair distribution, need for 85; national culture 101, 102; national debt and budgetary deficits 159; pluralism 97-8; profit 122, 123-4; rationality 169; social responsibility 116, 117; steel pipe industry 190, 194-5; tax code 157-8 The Civilized Market United States Steel Corporation 18, 150 universities 84, 220 Ussher, James 179 utilitarianism 65-6 Vanderbilt, Commodore 85 Veblen, Thorstein 11-12 Venice 144 virtual university 220 Virtues, Paradox of the 77 Volksgeist 66, 94, 95 Voltaire 73, 90 wage levels 143-5 Wallace, Alfred Russel 165-6 Wallas, Graham 12 water utilities, control of 57 wealth: burgeoning of 184; Carnegie’s views 17; diffusion of 214-15; distribution of 52; Ford’s views 52; 250 Gospel of 17; and nationalism 96; Rathenau’s views 15; Russia 31; Smith’s views 54; Solvay’s views 19 Webb-Pomerene Act 188 Weber, Max 16 Weinberg, Stephen 44 Welch, Jack 226, 227 West India Company, Dutch 111 Whitehead, Alfred North 44, 215 Wills, George 36, 103 Wilson, Woodrow 100 World Corporation 18-19 World Trade Organization (WTO) 125 Yamazaki, Masakazu 100-1, 223 Yeltsin, Boris 30 zero emission vehicles (ZEVs) 138 ... is the thread that runs through his two most important critiques of capitalism, The Theory of the Leisure Class (1899) and The Theory of Business Enterprise (1904) The Civilized Market 12 The. .. product and giving it to the consumer.” Eccentrics are the cartoonists of the conventional wisdoms of their times Ford and Rathenau took the received ideas of their day and applied the logic of the. .. another capitalism and another epoch, still in this century but long ago Capitalism and the Horn of Plenty Unpredicted Triumphs of Capitalism Six things mark the industrialized world of the