ANTI-CAPITALISM
AND
BUSINESS

(3. K89

 

 

 

 

 

ABOUT THE AUTHOR

Charles G. Koch is President of Koch In-
dustries, Inc., of Wichita, Kansas, and also
serves as President and Chairman of the
Board of the Institute for Humane Studies,
Inc.

This address was presented at a seminar
on ?The Anti-Capitalist Mentality,? held in
conjunction with the annual meeting of the
Institute?s board of directors in Dallas,
Texas, on April 27, 1974. In addition to Mr.
Koch, the seminar leaders included the
noted American economist and journalist,
Henry Hazlitt, and Ronald Max Hartwell,
distinguished professor of economic history
at the University of Oxford.

Additional copies are available upon request from:

Institute for Humane Studies
1 177 University Drive
Menlo Park, California 94025

ANTI-CAPITALISM AND BUSINESS

CHARLES G. KOCH

Anti-capitalist feelings in the United
States are probably more virulent today than
ever before. Yet the efforts to stem this
challenge to our traditional economic values
have been ineffective. It is crucial that we
understand what is happening, why the de-
fensive efforts have floundered, and what
approach, if any, would succeed.

Shortly before he became Associate Jus-
tice of the Supreme Court, Lewis Powell, in
his famous Powell Memorandum, described
the current contempt for business. Powell
noted that, in contrast to earlier periods in
our history, anti-business sentiment was not
being propagated merely by a few radicals.
The present assault on the enterprise system
is broadly based and rapidly gaining momen-
tum and converts. Today?s antagonists are
numerous, well financed, and increasingly
welcomed and encouraged by other elements

of society.
Powell illustrated the tone, the character,

and the intensity of the attack by citing
statements of a few heroes of the young.
William Kunstler, the activist attorney who
is a popular speaker on campuses, proclaims:
?You must learn to fight in the streets, to
revolt, to shoot guns. We will learn to do all
of the things that property owners fear.?
The self-appointed consumer advocate,
Ralph Nader, declares that a great many
executives of major corporations should be
imprisoned for defrauding the public and
willfully producing unsafe products. As
proof of the potency of these attacks,



 
 

Powell cited a recent poll of students on
twelve campuses: approximately half fa-
vored nationalization of basic industries in
the United States. 
It is easy to add to Justice Powell?s ev1-
dence. A Harris poll has indicated that those
having confidence in business leaders
dropped from 55% in 1966 to 27% in 1973.
Another poll showed that 63% of the Ameri-
can public believes that the oil industry,
rather than the U.S. government or Middle
Eastern politics, was primarily to blame for
the energy crisis. But even more disturbing
evidence of this adverse impact is the wide-
spread support found today for new federal
and local regulations of business practices.

With all due reSpect to the laudable pur-
pose of the Powell Memorandum, it con-
tained a fundamental error which was gener-
ally unnoted by businessmen themselves and
which must be corrected if we are to combat
the anti-business climate effectively. This
error is the assumption that the most in?u-
ential segments of the American business
community actually believe in capitalism 
in a free enterprise system and that there
currently exists a free market to be defended
and preserved. Neither of these ?facts? is
correct, and defense of the free market will
not succeed if we proceed on the assumption
that they are.

The present economic system of the
United States is a far cry from free enter-
prise. Who, after all, can deny that govern-
ment today is deeply involved in virtually
every aspect of business? Strangely, while it
is largely agreed that there is a crucial need
to defend the freedom of business in order
to avoid additional regulations, the fact that
free enterprise has already been crippled by
government intervention is largely ignored.
For some reason, many business spokesmen
seem to believe that the existing system of



interventions represents free enterprise,
whereas any new regulations would be
socialistic. We should realize, however, that
socialism includes not only the socialistic
measures proposed, but the socialistic
measures already adop ted.

It is too late to avoid an interventionist
economy; it is already with us, as the emi-
nent journalist, Garet Garrett, pointed out
thirty years ago:

There are those who still think
they are holding the pass against a
revolution that may be coming up
the road. But they are gazing in
the wrong direction. The Revolu-
tion is behind them.

We have confiscatory taxation, wage and
price controls, commodity allocation pro-
grams, trade barriers, restrictions on foreign
investments, so-called equal opportunity re-
quirements, safety and health regulations,
land use controls, licensing laws, outright
government ownership of businesses and in-
dustries, and many more interventions. No
advocate of free enterprise should confuse
all of this with a free, capitalistic economy!

Undoubtedly we businessmen have been
ineffective in our defense of the free market
system. According to columnist Jeffrey St.
John, American business is primarily in
trouble because of intellectual bromides
which it has substituted for a sound intellec-
tual exposition of its point of view. To date,
business has attempted to defend itself by
taking a conciliatory attitude rather than
exposing the fallacies in the anti-capitalist
arguments. For example, when the oil indus-
try and others are criticized for having ?ex-
cess? profits, businessmen should argue that

in a free market there is no such thing as

excess pro?ts that without high profits
there could be no signal to invest more capi-
tal in order to increase production to meet



 

the consumer demand that created the prof-
its. Instead, industry has betrayed itself and
sound capitalistic principles by pleading that
its profits really are not all that high. Since
the public could not be convinced, the
critics complaining of the evil of excess prof-
its have become even more credible.

The inept attempts of business to appease
or hide from its popular critics contrast
sharply with the effective offensive of its
opponents. Their activity has included ex-
tensive research and writing in economics,
history, and political thought; the systematic
education of students as socialist scholars;
and the use of every available means to
maintain a constant barrage of scholarly
sounding propaganda against business and
free enterprise.

But the situation is actually worse than I
have described, if that is possible. Not only
are we ineffective in countering the anti-
business critics; we ourselves have abetted
the destruction of the free enterprise system.

First, we have allowed the free market to
be blamed for fostering economic crises
when, in fact, a free market did not even
exist at the time the crises occurred. A com-
ment on the Great Depression will illustrate
this point. Those who believe that the pre-
1929 economy, polluted by massive govern-
mental manipulations of the money supply,
was a free market, are defenseless against the
charge that the Depression occurred because
of unregulated market activity. Similarly,
those who believe that today?s oil industry
operates in a free market cannot refute
charges that the oil companies are responsi-
ble for the energy crisis.

Second, we have supported the very insti-
tutions from which the attack on the free
market emanates. Although much of our
support has been involuntary through taxes,



we have also contributed voluntarily to col-
leges and universities on the erroneous as-
sumption that this assistance bene?ts busi-
ness and the free enterprise system, even
though these institutions encourage extreme
hostility to American business. We should
cease financing our own destruction and fol-
low the counsel of David Packard, former
Deputy Secretary of Defense, by supporting
only those programs, departments, or
schools that ?contribute in some way to our
individual companies, or to the general wel-
fare of our free enterprise system." Any
other course merely makes business a laugh-
ing stock in the academic community, gener-
ating respect from neither its few friends nor
its many enemies.

Third, we have accepted the concept that
the corporation has a broad social responsi-
bility beyond its duty to its shareholders.
But, as economist Milton Friedman points
out, ?The great virtue of the private enter-
prise system is precisely that by maximizing
corporate profits, corporate executives con-
tribute far more to the social welfare than
they do by spending stockholder?s money on
what they as individuals regard as worth-
while activity.? Yet the businessman has
come to believe that ?he is defending free
enterprise when he claims that he is not
concerned ?merely? with profit, but also with
promoting desirable ?social? ends. When the
businessman does this, he is in fact preaching
pure and unadulterated socialism.?

This is not to say that businessmen have
no responsibility beyond immediate profits.
We have an obligation to fight for the resto-
ration of the free market and the survival of
private enterprise. Just as the prudent busi-
nessman must insure the company?s major
facilities against physical destruction, so he
has an obligation to his shareholders to use
his time and the company?s money to insure
against the political loss of any opportunity
to make a profit.



Finally, in perhaps our most grievous mis-
step, business has consciously assisted the
government in destroying the free market.
Historically, businessmen have been at the
forefront of those bent on destroying free
enterprise. As Professor Gabriel Kolko noted
in his book on the Progressive era, The Tri-
umph of Conservatism, certain key business-
men at the turn of the century were among
the major initiators of federal intervention in
the economy. Kolko also observed that it
was not the existence of monopoly that
caused the federal government to intervene
in the economy, but the lack of it. Several
other scholarly studies have confirmed the
fact that monopolies cannot be maintained
by private means alone. As businessmen
came to realize this, on many occasions they
simply turned to the government for special
privileges and protection from competition.

The process apparently still continues.
Hence, those who blame the oil industry for
the energy crisis are correct in the sense that
the oil industry did encourage misguided
government regulation. Over the years, for
instance, the industry sought oil proration- 
ing and import quotas, and it approved the
1971 wage and price controls. Subsequently
it has called for federal allocation programs
and gasoline rationing.

As I perceive the situation in which the
pro-capitalist businessman ?nds himself .to-
day, there are basically four ways in which
he can fight for free enterprise through
education, through the media, by legal chal-
lenges, and by political action. As a believer
in the market economy, I appreciate the
benefits of specialization and the division of
labor. Therefore, in general, I recommend
that each businessman do what his own tal-
ents and resources allow him to do best._I do
maintain, however, that the educational
route is both the most vital and the most





neglected. As Professor F. A. Hayek has
acutely observed, ?Unless we can make the
philosophic foundations of a free society
once more a living intellectual issue, and its
implementation a task which challenges the
ingenuity and imagination of our liveliest
minds, the prospects of freedom are indeed
dark.?

By education, I mean basic scholarly re-
search and writing which will provide us
with better understanding of the market sys-
tem and better arguments in favor of this
system. We desperately need to develop ad-
ditional talent capable of doing the research
and writing that undergird the popularizing
of capitalist ideas. Business has so neglected
this approach that when, for example, a
project to study free?market ideas is funded,
the biggest problem is finding someone will-
ing and able to do the work. While business
has sometimes shown an interest in establish-
ing appropriate chairs at universities, there is
so little first-rate talent available that this
effort has often resulted merely in a shift of
one of the few free-market scholars from
one university to another.

Many things can be done to develop this
talent: financing fellowships for graduate
students to work under teachers sympathetic
to the free market; sponsoring conferences
where scholars and students gather to discuss
the market economy; arranging publication
and distribution of scholarly books; and in~
suring that able students can find attractive
opportunities as teachers or research schol-
ars. But business must make its funds avail-
able for such purposes and use its influence
to provide openings. I believe that this long-
term, educational approach is absolutely
necessary to restore the free enterprise sys-
tem.

Nevertheless, organizations like the Insti-
tute for Humane Studies that are active in
this educational effort have had trouble rais-
ing funds from business. This puzzles me



because education is by all odds the most
economical and productive of any of the
ways we can pursue. The educational meth-
od enables the businessman to work effec-
tively without exposing himself to the same
public criticism that the other methods, par-
ticularly politics, seem to evoke. Perhaps we
businessmen have overlooked education be-
cause we have been too impatient and thus
failed to recognize that the usual business

standards for returns on long-term invest-
ments apply in this area as well.

Unlike educational programs that produce
new advocates, the alternative approaches 
utilizing the media, the courts, and politics
fall in the category of self-defense. But
self-defense is necessary, and I recommend
that it be done aggressively. However, to do
this effectively, business must keep its own
house in order. Its defense must not backfire
and make it even more vulnerable. Thus, we
cannot speak out for free enterprise and at
the same time lobby for special privileges
and limits on competition. This issue may
create division within the business com-
munity, but it should be faced up to so that,
if necessary, the lines may be properly
drawn.

We should utilize the media in speaking
out in our defense, but we should make a
sound intellectual exposition of our point of
view. There should be no hesitation to at-
tack the enemies of the free market, such as
the Naders, as aggressively as possible. And
we must appropriately ?reward? the media
when they promote the free market, but
withdraw support when they attack it.

Concerning the use of legal challenges,
Professor Henry G. Manne of the University
of Rochester advises that ?the business com-
munity utilize available techniques of legal
adversary proceedings to announce publicly
and vigorously, both as individual companies
and through associations, that they will not



cooperate with the government beyond the
legally compelled minimum in developing or
complying with any control programs.? He
urges businessmen to ?publicize as widely as
possible the inevitable inefficiencies, mis-
takes, and human miseries that will develop
with these controls? and adds that ?busi-
nessmen should help the public understand
that morality, in the case of arrogant, intru-
sive, totalitarian laws, lies in the barest pos-
sible obedience and in refusal to cooperate
willingly beyond the letter of the law.?
Examples of non-cooperation and successful
resistance abound, such as the recent inde-
pendent truckers strike and the gasoline
dealers shutdowns. But we should also con-
sider the possibilities of strategically planned
litigation and administrative procedures.

The fourth method, political action, has
been the most widely used by businessmen
and, while seemingly successful in some
cases, has overall proved least fruitful. I be-
lieve the basic reason for this failure is that
politicians reflect what they believe to be
the view of their constituents, and this
majority view has been formed over the
years by socialistic educational efforts.

For limited objectives, political activity
can be effective and should be pursued. This
could include, for instance, litigation to af-
fect bureaucratic behavior, informational
programs for Washington lobbyists, and per-
haps educational seminars for administrative
and legislative staffs. Still, this is necessarily
a limited program and should not be consid-
ered a panacea.

Further, we must recognize that a direct
political approach contains certain inherent
dangers. Past history indicates that, once a
businessman has gained political influence,
he typically attempts to use it to gain an
advantage over his competitors. When this
happens, and at times when it doesn?t, a
strong public reaction against business devel-

-9-

ops. Thus, political activity is less cost-effec-
tive than the other approaches, and business-
men should allocate resources accordingly.

The important strategic consideration to
keep in mind is that any program adopted
should be highly leveraged so that we reach
those whose influence on others produces a
multiplier effect. That is why educational
programs are superior to political action, and
support of talented free-market scholars is
preferable to mass advertising.

The development of a well ?nanced cadre
of sound proponents of the free enterprise
philosophy is the most critical need facing us
at the moment. And this task is not imprac-
tical. As the Powell Memorandum points
out, ?business and the enterprise system are
in deep trouble, and the hour is late.? But
the system can be restored if business will
re-examine itself and undertake radical new
efforts to overcome the prevalent anti-
capitalist mentality.



The Institute for Humane Studies was founded
in 1961 as an independent center to foster 
research and advanced study for the strengthen-
ing of a free society. Through conferences, fel-
lowships. publications, and related activities, the
Institute seeks to serve scholars in all the humane

sciences who are interested in the principles of
liberty.

Interested persons in education, business, and

the world share in its
programs it sponsors.

the professions throughout
work and participate in the