CAPITALIST REVOLUTION

Time to Correct a Distorted Picture

THE talk about Communism goes on and on; its moves and moods are subjects of intense scrutiny. But who talks about capitalism? The Communists (and a lot of Socialists) paint a distorted picture of capitalism as it was in 1867 when Marx published Das Kapital, and most anti-Communists answer with a theory of capitalism developed more than 150 years ago by Adam Smith in his Wealth of Nations. The reason for this, says Adolph A. Berle Jr. in The Twentieth Century Capitalist Revolution (Harcourt, Brace; $3), is that "no adequate study of twentieth-century capitalism exists . . . No one, it seems, has seriously undertaken to restate the actual practice of American capitalism as it has developed since, let us say, 1930, describing its operations and results, and readjusting theories to conform to fact."

Lawyer Berle, who served as Assistant Secretary of State from 1938 to 1944 and later as Ambassador to Brazil, does not undertake a full-scale reexamination. Rather, he suggests an outline for a whole generation of scholars. As a longtime corporation lawyer and author (with Gardiner C. Means) of The Modern Corporation and Private Property, Berle is well qualified to bring corporate lore up to date. He directs attention to the American corporation--not as a legal or economic entity but as a political institution. It has power. It has limits upon its power. What kind of power? What kind of limits?

Berle draws a detailed picture of the American corporate colossus. Great kings have lived and their names are writ in the folk memory of the world who had not a tenth of the power of many a U.S. corporation headed by a half-anonymous member of the country club. But the limits--they are knottier. The statists believe that the essential limitation on corporate power will be absorption by the Government of top corporate control. But Berle observes that the fascist and Communist efforts to swallow corporate power have not been successful in terms of economics, morals or politics.

The traditional pro-capitalist answers the statist by asserting that the essential limitation upon corporate power is exercised by what "economists refer to as the 'judgment of the market place' . . . which was assumed to be a powerful controlling factor. By declining to provide capital, it could, in theory, check overexpansion, could favor enterprises which the country needed most . . ." But Berle does not believe that the judgment of the market place plays this part in contemporary U.S. capitalism. The modern corporation is strong enough to ignore the judgment of the market. The spectacular fact is that most of the new capital for the enormous postwar expansion came not from the market place but from within the corporation, i.e., profits and reserves.

What then limits the corporation? Berle goes back to William the Conqueror's ancestor Duke Rollo, who, along with his successors in Normandy and England, was about as absolute a wielder of power as political history knows. Yet Rollo, says legend, was impelled to proclaim that any subject who felt aggrieved could appeal to him by crying "Ha Rollo." This appeal to "the conscience of the King" became the foundation of liberties as the Western world knows them.

It was not sheer benevolence that caused Rollo and his line to admit their power and decide many a cause against their own immediate interest. Practical considerations of staying in the king business made it desirable to give the constituents the feeling that the king obeyed a higher law of justice. Kingship, indeed, is meaningless without reference to a higher law. And this is the irony of power: that it will either create checks upon itself or it will wither.

The American corporation, not out of its weakness but out of its strength, has begun to limit its vast power in conformity with "public opinion," with its managers' interpretation of "the ancient problem of 'the good life.' " This corporation with its highly imperfect corporate conscience is the great political fact of the modern world. Berle is not complacent about the state of the corporate conscience. But he knows that the corporation is not "soulless," as a past generation said it was. The corporation has tasted power; it can, therefore, be politically damned or it can be politically saved. Berle says that the implications of his line of thought "have both splendor and terror."

They do indeed. Once directors only wanted to make a buck or two. Now they are involved with Rollo and Conscience. They conduct, far more than does the State Department, the foreign relations of the U.S. They shape, far more than any President, the destiny of the Republic. Around them should swirl a tide of argument--but current argument, not the argument of 1867.

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