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A New History Of American Business

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Government intervention in the economy—via spending, regulation, and taxation—has expanded steadily over the last century and is now at an all-time high. As economist Joseph Schumpeter noted long ago, business has generally done little to resist that growth, viewing the costs of navigating a complex and ever-changing regulatory maze as an external factor beyond their control. Yet, not all businesses have been so passive, suggesting that resistance to regulatory overreach is possible. But the history of such resistance is both thin and demonstrates that future efforts will require learning from this history and considering what changes are needed to succeed.

I explored that record while assembling a bibliography for a luncheon seminar (“Business Response to the Growth of Government”) organized with Lee Edwards of the Heritage Foundation. We didn’t find a history of this type but a number of books did cover some campaigns which provide insights into what strategies did not work—and what changes might enhance future resistance efforts.

One of the best known efforts was the formation, in the early days of the New Deal, of the American Liberty League by a group of business and political leaders. The group included prominent Democrats and leading corporate CEOs. Its goal was to promote individual rights, respect for private property, and Constitutional limits on government power. It was well funded and, for a brief period, gained positive attention from the media and the public. Sadly, the elite nature of the League’s leadership made it all too easy for Franklin Roosevelt to mount a brilliant class warfare campaign against the League. FDR denounced the League’s membership as “economic royalists” unconcerned with the plight of the populace. The New Dealers decisively won that PR battle and the League retreated, quickly downsizing and closing its Washington office for good in 1940.

This failure persuaded many business leaders that resistance to the growth of government was futile and that they must accommodate themselves to an ever more politicized economy. Some noted that, after all, regulations and other interventions provided opportunities to gain some relative advantages, even at the expense of lost economic investment and operating freedom.

There were numerous efforts by some leaders and business associations to fend off specific attacks, but there are few histories of those individual skirmishes. But as government moved from the sector-specific regulations of the past (transportation, communications) to the economy-wide regulations of the 1970s (environmental regulation, occupational health and safety, labor rules), market defenders again became active. The most notable response was penned by American Bar Association President—and later Supreme Court Justice—Lewis Powell in the 1971 memo, “Attack on the American Free Enterprise System.” Powell sounded a wake-up call for everyone concerned about a free economy:

[W]hat 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.

The Powell Memorandum had a brief but significant impact, encouraging concerned businessmen to underwrite the formation of free-market public policy organizations, including the Heritage Foundation, made possible in part by support from Colorado beer magnate Joseph Coors. The memo also accelerated efforts already underway at the U.S. Chamber of Commerce to establish its own foundation and litigation program. Yet, no business leader assumed Powell’s leadership role when he moved to the Court and the intensity of the response lessened. The Chamber and other business associations acting generally independently of the growing array of pro-market policy groups continued the resistance but the sense of urgency that Powell created faded quickly. It needs to be rekindled, for the threats that Powell warned us about almost 45 years ago have steadily gotten worse.

Business leaders today face an array of regulatory burdens that don’t just affect a single company or even a single industry. These government rules restrict their ability to build their companies and serve their customers every day. But, business leaders too often resign themselves to increasingly burdensome regulation—We tried resistance once and we lost! Businessmen treat regulations like the weather, just another exogenous cost of doing business, much like a shopkeeper forks over protection money to a local mob boss. Even many entrepreneurs who aim to disrupt entire industries with new ideas seem reluctant to fight City Hall—or Congress, for that matter.

But as the costs of regulation increase and the freedom of business to make creative operating and investment decisions continues to shrink, business must rethink the costs of appeasement. Business leaders must learn to better tell their stories while also reaching out to free market intellectuals and policy groups as credible spokespeople. Better stories of why the productive sector of the economy deserves to flourish without the burdens of government are needed. These might inspire more executives, investors, and entrepreneurs in the U.S. to stand up against the threat of bureaucratic micro-management. The history of principled business leaders fighting for the freedom to innovate is thinner than it should be. But it is there. Our challenge is to ensure that newer and more successful chapters are written—these are critical if the American economy is to survive.