tury programs giving land to railroads and favored individuals, in special tariff protections to certain industries, in aid to the shipping industry and to agriculture via protection of the slave trade, and in a variety of other legal and extralegal measures. One wonders on just what empirical evidence the economic conservatives base their belief that a removal of all, or even of most, restrictions on the market's operation would provide us the ideally functioning economy we all seem to want. Do they have anything to offer us beyond a blind faith? And even were we to accept their theology, what mechanism can they offer to transport us to this free market society? The giant American monopolies and oligopolies exist. The big unions exist. Imperfect mobility of labor exists. Employment discrimination exists. Fraudulent commercial practices exist. Vast differentials in individual ownership of wealth exist. Furthermore, evidence already shows that the conservative prescription for curing inflation by allowing the economy to operate below capacity until inflation subsides is politically unacceptable, so one must question its usefulness as a guide to policy.

A SOCIALIST ECONOMY

A purely socialist economy, then, emerges as a potential solution. By sacrificing certain freedoms which are still permitted under the existing system, one could eliminate some of the problems which plague contemporary American society. Space does not permit a detailed defense of that statement, which would certainly be attacked from both the left and the right. Suffice it to say here that a moderately well-managed socialist economy in the United States should have little difficulty reallocating both physical and human resources in a way which would eliminate grinding poverty and unemployment, control inflation, and abolish generalized shortages in housing, medical care, and other basic needs.

Utopia it is not likely to be, any more than today's America is a utopia for any but a tiny minority of people. Whether the "better" side of man's nature, such as deeper expressions of brotherhood and the disappearance of greed and racial discrimination, will emerge with the disappearance of the profit motive, as some socialist theoreticians aver, remains to be seen. Some negatives would be inevitable, such as the loss of freedom of choice of one's career or place of abode. But the extent of such freedom is highly

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dubious under our present system also, where one must accept what the economy dictates or else starve. The millions of displaced southern farmers and farm laborers discussed earlier constitute an eloquent testimony to the lack of "freedom of movement" in the United States. Similarly, the rather swift decline in the importance of small and medium-sized farms and businesses in the face of the onslaught of the giants suggests that America's highly touted freedom of enterprise is largely a mythical hangover from the nineteenth century.

Furthermore, the tendency toward massive operations in the United States has for some time been moving the economy ever further toward the type of impersonalized, mass bureaucratic management which one generally associates with socialism. (Small-state socialism such as one finds in North Vietnam and Yugoslavia probably escapes the ills stemming from the curse of size.) To the extent that such impersonalization leads to alienation, large societies of all ideological forms will be obliged to discover mechanisms for giving workers a greater sense of participation in the total production operation. The same pertains to at least some of our ecological problems. It is the scale and technology of large, modern industrial societies which threaten the environment and only secondarily the society's economic ideology. The Soviet Union's Volga River, like so many of our own, has deteriorated into a conservationist's nightmare.

Although some form of socialist economy is a highly visible alternative to our present system, it has thus far been unable to attract widespread support from those Americans who have the most to gain from its adoption. The reasons for this are varied and include the concept of individualism which characterizes the American self-image, the accent on the negative aspects of socialism which is fostered by the American ruling elite, and the fact that socialism has been embraced most vigorously by nations which the American worker has been taught to hate.

On the other hand, people seem to find the socialist characteristic of equalitarianism most appealing. The most persistent historic complaint by dissidents against societies has concerned

some variety of inequalitarianism-either political or economic tyranny, or the juxtaposition of the specially privileged and the underprivileged. Attempts to rectify such inequities are the stuff of human history, especially the history of revolution. Unquestionably, economic inequalitarianism underlies much of America's current social pathology. It is very likely that economic inequalitarianism is also responsible for the near complete breakdown of the existing economic system.

The capitalist ideology of the American economic system accepts existing distributions of wealth, human capital, and talent as "givens," and allocates resources within that framework. Income accrues to owners of land, of capital, and of labor on the basis of the amount and quality of these factors which are utilized in the productive process. The productive process itself is guided by the wishes of these resource owners as reflected in their willingness to spend their incomes and their wealth. So goes the theory. When the system is operating perfectly, inequalities in income arise only because of differences in the amounts and the usefulness of the land and capital owned by individuals and by differences in the value which the society places on labor performed by each individual.

THE NONDISTRIBUTION OF WEALTH

It is, however, in the distribution of productive factors that one encounters the major source of the tremendous inequalitarianism which plagues contemporary American society. There is nothing in the system's operation which would tend to equalize the existing distribution of assets. On the contrary, in a society such as ours where wealth can so easily be utilized as a political weapon, the (allegedly "neutral") operation of the economic system not only leaves accumulated

wealth untouched, but provides the owners with advantages in adding to their assets. Thus, an oligarchical elite based on wealth exercises a vastly disproportionate share of power in the governance of America and through this power is able to perpetuate itself in its position of dominance.

A government-sponsored survey published in 1966 discovered that the wealthiest one percent of American households owns 31 percent of total wealth, with the top 5 percent owning about 50 percent. (My figures are taken from two articles which appeared in Volume 3, No. 3 of the Review of Radical Political Economy: Howard M. Wachtel's "Looking at Poverty From a Radical Perspective" and "Income Distribution in the United States," by Ackerman, et al.) In this land of "people's capitalism," where over 30 million Americans own shares of corporate stock, 96 percent of the stock is owned by 20 percent of the households, with the wealthiest one percent of these households owning 61 percent of the total. Fewer than 2 percent of all taxpayers received 74 percent of all dividends and 76 percent of all capital gains. This fantastically skewed distribution of wealth is matched by the distribution of income, where we find that in 1962, the richest 5 percent of the families enjoyed 19.6 percent of pretax national family income, while the poorest 20 percent made do on 5 percent of the total. It is not by the sweat of one's brow that one becomes wealthy in America, but by already being an owner of wealth!

It seems clear that any marginal changes likely to issue forth from either a Republican or a Democratic administration are destined to be inadequate. Major restructuring, not marginal changes, is what is required. A strong new political party, free of suffocating ties to the present ruling elite, would have to emerge if the changes needed in our economy are to be introduced nonviolently. But in a society where wealth is the most vital political resource, it is unlikely that a strong political party, free of entanglements with the aristocracy, can ever achieve power. If it could, it would be of lesser importance whether it were committed to socialism or to capitalism than if it were irrevocably committed to the destruction of all economic and social basis for a privileged class. Highly confiscatory death, inheritance, and gift taxes would be a sine

qua non of such a program, for the aristocracy which has always ruled America—an aristocracy founded upon grants of land from European royalty, upon the institution of slavery, and upon unconscionable nineteenth century robber baronry and exploitation-must have its power broken so that a fresh breeze can sweep across our land. In biblical times, the Hebrews had a custom called Jubilee. Every fiftieth year was a year of celebration, during which slaves were manumitted, alienated lands restored, and debts forgiven. In a limited way, the society's air was cleansed so that a new era could begin, free of the burdens of the previous period. Although the American society is less than two centuries old, its history has so burdened it with inequities that the Jeffersonian dream which was its raison d'être has not only been stifled, it stands in danger of total collapse. There would seem to be no better way to celebrate our forthcoming bicentennial festivities in 1976 than to declare a form of Jubilee and sweep away as much of the deadwood of the past as we possibly can. Let the vast accumulations of wealth be leveled (the rich will still have a headstart because of their superior education, health, experience, etc.); let the large landholdings revert to the state, to be homesteaded on long-term leases by those so inclined; let the large holdings of corporate shares be distributed to the poor, so that we can discover what a people's capitalism might really be like; let the tax laws and the criminal codes, whose complexity too often serves only to obfuscate rather than to clarify, be written afresh to state unambiguously what they are intended to

state.

THE END OF AN ERA

Thus far, America has been spared the agony of a bloody revolution. Endowed with an unusually favorable combination of human and natural resources and blessed by an advantageous constellation of external political circumstances, the United States economy has been able to outstrip all others. This has permitted the growth of a large and affluent middle class which has

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heretofore served as a staunch bulwark against any tendency toward revolutionary upheaval. This stability has been further assured by the willingness of the ruling class to use the government as an instrument to assist the individual in adapting to the existing institutions or, failing all else, to cope with his poverty by direct income transfers.

For a variety of reasons, this era is now nearing its end. The concessions, palliatives, and assists offered by the liberal establishment are increasingly being recognized as inadequate by the disadvantaged segments of the society who, newly politicized, are discovering that their meager share of the national income is neither increasing nor indicative of the effort expended. The working poor, the victims of racial discrimination, the migrant worker, and the underemployed peer sullenly from their near-peonage social conditions at a middle class which works no harder than themselves but which lives infinitely better. This destitute underclass even catches occasional glimpses of a leisure class which works hardly at all but which wields great power and is thus able to perpetuate its wealth.

While it may be utterly unrealistic to imagine that monopoly capitalism would be willing to preside over its own demise, a fundamental restructuring is certainly imminent in one form or another. The institutionalized inequality that exists will soon be intolerable to a large segment of our society. We must strive to launch a truly exciting adventure-the fashioning of mankind's first equalitarian industrial society. If a reasonable approximation of equality of opportunity, including equality of access to resources, were offered to the American public, it is highly likely that even the most disenchanted elements of the population would be willing to join in a vast national effort to build a truly democratic society. If the prospect of a genuine redistributron of wealth in America sounds too frightening, too ambitious, too radical, one need merely pause to consider how inadequate or unpromising are the alternatives.

behavior.

S THE CORPORATION really a political body? Can it be reformed only by giving the public a role in corporate decision-making? Influential voices among those who criticize corporations for ignoring their social responsibilities have taken just this position. They point to pollution, racial discrimination, and the war in Indochina as clear evidence that corporate policies and decisions profoundly affect the welfare of the general public, not simply the financial interests of shareholders. They maintain that corporations thus exert substantial power, political power, over the members of society. Corporations, they say, are governments in their own right.

This political view of the corporation rejects the belief that the corporation can serve society adequately through market mechanisms alone. Corporate decision-making, say the critics, must go beyond tabulation of prices and profits, costs and benefits. Indeed, they contend that the marketplace-the supposed arbiter of the corporation -has become distorted through lack of competition. It not only fails to discourage external costs such as pollution and discrimination, but actually encourages them. For remedy, these critics look to neither the marketplace nor government regulation, the two traditional prescriptions for cor

Donald Schwartz is professor of law at Georgetown University in Washington, D.C. He is a director of the Project on Corporate Responsibility and counsel to Campaign GM. Professor Schwartz is a contributing editor to Business and Society Review.

porate reform. Instead, they focus on the corporation itself and demand that the great power of management be curtailed.

For them, reform can be achieved only by opening corporate decision-making to public participation by revamping the corporate structure to conform to the democratic principles applicable to other political bodies. This restructuring appears urgent to those who agree with the Yale political scientist, Robert A. Dahl, who says that giant corporations are "political systems" governed by a few men and largely unchecked by such outside forces as the market, stockholders, and government.

CAMPAIGN GM

It was to accomplish this reform at General Motors that the effort known as Campaign GM was mounted. Campaign GM regarded the corporation's impact on society as political as well as economic. Its strategy was to exploit the mechanism of shareholder democracy-the model on which corporate government is based-to temper both the effects of the marketplace and the power of management.

Campaign GM was well aware that in most large corporations shareholder democracy is a myth. In theory, the corporation resembles a parliamentary democracy. The shareholders serve as the electorate, the board of directors act as the legislature, and management operates as the cabinet. The owners (the shareholders) delegate to

the board of directors and management the right to exercise power. Final authority rests with the shareholders and their direct agent, the board of directors.

In practice, however, most large corporations don't work this way. Management tends to be self-perpetuating and determines the corporation's goals as if it, not the shareholders, owned the corporation. The shareholders are consistently denied any real participation in decisionmaking. In reality, they are more bondholders than owners. The board of directors, in fact, acts as policy maker in name only. The Penn Central bankruptcy and like occurrences underscore the primacy of management and the insignificance of the board.

It is, of course, in management's interest to feed the myth of shareholder democracy; after all, it is precisely this myth that legitimizes management's power. Management assures its own reelection by controlling not only the proxy machinery but the corporate treasury as well. And it sometimes wields its authority brazenly. At the 1971 GM meeting, for example, the chairman refused to allow shareholders to ask questions of candidates for directorships.

Campaign GM's approach was to turn shareholder democracy-fictitious as it may be-to its own advantage. It meant to give it dimensions undreamed of by management. Shareholders were asked to take the lead in preventing or correcting social damage resulting from corporate conduct.

Campaign GM never expected its views to prevail among the shareholders, most of whom regard their stock strictly in terms of interest and dividends. Still the Campaign was not tilting at windmills, for it was skeptical as to whether the machinery of corporate democracy transmitted the views of shareholders effectively. For one thing, it believed that most shareholders who vote to retain incumbent managers do so not from conviction but from indifference or a feeling that to do otherwise is futile. Campaign GM also objected to the practice employed by institutional investors, such as universities and pension plans, who vote their stock en bloc according to the decision of a few trustees. It reasoned that true shareholder democracy would enable the voices of the thousands of underlying owners to be heard. Furthermore, Campaign GM advanced the singular proposition that on corporate issues affecting the general public, the constituency which deserved a voice and a vote included not

only shareholders but the public itself. Democratic principles demanded no less: Since General Motors' actions and policies affect the lives of the general public, management must win their consent if it is to exercise such power legitimately.

Campaign GM thus intended to use the machinery of corporate democracy to marshal public opinion in its support. It knew that the actual shareholder resolutions it submitted (for changes in the procedure for nominating directors and for disclosure of more corporate information) would be defeated, but the fate of the resolutions was secondary and could be dismissed as either irrelevant or essentially predetermined by the system. Moreover, General Motors might pay more attention to the uncounted votes of the public than to those of its own shareholders. As for institutional ballots, Campaign GM hoped that the constituency of a university, for example, would conduct debates to determine how the university would vote.

THE DANGERS OF POLITICIZING CORPORATIONS

Intriguing as Campaign GM's challenge was, and accurate as many of its observations were, political transformation of corporate structure would, in my opinion, pose serious dangers. The standard against which corporate structure must be measured is, I believe, the corporation's effectiveness in achieving society's goals-economic and otherwise—at a reasonable cost. This is a test of utility. "Cost" in this sense must be read broadly to include social costs, such as pollution and racial discrimination, that are borne by the entire community. As it stands, neither the oldfashioned market model nor the full-fledged political model of the corporation satisfies this standard.

The political model has two glaring faults. First, political restructuring threatens the corporation with failure at its chief task-the efficient production of goods and services. Second, as a practical matter it would prove all but impossible to politicize the corporation.

Those who would restructure the corporation to give the public a voice in its decision-making must first overcome enormous practical problems. Ralph Nader has suggested that approximately one-fourth of the corporate boards of directors be chosen by a popular process, although he has not specified how. Given Nader's aversion to intermediaries, he probably means by popular election. But how in the world would this be done? Assume we attempt to politicize only the

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