The following essay was written for the December 27, 1974, issue of the Observer, in honor of the magazine’s 20th anniversary. We publish it here in its entirety in honor of the late Roger Shattuck. Parts of the essay are obviously dated. Most significantly, unionized labor has long ceased being “the most powerful organized sector of the country,” as Shattuck described it more than 30 years ago. But his probing questions about the role of profit—the emphasis on corporate quarterly results and the all-consuming role of money in our political system—have taken on a greater importance in the years since this essay was written.
In retrospect it’s clear. Every-thing I have written for the Observer has to be classified either as a jeremiad or as a crackpot proposal. There was a piece on nationalizing telephones and railroads; a diatribe called “The Great Travel Hoax”; an ominous debate with John Silber on nuclear policy; and a proposal of a year’s universal national service (women included) as a substitute for the draft.
I wonder how the Observer ever survived on such fare. Yet it has thrived for all of us to see and read, and is now coming of age in America. In fact, for all its youthful energies and occasional raunchiness, the Observer seems to have been here much longer than 20 years. Our children always look younger than their years; our institutions look older. Let’s keep our illusions. Happy Twentieth, Observer & Co. But don’t expect silver and gold. For you, every anniversary is paper. Not a bad thing all around,
For the occasion I have found a quote that applies not to the Observer, thank God, but to some of us who, after making our home in Austin and Texas with every expectation of staying on, felt obliged to leave after the Great UT Regents Rumble of four years ago. Pop music turns up some great nuggets:
They’ve forgotten your nameIn Johnson CityAnd left you in the Texas of yourmind.
(“The Invisible Man,” Joe Byrd’s Metaphysical Circus)
For the past three years, the Texas of my mind, of my family’s mind, has been a log cabin in Vermont with adjacent mountains, a bigger potato patch every year, and no institutional connection to protect and define our existence. A good life? Yes, truly, even though I have now returned to teaching by choice and by necessity.
Out of that interim come two thoughts about the world that confronts all of us. I cannot change my tune: more jeremiads and crackpot proposals. Even an anniversary needs all kinds.
My father was a reasonably successful doctor in New York City. He gave half his time to unpaid hospital work and still survived the long drought of the depression. When he died a couple of years ago in his eighties, he left a small nest egg. After taxes and division among heirs, the capital I received, conservatively invested, yields enough income to help substantially with the education of four children, but only a fraction of what a family needs to live on—even with simple tastes and a garden, in Vermont. Furthermore, I didn’t earn the money; it isn’t mine to squander. It represents an inherited investment in our society and its future, and, willy nilly, in the capitalist system. By living within their means, my parents could place this small bet on our way of life. Unless I am incapacitated and need the money, it should remain in a kind of escrow, administered by me in such a way as to improve and if necessary modify the system which permitted its accumulation and inheritance. Otherwise, I should renounce it.
Many people must find themselves in a comparable situation. Yet we easily forget the responsibilities of money because we are constantly prevented from discharging them. The banking systems and the stock market drug us so effectively that we do not expect anything more of our money and ourselves than to earn more. Our tablet of the law shows only one commandment: Thou shalt show a profit. Marx never spoke about his form of alienation from self and from worldly possessions. Abdication may be a better word. It afflicts us without our even knowing it.
For how can I invest that money in the future of anything? (One could give it all to a carefully chosen charity or foundation. But that would mean turning over one’s responsibility to others—full abdication.) There are only two recognized ways to invest a nest egg: for long term gain, and for current income. In either case, most investment counselors will advise diversification in order to hedge bets and spread losses. What is the consequence? The investor, small or large, comes to own no identifiable thing or property. He has a “portfolio”—samples of wall paper and no room to live in. Absentee ownership could not be carried further. Even institutional investors exercise few genuine powers and limited responsibility of ownership. The final demonstration occurs when the proxies arrive. Management asks us all to vote for the present regime, along with salaries and pensions that stagger the imagination.
Occasionally in the notice of the annual meeting one finds a proposal from one or two obstreperous stockholders (they never seem to own many shares) to change some established practice. Management makes them sound meddlesome and ridiculous, even though their idea (for example, to vote separately for directors) may have unmistakable merit.
You ask your investment counselor about the proposal—and maybe the salaries too. By a curious professional code of ethics, he abstains from advising you on the only meaningful decisions you have to make about this money for which you are responsible. Stockholders have no way, and usually no desire, to communicate with each other about such matters. I understand that foundations and institutions follow the same blind course and vote with management. Is management automatically right as long as financial reports stay in the black? Is anyone listening? Is anyone thinking? I haven’t seen it happen yet. Every attempt to broaden the base of stockholders by stock splitting means less participation, greater distance. We tacitly support the system by merely having a bank account or by owning a few measly shares of a corporation over which we exercise not the slightest control and which, on the contrary, propagandizes us with glassy annual reports and other assorted handouts.
But you are not supposed to be concerned about all that. The youngest heir and the oldest counselor will tell you that what counts is to show a profit. Nothing else matters. Nothing else is even measured or counted. A few harried and reluctant universities may have sold out their Dow Chemical during the hurricane of the late Sixties. But no intelligent investment committee could conceive, then or now, of putting money in a firm that does not make a good return or promise growth. “Owners” are not expected to ask pointless questions about how the profit is turned and who else is getting a cut.
Is there another way? I’m not referring to any distinction between conservative, blue-chip investing and risk capital. My question concerns the nature of ownership itself. How could I invest my money so as to establish accountability on both sides and further the honesty and decency my father and mother believed in? Is that so ridiculous a hope? Even if I threw everything into one small corporation producing sound goods under enlightened policies and at a reasonable profit, my paltry holdings would be no more than a drop in the ocean of its capital assets. One noisy stockholder may do more harm than good, though a few sturdy cranks have obtained small concessions. The only language is votes. And votes follow the single goal of making the best profit possible. If you want anything else from a company, give up and sell out. Against such odds, one is a fool to do anything but conform.
I won’t accept that conclusion. We haven’t yet mobilized ourselves within the capitalist system. We remain enslaved by absentee ownership. It’s right here that my proposal comes, a proposal generally yawned at by investment counselors and economists I have talked to. It would never get off the ground. Yet I refuse to give it up. For there must be others like me who accept a fiduciary responsibility for money that is legally theirs, but morally many people’s—dead, living, unborn.
Could not a group of dedicated and knowledgeable investors set up a mutual fund in the public interest? The purpose of such a fund would be twofold: to invest people’s money so as to preserve its value and if possible to turn a small profit; and to pool many small holdings in such a way as to gain a significant voice in the votes and policies of a few chosen corporations. I don’t imagine that many people would want to invest more than half their capital this way. But even at that rate, the sums could add up. This kind of mutual fund would consult its stockholder about how to vote it proxies and about policies to pursue. What are the issues? Not only directors and their salaries, plus such closely related matters as interlocking directorates, but also pricing, mergers, advertising, development, accounting procedures, corporate gifts, and a host of other sensitive questions that the ordinary shareholder is encouraged to consider none of his business. Stockholders, it is true, cannot manage; but they should oversee. Otherwise no one will, except the great unblinking Cyclops called Profit.
A variation on the presumably private mutual fund scheme would be for a non-profit public interest group to serve as investment counselor for persons wanting to invest their capital on a coordinated or cooperative basis. The public interest group would direct large blocks of investors into a few corporations, advise them how to vote their proxies, and even solicit votes from other stockholders.
It really comes to this: must the profit motive be the only impelling force in our culture and economy? Is there no other basis for investing money? Investors of all sizes may cling fast to the old and seemingly proven system of using money only to produce more money. But unless I am deeply mistaken there are people of all ages, and particularly among the young, who could imagine things otherwise if offered the opportunity. Even foundations and institutions might find new ways of carrying out their responsibilities as major investors. The astonishing thing is that Ralph Nader’s groups and John Gardner’s Common Cause have not already developed such a plan. The profit motive may reign supreme, in part by default, until challenged by money itself, by our pooled resources. But investors remain worried, hesitant, unorganized. They would probably resist any kind of collective action, even on a small scale. Some believe that private gain is synonymous with public good. Some know better but see no course of action. Without some form of stockholding in the public interest we shall have failed our heritage.
The most numerous and potentially the most powerful organized sector of the country is unionized labor. It seems to think and act in a manner just as self-serving as that of individual investors. Rarely has a union acted on any basis other than the direct benefit of its members. Should we expect more?
Today we face a threat of inflation so devastating that none of us knows how it will finally affect us. Justified as it may be in the light of the rising cost of living; every strike adds to the forces that accelerate inflation. Is there no way of calling a halt somewhere to the vicious circle in which the sickness itself is cited as a justification for aggravating the sickness?
Conceivably there is a way to start. It would require a degree of vision and leadership that one finds rarely in any domain. But the proposition is worth laying out and examining. As I see it, unions could negotiate and if necessary strike to establish a new principle. According to this principle, profits in excess of a negotiated figure would have to be distributed in part back to the public in the form of lowered prices, and then, following a reasonable formula, to shareholders and to employees (management and labor) in the form of incentive pay. Accounting procedures would have to be carefully monitored. Without some such mandatory policy, prices may never settle down in time to cool off the economy; all sectors now plan on the assumption of inflation, and such planning, by fulfilling its own predictions, can build up into a force seemingly as unstoppable as nemesis or gravity.
It is hard to envision even the most enlightened of corporations deciding unaided in favor of lowered prices and against increased profits. They are bound to pay off their stockholders, even if they are faceless. Government is unlikely to interfere with corporate profits and policies except through increased taxes—which can also have inflationary effects. Under the circumstances only unions seem to be in a position to turn the tide. Their leverage of corporations, if exerted in the public interest, could produce a first step toward stabilizing prices. Genuine and equitable tax reform would have to accompany any such initiative. In order to make these demands, labor would have to display great restraint in asking for wage increases and other benefits. Union members and leaders have become so much a part of the economic system and of the status quo that it is difficult to imagine them deciding on such a course. And if they did, corporate management would vigorously resist any such invasion of their privileged domain. It would be a healthy and revealing fight.
The odds against this proposal are obviously enormous. But the possibility is there, and few alternatives present themselves. President Ford’s economic summit convoked recently presumably assembled the best economic brains in the land; it produced only mummified proposals. George Meany speaks out in unmistakably defiant tones. The only trouble is that he has no more to suggest than the President himself. The crisis of leadership has almost transfixed us. The only way to break out of the spiral is for a powerful group to make personal sacrifices for a definite purpose in the public interest. Unlikely as the idea may sound at first, organized labor may be in a better position to do so than corporate managers, elected office holders, or the unpredictable herd of private investors.
There they are: jeremiads and crackpot proposals. In the shuddering economic crisis we have now entered through our own actions, we cannot afford to brush aside any seriously advanced idea, not even if it flies in the face of deeply ingrained cultural and social habits. Furthermore, the real enemy lurks beyond the range of these two proposals. His name is waste—planned, systematic, institutionalized improvidence with all our resources and energies. In 1830 de Tocqueville found the democratic merchants of America “heroic” in their efforts to conquer new markets. That system has now become demonic, seemingly bent on self-destruction. It will take time and an enormous wrenching of mind to bring us to our senses. Citizens will have to do far more than drive 15 miles per hour slower and plant vegetable gardens. We will have to mount an imaginative attempt at mutual reeducation to expel the subtle demon of waste from our thinking. We cannot do so without leadership, little of which has declared itself so far. Honest unfearing journals everywhere will be essential.
Happy anniversary, Observer & Co., from the Texas of my mind. And keep hammering.
From 1962 – 1976, Roger Shattuck was an Observer Contributing Editor.