Transnational Corporations and the International Economic Order:
Reflections on the Bishops' Pastoral Letter *
From: SOCIAL JUSTICE REVIEW, Vol. 76:5 (1985), pp. 70-74.
by Gordon Welty
Wright State University
Dayton, Ohio 45435
The Pastoral Letter on Catholic Social Teaching and the U.S.
Economy is an important document. It is also a controversial one,
even in the First Draft which is before us. Syndicated columnist
George Will stated "the bishops convict themselves of, at best,
childlike innocence, or vanity" (Louisville Courier-Journal,
November 16, 1984). Joseph Sobran, editor of the National Review,
disparaged "the bishops' soggy prescriptions for the U.S. economy"
(Dayton Journal Herald, November 28, 1984). We will attend
especially to Section VII, entitled "The United States and the
World Economy." Leonard Silk, noted writer on economic affairs,
commented on this Section that "perhaps the most controversial
element in the bishops' letter may be its harsh criticism of
United States policy towards third-world countries" (New York
Times, November 12, 1984).
Section VII directs our attention to three needs in the current
international economy. The first is the need for a reform of the
international economic order. It has been estimated, for instance,
that the less developed countries owe the governments and banks of
the West and Japan some $600 to $700 billion. This is symptomatic
of the crisis of the international economic order. Were even a few
of these debtor countries to default on their loans, the
consequences for international trade would be devastating. The
second need is to refashion national economic policy. What kind of
national policy, for instance, opposes the United Nations
infant-formula resolution? It is crucial for any "refashioned"
policy that it include substantially more humanized values. And
this focusses attention on the third need. That is the need for a
"preferential option for the poor" as an overall policy imperative
in the international economy. To satisfy these needs is an
ambitious and crucial project.
One consideration of overriding importance to this project has
perhaps received less than full attention in the deliberations
which went into the Pastoral Letter, and especially Section VII.
That is the relation of the modern business corporation to the
state on the one hand, and to the citizenry on the other. Of
course this topic has received some attention in the Pastoral
Letter, but it perhaps deserves more.[1] The following discussion
is intended as sympathetic and constructive criticism to this
point; may it be received as such. We will argue three points in
this paper, and then follow that line of reasoning to identify
what seems to be a profound obstacle to the realization of the
Pastoral Letter's project. First, we will argue that the rise of
the modern corporation has overwhelmed the citizen in civil
society and in political action. Second, we argue that the
corporation is especially advantaged against the citizen in the
determination of foreign policy. Third, we argue that the
conjunction of these two advantages accounts for the peculiarly
dehumanized values which are frequently manifest in U.S. foreign
policy and international economic relations. The conclusion which
follows is disturbing -- how is "moral guidance," the principal
function of the Pastoral Letter, to be provided to social entities
such as the corporation? Let us now turn to the text of the First
Draft of the Pastoral Letter.
Paragraph # 286, on national economic policy, raises several
points which bear repeating. First, as Pope John XXIII has
observed, "the problems confronting us in an interdependent world
outstrip the political structures we have developed thus far."
Second, "this lack of formal structures requires individual states
to act wisely and generously in promoting the international common
good." Finally, "this severe practical and moral burden falls
especially on the United States, because no other nation's
economic policy yet matches the often decisive impact of ours."
Developing and enacting "wise and generous" international policy
at the national level is problematic for reasons which appear to
be endemic to our contemporary political and economic system. On
the one hand, there seem to be reasons why the international
political structures we have so far developed are more limited
than the problems confronting us. On the other hand, there seem to
be reasons why this individual state, for one, has such difficulty
in promoting the international common good. Let us begin to
address these reasons with several considerations of a general
nature.
Analytically, a `community' is a social entity which holds
interests in common, has a `general interest.' Since the early
modern era, the nation state purported to represent the `general
interest,' an interest which was understood as accommodating the
private interests of the citizens. But the interests of those
citizens were not only private; they tended to be privated as
well. As the Pastoral Letter expresses it, "modern society has
become so complex and fragmented that people have difficulty
sensing the relationship among the different dimensions of their
lives, such as the economic, the moral and the religious"
(Paragraph # 15). `Community' dissolved in the strong vitriol of
competing interests. Hence the interests of the citizens were
conflictual as well as compatible. Faced with these privated
interests the state tended in its policy to abstract the `general
interest,' so as to continue to accommodate them.[2]
This tendency to abstraction provided an `aperture' for relatively
autonomous action of the citizenry. This aperture was the `space'
of action and interaction of citizens, `civilians' as opposed to
officials, hence the locus of civil society, burgerliche
Gesellschaft. This aperture was the basis of the `liberal state,'
that state which was understood to intervene selectively and only
occasionally in civil society.
Within the last century, however, these citizens -- who are
`natural persons' -- have been joined within civil society by
joint stock, limited liability corporations -- which are `legal
persons.'[3] These legal persons themselves became `propertied,'
the owners of property, many times the size of the natural
person's smallholding, and many times at the expense of the
smallholder as well. These legal persons in turn limited the
liability of the natural person who owned `shares' in them. Almost
from their first appearance, some of these corporations were
`transnationals' -- the General Electric Company of the United
States, for example, with its relationships to the General
Electric Co., Ltd. of Britain, and the Allgemeine Elektricitts
Gesellschaft of Germany.
The conjunction of these two -- the limited liability, hence
limited responsibility of the propertied `classes' who owned
shares in the legal persons, and the unlimited size of the legal
person when compared to any natural person of the laboring
`masses' -- had the most serious consequences.[4]
Natural persons are `naturally' constrained, if you please, to a
relatively narrow range of size, strength, etc; legal persons are
not. The height and weight of an infant may differ from those of
an adult by an order of magnitude.[5] The number of employees and
the value of assets of a small corporation may differ from those
of, say, General Motors or Exxon by many orders of magnitude (cf.
also Paragraph # 116). As the Pastoral Letter indicates, many
business corporations today outstrip most nations in "sheer size"
(Paragraph # 280). It follows that the corporation also outstrips
any natural person, in terms of wealth, technology, etc. as well
as in terms of size. For instance, the `span of control' of the
modern corporation, encompassing as it does a multitude of
supervisory personnel, is much greater than that of any
proprietorship or partnership.
And that seems to be a crucial point. It is not so much the
relationship of corporation to state which is signal, but the
relation of corporation to citizen, both within civil society. The
relationship of corporation to the state appears to be an
ambivalent one, anyhow. There was a time, in the early Seventies,
when many held that the growing power of the transnational would
soon subordinate the nation state all around the globe. Books were
written on "The Sovereign State of ITT," etc. But this
subordination never came about.
More recently it has become widely recognized that state and
transnational are co-actors in the international economic order.
Just as the state is the creature of the people, both the citizen
and the business corporation are creatures of the state -- the
former through the conferring of citizenship, the latter through
charter. While both were `personalities' as far as the state was
concerned, the corporation had an enormous advantage for action in
the aperture provided by the state's abstraction of the `general
interest.' As the coactive relationship between transnational
corporation and the state was consolidated, the state began to
respond more and more selectively to the initiatives of the
corporation. In effect, the aperture for the autonomous action of
natural persons was closed. Their interests, whether conflictual
or not, were simply negated on behalf of the `larger interests' of
the business corporation and the `national interests' of the
state.
This circumstance has direct implications for the creation of
international "political structures" which can cope with "the
problems confronting us in an interdependent world." It seems that
the development of these political structures depends, among other
things, upon foresight and innovation, on the one hand, and on
material resources on the other. Without a good measure of
foresight and innovation, the plans for a new world order will
simply restate old, inadequate themes. These themes antedate even
Kant's proposal in Perpetual Peace (1795) and Hegel's rebuttal in
Philosophy of Right (1821), see Paragraphs 330 and following. Even
the most innovative and realistic plans, moreover, can fail to be
enacted for lack of material resources.
What about innovation? Despite, or perhaps because of the size,
scope, and vast resources of the large business corporation, these
entities are not particularly innovative. As the Pastoral Letter
acknowledges, "small and medium-sized farms, small businesses and
innovative entrepreneurial enterprises of moderate scale are among
the more creative and efficient sectors of our economy" (Paragraph
# 120). No such claims are made about large business corporations,
about transnationals. They are driven by economies of scale, not
innovation and creativity. Their activities are rule-bound, their
decisionmaking is highly centralized.[6] Now these conditions are
sufficient for the negation of innovation only in a highly stable
environment.
What about foresight? Again, the corporation has a relatively
short time horizon. Its ability to externalize costs which are
attributable to faulty anticipations perhaps explains this. This
is facilitated by internal sources of funds -- retained profits
and capital consumption allowances -- on the one hand, and by
oligopolistic pricing on the other. Both practices tend to
stabilize the organization's environment. The question of the
adequacy of society's material resources need not even be raised
here, since the quality of innovative ideas is so slight.
In the international sphere, the sphere of international economic
policy, the abstraction of the `general interest' conjoins with a
second source of abstraction, that of the citizen's unfamiliarity
with the `foreign.' The citizenry tends to abstract, to employ
national and regional stereotypes. Of course this tendency is
variable in its incidence. In the late Fifties, Seymour Martin
Lipset argued in Political Man that working persons most strongly
manifested this stereotyping. This argument has since been largely
discredited. Richard Hamilton, for instance, has suggested that
the notion of the `hard-hat,' the working person who was
understood to have thought in stereotypes, was itself a
stereotype, an upper middle class stereotype at that.[7] The
business corporation, by contrast, has the material resources,
size, and scope to avoid these abstractions. Thus, with the
entrance of corporations into American economic life, the
opportunity was presented for them to use their size and resources
to promote their interests in political as well as economic life,
and specifically so in the international sphere. This is why
consideration of the business corporation's relation to state and
citizenry is especially important to Section VII of the Pastoral
Letter. Consider then the implications of this for U.S.
international economic policy.
Beginning with Paragraph # 290, the Pastoral Letter presents a
critique of U.S. international development policy. It points out
that a "North-South set of problems" has come to be assessed in
terms of an "East-West struggle."[8] Examples are ready at hand.
Within the past few months alone, important illustrations have
included the whole of Central America, the Marcos regime in the
Philippines, and South African apartheid and its effects on the
African `Front Line States.' Joseph Sobran characteristically
stated "what the famished Ethiopians really need is not food and
water, but freedom" (Dayton Journal Herald, November 28, 1984). In
each case, the Reagan administration has represented the problems
of these areas in terms of the "East-West struggle." Thereby an
"earlier emphasis on basic human needs and social and economic
development" in U.S. international development policy has been
changed -- the Letter states "we deplore this change" (Paragraph #
290, cf. also Paragraph # 11). Let us assent to this judgment, and
append several comments which follow from the previous discussion.
The restatement of the "North-South set of problems" in terms of
an "East-West struggle" justifies the dehumanization of United
States foreign policy. Seemingly there is no issue of foreign
affairs which cannot be perverted by reference to the `threat' of
`international communism.' At once, communism is represented as
hopelessly anachronistic, hence unworthy of support, and also as
dangerously threatening, hence worthy of opposition.[9] Thus the
shift of focus from domestic issues such as civil rights, poverty
and employment, etc. -- to foreign policy issues obscured by the
phantasm of "national security."
How has a value such as "national security" become preeminent in
American culture? Why this value for a nation which has scarcely
if ever been invaded? And why the peculiarly dehumanized form this
value has taken? "Security," not in terms of the strength of the
people, but in terms of hardware (cf. also Paragraph # 13).
First, consider the genesis of this value. Under the conditions
already discussed, citizens feel helpless -- and in comparison to
their corporate fellows, they are. They feel uninformed -- and
again, in comparison, they are. Conjoined, these insure the
saliency of the nation state -- the "helpless" citizens perceive
it as crucial to their continued welfare and even existence. They
perceive this particular state as unique as well -- the
"uninformed" citizens cannot conceive any alternatives. Saliency
and uniqueness of Y to X are sufficient for X's dependency on Y.
Thus the "security" of the nation state has become the absolute
condition for the security of the citizen. The citizen's security
moreover becomes confused with the welfare of the person.
Next, consider the maintenance of this value. Under the conditions
already discussed, citizens tend to be distracted from global and
even national issues. They feel uninformed and helpless -- and are
reassured only by their belief, unfounded though it may be, that
the state represents the `general interests.' The citizens tend to
be distracted towards local and even patio issues. But this
heightens their privation. And that stifles any broad public
discussion of "national security." But the corporations, big and
powerful, and fully aware of it, are thereby permitted to define
"national security," and apparently do so in the only way a legal
`person' could -- in dehumanized terms.
Given such a definition of `national security' and such an agency
as the modern corporation, international economic policy suffers
the most dehumanizing distortions. The greater portion of U.S.
`foreign aid' goes to a few nations in the Middle East (cf. also
Paragraph # 291), seemingly to exacerbate the perennial conflict
there. Armament sales clot international trade (Paragraph # 314,
cf. also Paragraph # 12).
Now it is time to conclude. As the Pastoral Letter indicates, its
principal role in influencing economic policy is providing moral
guidance (see Paragraphs 17 and following). This raises a profound
question in light the discussion this far. It is clear how such a
role is enacted towards moral agents, such as citizens, laity,
trade union members, consumers, men and women, etc. These are all
`natural' persons, that is to say human beings. But this does not
exhaust the range of economic agents (cf. also Paragraph # 116).
The corporation is another economic agent. It is surely the case
that "the production and manufacturing of goods for profit . . .
is the business corporation's raison d'etre." Then how can such an
entity also to be "directed toward achieving the common good"?
(Paragraph # 312; also Paragraph # 281) How does one enact such a
role as the Pastoral Letter proposes towards a non-moral -- to
repeat, a non-moral -- agent such as a `legal' person?
It will not do simply to note that the corporation is `manned' by
natural persons, managers, shareholders, etc. who are them selves
moral agents. The former either deny their moral agency on behalf
of the overriding interests of owners which they represent, or
else simply hide behind the `legal personality.' Likewise, the
owners deny their moral agency. The very testimony on this
Pastoral Letter before the U.S. Catholic Bishops -- both in Dayton
and, according to newspaper accounts elsewhere -- divided rather
strikingly into two orientations. One orientation, including the
present testimony, favored the project of the Pastoral Letter in
general, and provided criticism and encouragement at particular
points of the text. The other orientation, that of the corporate
apologists, denied that the Bishops had any "business," moral or
otherwise, to "meddle in business."[10] And the corporate
apologists' tacit premiss of a priviledged sphere of economic
amorality is the strongest testimony to the problem of non-moral
agents and their insidious influences.
NOTES
*This is a revised and enlarged version of testimony presented at the
hearings on the First Draft of the "Pastoral Letter on Catholic Social
Teaching and the U.S. Economy," held in Dayton, Ohio (January, 19, 1985).
We refer to the Pastoral Letter in parenthetical citations of its
numbered Paragraphs.
1. Regarding the Pastoral Letter drafting committee's attention to big
business, Archbishop Rembert Weakland stated that "the committee has
probably consulted that area of the economic community more than any
other;" cf. his "Where Does the Economic Pastoral Stand?" Origins Vol.
13 (April 26, 1984), p. 756.
2. Cf. Alexis de Tocqueville Democracy in America, Garden City, NY:
Doubleday (1969), p. 119.
3. In addition, `legal persons' include the `private company' of English
commercial law, and the `Gesellschaft mit beschrnkter Haftung' of
German commercial law.
4. Alexis de Tocqueville had observed in 1840 that the industrial `class'
did not then exist; while there were "limbs," or rich industrialists,
there was no industrial "body;" cf. Democracy in America, p. 557. That
"body" was subsequently provided by the artifice of `legal
personality.' Hence de Tocqueville was correct; what was to emerge in
America was not an "industrial aristocracy" -- it was instead the
regime of the dehumanized corporation.
5. Cf. also Adam Smith, Wealth of Nations, NY: Random House (1937), pp.
15-16.
6. Cf. Jerald Hage and Michael Aiken, Social Change in Complex
Organizations, NY: Random House (1970); moreover, the large business
corporations tend to set cultural terms which stifle creativity
throughout the society. See such disparate writings as those of William
H. Whyte The Organization Man, NY: Simon and Schuster (1956) and Melvin
Kohn's "Bureaucratic Man", American Sociological Review, Vol. 36 (June
1971).
7. Cf. Richard Hamilton Restraining Myths, NY: Wiley (1975), p. 207; and
S. Putney and R. Middletown have pointed out that education is indeed
correlated with one's understanding of foreign affairs. But the more
highly educated are also more likely to have been swayed by the
government's foreign policy bias. Cf. their "Student Acceptance or
Rejection of War," American Sociological Review, Vol. 27 (October
1962).
8. As the syndicated columnist, Garry Wills, has put it "our aid programs
were mainly anti-communist ploys" (Dayton Daily News, November 29,
1984).
9. It is widely recognized in social psychology that such
self-contradictory characteristics of a set of attitudes (an ideology)
are located in the subject, the bemused, rather than in the object
itself; cf. Theodor Adorno et al, The Authoritarian Personality, NY:
Harper and Row (1950), pp. 148-149.
10. This orientation was anticipated by Robert McAfee Brown "On Getting
Ready for the Bishops' Pastoral Letter," The Christian Century (October
10, 1984), p. 927.
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