Kindred Strangers: The Uneasy Relationship Between Politics and Business In America.

A popular subject of debate within academic circles is "American exceptionalism," or why the United States declines to conform to academic theory. Exceptionalism is said to characterize America's relatively low level of class tension, versus the high level theoreticians expect. Exceptionalism is said to run through the U.S. labor movement, which differs from its European counterparts by rarely being violent, by praising market economics and by supporting military policy. (European strikers still routinely skirmish with riot police, destroy equipment, and shut down essential public services - tactics safely tenured academic theoreticians seem to look on with nostalgic longing, but that American labor leaders consider irresponsible. As for hard-hat support of the Vietnam War - or the labor states of Illinois, Michigan, and Ohio twice voting for Reagan - labor scholars find such defection too painful for words.) Whatever it is, exceptionalism is invoked to explain why Americans are more religious than Europeans, why they trust individual initiative more than government, why they rarely resent wealth, and various other departures from what contemporary social psychoanalysis predicts capitalist culture should be like.

Exceptionalism is state-business relations is the subject of Kindred Strangers, an admirable and amenable, if slow-moving, book by David Vogel, a professor of business ethics at Berkeley. In Europe, government and corporations have cozy shared-bed relationships built on the statist model of capitalism. European corporate leaders employ the state to plow the road for them in more ways the one, while legislatures pass few restrictions that business leaders have not privately assented to: The typical European CEO views government as a patron. In the United States, by contrast, business leaders almost uniformly despise government, and relations with regulators are adversarial. The sorts of business-politics interactions that in Europe are done in the back room over Armagnac are, in America, done in lawsuits and at press conferences.

Why do American business leaders have such hostile intercourse with the political sphere? Vogel roots his answer in the 19th century. "The 1840s and 1850s are the critical period in the history of the American business system," he writes. Then, business worked without government alliance, unlike in Britain or the Netherlands, where crown-chartered corporations were the great money-makers, and government sanction was the corporate baron's mark of status. American business allowed itself to be led by politics briefly during the Civil War, Vogel writes, but returned to hands-off relations as soon as that conflict ended. In the older and relatively stable societies of Europe, plutocrats wanting to forge monopolies looked to government connections to do the dirty work for them. In the new and tumultuous United States, the tycoons of the Gilded Age were able to fashion monopolies on their own, without having to cut government in on the deal. As the late-19th-century economy began to hum, "the emerging industrial elites began to outgrow the need for government participation in economic development."

At the same time, Vogel believes, American democracy made business leaders fear that the public - what turn-of-the-century aristocracy sneered at as "mass man" - would devour them by ballot. Democracy was what 19th-century American business leaders dreaded: Legislatures beholden to the mass man might take down the trusts for reasons unrelated to Marxist theoretics. Fearing this, American business leaders adopted a view of government that boiled down to "See you in court." In response, U.S. regulatory practice became litigious. Legalistic regulations gave business leaders a grievance about which to moan, and the system started downhill to its current belligerent norm.

Kindred Strangers does a skillful job of covering the oddities of relations between American business and politics, including the heavy-handed ways in which corporations buy legislative influence, and the irony that consumers sometimes oppose consumer protection. The book suggests the United States would be better off with European-style business-government relations, although it generally ally avoids calling this idea "industrial policy," a phrase that has been losing appeal since it came to imply Dukakis-style monotony.

Vogel's example of superior business-government relations is British environmental policy. In the United Kingdom, "courts and the national legislature play a relatively minor role in shaping environmental regulations." Lawsuits regarding environmental initiatives are rare, as are anti-environmental lobbying campaigns by business. There are few statutes on pollution control; regulators have the authority to impose emission reductions, but are told to use their discretion on the details. Working in a generally collegial style, British regulators have been prompting industry to reduce its pollution output since the venerable Alkali Inspectorate (sounds like a Monty Python sketch) was established in 1874 and given sanction to impose whatever strictures it deemed appropriate.

Basically, it seems the English regulate pollution using the Philip Howard solution. Howard's 1995 book The Death of Common Sense was widely misinterpreted as maintaining that America ought to get rid of bureaucrats. Actually, what Howard wrote is that America ought to get rid of regulations - the fine-print prescriptive kind. Howard's solution would give government officials more authority by allowing them to reach their own conclusions about what ought to be permitted or forbidden. The Alkali Inspectorate, not the Federal Court of Appeals, would be the paradigm.

Needless to say, the current American approach differs. Extremely complex federal statutes dictate the specifics of pollution control, leaving regulators little discretion. Lawsuits abound. Antagonism is the essence of all environmental policy. Not only does the law assume that business can never be trusted, but during the 1980s, when Ronald Reagan's Environmental Protection Agency was twiddling its thumbs, Congress passed a number of statutes that assume regulators cannot be trusted either. Called "hammer" provisions, they mandate that if federal agencies do not impose certain rules by certain dates, courts will impose them.

Hammer regulations have driven antagonism between business (especially small business) and government to an all-time high on many aspects of conservation policy, because they are tailor-made for generating lawsuits and automatically offend all sides with the presumption that no one can be trusted. EPA Administrator Carol Browner recently told me that hammer rules force her to spend about 80 percent of her time responding to court orders; in many areas she would like to make environmental policy more flexible, but cannot because of the wording of laws. And absurdly enough, in the current political milieu, many interest groups prefer this outcome. Keeping ecology policy a realm of nasty confrontation assures right-wing factions of red-tape outrages about which they can become lathered, and environmental lobbies of corporate intransigence about which to cry doom.

But does all this mean we'd be better off with the British solution? Vogel's argument here is not fully compelling. He notes that the United Kingdom has broadly reduced pollution in the past 25 years, but does not note that the rate of reduction has been even more rapid in the United States. The American approach to environmental protection may be expensive - costing nearly 2 percent of the U.S. GDP, according to the Organization for Economic Cooperation and Development figures, versus about 1.2 percent in Britain - but it generates the worlds best results. Nearly all forms of U.S. pollution have declined more rapidly than the pollution levels in other Western countries - a fact the left doesn't like to mention because it dilutes the sense of doomsday, and the right doesn't like to mention because it confirms that federal health and safety regulations really can do good. Switching to the British mode of pollution control might make an aspect of public affairs more congenial, but it would also slow progress. For instance, the United States banned leaded gasoline in 1977 and required automobile catalytic converters for smog reduction on all cars in 1980. Britain didn't get around to these advances until 1993.

The paradox inherent in American business-government relations is that although they are based on mutual antagonism, America nevertheless manages to have the worlds most vibrant economy. Its hard not to conclude that the tense political-business boundary in the United States has some beneficial effect, forcing corporate leaders to stay on their toes and remain self-reliant. Of course the system would be better served by fewer lawsuits and more cooperation, especially in areas such as pollution control, where nearly all nonpartisan analysts have long recommended a more flexible federal approach. But overall, Maybe exceptionalism isn't so bad.