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What Charlie Peters can learn from Henry Kravis.

Gregg Easterbrook, an editor of The Washington Monthly from 1980 to 1982, is a contributing editor o >;f Newsweek.

Intellectual magazines like this are never exactly what you might call gold mines. Opinions, like farm products, are being overproduced-that's why the markets for both are depressed. But just because The Washington Monthly does not itself make money is no reason for the magazine to have such confabulated opinions about enterprises that do. Advocacy of the peacetime draft already having been taken (see Michael Kinsley, page 26), I choose economic doubletalk as my objection to the magazine's >;first 20 years.

* In the 1960s and 1970s the Monthly was unique among liberal intellectual publications in extolling the need for business growth and calling business an honorable profession. That's much to its credit. But for all the homage to the businessman the Monthly has published, the magazine blows a gasket whenever any corporation (except perhaps locally owned passenger train ventures in West Virginia) or individual (except perhaps the first-generation immigrant inventors of low-cost military >;hardware) actually clears a profit.

Isn't profit the organizing discipline of a market economy? Surely profit should not be the only goal. But it has to be one of the chief goals if all the many other benefits of market economics-prosperity, jobs, material security, a mechanism for the lower class to move up-are to be realized. Ivan Boesky was wrong to say that the word "greed" is good. But there surely is nothing wrong with the phrase "maximize profit." Occasionally companies make big profits via fra >;ud, monopoly, or other chicanery. Usually they make big profits because they deserve to-the market is pretty effective in distributing that reward. So Monthly, quit groaning about profit.

* What's so terrible about the service/yuppie/paper economy? The Monthly, often laments that the backbreaking, dangerous, soul-draining jobs in heavy industrial production are being replaced by highly paid white-collar desk jobs......???????? Sounds pretty good to me. Yes, it's true that those new whitecollar jobs re >;quiring higher education tend to shut out the traditional working class. But look how much the traditional working class has shrunk in the postwar years-because so many of its members or their children have moved up to the new, far larger white-collar class. I often stand on my head trying to figure out why this in itself is bad for America.

* What's so terrible about mergers and papershuffling of assets? Sure, mergers and papershuffling are bad when carried to excess or used to create monopoly power. >; But usually mergers take place because the resulting enterprises are more efficient than what they replace. Otherwise the market, which appears in most cases (not all) to reward mergers, would have to be seen as highly illogical. And whatever else the market may be, it's not illogical.

Also, contrary to the impression you get reading the Monthly, all under-40 Ivy League graduates in America are not currently engaged in arranging corporate mergers. The number of firms that specialize in mergers and ac >;quisitions is surprisingly small-that's why the same few dominate the headlines on this subject.

* The Monthly, often asserts that private ownership of corporations is superior to public ownership because private owners, freed from pressure to post quarterly gains, are in a better position to play a public-spirited role in the community. There is some truth to this contention, But as we are finding out in the age of the leveraged buy-out, it overlooks the downside of private ownership: secretiveness, un >;accountability, running corporations solely for the good of the managers. We now take for granted that corporations must disclose to the public vast amounts of data about their operations; such disclosure stems from the legal implications of offering public shares. If the typical large American corporation were privately held, the public ability to monitor and understand corporate behavior would be severely restricted.

Meanwhile, though extolling the beauty of private ownership, when the Monthly notes >;public corporations such as the Washington Post Co. (disclosure: my employer) buying back shares of its stock, it cries conspiracy.

At any rate why must we assume that public corporations can have responsibilities only to their shareholders? There is no reason why a public corporation's charter could not be written or amended to rank community responsibility and shareholder fiduciary responsibility of equal value. True, the market would then discount the value of such a corporation's stock. But some m >;ight actively choose to invest in such a corporation in preference to others. And it might have an easier time obtaining the regulatory approval needed to make money in some fields. And so on.

* Who cares about absentee ownership? The Monthly often reflects in economic matters the sort of fear of "outsiders" that is among the less attractive aspects of traditional small-town life. Some locally owned businesses are ogres; some businesses run from faraway skyscrapers are socially responsible.

I'm fro >;m Buffalo and a long-suffering Buffalo Bills fan. For years all true Buffalonians intensely despised the Bills's absentee owner, Ralph Wilson, a Detroit businessman. It was said that the Bills were bad because Wilson, living in a different city, didn't care about Buffalo civic pride and wouldn't invest in the team. Then a few years ago Wilson underwent some kind of epiphany and began to invest in the Bills. Now the Bills are championship contenders and Wilson is a local hero. What does this tale sugges >;t about absentee ownership? That it's a neutral factor. What matters is the character of management, not the town that managers sit in.

And P.S. to owners and managers-this tale also suggests it's a heck of a lot more fun, and not really all that hard, to be a local hero than to be intensely despised.
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Title Annotation:Washington Monthly and its position on business enterprises
Author:Easterbrook, Gregg
Publication:Washington Monthly
Date:Mar 1, 1989
Previous Article:Act II, winning an election.
Next Article:What Charlie Peters can learn from Jerry Brown; the small-is-beautiful economy.

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