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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.


* 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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