The October 1944 edition of Fortune magazine carried an article by a corporate executive that makes for amazing reading today. It was written by William B. Benton — a co-founder of the Benton & Bowles ad agency — and an editor’s note explained that Benton was speaking not just for himself but on behalf of a major corporate lobbying group. The article then laid out a vision for American prosperity after World War II.For a quarter century, it worked.
At the time, almost nobody took postwar prosperity for granted. The world had just endured 15 years of depression and war. Many Americans were worried that the end of wartime production, combined with the return of job-seeking soldiers, would plunge the economy into a new slump.
“Today victory is our purpose,” Benton wrote. “Tomorrow our goal will be jobs, peacetime production, high living standards and opportunity.” That goal, he wrote, depended on American businesses accepting “necessary and appropriate government regulation,” as well as labor unions. It depended on companies not earning their profits “at the expense of the welfare of the community.” It depended on rising wages.
Freedom is like that. Plus, part of the victory dividend resource curse was the expectation, irrespective of your political stance, that the objective conditions for continued prosperity would always be with us. We see that in the pop-culture treatment, early in the Reagan years, of former hippies entering middle age as yuppies. It's more subtle than that, as there were more young people who had a bourgeois bent, despite all the efforts of the academic culture of the era to make bourgeois a dirty word, than there were smelly hippies, but yes, the hippies and the long-haired radicals had the idea there would be enough of the productive economy to sustain them once they got bored with their crusades. Thus we find ourselves here.The Best and The Brightest, however, looted the victory dividend's effects and blanked out its causes.
In the years that followed, corporate America largely followed this prescription. Not every executive did, of course, and management and labor still had bitter disputes. But most executives behaved as if they cared about their workers and communities. C.E.O.s accepted pay packages that today look like a pittance. Middle-class incomes rose faster in the 1950s and 1960s than incomes at the top. Imagine that: declining income inequality.There's probably a research opportunity somewhere, figuring out, if that is possible, how much real incomes in the United States might have declined had businesses gone on with the Treaty of Detroit.
And the economy — and American business — boomed during this period, just as Benton and his fellow chieftains had predicted.
Things began to change in the 1970s. Facing more global competition and higher energy prices, and with Great Depression memories fading, executives became more aggressive. They decided that their sole mission was maximizing shareholder value. They fought for deregulation, reduced taxes, union-free workplaces, lower wages and much, much higher pay for themselves. They justified it all with promises of a wonderful new economic boom. That boom never arrived.
Fewer people have to make do on the equivalent of a dollar a day these days. "The world attained the first Millennium Development Goal target—to cut the 1990 poverty rate in half by 2015—five years ahead of schedule, in 2010." That improvement in living standards in the developing world, however, was a Marshallian improvement, and gadgets in hand or polemics are scant comfort to, for example, U. S. citizens who might genuinely be enjoying higher living standards at the same time that they have lost ground to neighbors who are relatively even better off.Yes, we could investigate whether the shareholder value craze encourages short-term thinking.
We could investigate whether the payoffs to winning tournament markets are inefficient.
But let's not pretend that a restoration of the Treaty of Detroit and the Divine Right of Technocrats is either desirable, or likely to succeed.