George C. Lodge - The American Disease: Why the American economic system is faltering . . . and how the trend can be changed with a minimum of crisis

A LSO BY G EORGE C. L ODGE

Spearheads of Democracy:
Labor in Developing Countries

Engines of Change:
United States Interests and Revolution
in Latin America

The New American Ideology

THIS IS A BORZOI BOOK
PUBLISHED BY ALFRED A. KNOPF, INC.

Copyright 1984 by George C. Lodge

All rights reserved under International and Pan-American Copyright Conventions. Published in the United States by Alfred A. Knopf, Inc., New York, and simultaneously in Canada by Random House of Canada Limited, Toronto. Distributed by Random House, Inc., New York.

LIBRARY OF CONGRESS CATALOGING IN PUBLICATION DATA
Lodge, George C.
The American disease.
Includes bibliographical references.
1. Business and politicsUnited States.
2. Industry and stateUnited States.
3. Industrial relationsUnited States.
I. Title.
JK 467.l63 1984 322.30973 83-48871
eISBN: 978-0-307-83192-7

v3.1

For E.S.L. and H.C.L.

The United States in the early 1980s confronted a set of structural difficulties that it was seeking to meet experimentally and pragmatically. Faced with recession and a loss of competitiveness, the countrys institutions were changing their functions and relationships. The federal government was being forced as never before to set priorities; to limit the rights of its citizens, and to define their duties more stringently; to contemplate the role and dimensions of the countrys great industries; and to recognize that the costs of unemployment necessitated, in addition to income maintenance, a program of job creation and training. Government was, in short, being required to think strategically about the nation as a whole, at a time when other nations strategies were more competitive than ours.

Concurrently, great corporations were aware more than ever that their reason for being went beyond the satisfaction of their mythical owners, the shareholders, and that it was linked, vaguely but inexorably, to the interests of the several communities that they affected. Similarly, trade unions were realizing that the adversarial struggle to increase the wages and benefits of their membership was by itself no longer a practical mission in a world in which failure to keep costs competitive meant the erosion of the companies upon which those workers depended for employment. Furthermore, the rhetoric of their leadership notwithstanding, all three sets of institutions were realizing that their goals and policies were inseparably intertwined. None could succeed without the others.

There is nothing particularly new about these evolving trends. In 1959, for example, President Dwight D. Eisenhower devoted his Economic Report to Congress to the redefinition of the respective rights and responsibilities of free government under a popular democracy. He spoke of the commitment of government to the growth of business; to expanding total production rather than redistributing the current product; to realizing the mutualities of interest that united the different elements of the American economy; to rethinking antitrust policy in order to promote efficiency; and to cooperating with business to assure the fulfillment of the nations health and welfare. The distinctive feature of the 1980s was the degree to which crisis was forcing the change implicit in Eisenhowers vision.

The transition was difficult and confusing, because it represented a departure from traditional conceptions of institutional roles and relationships that were almost religious in nature. The tension between practice, born of necessity, and beliefs rooted in tradition caused a variety of psychological effects: a romantic yearning for a more glorious past, the denial of the reality that was forcing change, an escape into illusion, a loss of confidence, and an erosion of authority and responsibility. Together, these comprise the American disease.

This book attempts to describe the nature and symptoms of that disease, reveal its causes, and outline some remedies. But the first, most important step is the recognition of the disease itself. Once that is accomplished, remedies will appear in profusion; they will be many and varied. But until the disease is clearly recognized there can be no cure; it will continue to waste our resources, our institutions, and our people.

In light of recent political events, it may prove surprising to some readers that I perceive the transition from individualism to communitarianismdescribed in my last book, The New American Ideology (1975)as continuing unabated. But the transition is not necessarily what the American people desire; it is what reality is imposing upon us. We must understand the tension that this uncomfortable circumstance generates; through the analysis of this tension, we can come to a greater understanding of our choices.

We shall examine the evolving relationships among large publicly held corporations, the federal government, and labor unions by focusing on a number of problems that shape those relationships, such as international competition, environmental pollution, electric generation, worker motivation, corporate governance, unemployment, and urban disintegration. To gain greater insight into these problems my research assistant, William R. Glass, and I interviewed many persons associated with business, government, and labor, whom I would like to thank for being so generous with their time and thoughts.

In and around government there were: Douglas D. Anderson, Deputy Counselor to the Secretary, Department of the Treasury, 198182; Joan Z. Bernstein, General Counsel, Environmental Protection Agency (EPA), 197779; Phyllis D. Bonanno, Director, Office of Private Sector Liaison, Office of the United States Trade Representative (USTR); Ambassador William E. Brock III, United States Trade Representative; Adolf Brueckmann, Senior Policy Analyst, Department of Commerce; Douglas M. Costle, Administrator, Environmental Protection Agency, 197781; William Diebold, Senior Research Fellow, Council on Foreign Relations; William Drayton, Environmental Protection Agency, 197780; Professor George Eads, member of the Council of Economic Advisors, 197981, School of Public Affairs, University of Maryland; Ambassador William D. Eberle, Special Representative for Trade Negotiations, 197175; Charles W. Ervin, Director of Operations, United States International Trade Commission; Geza Feketekuty, Assistant U.S. Trade Representative for Policy Development, Office of the USTR; John D. Greenwald, Assistant General Counsel, Office of the USTR, 197479, Department of Commerce, 198081; Matthew Holden, Jr., Commissioner, Federal Energy Commission, 197781; Richard John, Chief Scientist, Department of Transportation; Congresswoman Marcy Kaptur, former White House aide on Urban Affairs; Frederick T. Knickerbocker, Acting Director, Economic Policy Staff, Department of Commerce; Rebecca Lambert, Associate Deputy Secretary, Department of Commerce; Edward J. Logue, President, South Bronx Development Organization, Inc.; Charles Mahoney, Secretary of Human Services, Commonwealth of Massachusetts, 197981; Harald B. Malmgren, Deputy Special Trade Representative, 197275; John F. OLeary, Deputy Energy Secretary, 197779, Administrator, Federal Energy Administration, 1977; Joseph S. Papovich, Labor Liaison, Office of the Private Sector Liaison, Office of the USTR; Roger B. Porter, Deputy Assistant to the President; Richard R. Rivers, General Counsel, USTR, 197779; Marjory E. Searing, Director, Office of the International Sector Policy, Department of Commerce; Thomas G. Sheehan, Assistant Director, Private Sector Liaison, Office of the USTR; Harry Spence, Receiver/Administrator, Boston Housing Authority; Ambassador Robert Strauss, United States Trade Representative, 197779; Joseph C. Swidler, former chairman of the Federal Power Commission and N.Y. Public Service Commission, now Energy Consultant; Jim J. Tozzi, Deputy Administrator, Office of Information and Regulatory Affairs, Office of Management and Budget; Anne Wexler, Deputy Undersecretary for Regional Affairs, Department of Commerce, 197779, Assistant to the President for Political Issues, 197981; and Mary Jane Wignot, Subcommittee on Trade, Committee on Ways and Means, U.S. House of Representatives.