First straw. Notes from A Class.

  The Guest Lecturer has posed a Case. You are running a portfolio of a hundred million dollars. (Baby Stuff.) You are in a competition not unlike the one the Chase Manhattan runs among competing money managers. The worst-performing portfolio managers at the end of a certain time get fired. The best get more money to run, and presumably appropriate rewards.

  Company A is a notorious polluter, but its profits are unimpaired. Company B is buying antipollution equipment that will depress its profits for years. Other things being equal, which do you buy, A or B? The Case was not too far from reality. Ralph Nader’s Project on Corporate Responsibility was trying to put some people on the General Motors board, and Harvard owns 305,000 shares of General Motors. Harvard’s treasurer reportedly said he was going to vote for management “because they are our kind of people,” after which both faculty and students generated a furious debate. The Case is not only limited to pollution; the same principles of the social purpose of investment can be applied to defense contractors, the makers of napalm, companies with investments or branches in South Africa, and so on.

  All right, you want to achieve performance in your portfolio, and this performance is being measured competitively. It may affect your career. Do you buy Company A, the profitable polluter, or Company B, the unprofitable antipolluter?

  Student One: I would try to evaluate the long-term effect . . . because in the long run Company B is going to have a better image.

  Student Two: But in the long run you would have lost the account. I think you have to know the wishes of the constituency. If it’s a fund, how do the fundholders feel? What do they want?

  (Scattered boos. The class begins to chant, “A or B, A or B”)

  Several other students offer comments, all trying to hedge, to keep both the profit and the social purpose.

  Student Three: I buy the polluter. (Cheers, then scattered boos) It isn’t the business of a fund manager to make a social decision, or to discriminate between companies on his own ideas of some social purpose. That could be dangerous. If we want to combat pollution, let society vote for it, and have a consensus. I doubt that consumers really want to pay the price. You can’t ask profit-making organizations to subsidize society.

  The Radical Student (The Radical Student is only radical by standards of this side of the river, which is to say that he is neatly shaven but is wearing a colored shirt and a tie that is a bit wider than the 1955 width.): Maybe that’s the problem. Everything in this school is geared to the purpose of the corporation, and that purpose is maximized profit.

  We ask the Radical Student: “What are the goals of a corporation, if not to maximize profit?”

  Silence in the classroom, a rustling of papers. The idea is very confusing.

  What are the goals of a corporation, if not to maximize profit?

  Not a hand goes up. It is just too hairy a question. We ask it once more. More shuffling, an occasional left wrist shoots out from the cuff with the wrist watch exposed.

  The Radical Student: You know the trouble? It’s the way we look at it. We’re concerned with property rights.

  At the Law School, say, they talk about civil rights. We’re objective, but maybe objectivity has been overdone. Is our one purpose to measure things?

  My second straw is the Resolution. This was, as I said, an emotional time. The Business School voted and passed this, then bought an ad in The Wall Street Journal to publicize it. The Resolution called for American withdrawal from Southeast Asia, not startling for a student resolution at that time. But this was the Business School, normally heavily Republican, heavily Republican in 1968, and it was the language juxtaposed to the source that was startling:We condemn the administration of President Nixon for its view of mankind [its view of mankind?] and the American community which:

  1. Perceives the anxiety and turmoil in our midst as the work of “bums” and “effete snobs”;

  2. Fails to acknowledge that legitimate doubt exists about the ability of black Americans and other depressed groups to obtain justice;

  3. Is unwilling to move for a transformation of American society in accordance with the goals of maximum fulfillment for each human being and harmony between mankind and nature.

  Harmony between mankind and nature?

  I asked the former dean of admissions what was this about harmony between mankind and nature; when had that crept into the Business School?

  “I don’t know,” he said. “I guess it means they’re not going to work for Procter and Gamble and make those dishwasher soaps that don’t dissolve and smother the lakes. They don’t want to work for big companies anyway, or so they say; I’d like to see what they say a couple of years out. The big companies treat them as objects, they say. In the fifties, the guys here all wanted to get to the top of Procter & Gamble. In the sixties it was finance.”

  “Last year,” I said, “my classes all wanted to go right to work for a hedge fund. You couldn’t even offer them twenty thousand a year, because they were going to run five million into ten in a year and take twenty percent of the gain. I used to say, ‘Good morning, greedy little bastards.’ ”

  “The guys in the fifties,” said the ex-dean, “wanted to run the Big Company, and the guys in the sixties wanted to be Danny Lufkin, make a big bundle by the time you’re forty and run for something.”

  “And now?”

  “And now, they’re just confused. I’ve never seen such malaise. I don’t think the big companies have gotten the message yet, and maybe the Fortune 500 can run without the Harvard Business School, but I have the feeling something will give on one side or the other.”

  More recently, I talked to the same ex-dean, who now teaches a popular course, and asked him what changes there had been. Popular journalism had said that things were “back to normal,” whatever that was. Nader’s Raiders had been swamped with applicants in the emotional summers, and now the young law students were scuffling in the line when the man from Sullivan and Cromwell came to interview. It was said pro bono was over. The law students didn’t even want the social courses any more; they wanted Taxation and Trusts and Corporations. Were the current B-School classes still holding out on the big corporations? Were the big corporations bending at all?

  “They’re bending to the extent that they don’t come and interview the wives and tell them they have to fit to corporate life, and move fourteen times in fifteen years,” he said. “But other than that, all you can say is that they’re conscious of some change. As for my students, I think they have an acceptance of corporate life and they’re looking for something inner. I hear a lot about life styles, how they want a non-anxious working life. They don’t want to have what one of them called a dumbbell life, which is to say a blob of work at one end, a blob of home life at the other, and a conduit between, a railroad or a freeway. There’s a lot of stuff about walking on the beach, that the worthy cause is themselves, and that work should fit life, not the other way around, and they talk a lot about intimate relationships, wives, children, and so on.

  “So if I had to divide the decades again, I would still say that the fifties produced the corporate man who would rise to the top and die seventeen months after retirement, leaving a beautiful estate; the sixties students wanted a piece of the action; and currently the fantasy is a balanced life—just enough success to include it all; they want to run things but not at any cost; they still want power but now they want love, too.”

  Maximum fulfillment for each human being? Harmony between man and nature? That’s not the old Business School. How do you put those things into a balance sheet? Can we operate a corporate society without objectivity, or at least what has passed for objectivity?

  I wrote in my notes: Will General Motors believe in the harmony between man and nature? Will General Electric believe in beauty and truth?

  It is not, of course, a revolutionary idea in the limited history of capitalism in this country to make something for less than a maximum profit. First of all, profit was not necessarily something that could be controlled; it came like the rain on the crops, between the costs and the market. Moreover, when the bulk of business was family-owned, its purpose was to take care of the family—sons, nephews, and so on—and of the product’s reputation, if it had a reputation of value. So a wagonmaker could simply make a good wagon, and a book publisher could publish an author simply because he wanted to. What we have come to call social purpose was a matter of individual integrity, randomly and haphazardly applied.

  But these businesses sold out to bigger ones, and those in turn to bigger ones. Supercurrency! That New York Stock Exchange listing, that broad market with the stock selling at a fancy multiple, the sons of the Founders with Caribbean estates, and the grandsons in their pads all secure to blow their minds with 3K electronic guitar apparatus and not worry about work because the Supercurrency has been salted and peppered into hundreds of trusts so the tax man cannot get it. Only the Supercurrency has to stay Super, the profits have to keep growing, the multiple has to go up, and the accountants can’t do it all.

  Multimillion-dollar businesses can’t be run by intuition or seat-of-the-pants engineering. There has to be objectivity, whatever that is, and the continuous quantification of results; we have to have what the course catalog at the school calls “a rigorous and systematic approach,” that is, the collection, processing, analysis, reporting and use of quantitative information. But there is competition, maybe, and the judgment of those crazy crapshooters up in New York; if the earnings go down they will bomb the stock, and then what will our report card as a manager look like?

  For our man in the green eyeshade asking how goes the world, how will it go, the harmony between man and nature becomes an important question, and not just a spiritual one.

  Nobody is against such harmony. When ecology first crept into the scene, industry seized it as an advertising opportunity; not a filter was bought that the buyer didn’t take an ad about cleaning up the rivers and waters. In fact, at one point someone figured out that more was spent drum-beating about cleanup than on the equipment. Industry began to sense that the public belief that more was better was beginning to fall away. Union Carbide dropped its slogan, There’s a Little Bit of Union Carbide in Everybody’s Home. They wanted you to think of the plastics and the sandwich bags, and instead a Little Bit of Union Carbide meant: the wind’s shifted, here it comes again, shut the doors, close the windows, you know what it cost to have the curtains cleaned last time. President Nixon gave an Ecology Speech, and somebody slipped him a real good quote from T. S. Eliot. “Clean the air! clean the sky! wash the wind!”—that’s what we were going to do, said the President, not realizing that the very same quote went on, “Take stone from stone and wash them ... Wash the stone, wash the bone, wash the brain, wash the soul, wash them, wash them!” Not ecology at all, but the blood of murder in the cathedral.

  But while everybody agrees that mankind and nature should live in harmony, few agree on what that means, or how the cost shall be borne. They have not changed the consciousness of the way they think. To paraphrase University of Colorado economist Kenneth Boulding, man has lived through history in a “cowboy economy” with “illimitable plains” and “reckless, exploitative, romantic, and violent behavior.” Consumption was “linear”—that is, materials were extracted from supposed infinite resources, and waste was tossed into infinite dumps. But we are shifting to a “spaceman economy.” The earth is becoming finite, like a closed spaceship; consumption must become “circular”—that is, to conserve what we have, resources must be continuously recycled through the system. Air and water have always been free, and few realize that we are approaching the point in our cowboy ways where we will wrench the earth’s ecology out of shape. In The Closing Circle, biologist-ecologist Barry Commoner writes that we have to reconsider the true value of the conventional capital accumulated by the operation of the economic system: we have not considered the true cost.

  The effect of the operation of the system on the value of its biological capital needs to be taken into account in order to obtain a true estimate of the overall wealth-producing capability of the system. The course of environmental deterioration shows that as conventional capital has accumulated, for example in the United States since 1946, the value of the biological capital has declined. Indeed, if the process continues, the biological capital may eventually be driven to the point of total destruction. Since the usefulness of conventional capital in turn depends on the existence of the biological capital—the ecosystem—when the latter is destroyed, the usefulness of the former is also destroyed. Thus despite its apparent prosperity, in reality the system is being driven into bankruptcy. Environmental degradation represents a crucial, potentially fatal, hidden factor in the operation of the economic system.

  So we do not even have a true picture of how well we have done. This parallels the arguments of the British economist Ezra Mishan. If a wage earner dies sooner because of exposure to mercury, radiation and DDT, but doesn’t have extra medical bills, is there not still the cost of the lost earnings from the extra years? They have to be assigned a value, even if the human anguish of the missing years is ignored.

  According to Commoner, intense environmental pollution in the United States has come with the technological transformation of the productive system since World War II. Production based on the new technologies has been more profitable than the older technologies they replaced; that is, the newer, more polluting techniques yield higher profits. We could, of course, survive with new technologies, new systems to return sewage and garbage to the soil, retire land from cultivation, replace synthetic pesticides with biological ones, recycle usable materials, and cut down the uses of power. That would cost about six hundred billion, or a quarter of our current capital plant.

  Placed in the kind of terms used in the analysts’ societies, this debt-to-nature means there is suddenly a liability on the balance sheet we didn’t know was there. It must have been in the footnotes, in fine print. We have been very profitable, but the plant is falling down. We can build a new plant, but we are going to have to amortize the charges against earnings for a long time.

  Ah, but then we have a spanking new plant. Isn’t that good? Not in the terms, necessarily, that we have been used to considering as good. Of course, if we survive, that’s good. And perhaps even prevent life from getting more noxious, that’s good. But we have been measuring good as profitable. New capital expenditures are—at some point—supposed to increase the profits. That is why the class is so confused when asked what the purpose of the corporation is. Good is profitable; profitable is new technology; new technology has been pollutive, and profitable. Killing whales is very profitable until the day when there are no more whales, because we have only been amortizing the ships and the radar and the depth charges and harpoons. We haven’t amortized the whales, and anyway, how do you replace whales?

  But the debt to nature, paid, does not increase either productivity or profitability. Thus, probably the corporation is not going to pay up unless the society compels it, induces it, inveigles it, or brings it about in some other way. The vision of good is simply too far removed from the vision of what has been perfectly good in the hundreds of years of cowboy economics.

  This is going to be true not just for the United States and not just for capitalism. The Cellulose, Paper and Carton Administration of the Ministry of Timber, Paper, and Woodworking in the U.S.S.R. is going to have its problems, too. It has its quotas, and the boys at the Ministry get their satisfactions from churning out the stuff, and ecology freaks are everywhere. This is from Professor Marshall Goldman’s account of the pollution of Lake Baikal, the world’s oldest lake and largest body of fresh water by volume. The manager of the plant at Bratsk is asked why a new waste filter has not been installed. Says he: “It’s expensive. The Ministry of Timber, Paper and Woodworking is trying to invest as few funds as possible in the construction of paper and timber enterprises in order to make possible the attainment of good indices per ruble of capital investment. These indices are being achieved by the refusal to build purification installations.”

  The finite-earth argument leads almost inexorably to a call for an end to growth, both in population and industrial output. Growth in industrial output is one of the justifications for both capitalism and socialism, each to each. When Khrushchev talked about burying us, he was bragging about increases in industrial production. Increases in our Gross National Product have been hailed as the triumph of our system. (Leave aside for a moment what GNP measures. It does measure only quantity; so if everybody goes and buys triple locks for their doors because crime has increased so much, the GNP goes up, though the quality of life may have gone down. There are those who believe we should attempt to measure such quality.)

  The most dramatic assault on growth came from a group at MIT headed by Dennis Meadows, which built a mathematical model of the world system with the interrelationships of population, food supply, natural resources, pollution, and industrial production. The Meadows group produced a doomsday equation: the world is out of business in less than a century, unless the “will” is generated to begin “a controlled, orderly transition from growth to global equilibrium.” Even new technologies, such as nuclear power sources, said the group, wouldn’t help much. The team doubled the resources and assumed that recycling cut the demand to one-fourth; even optimistic estimates didn’t put the day of doom off longer than 2100. We are going to stop growing one way or the other, said the group, the other being the collapse of the industrial base through depleted resources, and then lack of food and medical services.

  This report did not lack for critics. One economist said it was “Malthus, with lights and a computer”; others said the base was too skimpy for the assumptions, and that future science and future technology were unknown. If you had assumed our population growth in 1880 without the automobile, you could have assumed asphyxiation by horse manure. If materials were going to become visibly scarce, would not the prices begin to anticipate scarcity? And would not new materials and new power sources be developed? The representatives of less developed countries who considered the report at a Smithsonian symposium were particularly alarmed, because freezing growth without some sort of worldly distribution of income would keep them at their current levels. The poorer nations, said the Indian ambassador, would “slide down to starvation.” At another international conference, the Malaysians said: “Some of us would rather see smoke coming out of a factory and men employed than no factory,” and “We are not concerned with pollution but with existence.”