Neil H. Jacoby

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Neil H. Jacoby at UCLA in 1960.

Neil Herman Jacoby(September 19, 1909 – May 31, 1979) was a university professor and public servant and was widely recognized as an expert on matters of taxation, finance, economic policy, and business-government relationships.

Quotes[edit]

  • [ Proposition 13 ] would precipitate a revolutionary reform—one long overdue—in California state and local finance… People’s incomes are not closely related to their ownership or use of housing. Hence, the present tax system unjustly burdens the young family with large housing needs and the older couple who want to live in their family home or their retirement pensions. Stability of home or apartment occupancy is an important social goal. The present tax system weakens our society by threatening to force people out of their homes.
    • UCLA Business Forecast Conference, (March 16, 1978) quoted in Organization of Arab Petroleum Exporting Countries I’ Mad As Hell: The Exclusive Story of the Tax Revolt and its Leader, Howard Jarvis, Times Books, Westminster, Maryland (1979) p. 109
  • Property tax bills are rising much faster than family incomes…. They threaten to erode away that foundation of American society: the American-owned home…. We must deliver an unmistakable message to our elected representatives that no longer will we permit misuse of the property tax to finance welfare, health, educational and other governmental services that serve all people in our state. Such government spending programs should be paid for by revenues collected from all the people.
    • San Fernando Valley, CA speech (October 15, 1977) quoted in I’ Mad As Hell: The Exclusive Story of the Tax Revolt and its Leader, Howard Jarvis, Times Books, Westminster, Maryland (1979) p. 108

Corporate Power and Social Responsibility: A Blueprint for the Future (1973)[edit]

Macmillan Publishing Co., Inc., New York 1973

  • An institution is likely to be more searchingly appraised if attention is focused at the outset upon its faults rather than its virtues.
    • p. 3
  • But beginning in the 1960’s, an adverse tide of public opinion began to rise against business… Frustration over the [[w:Vietnam War |Vietnam War added fuel to the fires of discontent. Suddenly, consumerism, stock-holderism, racial equalitarianism, antimilitarism, environmentalism, and feminism became forces to be reckoned with by corporate managements. For the most part, they replaced the classical ‘isms’— socialism, Communism, syndicalism, fascism—as the main driving forces seeking the reform of the American business system.
    • p. 6
  • Reformist critics comprise the majority of contemporary critics of American business. To a considerable extent, their demand is not for new or stricter governmental controls, but for attitudes and policies on the part of corporate leaders that are more responsive to public needs. Our society needs reformist critics and the author counts himself among them.
    • p. 7
  • Although the Marxist antithesis to the capitalist thesis has been vigorously advanced for more than a century, it has never gained significant support in the United States. Marxist voices have, during recent years, been drowned out by the complaints of the Reformers, on the one hand, and of the Utopian critics, on the other.
    • p. 8
  • Utopian critics reject both capitalism and authoritarian socialism and seek to establish new social orders based upon different human values.They believe that human nature can be radically changed. Individualistic striving for material gain is to be replaced by cooperative efforts to elevate the moral and cultural character of society. Wealth and income are to be shared according to need rather than according to productivity—an ideal not yet realized in any of the socialist countries. American-style capitalism and Soviet-style socialism equally err, they contend, in having hierarchical structures and in stressing material rewards; the difference between them are not significant.
    • p. 8
  • The Hippies are nonviolent anarchists who withdraw from the mainstream of society into their own communes. They are apolitical, libertarian, anti-industrialist, and essentially parasitic upon society. They have a nostalgic yearning for the smaller, simpler social orders of the past… Feeling and intuition are claimed as the source of their attitudes rather than reason and intellect.
    • p. 8
  • The central them of Humanistic Marxism is the replacement, in the economy, of authoritarian penalties and material incentives with democratic processes and moral incentives…Great stress is laid upon an egalitarian distribution of income and wealth. Everyone is expected to perform some physical work… Corporations are maintained as state-owned facilities under joint government-worker control. Market competition and profit motivation are blunted or obliterated. Authoritarian political methods, officially shunned, are used in some degree to stifle dissent and to enforce industrial discipline provided by market competition in the United States.
    • p. 9
  • In assessing business performance, we must keep in mind that ours is a pluralistic society. Indeed, the maintenance of pluralism by the diffusion of power among diverse institutions is itself a national goal. In such a society, each institution tends to specialize in the performance of those tasks in which it has a comparative advantage. The society is a highly complex system of interacting subsystems and institutions, in which the performance of each is affected by that of others. Hence, the business corporation should be assessed primarily with reference to the performance of its unique function of production, taking into account the effects of other institutions, such as governments and labor unions, upon its performance; no institution in a pluralistic society should be evaluated in isolation.
    • pp. 16-17
  • At the end of 1968, the United States contained about 1.6 million active, profit-seeking corporations and about 200 million people—one corporation for each 126 persons.
    • p. 21
  • The growth of the British company population was not interrupted, as it was in the United States, by the economic depression of the 1930’s and World War II. By the middle 1960’s, the United Kingdom was more densely populated with companies in relation to its human population than was the United States, although the reverse had been true in 1935.
    • p. 22
  • Even the population of business enterprises does not provide a comprehensive measure of ‘entrepreneurship’ in the United States because it excludes farmers, professionals, and other persons devoting at least part-time to selling their services in markets and who have neither an established place of business nor employees. A conservative estimate of the ‘entrepreneurial’ population is given by the number of individual income tax returns filed reporting income from self-employment. An estimated 11.1 million persons did so for 1968, one for each 18 persons in the United States.
    • p. 24
  • The American credo is one of faith in institutional pluralism and of mistrust of large size and concentrated power, political or economic. The growth of giant institutions has always been viewed with apprehension, even though it has been for the most part the natural product of rising populations and income, and of technological changes that created economies of larger scale.
    • p. 27
  • The largest corporations, like companies of lesser size, are a changing rather than a static group. Their annual turnover rate reflects the rise or decline of management and the vagaries of business fortune. Of the hundred largest industrial corporations in 1909, only thirty-six remained on this list in 1948. And, of the top hundred companies in 1948, only sixty-five continued to hold this ranking in 1968.
    • p. 32
  • It comes as a shock to many, therefore to learn that the majority of the labor force in the United States works for government, unincorporated business, nonprofit institutions, or are self-employed. Less than half of the total labor force was employed in the entire corporate sector in 1969.Less than one-quarter worked for ‘large companies,’ defined for present purposes as those employing more than two hundred people.
    • p. 34
  • It is widely believed that big business firms collectively own the preponderance of America’s wealth and are steadily expanding their share. The facts show the contrary. Corporate business owns about 28 percent of the tangible wealth of the United States, and its share has not changed much during the past fifty years. The bulk of the nation’s tangible wealth is held by the household and government sectors of the economy and is not employed in profit-seeking enterprise, corporate or noncorporate. …If the character of a society were to be designated by its major wealth-holding institution, the United States could more appropriately be described as a ‘household state’ than a ‘corporate state’.
    • p. 35
  • During the recent nineteen-year period from 1950 to 1969, corporate profits, both before and after taxes, formed a shrinking proportion of the national income.
    • p. 35
  • Modern management science has made it feasible for corporations to expand the scope and variety of their operations. It has created new economies of scale through which larger aggregations of men, materials, and funds can be efficiently deployed and controlled over larger areas.
    • p. 56
  • Still another trend supports greater emphasis upon the social responsibilities of business firms and greater interest in the interactions between business and public policies. The great problems of contemporary society, such as environmental pollution, waste disposal, unemployment, poverty, urban renewal, and mass transit, are most likely to be solved by combining the organizational discipline of the action-oriented business corporation with the legal and taxing powers of government. Private corporations will more frequently be used to attain public purposes. At the same time, the public has made it clear that it will no longer tolerate the thrusting of private cost upon itself.
    • p. 69
  • During 1968, more than forty-four hundred companies disappeared by mergers involving an estimated $43 billion in securities—an all-time record. In this tidal wave of mergers, which subsequently crested and receded, conglomerate firms accounted for either a substantial or a preponderant fraction, depending upon the definition of ‘conglomerate’ adopted.
    • p. 72
  • The 4,400 business corporations that disappeared by merger during 1968 were a small number compared with the 12,000 that disappeared by failure, or the 207,000 new corporations that were formed. Even the $43 billion in securities exchanged in mergers that year were only 3.3 percent of the market value of corporate securities.
    • p. 75
  • A fourth factor underlying the merger wave of the 1960’s was the steep rise in the load of corporate income taxation since World War II. In 1940, the effective federal corporate income-tax rate was 27 percent; in 1968, it was 50 percent. Rates of state and local taxes on business incomes have risen commensurately.
    • p. 80
  • Because some conglomerate, and other, mergers have proved to be unsound and failed. It has been proposed that government should prohibit such mergers. But there is no feasible way to identify bad mergers in advanced; only time and the test of market competition reveal them.
    • p. 90
  • A corporate manager, interested in playing a numbers game with stock price-earnings ratios for quick profits, is able to inflate current reported profits at the expense of future profits. The methods are legion: shift from accelerated to straight-line depreciation; defer or stretch out maintenance expense; deplete inventories held at low cost; sell assets for ‘one-shot’ income. Excessive flexibility in permissible accounting methods creates opportunities for misleading reports of profits.
    • p. 90
  • The Multinational corporationis, among other things, a private ‘government,’ often richer in assets and more populous in stockholders and employees than some of the nation-states in which it carries on business. It is simultaneously a ‘citizen’ of several nation-states, owning obedience to their laws and paying taxes to their treasuries, yet having its own objectives and being responsive to a top management that may be located in another nation. Small wonder that some critics see in the multinational corporation an instrument of irresponsible private economic power, or even an agent of economic ‘imperialism’ by its home country. Others view it as an international carrier of advanced management science and technology, an agent for the global transmission of cultural values, bringing closer the day when a common set of ideals will unite mankind.
    • p. 94
  • Private business investment is inherently superior to governmental aid as an instrument of development because it combines transfers of managerial and technical assistance with that of capital.
    • p. 105
  • The multinational corporation is leading Europe toward a more egalitarian, homogeneous, and democratic society. While traditionalists will deplore the gradual blurring of class and national distinctions, such segmentations cannot in the end withstand the onslaught of technological and economic changes.
    • p. 108
  • The multinational corporation is, beyond doubt, the most powerful agency for global economic unity that our century has produced. It is fundamentally an instrument of peace. Its interest is to emphasize the common goals of peoples, to reconcile or remove differences between them. It cannot thrive in a regime of international tension and conflict. The instrumentality of multinational business is man’s best hope of achieving political unity on this shrinking planet.
    • p. 122
  • If big businesses in concentrated industries truly behaved as oligopolists, one would find higher prices, persistently higher profits, more extensive advertising, and less product innovation among such industries than among unconcentrated industries. However, the facts show either the contrary or insignificant differences. During the period of price inflation from 1965 to 1970, prices rose most in the unconcentrated industries.
    • p. 144
  • A second drastic reduction in the political power of American corporate business occurred during the Great Depression of the 1930’s. This crisis shook the faith of the American people in the capability of its industrial and financial leaders, even in the enterprise system itself… Roosevelt sought to make political capital of the popular disillusionment with business; and he made business a scapegoat for errors of federal economic policy that had deepened and prolonged the depression.
    • p. 154
  • The primary difficulty is the problem of determining what the interest of business is.At any given time, business corporations are split on many national issues; there does not appear to be a monolithic ‘business interest.’ Thus, petroleum companies have opposed liberal oil import quotas, while petrochemical companies have favored them in order to obtain less expensive feedstocks; steel companies have sought restraints upon imports of foreign steel, whereas automobile companies and other large users of steel have fought them; and even with respect to such matters as labor union legislation or antipollution regulation, businessmen are far from presenting a united front because firms in some industries are much more deeply affected than those in other industries.
    • p. 155
  • Certainly the political assets of American labor organizations are formidable in both manpower and money. Unlike corporations, eighteen million union members vote. With the union shop prevailing in most states and union dues being deducted from members’ paychecks, labor unions have a steady inflow of funds, estimated to be around $700 million per year in 1963…Indeed, many a businessman seeking a favor from government has found that his most effective course was to get the support of the leaders of the unions representing his employees!
    • p. 157
  • The basic flaw in the distribution of political power among American economic institutions is that producer interests rather than consumer interests tend to dominate and shape the actions of government.
    • p. 158
  • Until 1837, companies were individually charted by ad hoc legislation. In that year Massachusetts enacted the first general corporation law, which was comparatively stringent in limiting corporate powers. Subsequently, motivated by the philosophy of free enterprise, as well as by competition among the states in charter-mongering, state corporation laws were progressively relaxed.
    • p. 168
  • Because contributions for charitable and educational purposes were the earliest form of corporate social action, their pattern enables us to test the validity of our theory. Corporate giving was stimulated by federal legislation in 1935 authorizing companies to deduct from taxable income up to 5 percent on account of such gifts.
    • p. 198
  • During the sixty years between 1910 and 1970, the percentage of Americans living in urban areas of 2,500 or more rose from 45.7 to 73.5, and the number of urbanites more than tripled from 42 to 150 million. Urbanization clearly has brought important benefits to people… But this overwhelming tendency of people to concentrate in cities has worsened the environment through crowding, traffic congestion, delays and loss of time, and the over-loading of transportation, marketing and living facilities.
    • p. 208
  • A static technology is, however, almost inconceivable. It runs so strongly against established drives in American society as to be practically impossible. So long as we are thinking beings, we will find new ways to increase the productivity of work! The basic point, however, is that economic growth is needed to improve the quality of life. A rise in the GNP, taken by itself, is neither good nor bad. Everything depends upon what kind of production has increased, its costs to society, and who benefits from it. What people now want and need is resource-conserving, pollution-free growth—growth that does not harm the environment and demands less of the earth’s limited resources.
    • p. 213

Multinational Oil: A Study in Industrial Dynamics (1974)[edit]

Macmillan Publishing Co., Inc., New York 1974

  • World energy problems entered the headlines during 1973 and 1974 when members of the Organization of Petroleum Exporting Countries (OPEC) unilaterally quadrupled the price of crude oil. Concurrently, members of the Organization of Arab Petroleum Exporting Countries (OAPEC) cut back production and imposed a temporary embargo on shipments to the United States for political reasons. Suddenly, the industrialized nations awoke to their heavy and increasing dependence upon the abundant supplies of oil from Africa, the Middle East, and Latin America.
    • p. xxi
  • In a world market that was free of all taxes, royalties, or other governmental constraints, and in which competition was effective, the price of oil would be very low. But the real-world market for oil is dominated by high taxation by the oil-exporting nations, and, since 1972, by concerted efforts of the members of the OPEC to raise prices and to restrict output. Because of effective competition in the industry and the power of OPEC, an international oil company today has relatively little influence on the price of oil to consumers.
    • pp. xxv-xxvi
  • How did it come about that only a few international oil companies held concessions to all of this region Middle East at the end of World War II? The answer lies in the bitter struggle of the United States government to gain an entrance for its nationals into the British-dominated Middle East, a struggle which very significantly shaped the structure of the industry as it emerged from World War II.
    • p. 25
  • Motivated partly by the decision to convert its navy from coal to oil, the British government ultimately acquired a major interest in what was then the only oil-producing company in the Middle East.
    • p. 26
  • The foreign oil industry was radically affected by World War II. The burden of meeting Allied military requirements fell largely on the United States. Between December of 1941 and August of 1945, nearly 7 billion barrels of oil were produced to meet the requirements of the United States and its allies, almost 6 billion barrels of which came from the United States.
    • p. 37
  • During the war years, the United States government gave serious thought to acquiring a direct interest in Arabian [oil] reserves.
    • p. 38
  • In 1949 coal met nearly two-thirds of the world’s energy needs, oil less than one-quarter, and natural gas about one-tenth, with water power a residual 2 percent. By 1971 the use of coal had dropped to one-third of world energy consumption, while the use of oil had risen to 43 percent and natural gas to 21 percent.
    • p. 50
  • Proven crude oil reserves in the foreign non-Communist world were estimated to be just under 41 billion barrels at the end of 1948; they had increased sixfold to 250 billion barrels by 1962 and then more than doubled this amount to 522 billion barrels by 1972. This increase over a twenty-four-year period was equivalent to an average annual compound growth rate of 11.2 percent—a spectacular expansion of the non-Communist world’s oil stock outside the United States and Canada.
    • pp. 64-65
  • Because exporting and importing nations have conflicting goals, and the interests of individual countries within each group are not identical, United Nations efforts to regulate the industry have not been successful.
    • p. 94
  • Foreign oil companies suffered major expropriations of their property during the postwar period, usually without payment of full compensation to the private owners. These episodes—the most significant were in Algeria, Ceylon, Cuba, Egypt , Iran, Libya, and Peru—followed by many years the first major oil industry expropriation by the Bolshevik government of Russia in 1918 and a second major expropriation of foreign oil properties by the Mexican government in 1938. All illustrated the great latent power of governments over the international oil companies and the reality of the political risks inherent in the industry.
    • pp. 96-97
  • The Soviet Union, as might be expected, conducted a ceaseless campaign to persuade the less-developed countries to nationalize their petroleum industries, by deprecating the record of private oil enterprises and extolling the virtues of governmental petroleum monopolies.
    • p. 99
  • After World War II, foreign government levies on the incomes of private oil companies were progressively and substantially increased. This was true of both royalty and income tax rates… Later, the 50 percent rate of taxing foreign oil income was materially increased in many nations… Colombia’s oil law of 1962 changed the tax rate to 68 percent of net income from production. Contract agreements with Indonesia provided that 60 percent of profits would go to the government… The oil companies were unable to pass on all the increased costs per barrel to petroleum consumers after 1957, because of the redundancy of supplies.
    • pp. 107-111
  • The postwar tendency of foreign governments to intervene directly in the regulation of petroleum production and pricing contrasts sharply with the laissez-faire policies followed up to World War II. Formerly, rates of output and prices were almost entirely within the discretion of the private oil companies.
    • p. 111
  • Expropriation and nationalization of private oil properties, and the growth of government oil companies, extended public ownership in oil. However, the primary result of postwar government petroleum policies was to enhance competition in the industry. Governments encouraged new entrants, which diffused the structure of the industry. The number of competing firms increased, and the market positions of the largest international oil companies declined, reducing concentration. As the entrants developed more concession areas, the growth of petroleum supply relative to demand accelerated, intensifying competition in both crude oil and product markets, and depressing prices and rates of return on investment.
    • pp. 116-117
  • One hallmark of a competitive market is that new firms are able to—and do—enter it… The key economic consideration is the relative difficulty of overcoming the barriers to entry, which can be measured by the advantages of established firms in the industry over potential entrants. In general, the relative difficulty of entry into any industry is determined by the amount of capital required for an efficient scale of operations,…
    • p. 121
  • The competition of government oil companies with private enterprises was often buttressed by monopoly privileges, public preferences, low-priced capital, special tax benefits, or freedom from the commercial obligation to earn a normal return on investment. These government companies, regardless of whether they had complete or partial monopolies of oil production and trade in their own countries, were part of the structure of the foreign oil industry. They could not be dismissed as ‘noncompetitive’ with private oil enterprises.
    • p. 128
  • The postwar burgeoning of oil enterprises throughout the world wrought important changes in the structure of the foreign oil industry. Competitors multiplied, concentration of the industry was reduced, and the market positions of the ‘seven largest’ companies shrank.
    • p. 172
  • Before World War II, the United States Gulf and the Caribbean were the foreign world’s primary sources of crude oil. Eastern Hemisphere consumption was relatively small and yet its crude oil production supplied less than half of its petroleum needs.
    • p. 220
  • World War I created a huge drain on U.S. oil. Fear of inadequate domestic reserves caused the U.S. government to urge its nationals to develop foreign sources and to support them in this effort. But American oil companies were unable to obtain exploration concessions in the Middle East and other areas because of the political influence of the British, Dutch, and French empires. The United States called for an ‘open door’ policy. Ultimately, after prolonged and stubborn British opposition, an agreement was made in 1928…
    • pp. 288-289
  • A foreign oil industry consisting mainly of private multinational companies competing in open markets has unique values to the Western World. Profit-motivated firms have proven to be better adapted to accept long-term risks and to allocate investment multinationally than have politically motivated government agencies.
    • p. 304

Bribery and Extortion in World Business with Peter Nehemkis and Richard Eells (1977)[edit]

Macmillan Publishing Co., Inc., New York 1977

  • Political payments by multinational companies in foreign nations have long been a pervasive practice; but a cultural taboo against discussion of the subject, combined with a lack of public information, has created a vacuum in public understanding.
    • p. xi
  • Because conduct judged improper or illegal in one culture may be considered quite proper—even unavoidable—in other cultures, we have been chary of making moral judgments. Thus, we have sought to avoid the twin pitfalls of arrogant ethnocentrism and moral absolutism.
    • p. xi
  • Thus the principle that no foreign political payments shall be made often collides with the principle that we should expand international trade and investment, that multinational companies should conform to local business practices, that the United States should avoid extraterritorial application of its laws, or that this county should abjure moral as well as political and economic imperialism.
    • p. xiii
  • The revelation that American companies were making payments to foreign political parties and government officials touched a sensitive nerve in the post-Watergate era. Although most knowledgeable people were aware of the bribery of domestic government officials, they felt more keenly about the payment of millions of dollars to foreign officials.
    • p. xiv
  • Today, multinational business is under attack by socialist and other critics on a wide spectrum of issues. New charges that multinational firms corrupt the officials of foreign governments have been added to the litany of criticism Many governments, especially those of the Third World, have taken or threaten to take punitive and restrictive actions against foreign companies. Such measures would impede international investment, slow down economic progress, and damage the economic welfare of all countries concerned.
    • p. xix
  • Since 1950, American enterprises have invested in virtually every part of the world. Their annual exports in 1976 were more than $117 billion, and their foreign investments in book value were about $133 billion. This unparalleled international movement of goods, capital, technology, and managerial resources has had both successes and failures, but the former have by far outweighed the latter.
    • p. 3
  • Lubrication payments are not subject to a going rate. They are usually determined by what the traffic will bear. The usual way for a government official to extract a payment is by threatening obstruction or delay in carrying out his official duties… Large political payments are rarely transferred directly by a principal to an upper echelon official; rather, a middleman is used. He may be a professional ‘fixer’ who is himself a low-level government functionary; more often he will be a member of the same family as the high-level recipient.
    • pp. 5-6
  • State ownership of, and control over, much of the means of production has been an essential part of Middle Eastern economies. Unlike Europe, the Middle East did not produce a politically and economically influential bourgeoisie that could act as a countervailing power to the state and its rulers.
    • p. 7
  • Like their counterparts in other Third World nations, Middle Eastern socialist-orientated regimes are inefficient and mismanaged, and they tolerate the use of the political payments by those who must deal with them… The Middle East is one of the world’s most politically volatile regions. Nationalization of foreign investment is frequent, and taxation is high. National rivalries and the unresolved Israeli-Arab conflict contribute to the investor’s political risks.
    • p. 8
  • The African nations that won their independence from the European colonial powers are, for the most part, uneasy confederations of tribes that are traditional enemies. The primary loyalty of their citizens is not to the state, but to the tribe and its chiefs. The political objective of the dominant tribe is to capture the country’s economic power base, which is the government, and, once it has been seized, to hold on to it.
    • p. 10
  • India’s political democracy was built on political payments. ‘Speed money,’ shakedowns, and gaining illegal access to wealth—known as ‘black money’—occupied much of the time and energy of the Congress Party while it was ruling India. For generations, corruption of government officials by Indian businessmen has bought official tolerance for hoarding, adulterating, smuggling, and black marketing. Payoffs have been an integral part of Indian business-government relations.
    • pp. 14-15
  • Indonesia dramatizes the dilemmas of the poor countries whose officials are forced to be corrupt. Maladministration reduces the collection of income taxes to provide revenue for the national treasury. Widespread smuggling further deprives the treasury of needed customs revenue. Lack of revenue prevents the payment of adequate salaries to the bureaucracy. This function of government is, then, fulfilled by private payments to underpaid civil servants. Thus, a vicious cycle breeds corruption in business-government relations.
    • p. 19
  • Communist propagandists have long maintained that capitalism is the breeding ground of corruption. One would, therefore, expect to find in the communist orbit a ‘new man’ who has no appetite for the decadent bourgeois habits of the West. But fact as distinguished from myth reveals that corrupt practices abound in the communist nations.
    • p. 38
  • Internal corruption grows out of the very nature of the communist economies—chronic shortages of consumer goods, their poor quality, the interminable delays in obtaining service and repairs, a centralized planning system that decides what people should wear or consume, whether they like the product or not.
    • p. 38
  • Because internal corruption is endemic to the communist system, it ineluctably conditions privileged elite to the habits of corruption in their external relations with other communist officials in the Eastern bloc countries and with the Western and Japanese businessmen who negotiate with the state enterprises.
    • pp. 39-40
  • The emerging censorship of political payments by U.S. business corporations is a potentially important, but little noted, aspect of the recent controversies about these payments. The operating behavior of American business overseas is becoming a new dimension of the public regulations of business. Until recent years, this regulation was concerned with such matters as healthy working conditions for employees, safe and reliable products, and enforcing competition. The disclosure of political payment abroad has led federal agencies to increase still further their role as arbiters of business behavior.
    • p. 45
  • It would be virtually impossible to obtain proof outside the United States that foreign companies were making payments to officials of foreign governments to assist them in obtaining business. American companies may engage in mea culpa breastbeating in this country, but it is not a popular addiction abroad.
    • p. 68
  • During the decade of the 1970s, the print and electronic media emerged as an institution comparable in power and influence to the three coordinate branches of government. Shielded by the First Amendment to the U.S. Constitution, the press has become almost invulnerable to the criticism and legislative curbs that limit the power of such other social institutions as business or government. Congressmen, who depend upon the radio and television networks for national visibility, are loath to level criticisms at the media.
    • p. 78
  • In its two most dramatic conflicts with the Nixon Administration—publication of the purloined Pentagon Papers and of the Watergate scandal—the Washington-based press corps and the New York-Washington press axis not only challenged but defeated a President of the United States. Indeed, Professor Huntington has asserted that the media were able to accomplish what no other group of politicians or disgruntled citizens had previously done in American history—bring about a journalistic coup d’etat that forced the resignation of a President.
    • p. 78
  • Although the media editorials have roundly condemned corporations for making political contributions at home and abroad—payments which were legal in many jurisdictions—they have yet to express equal indignation about the congressmen and public officials of this and other nations who receive these payments and who, in many instances, solicited them. Media voices have also been muted about violations of the Corruption Practice Act by the big labor unions.
    • p. 79
  • The public has come to suspect that bribery of high foreign political figures by American companies is rampant. Yet the number of proven cases of bribery involving misconduct by high officials of foreign governments is very small. And many instances of misconduct are more extortion than bribery. The truth, however, is always hard to discover because of the clandestine nature of the transactions.
    • p. 93
  • In many foreign nations, especially those in the Third World, political and social evolution has been such as to produce a monolithic state that lacks any clear division between a public and a private sector. Indeed, throughout much of the world today, official political ideology is hostile to the concepts of the private-enterprise market economy.
    • p. 131
  • In consequence, the civil services of many Third World nations operate as feudal baronies, exploiting those with whom they deal. In the absence of institutions or organized groups capable of restraining official venality, the employees and officials of these bureaucracies possess virtually untrammeled power for obtaining personal wealth.
    • p. 152
  • Payments made to, or extorted by, a corrupt bureaucracy can enable a socially chaotic system to function.
    • p. 153
  • Political influence is exerted differently in the industrialized countries than in the agrarian, preindustrial societies. In the former, demands by individuals and special interest groups normally reach the political system before the enactment of legislation. Indeed, legislation is usually a consequence of such demands. Bribery of officials by businessmen is considerably lessened by the existence of open channels for the exercise of political influence.
    • p. 153
  • In the black market for political influence, who did what to whom makes much practical difference. But as the scales of justice are seen by the media world, guilt is not evenly assigned. It is useful to note that, in their coverage of political payments by American companies abroad, who initiates a political payment has not seemed to make much difference to the U.S. media—and, until recently, to the Securities and Exchange Commission.
    • p. 155
  • Markets work most efficiently and the economy of a country develops best when the price and merits of products and services are the criteria that determine buying and selling—not secret payments to well-placed politicians and government employees.
    • p. 183
  • The media have tended to emphasize the notion that it is the American company that initiates the bribe, without laying any emphasis on the fact that around the world, for hundreds of years, companies from other countries have been making payments and paying bribes, and that usually the reason they have done so is that they have been solicited or extorted by politicians and government employees. To point this out is not to negate the blame for making the payments and paying the bribes, but simply to make it clear that in many, if not most, cases the payments are made under duress. All other things being equal, an American business manager would rather avoid the costs of bribes.
    • p. 188
  • While it is true that not everyone in such a country will agree that this is the best way to run the government’s ‘civil service,’ by and large one has to conclude that a system of petty extortion and bribery has become entrenched over time simply because the country and its people have decided that they want it that way.
    • p. 191
  • The American tendency to equate economic efficiency with moral virtue has deep roots in our history. It helps to explain why Americans so widely embraced the ideology of Adam Smith… Competition in open markets was seen as the most efficient way to allocate limited human resources and to maximize the satisfaction of human wants. Interference with market processes by government officials—whether lawful or illicit—was interpreted as not only inefficient but immoral.
    • pp. 197-198
  • Whenever any thought or idea or moral imperative is transferred from one society to another an important question is whether that which is transferred is freely sought by the recipient or is, to one degree or another, forced down his throat. Does the transference occur freely through reading or the reports of visitors to other lands, i.e., does it occur as a voluntary importation by one society of what another has developed or found, or does it occur through the coercion of the bayonet or propaganda?
    • pp. 200-201
  • Experience has taught that a great power must always act with deliberation and restraint in pursuing its national interest, even when they coincide with the long-run global interest. U.S. efforts to reduce corruption in the business-government relationship throughout the world should be undertaken patiently and persistently, with an understanding of the problems confronting the governments of other nations, and without unrealistic expectations of speedy results.
    • p. 203

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