The Freeman 1972 - The Ludwig von Mises Institute

1972 THE ECONOMIC-POWER SYNDROME 217without a full and accurate graspof this fact of consumer sovereigntyin the market economy. Thelate Mr. Adolph A. Berle, in manyways a learned man and a. keenobserver of contemporary society,illustrated in his well-known writingsa characteristic error, tracingto inadequate grasp of consumersovereignty. Although yearby year he grew more moderate inhis criticisms of big business, yet,even in his latest book, Power(1969) he continued to hold to aconfused view of economic power.He attributed to that power aspecies of capability, a capacityfor decision and action which itsimply does not possess. He spokeas though big business had unlimitedpower in the dispositionof resources, the direction of investment,choice of product,amount of production, and level ofprice. From others, such as J. K.Galbraith, such a blunder mightbe expected. But Mr. Berle was adifferent case: he frequently displayeda genuine understandingof consumer sovereignty. For example,in his latest book, he hadthis to say:In economic life, every decisionmade affects, in some way, every lifein the modern world. This is thepeculiar quality of economics. The impactof economic-power decisions maybe imperceptible or great, but it is alwaysthere. The· woman who chosenylon stockings instead of silk (achoice she still has, though nylon hasclearly Yvon the campaign) affectedthe lives of silk growers in Japan,China, and Southeast Asia.Consumer PowerOnce one grasps the significanceof the female preference for nylonhosiery, it is no longer possible tomistake the locus of ultimatepower. The Dupont Company haspower, of course, but it is only thesame kind of power to propose, tooffer, that everyone else has, inbusiness and out. Business proposes,the· consumer disposes. Ifshe disposes favorably the businessprospers and may expand. Ifnot, the business must mend itsways or retire from the field.The business must do more thanpropose an attractive product. Itmust have the capability to deliverthat product at an attractiveprice which still exceeds productioncosts. When it demonstratesthat capability, it demonstrates atthe same time its social qualification~Profitability and social utilityare two names for the same thing.The business that makes losseshas abused the society in which itoperates; the business that makesprofits has served it; and, remark-. able as it may seem, it followsthat the higher the profit, thegreater the service.Much current literature viewsthe word "profit" and·its referent