Harvard Business School and the American pursuit of profit

The Golden Passportby Duff McDonald

HarperCollins. 672p, $35

The business of America may always have been business, as President Calvin Coolidge said, but uneasiness always accompanied business. There was personal uneasiness that what had been gained could be lost; religious uneasiness that material well-being, achieved or simply desired, would overwhelm traditional values; civic uneasiness that private interests would corrupt public life. Out of this uneasiness came gospels of wealth warning the rich to help out, and prosperity gospels encouraging the non-rich to get moving. And along the way came earnest efforts to think about business, improve business practices and train business leaders.

Harvard Business School, founded as a graduate school in 1908, was and remains in the forefront of this long effort to understand and elevate American business. Depending on their assessment of the American political economy, readers will be either amused or infuriated by Duff McDonald’s irreverent, critical history of the school often known simply as H.B.S. McDonald knows a lot about money and technology and markets,;but he also thinks that ideas matter, and Harvard Business School is all about ideas. He has a lot to say, usually with respect but not with charity, about the people who run the school and those who teach there, and, unusually for a story of an academic institution, about those who have graduated and those who supply money to the school, lots of it.

Harvard Business School provides students with a “golden passport”; its 76,000 alumni have wealth and influence in over 167 countries. McDonald argues that H.B.S. also helps business leaders blame everyone but themselves for the country’s problems. One recent graduate told McDonald that he and his classmates learned two things at H.B.S.: “how to build great companies and destroy the planet in the process.” For Duff McDonald, what makes H.B.S. particularly irritating is the yawning gap between what it says about itself and what it actually does. The founders hoped to integrate traditional New England Protestant and civic virtues with the ever-changing American political economy. Yet H.B.S. was born in the progressive era, and its leaders had to find ways to keep that republican ethic alive amid spiraling changes in markets, technology and capital requirements.

One recent graduate told McDonald that he and his classmates learned two things at Harvard Business School: “how to build great companies and destroy the planet in the process.”

The corporation had already replaced many lone proprietors and regional partnerships, a change that challenged, and still challenges, personal and conscience-centered ethics. Harvard Business School had more than its share of apostles of one form or another of “servant leadership”; but when the chips were down, what mattered at H.B.S. and in the political economy it served was not just money but power. And, as McDonald sees it, power is one, but far from the only, taboo subject there.

Still, Harvard Business School leaders tried hard to develop a mission consistent with traditional republican ideals and emerging academic standards. One option was science. H.B.S. hired Frederick W. Taylor, whose “scientific management” promised to bring engineering precision to manufacturing and the many activities surrounding it. Later, H.B.S. turned to human relations and invited Elton Mayo, the prophet of human relations, to join them. Then there was professionalism. H.B.S. leaders hoped that someday business could become a respected profession, like medicine and law. McDonald finds this too was an unsuccessful option. Business did not, and probably could not, find the control over entry and access and the codes of conduct that shaped the other professions. McDonald is even harder on what he calls “the insidious cult of moral leadership” and “leadership hucksterism.” Here Donald’s detached assessment begins to echo the griping of the humanities faculty on hearing the latest announcements of gifts to the business school and salaries for its endowed chairs.

McDonald thinks that Harvard Business School, with help from very wealthy friends, a) actively championed poisonous antigovernment arguments; b) avoided serious discussion of public policy; c) let a trade union fellowship program whither; d) confined “social enterprise” to a separate program (isn’t all business a social enterprise?); e) gave respectability to neoliberal ideas about “The Dangers of Social Responsibility”; and g) in a “cynical repudiation” of long-standing claims to good citizenship, embraced “shareholder capitalism” championed by Professor Michael Jensen. Why? The reader winces a bit at McDonald’s answer: “The money got too good.”

The theme of this history, then, is that H.B.S. deserves little credit for the success of the American political economy and a big share of the blame for its recent failures. As McDonald sees it, American business is in decline, and part of the reason can be found in bad ideas, none worse than the absolute priority of shareholder value and thus of financial markets. The latter is now almost beyond retrieval as hedge funds dominate financial markets and the best business leaders are paid in stock and stock options. If university presidents and trustees critically engage all this, they will undoubtedly limit contributions and opportunities for graduates. If they accept the system, or merely keep quiet, they contribute to the economic and social decline McDonald thinks obvious.

Catholic higher education leaders, and Catholics generally, might read this book and think about American business. McDonald is not the only one who thinks “business has lost sight of its true function in society, which is to provide a mechanism by which we can work together and with our environment to achieve our common goals. It is not, and never was, to simply make a profit.” Pope Francis often says things like that. But we American Catholics, when we think about business at all, are pretty much in the same place as the Harvard faculty and students: good at economic and social analysis, confused about the meaning of social as distinct from personal responsibility, unsure of the proper extent of government intervention, blank about the role of trade unions and professional organizations, and pretty much back to asking people to be and do good, as best they can. Maybe, just maybe, books like this can draw us to seriously engage the meaning and purpose of business, so much a part of our American lives. If McDonald is right, the country surely needs that engagement.

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