Harry Ransom CenterThe University of Texas at Austin

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Charles Percy

Charles Percy, president of Bell & Howell, talks to Wallace about the role of government in the economic system, about private enterprise's involvement in public services, tax reform, and the soviet economic system.

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Guest: Charles Percy

WALLACE: This is Charles Percy, one of the America's dynamic young industrials, an important spokesman for the free enterprise system, Mr. Percy is President of Bell and Howell. He is a member of the Business Advisory Council of the U.S. Department of Commerce, and he has been a special Ambassador for President Eisenhower to South America. If you want to hear about the function of free enterprise in a free society, we'll go after that story in just a moment.


WALLACE: Good evening. I'm Mike Wallace. In recent weeks we've discussed the role of religion, government, and the communications media in a free society. Tonight we'll talk about the role of free enterprise, capitalism in a free society, and we'll try to find out just how important one is to the other. Our guest is Charles Percy, President of Bell and Howell, who returned recently from a European conference on world trade, which was held among top industrialists from the United States and Western Europe.

Mr. Percy, first of all let me ask you this: We here in America take great pride, I think, in our capitalism, our free enterprise yet at the same time we see our government playing an ever greater role in our economic life, in the way of higher and higher taxation, social security, unemployment benefits, government subsidies, federalized power and so on. As a man who believes in the free enterprise system, do you... do you approve of this increasing government role in our economic system?

PERCY: Mr. Wallace, I frankly deplore it. I do not think in a democracy such as we have that it's possible for individuals to continually delegate their responsibility to federal authority as individuals and have us as a society of free individuals survive. I think the greater concentration we have, the less responsibility we feel as individuals.

WALLACE: And yet...

PERCY: And a greater cost also because a dollar, after all, as expense for the Federal Government must come back to the people, but in a round trip from a local community in America to Washington and back a certain amount is deducted for overhead by the bureaucracy that's spending it.

WALLACE: And yet the trend is to ever and ever bigger government. You are an Eisenhower Republican and even under Eisenhower, government continues to get bigger. We get a kind of a modified socialism, I think that you will agree. Is there any way to stop it?

PERCY: I think there is a way to stop it; I think we must first realize the danger of it, and when we as a nation of individuals realize the danger we are quick to respond to it.

WALLACE: All right, but...

PERCY: I think the creeping erosion of our freedoms and our responsibilities has caused us to be lulled into a sense of complacency and accept as inevitable that government must constantly get bigger and bigger and take over more and more of the functions performed by the states, by the local communities, and by we ourselves as citizens and individuals.

WALLACE: What's wrong with big government? Let me quote to you from Norman Thomas. He is America's leading socialist. He is quite satisfied with a good deal of our present system, he's boasted we have socialized education with our free public schools, socialized medicine with our health departments, and publicly owned hospitals and clinics. He points as well to taxes and government subsidies, projects like TVA, and he adds this: he says, "The only conspicuous example of genuinely free enterprise in America is boys playing marbles for keeps." Do you agree with him?

PERCY: Of course there is not a shred of truth in what he says. It's a play on words, and it can be disproved by facts. Our government is big, it's too big, but it still takes 'only' 25 percent, I put 'only' in quotes, 'only' 25 percent of our gross national product or the value of all of the goods and services we produce to finance this federal and state government, a 75 percent of all of the goods and services produced by our country are consumed by us as individuals in our individual capacity.

The place that we go to work, the home in which we live, the prov... the services provided to that home, the telephone that we use for communication, the private universities that we go to, certain of our private schools, er... most of our amusements, a great deal of our culture, such as our symphony orchestras, I think we have more than all of the world combined in America and they are all under private enterprise, private sponsorship, and private financing.

All of these things come from the private sector and we're a long ways from saying that we are a socialistic country, though again I say we must be constantly aware of the dangers of creeping socialistic tendencies.

WALLACE: But I would like for you to tell us Mr. Percy, if you will, what's wrong with creeping socialism? Really, what is wrong with government planning and I wish that you'd answer it in the light of this: Just from the standpoint of industry and production, right now the gross national product of the Soviet Union is growing at twice our rate.

In the first quarter of 1958, for the first time in history, the combined Soviet-Red Chinese steel production topped American steel production and Soviet output alone reached 75 percent of our steel production. Now, could it not be, that in the light of the way the world is going today, that a planned economy like theirs is superior to ours?

PERCY: I feel there is a danger in the rate of growth of the economy of the U.S.S.R. today. Let's come back to that in just a second.

WALLACE: All right.

PERCY: First of all is socialism, a system of socialism more efficient than a system of free enterprise? I think we have to define what we mean by efficient and for whom, for the consumer? Absolutely not. A system of socialism perhaps might be more efficient for the people who are running it.

It assumes that those at the head of the government, in their infinite wisdom and judgment, are wise enough to determine where people should work, what they should do, how they should be educated, what they should consume and what they should pay for the products that they consumed. I don't think anyone, no mortal is that wise. We, in our own individual capacities, in a democracy such as we have in this country or a republic, have the choice, the freedom of choice... choose what we wish to do for ourselves and for our children and I think our collective individual decisions are far better than the wisdom of a few people at a central state planning commission, for instance.

Let's look at the facts and see whether this increased productivity of the Soviets is benefiting their people actually. In the Soviet Union today 46 percent of their gross output of products and services is consumed by the people, the balance goes to the state. In this country 75 percent of all of our gross product is consumed by our people so that our system is enriching and benefiting the individual and raising his standard of living, whereas the Soviet achievements have been brought about as a result of the exploitation of the very people that the system presumably is supposed to benefit.

WALLACE: But there are those who will say that our free private enterprise system, as it currently stands, is not doing as good a job for the people, for all of the people, as indeed it might do. Let me quote to you if I may, from Professor John Galbraith: Professor John Kenneth Galbraith, who is a leading economist from Harvard, he says this in his new book The Affluent Society.

Galbraith says that under our present economic system, we as Americans are amply provided with what he call mauve and cerise, air conditioned, power-steered automobiles, as well as television sets, vacuum cleaners and the like. But at the same time, he says, we have inadequate public services such as roads, schools and health facilities, and he points out certain other inadequacies in the service area. Will you disagree with Professor Galbraith that there are inadequacies in the services that are provided by our government to us?

PERCY: I would agree and disagree on... on two different scores. I will agree with some of the conclusions that he comes up with that we must take an attitude of constructive discontent with everything that we are doing as a society; there certainly is a better way to educate our children, there certainly is a better way to provide safety on the highways, there certainly is a better way to provide the services of government to the people at lower cost.

On the other hand I disagree that you necessarily must take from one sector of the economy and move it to the other in order to accomplish the end. I disagree that we have to cut down on the material well-being that is provided to the people of this country through the great productive... production of consumer products and move that sector over to the public sector, I think it is possible to raise the level of our entire economy so that we can afford the services that we must have as a people.

WALLACE: Let me ask you this: This is maybe kind of a revolutionary proposal but come with me for just a little while, while I outline it to you. Everybody here in America seems to agree that we have proper automobiles, television sets, houses, lawns, gardens, things. We have possessions. We do agree that some of our services are not up to the par set by some of the things, which we possess. Is it possible, therefore, that private enterprise should get involved with the postal system which isn't up to par, with the educational system, with the road system, with the... er... Well, let's just take those.

PERCY: Er... Maybe we could just take a couple of them now.

WALLACE: All right?

PERCY: Er... The telephone system of this country is under private enterprise. The telephone systems of European countries is government-owned.


PERCY: Any American who has been abroad, and today a million and three-quarter Americans travel abroad each year, I am sure they are acquainted with the frustrations they have at attempting to make a telephone call in the archaic telephone systems that are used in most of these countries, with Switzerland, one of the few exceptions. I'm also sure that most Americans are aware of the archaic system we have in our Post Office today.

I think Postmaster Summerfield has been one of the most ardent critics of the postal system that has grown up and has been the most frustrated person in attemp¬ting to improve the efficiency of the system and yet being held down by the fact that approvals must go through Congress, layers of bureaucracy must act on things, and it's been very difficult indeed even though the desire was there to improve the system. We are all aware of what happens to Christmas parcels at Christmas time, when they come through the system after being thrown around so many times, many of them even arriving late.


PERCY: So, I come to this conclusion: that if it is possible for the telephone communication system of the country to operate so efficiently where you can dial from any major city of the United States... any other major city, a point three thousand miles away and have the party on the end of the line in 2O seconds. A model of the efficiency.

Perhaps we should study, to see if after all these years of attempts of improving the postal system, some type of private enterprise, in cooperation with public commissions because it would be a public agency that would have to regulate anything as important as our mail, could not somehow improve the effectiveness and system, and perhaps one of the archaic systems and one of the growing problems of the Federal Government that consumes time of Congress and the adminis¬tration and other branches, could be handled more efficiently.

It's a radical thought but perhaps we should think radically in terms of getting government concentrating its attention on those things, as Lincoln said, that only government can do because the people in their individual and separate capacities cannot do; but leaving out of the public sector, those things that people can do better for themselves, and maybe private enterprise can enter into a certain arenas now and take over the responsibilities of government.

WALLACE: All right, another area is that of education. Right now the hue and cry about improper education for our youngsters here in America is a consider¬able one. Is it not barely possible, by your thesis, that private enterprise could do well to take over education? Why not?

PERCY: This is far more complex than the postal system because there are, I believe, some 250 thousand individual separate school systems in this country. Er... First, private enterprise is, of course, -- I don't mean business, but private enterprise with respect to individuals -- is in education. Some of our finest private schools are the... offer the finest education being offered in this country; and certainly our private universities establish the academic standards that our state universities attempt to aspire toward. So that private enterprise has proved it is able and capable of offering excellent education. I don't think the answer would lie in private enterprise's taking over the educational system of the country, however.

But I think in our individual responsibilities as citizens, as businessmen, as housewives, as labor leaders, as civic leaders, we have a responsibility to take whatever talents we possess and apply them to the problems of education at the local level, and apply the best thinking we can in this country to solve a problem that is a growing problem. Today we spend in this country less on education than we spend on pari-mutuel betting.

WALLACE: All right...

PERCY: Less on education than we spend on tobacco and liquor. The Russians are spending 12 percent of their gross national product on education, we spend 3 1/2 percent. It's a matter of our participating so that we get the understanding of the problem, and then re-assessing our values and determining how much more it's going to be worth to improve the educational system.

WALLACE: We talk about free private enterprise. Everybody -- I shouldn't say everybody -- a good many people of substance, men and women of substance, have been saying more or less what you have just said here. We need better education. Is it possible... is it not possible that if it were put on a paying basis as free private enterprise in the American tradition that we might not just get better schools?

I think that you will agree that it's not perhaps too outlandish a rule of thumb to say that teachers across the country could have their salaries increased by 50 or 100 percent in order to attract the kind of people we're talking about. We seem unwilling to pay the taxes necessary to do that job; if some free private enterpriser were to take it over, or some group isn't it possible it could be put on a paying basis and a more sensible basis?

PERCY: Well, I have great faith that our communities today are facing up to this problem, and though our progress is much slower than we would like to see it. I do feel that... in my own community -- and this subject is one of great interest to me, with five children -- in my own community, I have seen our own school board evaluating carefully the problem, weighing the consequences of a major building program.

We've already had a special bond issue to drastically increase the salaries being paid to our teachers and I think when that bond issue is completed and passed, we will have one of the highest standards of payment of teachers any¬ place in the country in our village of Kenilworth. This then provides a goal for other communities to shoot towards and as we raise the level of our salaries, we will attract finer and better men and women into the teaching profession. I think this is going to be accomplished, but we must become aware of the problem and do something about it, otherwise, perhaps, a more drastic solution to the problem will have to be found.

WALLACE: As we raise the caliber of our education, are we not going to raise our taxes at one at the same time and does this not, in a sense, drive us more and more, into the area of the welfare state. Does not that 75 percent that you talk about get whittled away until its only 70 or 65 or 60 percent?

PERCY: Well, I think the Hoover Commission showed that the Federal Government could reduce its expenditures by some five billion dollars. If we took this five billon dollars out of un-essential activities being performed by the government, or maybe we should say 'less essential' and move that amount over into education, I think we would accomplish the same thing without increasing our taxes.

But again I say, the best way to increase the revenue to the Government is to increase the output of our country and raise the earnings of our people by encouraging capital investment. And when we do this, we will not only sustain and keep up the rate of growth of this country but also put us in a better position to afford the services that we simply cannot do without in this day and age.

WALLACE: But by encouraging capital investment you are going to have to reform the tax structure somewhat, which will mean that the government will collect less in taxes, and for that reason will be unable to provide some of the very services that we must provide if we are to honor our responsibilities to our people, this is the dilemma in which this particular free society in the United States would seem to be.

PERCY: Well, we are in a dilemma I suppose on many questions, but here is one where you have to have courage and faith of your convictions. Er... You can simply take the extreme and tax business out of existence, er... take entire... tax individuals to the point where we almost are now where there is no incentive to earn more; and when you do that, you're killing the goose that lays the golden egg. What you have to do is reform your tax system in such a way as to encourage us to do the things that we need done as a nation and feel that at the end of the line, by doing the things we feel should be done, you will have increased the well-being of the people and the wealth of the people to the extent that you can afford to provide the kinds of services government must and should provide that cannot be provided in the private sector.

WALLACE: Mr. Percy, I understand that a group of Soviet industrialists visited your Bell & Howell plant just a few days ago to see capitalism and free enterprise at work. There are two things that I would like to ask you. One, as a result of your talks with them and your knowledge of their system, I'd like to know if you see anything worthwhile at all in the Soviet economic system, and I would also like to know their reactions to what they saw at your plant.

PERCY: Er... This visit was one of the exchange visits that American industrialists are making in Russia and the counterparts in their system are making over here, and they visited six companies at the request of the United States State Department. I saw, I think really, we learned far more about them than they learned about us. We questioned them for a day and a half and they wanted to talk about their system, and the amazing thing to me was that they've almost given up the thought of 'to each man according to his need,' in fact the disparity of incomes in Russia is far greater than it is in the United States.

Second, they are constantly resorting to -- they never call it a profit, they call it a socialistic incentive. -- But they are resorting more and more to incentives to get people to do the things that they have simply found force will not get them to do. There's always a way they can get around it, so the incentives in the Russian system today are being borrowed blindly from us but they give us no acknowledgment or credit by them.

I think from their standpoint, they were intensely interested in automation and we sensed from them, that this economy of theirs, and almost everyone we've ever talked to that's been to Russia says that the Russian people as a national goal are going to equal and exceed the production of this country by 1972, so that in the next two seven-year plans they anticipate being equal with us and from then on, go ahead; this a national objective, a zeal, a feeling they have they must beat the United States and they intend to do this, I think, by leap-frogging. They intend to jump over some of the methods that we are now using and go directly into automation. This is about the only thing they were interested in talking about.

WALLACE: Will they be ahead of us, do you think, in automation by 1972?

PERCY: Unless we recognize that we are today in an economic war, Khrushchev himself has said "We declare war upon you, if you'll excuse the expression," he said, "in the field of trade," and they are in everything they are doing, they're attempting to wage war to prove their system is better than ours. Unless we recognize the competition we have and face up to it, and realize that we as people, as individuals, as businessmen, as citizens must somehow use this leisure time of ours, must use the time at work to constantly improve our system in every way we can, we can't be complacent today.

We must recognize that we have a strong enemy who is bound to beat us, unless somehow or other, we find a way to make our system work better, more effective¬ly serve its purpose, government and private sectors, than it has up to this point, when our rate of growth has been slower than we would like to see it.

WALLACE: You feel that it is... that the fact that our rate of growth is slower is due to complacency on the part of the American businessmen?

PERCY: I think we have all been too complacent, we're all too self-satisfied and we must recognize that as a nation we are bucking history. No nation on earth at any time in history, has ever maintained a position of leadership over a period of time. We must find a way to buck history because we know that our system is the right system... we know that freedom of the individual is the end of our society, where any freedom exists in the Soviet system or any countries under their dominion, it is merely a means to further state capitalism, we call it, to exploit people for the ends of the state.

So that it is worthwhile for us to apply ourselves as diligently as we can, to use our time as effectively, to become, aware of the issues, to recognize that education is a continuing process, and in this complex world in which we live today there are not simple answers to the complex problems we face. There are problems we have to wrestle with as a people and apply ourselves, but this country has never lost a battle, a major battle on any front before. If we recognize the problem I'm sure we'll find the answer.

WALLACE: Tell me this, I was going to ask you before, is there anything in the Soviet economic system which you admire, which we might copy?

PERCY: I think the thing they saw in our system that amazed them in our Bell & Howell plant was the... even flow of production, a sense of steady planning. Here we... er... look to them as a planned society and a planned state, and yet in discussions with them, we realized that when all planning stems from the top with all authority resting in one office, the State Planning Commission or whatever it may be, utter chaos exists down below when they are attempting to balance everything out. Er... The only thing I saw was that planning... but planning the way we do it. Let's plan ahead. They do plan ahead. We should do more planning ahead, and I think the Rockefeller Brother studies have shown us what can come as a result of long-term planning.

WALLACE: One final question and we just have about a minute in which to answer it. As you know, Mr. Khrushchev has written to Mr. Eisenhower looking to an expansion of Soviet-American trade. I'd like to know your view about that, and also I'd like to know your view about trade with Red China by the United States?

PERCY: I think that Mr. Khrushchev, as he has in his previous letters, is merely using us as a means of propaganda. I actually don't believe that there, would be a great deal of trade between Russia, they have very little that we would want to buy and I don't think that they would want their people to have, or would be willing to spend money on consumer products.

WALLACE: But in principle?

PERCY: In principle I'd say we should assess this and look at it realistically, and I would tend to think it would be a question that might well be one that we should face up to and say, except in strategic materials when we certainly would not trade, in certain other areas, "We will trade with you," and just let's see how much they accept of our products and give to their people.

WALLACE: The same with Red China?

PERCY: Same with Red China. I doubt if there'd be very much trade if we did open the door.

WALLACE: Well, Mr. Percy, I surely thank you for coming to New York to spend this half-hour with us and I wish you Godspeed, sir.

PERCY: Thank you.

WALLACE: Most Americans accept the theory that free private enterprise is a major bulwark of our free society. It would therefore seem relevant to ask: Does not any modification of the freedom of enterprise, modify the freedom of our society as a whole? And if it does, is it necessarily bad? A rundown on next week's interview in just a moment. Till next week, Mike Wallace. Good night.

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