The Reluctant Academics of Capitalism.

I. The State of Business--How and Why?

Over the past two years, the news of Cendant Corporation's creative earnings, Archer Daniels Midland's price fixing, Bankers Trust's leveraged derivatives, and Long-Term Capital's high-risk bets with others' funds have dominated the business press. The softer side of Sears Roebuck succumbed to its swarthy side when the tale of its disregard for bankruptcy laws, debtors' rights, and creditor priorities emerged along with a $63 million fine, the largest in the history of U.S. bankruptcy law. Rite-Aid and Wal-Mart have been profiled for their peculiar charge-back policies that leave their suppliers confused and temporarily or permanently underpaid.

Arthur Levitt, Jr., the chairman of the Securities Exchange Commission, has made market ethics and trust his goal, calling for more transparent financial statements and less earnings management. His policy speeches have also focused on investment managers and the conflicts that soft dollar benefits create.

Just the magnitude of the dollars and number of missteps require a close examination of the question: what's going on in business? Misconduct in business gallops along at a Triple Crown pace while business academicians stand on the sidelines wringing their hands and clucking their tongues in exasperation.

The notion of business's inherent evil has been an ongoing academic theme. Some years back, the dean called me in and declared that we should begin teaching ethics in our college of business. I challenged his wisdom, for we had a philosophy department using its resources to handle the job. But the dean explained the problem: "We're losing majors. They come back from their ethics course believing capitalism is a tool of the devil and they're changing their majors to liberal arts."

Business in the academy has never quite overcome its poor reputation. That liberal arts schools regarded business with disdain was not surprising. Socialists spring eternal from the bowels of the queen mother of the academy. But, business schools were able to chug along, turning out successful majors, bringing in private dollars and even attracting attention through research in economics and finance with cross-over scholarship in psychology and sociology by the management folks. Like the uncle with white shoes and a powder blue plaid sports jacket, business schools have been tolerated as tacky but harmless. They largely avoided controversy during the era when liberal arts and education colleges underwent their transformation from seats of learning to factories of indoctrination in appropriate politics and inalienable rights. These include, of course, the right to women's studies programs, an entitlement that the founding fathers somehow forgot to list.

However, the transformation of the bulk of college campuses from seats of intellectual exploration to factories of dogma was insufficient. And it was naive to think that what happened on the rest of the campus would not insinuate itself into the hearts and minds of business students. Indeed, the long tentacles of multiculturalism and androgyny have found their way into debit, credit, risk, and macroeconomics. There is an ongoing transformation of the business curriculum with the full participation and blessing of business students, who are well versed in all the dicta from sexism to socialism.