For the United States, its economy and its political institutions, the present is a time of challenge in which long cherished beliefs are under attack, the outcome of which may herald a historic turning point. I am increasingly aware of what the prospective changes portend for business, and no less anxious that business may fail to seize upon the opportunity offered.
The last recasting of economic thought was not surprisingly an outgrowth of the Great Depression. Keynesian economics, with its emphasis on demand, largely replaced classical economics as a guide to government economic policy. Starting with the New Deal, government -- particularly the federal government -- assumed an ever larger responsibility for fulfilling social and economic expectations.
Until the last few years, things worked reasonably well - productivity went up; unemployment and inflation remained at tolerable levels; and the average US citizen enjoyed a rising standard of living. Now all that is changed, and a new word ''stagflation'' has been coined to describe our current ailment. Economic problems, coupled with voter resentment against excessive government regulation and high taxes, has led to a changed political climate.
Candidate Ronald Reagan capitalized on this trend, and was elected on a platform calling for less government and greater freedom for business. Classical economic thought is back in vogue, with great faith expressed in Adam Smith's ''laissez faire'' and the ''magic of the marketplace.'' All this is heady fare indeed for American business, which for decades has been in the proverbial doghouse. Unfortunately, however, today's problems are simply too complex to yield to a single ideological solution formulated 200 years ago. If business mistakenly believes that the clock can be turned back, it will fail to make the significant gains that are possible in the current environment. . . .
Back in 1969, when I joined Stanford, the attitude of university students throughout the country was generally hostile toward business. Students enrolled in business schools were often viewed by the general student body as having ''sold out'' to ''capitalistic'' interests.
All that is now dramatically changed. Business courses are the biggest growth industry on campus. The number of MBA graduates has increased from 19,400 in 1969 to 54,000 last year, and applicants bring impressive credentials. Obtaining a good job has moved high up on the priority list.
This pro-business attitude by students has been reinforced by a similar change in attitude of the overall university community. As universities themselves have become victims of excessive government regulation, they have become more sympathetic to the complaints of businessmen on this score.
Of greater political importance is the change in the attitude of the general public toward business. Beginning with the New Deal, most people tended to look to big government for a solution to problems. . . .
A significant change in attitude of one more important group should be mentioned - that of organized labor. In the automobile industry, to take one example with which I am very familiar, the United Auto Workers recognize that current high wages are one cause of record unemployment. . . .
In addition to labor, business is now also presented with an opportunity to establish a new relationship with government. The ball is in the hands of business.
I suggest. . . .a clear articulation of the respective roles of business and government, coupled with an understanding of how they should interact. The basic role of business is to produce private goods and services for a profit. Left to its own devices, it does so in a very efficient manner. As a matter of fact, business has been so successful in producing private goods in America that we have been able to shift productive resources to what might be called ''public goods'' - such as safety, clean air and water. . . .
Perhaps here we should study the Japanese experience, in which the Ministry of International Trade and Industry (MITI) provides the means to establish a coordinated industrial and international trade policy. Based on discussions between political and business leaders, a consensus is reached which allows long-range planning to proceed, firm in the knowledge that ground rules will not suddenly be changed. Without attempting to dictate to industry or to eliminate the advantages of free competition, efforts are directed at creating an external environment in which individual companies can pursue successful long-run strategies. . . .