Business people should stand up for themselves
HENRY HAZLITT, one of the great popularizes of free-market thinking,
once said that good ideas have to be relearned in every generation. This is
certainly true of good ideas about business. A generation ago Margaret
Thatcher and Ronald Reagan did an excellent job of making the case in
favour of business. Today it looks as though the case needs to be made all
It is hardly surprising that business has fallen from grace in recent years. The credit crunch almost plunged the world into depression. The new century began with the implosion of Enron and other prominent firms. Some bosses pay themselves like princes while preaching austerity to their workers. Business titans who once graced the covers of magazines have been hauled before congressional committees or carted off to prison.
Business people have been at pains to point out that it is unfair to judge
all of their kind by the misdeeds of a few. The credit crunch was the
handiwork of bankers (who lent too much money) and policymakers (who
fooled themselves into thinking that they had abolished boom and bust).
Corporate criminals like WorldCom's Bernie Ebbers and Tyco's Denis
Kozlowski were imprisoned for their crimes. Avaricious bosses like Angelo
Mozilo, who pocketed more than $550m during his inglorious reign at
Countrywide, are exceptions. The average American boss is actually paid
less today than he was in 2000.
This is all true enough but hardly sets the blood racing. More ambitious
defenders of business have advanced two arguments. The first is that
many firms are devoted to good works. They routinely trumpet their
passionate commitment not just to their various stakeholders (such as
workers and suppliers) but to the planet at large. Timberland puts "green
index" labels on all its shoes. GlaxoSmithKline makes HIV drugs available
at cost to millions of Africans. Starbucks buys lots of Fairtrade coffee.
The second argument is more hard-headed: those businesses have done
more than any other institutions to advance prosperity, turning the
luxuries of the rich, such as cars a century ago and computers today, into
goods for the masses. General Electric's aircraft engines transport 660m
people a year and its imaging machines scan 230m patients. Wal-Mart's
"everyday low prices" save Americans at least $50 billion a year.
The problem with the first argument is that it smacks of appeasement.
Advocates of corporate social responsibility suggest that business has
something to apologise for, and thus encourage its critics to find ever
more to complain about. Crocodiles never go away if you feed them. The
problem with the second argument is that it does not go far enough. It
focuses exclusively on material well-being, and so fails to engage with
people's moral qualms about business.
This is doubly regrettable. It is regrettable because it has allowed critics of
business to dominate the discussion of corporate morality. For all too
many people it is now taken as a given that companies promote greed,
crush creativity and monopolize power. And it is regrettable because it has
deprived the business world of three rather better arguments in its
The first is that business is a remarkable exercise in co-operation. For all
the talk of competition "red in tooth and claw", companies in fact depend
on persuading large numbers of people—workers and bosses, shareholders
and suppliers—to work together to a common end. This involves getting
lots of strangers to trust each other. It also increasingly involves stretching
that trust across borders and cultures. Apple's iPod is not just a miracle of
design. It is also a miracle of co-operation, teaming Californian designers
with Chinese manufacturers and salespeople in all corners of the earth. It
is worth remembering that the word "company" is derived from the Latin
words "cum" and "pane"—meaning "breaking bread together".
Another rejoinder is that business is an exercise in creativity. Business
people do not just invent clever products that solve nagging problems,
from phones that can link fishermen in India with nearby markets to
devices that can provide insulin to diabetics without painful injections.
They also create organizations that manufacture these products and then
distribute them about the world. Nandan Nilekani, one of the founders of
Infosys, put the case for business as well as anyone when he said that the
computer-services giant's greatest achievement was not its $2 billion in
annual revenue but the fact that it had taught his fellow Indians to
"redefine the possible".
Enfranchising, not enslaving
A third defence is that business helps maintain political pluralism. Anticapitalists
are fond of arguing that companies account for half of the
world's 100 biggest economies. But this argument not only depends on the
abuse of statistics—comparing corporate turnover with GDP (which
measures value added, not sales). It also rests on ignorance of the
pressures of business life.
Companies have a difficult enough job staying alive, let alone engaging in
a "silent takeover" of the state. Only 202 of the 500 biggest companies in
America in 1980 were still in existence 20 years later. Anti-capitalists
actually have it upside down. Companies actually prevent each other from
gaining too much power, and also act as a check on the power of
governments that would otherwise be running the economy. The
proportion of the world's governments that can reasonably be called
democratic has increased from 40% in 1980, when the pro-business
revolution began, to more than 60% today.
Most hard-headed business people are no doubt reluctant to make these
arguments. They are more concerned with balancing their books than with
engaging in worthy debates about freedom and democracy. But they
would do well to become a bit less reticent: the price of silence will be an
ever more hostile public and ever more overbearing government.