All Commentary
Thursday, August 1, 1974

The Business of Undermining Business


Ms. Zupan has majored in psychology and philosophy and hopes to do graduate work in economics or law, or both. She is editorial assistant for book reviews in Reason magazine.

In the April, 1974, issue of The Freeman, Roger Donway considers and dismisses Irving Kristol’s contention that since the free market must allow anti-market views it, so to speak, “contains the seeds of its own destruction.” A similar but far more subtle danger to the free market pervades our society.

The attitude to which I refer is epitomized starkly in a commercial sponsored by the American Savings and Loan Association: “This bank is for the business side of me and this bank is for the human side of me.” Perhaps this seems harmless enough; after all, the savings banks are just trying to improve their “image” and to emphasize that their goal is really to be humane in the popular sense of that word — to help humanity. But there is a widespread practice here, merely illustrated in this advertisement, which deals two blows at the very roots of free enterprise.

The first danger is a separation between the business and human functions of certain individuals, and thus between business enterprises and other human activities. The second danger lies in the notion that the way to sell a product at a profit is to promulgate the idea that the business is engaged in a humanitarian program of improving the general good. These two ideas not only are contrary to the best interests of both producer and consumer, but also are at cross purposes with each other. For the first leads to putting business outside the moral realm, and the second to an impossible conception of business morality.

The division of human beings into “businessmen” and “others,” or the separation of the businessman’s role as such from his human (all other) capacities, supports the popular myth that those engaged in producing and selling goods are authorized by “the system” to do anything in order to make a profit. Thus, free enterprise, its critics say, allows for and even promotes, dishonesty, exploitation, theft (of trade secrets, for example), irresponsibility, stinginess, or whatever, as long as making a buck is the result. This is the force of Irving Kristol’s dismay with the moral philosophy underlying the free enterprise system. If he could profit from it, there is, according to Kristol, no moral restraint which could keep the entrepreneur from investing in anti-market literature.

But this is not so. Donway ably pointed out one problem with this view, and I would like to exhibit another. Any individual engaged in the various facets of financing, planning, producing, and selling goods and services is — cannot be other than — a human being. What follows from this is that the general moral principles which are valid for all human beings are equally valid for businessmen. Of course, different ones may apply; for instance, the businessman may never have occasion to exhibit courage as might a soldier, nor may the steel worker have occasion to practice the virtue of truth in advertising. As long as there is human action, all human virtues are valid, however relevant to differing circumstances, occupations, and the like.

The Role of the Law

I want to point out that this implication of business action as human action does not further imply that “there ought to be a law.” That is, the moral uprightness of businessmen ought not be the subject of special legislation, any more than there should be special laws concerning how you behave during your leisure time, in social interaction, toward the ones you love, and so on. To enact such laws is to destroy freedom, to undermine the foundation of morality.

The function of law is not to force morality — a contradiction —but to protect people’s rights. To put it another way, the law ought to ensure the conditions for free enterprise by making explicit each person’s sphere of action and by assuring proper recourse for harm done. Thus, with respect to businessmen, the law should allow each to produce whatever he likes, but not allow him to force people to buy or use his product. The law, then, would concern itself with such matters as enforcement of contracts, compensation for injury due to faulty labeling, violation of property rights (including, conceivably, air and water pollution); but it would not engage in forcing producers to solve the ills of society. (A pernicious example of the latter is the recent legislation requiring Detroit auto makers to install pollution control devices, rather than holding the consumer accountable for damages resulting from his activities.)

Perhaps this attempted separation of “business” and “human” can be traced to the popularity of sociological theories which explain all human action in terms of diverse roles. Thus, while at the office one part is played, at home or at a party another, and never the twain shall meet. Although this may help us understand why the separation is attempted, it does not excuse it or make it any less harmful. The perpetuation of such a view plays right into the hands of those critics of free enterprise who believe that the latter depends upon and promotes immoral or, at best, amoral behavior on the part of those involved.

The second ruinous attitude commonly espoused and promoted by businessmen these days is that their reason for existence, and their value, derives from their devising, investing in, producing, and selling products in the interest of helping humanity. This is the utilitarian argument: since your being engaged in making a profit will also benefit most people by providing them with goods and services, you are allowed to do so; as a matter of fact, it is downright virtuous for you to do so. Whether or not making a profit ought to be tolerated or condoned, per se, it is accepted as a necessary function of increasing the general good.

Guilty Until Proven Innocent!

The danger lies in the pay off, which we witness today on all fronts. For if profits are not justifiable, but only tolerable, and the proper goal for everyone, including businesses, is to ensure and work for the good of everyone else, then profits may be denounced and expropriated when the greater good would seem to call for that measure. So when prices get too high, controls on profits can be justified; in the “energy crisis” the “obvious” guilt of the oil companies lies in their having made profits; IBM must prove to the courts its innocence in actions in relation to competitors because it has shown a profit. Thus, a crucial maxim of the American legal system has been reversed when it comes to business enterprises: guilty until proven innocent.

There is, however, a justification of profit-making which does not rest on such a notion of the common good. It is as right for the entrepreneur, the manufacturer, the retailer, and any others involved in producing and selling goods and services to make a profit as it is for the members of the “working class” to hire themselves out for wages, for writers to charge for their services, for people to buy homes, and so forth. In short, the justification of profit is simply the right to private property, the right of every human being in virtue of being human. Survival as a human being (that is, as a rational, morally accountable agent) requires that each exist in some place and procure some things; the place and the things we designate by the term property. It is right and good that human beings act so as to secure their own survival; and this is a fundamental moral justification of the right to property.

Of course, there are many ramifications and details to be covered before one would have in hand a comprehensive argument for the right to private property. The point here is that such an argument exists; it does not rely on any “happiness of society” justification of free enterprise. The right of the individual is justification enough. I am not denying that the common good will be served by a free economic system; what I want to point out is that the common good cannot serve as an adequate justification, since it leaves the door open to serious encroachments which undercut the very foundation of that system.

Everyone Loses

Since the idea that profits take away from the common good is so prevalent today, it might be argued that the businessman, just in order to survive, must create an image of being in business to help all. In the short run, perhaps, there is not much to say to this argument except that it is a proliferation of unrealities. But in the long run, reiteration and promotion of this attitude can only work to the detriment of the political framework in which business can flourish. It would thus work against the best interests not only of business, but also of consumers.

Perhaps I seem unduly harsh on American businessmen; I recognize, however, that to a large extent they have merely acted to accommodate themselves to the overall climate. They are unloved by many who benefit from their existence; they have been badgered as no other segment of society. Thus, during the recent energy scare, the press made (or conveyed the public’s) accusations against the oil companies, but offered little opportunity for rebuttal. The oil companies were obliged to pay for advertisements in order to get a word in edgewise, and were promptly maligned for doing so. Moreover, since they did this defensively, to protect their interest, they were dismissed as acting from ulterior, “selfish” motives. Nevertheless, it clearly cannot help for businesses to go along with all this. The long-run consequences are devastating; no good can come of further miseducating the public — or public officials.

Moreover, businessmen may be properly criticized for their frequent complicity in chipping away at the foundation of free enterprise. I have in mind here calling on government for tax breaks, price supports, subsidies, licensing to prevent entry of competition, and so on. Many seem not to realize the inconsistencies involved; but for every measure instituted by government to “help” some industry, a comparable amount of freedom is lost. The farmers complained bitterly when price controls were set on beef; but before the year was out many were eagerly supporting the government’s buying of “surplus” beef in order to sustain prices.

So, the problem is not simple; it is not just consumers or the intelligentsia or the press, but businessmen themselves who fail to understand the nature of free enterprise. Needed is a return to the fundamental principles of the free market, and this is unlikely to happen without a consistent effort on the part of businessmen to practice and preach those principles.

It should be noted in conclusion that this is a moral imperative. Since it is good and right for them to be free to work for profit, to reap the benefits of their own ingenuity, labor, risk-taking, then it is wrong for them to rely on the government (that is, on the taxpayer) to share the burden. To do so is not only wrong, but will lead to the demise of the system which leaves each individual free to work for his own diverse ends (which may, of course, include cooperative ventures). And this implies a further moral imperative: it is right for all, businessmen included, to consistently act so as to preserve that system. And it is wrong to call on government for handouts, just as it is wrong to promote business by catering to prevailing sentiments and myths. How can the businessman claim to be so unjustly accused if he persists in tightening the noose around his own neck?