No, Albert

Albert replied to my previous post with a determined refutation of the proposition that the purpose of a business is to make money. It should, he says, be concerned with the welfare of all those around it.

Albert is so wrong that it hurts; he has made the classic mistake of the left, one based on both a misunderstanding of the purpose of a corporate entity and a failure to distinguish between the company and the people within it. I have therefore decided to devote an entire post to his comment and my response to it.

Let us start with a seemingly irrelevant example, that of a kitchen knife. To make a good kitchen knife, we want something that is very good at cutting through food, including both meat and vegetables. This will obviously create something that could also be used for harm, if the user so decides; that which makes the knife efficient at cutting lamb chops also makes it efficient at cutting throats. But the solution is not to make the knife less good at cutting throats, because that also impinges on its ability to cut lamb chops and is detrimental to all of us - because we cannot cook our dinner. The correct solution is to require appropriate moral choices of those who wield the knife, i.e. to use it for good not for bad. We do not design the knife with a view to making it unable to cut throats, nor do we criticise the designer for making a knife that is good at cutting lamb chops.

The same applies to a corporation or business (I shall use the two interchangeably). The purpose of a business is to make money, and it should be good at doing that; it should be designed to do that. If it is used in an inappropriate manner, then that reflects on the morality of those who choose to use it in that way. The correct response is to censure them, not hobble the nature of businesses in general so that can never happen again.

Albert quotes no less than a previous Pope to say that I am wrong. Sadly, he mis-applies the quote. His Holiness refers to a “community of persons” within the business who must endeavour to satisfy their needs taking into account moral questions. Thus, the quote in fact affirms my view that the moral choices apply to the people, but does not imply that we should blunt the knife in order to remove the need for those people to think about the choices facing them. Anyway, I can see Albert’s quote and raise him with one by Milton Friedman:

The business of business is business

and, of course, the famous comment by the only decent economic mind ever to come from Kirkaldy, the moral philosopher Adam Smith:

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.

This, then, is the fundamental reason why Albert’s approach is wrong; he seeks to impose moral duties on an amoral thing, viz the corporation. Moral codes apply to people, and are the subject of valid differences of opinion between different people. Albert might think it immoral to deny maternity leave to some employees, for example; I might think it positively immoral to ask for maternity leave so soon after arriving in a new job that the pregnancy must have existed before the employment commenced. In that regard we disagree, although I suspect that Albert’s world view does not allow for disagreement with the authorities on moral matters.

But the point is deeper than a mere lack of clarity as to where moral boundaries lie; it is that businesses are (in a stable economy) subject to a different and entirely self-policing, self-correcting form of control over their actions. Put simply, there are two reasons why I am not rude to my PA. The first is that I (personally) consider that it would be wrong to do so. This is a moral choice of my own; others may disagree. The second reason, the more important reason of the two, is that if I do not treat her politely then she will probably leave. That would harm my business. Indeed, if I were to carry on doing that, I would have no staff & hence no business. Note that this reason applies to all businesses, regardless of the moral preferences of its directors.

(Before you query whether this actually works, I can confirm that it indeed does; I have seen a firm slowly die as a result of the rudeness of its owner, as staff and suppliers slowly walked away)

This works because those involved in the game are all free agents. My PA chooses freely to work for me. I choose to employ her. Both of us can change her mind; she can do so freely although there are monumental hurdles in place for me to clear should I do so. The reason why this form of restraint is better is rooted in this freedom, because it works at an individual level and therefore sets the moral boundary at precisely the level that is acceptable to the individual.

So, if a hypothetical boss found that he personally worked far better if he was in a permanent state of irritation, in which he was likely to be rude and difficult to those around him, then he (we could call him “Sirallen”, for example) would effectively limit his choice of staff to those willing to put up with it. The effect of a more limited supply is that the price will rise; thus those staff willing to put up with Sirallen would be paid accordingly. Those that did not like being treated in that way could choose to work for someone else. For Sirallen, the additional cost might be justified by his increased effectiveness; he would be free to decide whether it was or not. Of course, when the time comes and Sirallen reaches the pearly gates, he will still have to answer for the choices that he made, to whatever deity he finds waiting there for him.

But if you impose an externally decided morality on a business, as Albert wishes to, you either (i) blunt its efficiency as a business by asking it to do things other than those which are demanded by natural competition or (ii) achieve nothing but the imposition of compliance costs by asking it to do something it was going to do anyway. At the same time, you deny thick-skinned people the chance to choose to be paid more than would otherwise be the case.

This is, at heart, the difference between the right and the left. The right seeks to provide a stable and competitive economy in which people can protect themselves from unpleasant working conditions by simply leaving and finding a new job elsewhere. The left seeks to impose ever heavier and more detailed layers of regulation to make sure that people never need to do so, and thereby degrade that economy - eroding the freedom to leave, and creating conditions where still further regulations become necessary.

Albert, running a business is not like choosing a pleasant sunny meadow to stroll through. It is like running through the meadow knowing that anytime you stop running, the bull will catch up with you. You can look at a sleek, fit runner making his way across the field and be impressed by the profitable distance he is maintaining in front of the bull. But that is no reason to say “Those nice running shoes he has; we could put them to good use. Make him wear some old hobnailed boots instead – he’ll be fine”.