The Usefulness Of Political Blather

Republicans-vs-DemocratsIt’s election year and we are once again inundated with political blather. But all is not lost. Even the most tiresome political attacks can invite interesting questions and produce insights. Take, for example, the suggestion in many political ads that business, especially big business, is immoral and profit is therefore sinful. Following are some useful questions. Note that they are philosophical rather than political—that is, about ideas rather than individuals or parties.

Why do people start businesses? For any number of reasons: to be their own boss; to fulfill a dream; to gain security for themselves and their families; to bring a creative idea to fruition; or simply to prove they are not as inept as some of their relatives believe. Some reasons are practical, others idealistic, a few noble, but all are legitimate as long as the business is not designed to harm others. (Starting a Ponzi scheme or an assassination service would not pass the test.)

How does a business succeed? Luck is often a factor, but much more important is hard work and a proper focus. Generally speaking, that focus is on making a better product or offering a better service than one’s competitors and publicizing it effectively. Success is increased by improving products or services or adding new ones. The key to both initial and continuing success is responsiveness to consumers’ wants and needs.

Why do some businesses fail? One reason is that the quality of their products or services falls below that of their competitors. Another is that their production costs—including workers’ salaries and benefits, raw materials, transportation, advertising, and so on—are more than the market will bear. This bloated condition is caused by low worker productivity or other forms of inefficiency. When the situation becomes serious, the business goes into bankruptcy or is taken over by outside investors who believe they can restore it to solvency.

So far, the questions have been relatively easy to answer. With those answers providing context, let’s turn to more difficult questions.

Is profit immoral?  The class-warfare mood of the time suggests it is. But that doesn’t make sense. We might as well say that running a business is immoral, for the very point of having a business is to make a profit. (The alternative, not making a profit, will kill the business.) Should we say, instead, “profit is OK, but not BIG profit”? That would mean success makes a business immoral. Let’s test that idea in a couple of familiar cases.

  • In 1954 McDonald’s was a small, popular hamburger restaurant serving the residents of San Bernardino, CA. Today it serves over 58 million customers in 119 countries. (The company stopped counting hamburgers sold when the number reached 100 billion in 1994.)
  • Since it produced its first computer in 1976, Apple has grown into one of the most successful and profitable businesses in history. Now when it announces a new product—iMac, iPod, iPad—people around the world form lines to be among the first to own it.

Would it make sense to say that McDonald’s was moral until it served a certain number of burgers, say a billion, but immoral thereafter? Or that Apple was moral as long as it produced computers, but became immoral the moment it turned to other products? That would not merely be silly but absurd because as those companies became more successful, they not only made more profit—they also created more jobs and expanded service to customers. So level of profit is not a measure of morality.

Is exporting jobs immoral? Some people argue that American companies have an obligation to keep jobs here. This is usually one-way reasoning. For example, when Toyota began producing cars in this country with American labor, no one accused them of violating their obligation to Japan. In reality, companies have as much right to move to another country as they have to move to another state. There is no moral offense in doing so. (The negative feelings people may have about a company moving do not constitute a moral argument.)

Is paying low wages to foreign workers immoral? Instead of paying American workers $18 an hour, employers who export jobs may pay Third World workers $18 a week for the same work. Though that practice may seem to take advantage of foreign workers, in many cases it does not. If the workers previously earned $6 a week, the new job has tripled their wages, dramatically increased their families’ standard of living, and helped their country’s economy. And if the workers had no job at all before, their gain would be even greater.

Is venture capitalism immoral? Venture capitalism is a form of business in which individuals or groups provide funds and ideas to help fledgling companies grow and ailing companies recover. Opponents of venture capitalism have coined the term “vulture capitalism” to create the image of investors feasting on a company’s dead carcass. The analogy is unfair because vultures (the birds) never restore their “clients” to health, but venture capitalists do. In fact, venture capitalists profit most when their clients prosper. And the best venture capitalists do an outstanding job of creating such prosperity.

This brief discussion does not deny that unethical behavior exists in business or that profit can be excessive. Lots of examples of both problems could be cited, from hazardous, unhealthful working conditions and child labor in Third World countries to price fixing and obscenely large bonuses in our own country, and all would be interesting topics for a different discussion. The argument here is that saying business is immoral and profit is sinful at best oversimplifies the matter and at worst blatantly distorts reality. Moreover, making such an assertion hinders both genuine understanding and meaningful problem solving.

Copyright © 2012 by Vincent Ryan Ruggiero. All rights reserved