Tuesday, June 20, 2006

Understanding business

A short comment in the Times today by Madsen Pirie which addresses many of the common mis-perceptions of business and its role. At the heart of the environmentalist's clamour for "corporate social responsibility"” is a sub-text that suggests that corporations left to themselves are not socially responsible.

Fundamentally those who advocate this view are anti-capitalist. They equate business activity with greed. Indeed, because they inhabit a world cushioned from reality by government largesse, they often promote a world where everyone's activity is similarly encompassed within in the public sector. A world free of the perceived evils of profit-making. As Pirie notes "we have seen this world, those of us who remember it. It was called communism and it reduced the human condition to squalor and servitude".

Business is an easy target for mis-representation and vilification. Much of it seems faceless and anonymous. Often it lacks direct personal connection. Moreover, those who argue against capitalism often do so with a dislike born from a misunderstanding of how it works: "There is a primitive and naive view that one person can only get rich at someone else'’s expense, and that if a business is making money, someone else must be losing it".

Most critics have never been in business for themselves but they do have lots of theories about business and the capitalist system. Mostly they seem to suggest that capitalism, business, growth, globalization and/or Americanism are synonymous and represent a global '“zero sum game'” that act only to benefit the strong and can only survive with the exploitation of the weak. This fallacy completely misses the point, which is that business activity creates wealth instead of just redistributing it. As Churchill once noted, there are lots of economic systems for the re-distribution of wealth, thus far we have only found one (capitalism) that consistently generates wealth.

And today, as throughout history, "it is business, not pious posturing, that is making poverty history".

And today, as throughtout history, it is still easier to teach people how to blame the system, abuse the system and partake in controlling the system, than it is to be individually responsible as an entrepreneur for the expansion of that economic system.