The Politics of Business Responsibility

With the possible election in November of Mitt Romney as America's first “businessman-president” since Herbert Hoover in 1928, we're forced to ask a philosophical question that comes around regularly on the guitar: Beyond its imperative to make profits, does business have any moral responsibility to society?

Republicans, our traditional zealots for unregulated capitalism, usually inject into this discussion the 18th century economist, Adam Smith, who depicted every good merchant's fierce pursuit of profit as an “invisible hand” that naturally redounds to society's benefit. To quote Smith: “By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.”

If this were all Smith had written in his masterwork, The Wealth of Nations (which most Republicans have never read — but I have!), he'd remain the ideological linchpin for the conservative movement's current breed of social Darwinism. The trouble is that Smith also favored the sort of “compassion” that tends to creep-out winner-take-all capitalists like Romney. Smith, for example, not only advocated the minimum wage; he was the first to suggest a “living wage” that might lift all laborers to genuine prosperity.

Smith thought wealth earned by labor was virtuous, but he frowned on guys (like Romney) who make millions by dabbling and gambling in financial markets. He believed that great wealth concentrated in private property or in big banks was a menace to society, and he was a pioneering fan of progressive taxation. “It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion,” Smith said.

Talk like this positions Smith way left of Romney — which is why his running-mate choice, Paul Ryan, was a brilliant stroke. It not only brought youth and the Tea Party into Romney's camp, it interjected an economic philosopher more appropriate to current conservatism.

Enter Ayn Rand, stage far right (holding Paul Ryan's hand).

For 25 years (until a politically driven recantation in April), Ryan was a slavish Rand disciple, quoting her, handing out her books, and declaring that America was locked in battle between “individualism [yay!] and collectivism [boo!].”

Rand — who died before Ryan could seek her out and actually genuflect in her presence — was a Russian atheist whose “heroic” vision owed debts to, among other megalomaniac wet dreams, the Norse gods and Valkyries, Ivan the Terrible, and Friedrich Nietzsche. This sort of testosterone intellectualism has long rendered Rand deeply seductive to sheltered, wealthy, snow-white reactionaries on backwater campuses like Miami of Ohio (Ryan's alma mater).

While Smith counseled empathy — even fairness — for the working poor, Ayn Rand's capitalism is pure, crystalline, merciless. She regarded ordinary people as a vast cesspool. She would spare the poor and jobless from an industrial-scale system of extermination only because they were, simply, unworthy of notice. Quote Rand: “One can't love man without hating most of the creatures who pretend to bear his name.”

Adam Smith, by contrast, was a sissy. He said: “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.”

Perhaps the big difference between Smith and Rand is that Smith grounded his ideas in reality. Rand, a Hollywood screenwriter, fashioned fictional worlds, built on a Cecil B. DeMille scale, manned by solitary, misunderstood giants who waged lonesome battle against armies of jealous drones, vengeful dwarfs, and parasites. In Rand's five-pound pulp novels, she spun grand fables, erected ivory pulpits, and unspooled epic paeans to the divinity of Self (while, back in Janesville, one deeply gullible teenage boy, looking around at the unwashed shrubs in study hall, wept silent tears of inspiration).

Rand's world in The Fountainhead featured hero-architect Howard Roark, inventor of modernism. He is rejected by a hidebound Establishment that perpetuates — by violence, if necessary — the endless imitation of a neo-classical past. We know this is a cool fictional premise because, by time of The Fountainhead 's release in 1943, a real-life architect named Frank Lloyd Wright (after his early battles against tradition) had been designing modernist buildings for an eager Establishment for some 50 years. Rand's heroic iconoclast was an outdated outcast in a tendentious dystopia.

Like Howard Roark, both Romney and Ryan seem the brainchildren of a pop philosopher whose magically simple measure of human superiority is rooted in a sort of divine materialism. In Romney's and Ryan's Randworld, virtue and wealth are two sides of the same shiny Krugerrand.

There's just one hitch. Rand, who was actually alive during the Hoover regime, offers no guidance on the question of whether business guys, as Mitt asserts, make better presidents. Rand found democracy — the scum of the earth electing their leaders — disgusting. She didn't vote; nor did she care whether the president was a businessman or a porn star. Nor would she have deigned to admit into her salon the corporate lobbyists and casino billionaires who are bankrolling campaigns.

Adam Smith, on the other hand, had a position: “The government of an exclusive company of merchants is, perhaps, the worst of all governments for any country whatever.”

6 comments on “The Politics of Business Responsibility

  1. maxmin
    August 23, 2012

    Huh yeah, as I recalled that Herbert Hoover is associated with that notorius Great Depression in 1930s.  With the possible election of Romney, I'll bet we'll have another Great Depression incoming.  And BTW, the Fed is ready to flood the market with QE3 soon.

  2. SemiMike
    August 23, 2012

    The Jackson Hole Symposium will be worth some attention, as Mario Draghi follows Ben Bernecke and they may have strong interaction in effect of their choices for Eurozone and US.  if the link works covers this event from one viewpoint. 

    From another economic viewpoint,

    Hope the links work.

    I loved the final paragraph of he main aricle, re Adam Smith and Ayn Rand.

    I refer to Ryan and Greenspan as “The Spawn of Ayn Rand” to my buddies.

    We just had to go back and re-read Atlas Shrugged..but could not finish it this time…last time was mandatory.

    August 24, 2012

    I really enjoyed your article and found it very thought provoking.  I am more of a Smith man myself.

  4. William K.
    August 25, 2012

    I found Ayn Rand to be entertaining in the manner of good fantasy fiction. Her message is not applicable in an area populated by humans, so her writing should not be considered as other than entertaining fantasy. Enough about her.

    The challenge that exists with business can best be explained by quoting one of my co-workers, who declares that “the sole responsibility of a board of directors is to maximize the profit for the shareholders”. The intrinsic flaw in that theory is that it never mentions the customers of the business, much less the employees. Why would it be that there is no responsibility towards those whose consumption of the product is the sole means of gain for the business? And is it possible that at some point the business should avoid “consuming” it's employees? After all, some of them may also be customers, at least potentially.

    Perhaps if it were to be assumed that the obligation of a business was to provide the customers with the value of product that they paid for, things might be different. Today I see some businesses that appear to be doing that, but they are not a majority. 

    It is simply not possible to legislate morality, as all of the attempts in the past have proven. On top of that, there are certainly a bunch of different understandings as to what is “moral”. Is being completely honest adequate? Or should business support the nanny state, supporting nearly everybody? The problem with that is that with support comes control, at least, if things are fair. So there would be a loss of freedom associated with it.

    Probably the best way to have business behave in a more responsible and decent manner would be to take those individuals and companies that created this last financial disaster that has hurt our nation so badly, and lock them away in some third -world jail and forget about letting them out. Example can be a very effective teacher.

  5. bolaji ojo
    August 26, 2012

    William K., Unfortunately, this example that you talked about is the one thing we are unlikely to get. Companies don't pay any huge price for the misadventures they cause. Instead, they either get a slap on the wrist or even worse, get bailed out, in the belief that they are too “big to fail.”

    The same applies to the environment. The idea that a company will work in any way against its own interest to protect the environment is silly. It won't happen. But if it is in the company's interest to protect the environment then they'll do it most vigorously. If we can't legislate interest, we can at least make compliance sound beneficial through legislation.

  6. William K.
    August 26, 2012

    It is indded correct about adjusting the costs.

    IF the penalty for an oil company having a blowout preventer valve system fail were a whole lot more than the cost of testing and replacing a blowout preventer, then possibly another disaster like the last one could be prevented. Of course, my idea would be to simply never allow that company, or it's dirivative company, to ever drill in the golf again, with no recourse or consideration of economic damage. In fact, a penalty aimed at the shareholders profit would probably be the very best way to assure that adequate precautions were taken.

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