Economic Morality

Professor Bainbridge makes a statement:

The Hill:

Businesses have a responsibility, too,” said Obama in his weekly address on Saturday. “If we make America the best place to do business, businesses should make their mark in America. They should set up shop here, and hire our workers, and pay decent wages, and invest in the future of this nation. That’s their obligation.”

Wrong. The social obligation of business is to sustainably maximize long-term profits for shareholders. Nothing more. Nothing less…

Both Obama and the good professor got it wrong – though Bainbridge got it more wrong than Obama did. Obama’s flaw is to think that the obligation of business is to serve as a funding and policy tool for liberal, Big Government. In Obama’s mind, if corporations are paying high taxes and providing lush contracts for union workers, then they are carrying out their responsibility. The result of this sort of thing, though, is GM. I need say no more on that matter.

Professor Bainbridge gets it wrong in a different way – asserting that the sole responsibility of a corporation is to be profitable. This argument is disposed thusly – pornographic businesses provide hefty and steady profits. The worth of a business enterprise is not determined by its profits – though, of course, profits there must be or there would be no purpose to the business. A business is worthy of being engaged in – and worthy of a decent man’s investment – only if that business also advances the general welfare of the community. You have to make your money doing something worthwhile. If you make your money in a destructive enterprise then it doesn’t matter how high your profits are, you still shouldn’t do it.

I realize that this is to inject a moral – indeed, a religious – note in to a discussion of economics. But that is precisely what is needed. At bottom, all questions are religious questions. They all boil down to what sort of society we wish to live in. Very widespread and successful efforts have been made to divorce all human activity from the compulsions and supports of religion – and we can see the result. Our economy is hollowed out because of a pursuit of profit above all other considerations. You can’t, in the end, get a good thing by doing a bad thing. You might make some hefty profits, for a time, but it all fails in the end. The end we see right now is a failing American economy – and if we tip over in to national bankruptcy, of what value will be the high profits of 2010’s fourth quarter?

Everything must come together. You can’t break it up in to pieces – the economy exists to provide sustenance to the common man and women going about the primary activity of society – starting and raising families. If we don’t do this activity, then all other activities become moot. Given this, all economic activity must have at its center doing what is right for people – profit is fine; private property is an absolute requirement; government must stay out of the day to day affairs of families and the businesses they own and/or work in…but business must not become a mere engine for profit. If it does, it becomes what we have now; either State sponsored slush funds for favored interests, or mere money manipulators as our financial institutions have become. Meanwhile, the actual needs of society – of the family – are unmet and ever more pressure is placed on this institution, spreading untold misery.

Ultimately, the fix for our economy – and our whole society – lies in curbing both the power of government and corporations – especially the bigger elements of both. They are two sides of the same coin and both of them distort the real economy towards the desires of a select few. A free people working for themselves and able to raise families without let or hindrance from others – that, really, is all we’re supposed to have, and all we really need.