Some Ideas About Business; P. Dean Russell

P. Dean Russell Some Ideas About Business THE amount of money spent by business for economic education continues to increase year by year. But the confidence of the American people in our business leaders, and in the market economy itself, con tinues to decline steadily. An exceedingly thorough survey of what people think of business was made by U.S. News & World Report in 1976. That survey confirmed what most of us already knew: We American people in general simply do not trust our business leaders or believe what they say. Further, we favor more government controls over them and the economy in gen eral. A Gallup Poll executive recently ~nformed a group of businessmen Dr. Russell is Professor of Management, University of Wjsconsin at La Crosse. that 23 per cent of the American people now look upon big business as perhaps an actual threat to our freedom and general well-being. The number of us who hold that disturb ing belief today has doubled from the 12 per cent who held it nine years ago, and the trend continues steadily upward.

That's what this article is all about-business and human free dom and how best to communicate the idea that the two are inextrica bly tied together, Le., when the market economy of private own ership disappears, human freedom necessarily and automatically dis appears right along with it. Now here's my basic reference point for effectively communicating that idea: All people hold beliefs and ideas. Those beliefs and ideas are 67 68 THE FREEMAN February always compelling and are some times more precious than life itself; religion, for example. Thus if we wish to be effective communicators in business and economics, we must present our facts and statistics in a manner that will be in harmony with existing beliefs and ideas and desires already held by the reader. You see, it's ideas-not facts and figures-that rule the world. It's what you and I want-not what we need-that determines our actions.

The fact that many of the things we want to do are likely to kill us, and perhaps even destroy our families, doesn't appear to be a compelling argument not to do them. As quick examples, I give you cigarettes, al cohol, and fast driving. Since the facts and statistics don't support what most of us want to do in those areas, we simply ignore or deny them. You understand, of course, I'm not talking about ~~those dumb people out there." I'm talking about edu cated you and me. Since that's us along with everyone else, I suggest we accept ourselves as we are and develop and present our economic facts and figures in harmony with it. Pensions and Insurance Here's an example of how to go about presenting the economic case for private ownership and profits even high profits-that's in har mony with the desires of most peopIe. The basic statistical fact for this example is quoted from an article by Professor Peter Drucker: ~~Employee pension funds now own more than one-third of the equity capital of America's publicly-owned com panies .... And in the truly big businesses (the top 1000 or so com panies), employee pension funds al ready hold majority ownership ... in most cases."

Congressman Jack Kemp said much the same thing when he wrote, ~~More than 51 million work ers have a vital stake-beyond their jobs-in American business. Their retirement funds are invested in stocks and bonds" of our largest in dustrial corporations. ~~In addition, more than 380 million life insurance policies depend to a great degree on business investments." All of us-no exception-want low premiums on our insurance policies and security in our retirement years. It's a fact that both of these ~~universal desires" of the American people are solidly based on the prof itability of business. We-not the rich people-are the real owners of our largest companies. Most of the profits are paid to our retirement funds and insurance companies and endowment funds of educational in stitutions. And those dividends never seem large enough to meet the needs of older people who have re tired, younger people who are trying to protect their families by carrying 1978 SOME IDEAS ABOUT BUSINESS 69 as much insurance as they can af ford, and colleges and universities that are continually searching for funds for scholarships, research projects, and higher pay for faculty.

To paraphrase Pogo of comic strip fame, ((We have_ met the owners of big business and they is us." Can there be any doubt that sec retaries and mechanics will find this information and this approach more persuasive than the customary statistical approach favored by most economists and business com municators? Since those customary charts and equations don't usually relate to what the employee thinks and wants, that employee doesn't even see them, much less believe them. But when the answer to the employee's unspoken question ttwhat's in it for me" is ttbigger pen sions and lower insurance pre miums," you're likely to attract his attention. You see, like you and me, that's what he wants. At that point, not before, he's willing to listen to your facts and figures that justify profits-even high profits-on vari ous other grounds. Freedom of the Press Very few of us actually want to turn the economy over to govern ment. Some do, of course; and again, there's no way you can use your statistics to change the ideas of those persons who want government control and/or ownership of American industry. There's simply no common interest between your wants and their wants. Thus our objective is more likely to be ac complished if we concentrate our ef forts on those persons who are not overtly dedicated to the abolition of the market economy of private own ership and profit-motivated produc tion.

Here's a ((common interest" ap proach to this basic ((ownership is sue" that I've found works fairly well with business and professional people, students, and colleagues in education. Again, it's an approach that aligns 'your wants with a most precious (and related) want held by the overwhelming majority of the American people. It has to do with helping them keep their freedom to write and print and distribute what ever they wish. I assume that almost everybody in the United States is in favor of free dom of the press, even though we may have a bit of trouble agreeing on a final definition. I also assume (with even more confidence) that people in general are now increas ingly influenced by the appealing idea of common ownership and ((pro_ duction for the benefit of everyone instead of for the profit of a privileged few." Is there any way we can tie to gether what we all want (freedom of the press) with the profit motive that undergirds private ownership?

70 THE FREEMAN February There is, indeed. For literally, there cannot be any freedom of the press except in an economic arrangement where (to select a random example) the automobile companies are pri vately owned and the producers are motivated by hope of large profits rather than by any particular desire to serve mankind. Private Property But how can one possibly relate Ford Motor Company (an example of production for profit) with freedom of the press? Well, begin with this empirical test: Wherever in the world the Ford Company can pro duce cars for a profit, freedom of the press exists to some \degree, and usually to a high degree. But wher ever in the world the economic sys tem prevents Ford Motor Company (or its equivalent) from operating for a profit, there is no freedom of the press at all. None. Nor can there be. Check it out. Where in the world is Ford forbidden to own plants and to produce cars for a profit? Russia?

China? Bulgaria? Yes, it's impossi ble for Ford to own and operate plants in any of the ((common own ership" nations that deny the con cept of production for profit instead of for service. Do you have any doubt about the free press situation in any country where the means of produc tion and distribution are owned in common, Le., by the government? You see, the harsh reality of the ((production for service instead of for profit" system is always this: If car companies can't be owned privately, the printing presses can't either, at least not for long. Now where in the world can Ford own plants and produce cars for a profit? South Africa? Brazil? Tur key? Yes, private ownership and production-for-profit is the basic system in those and a hundred other nations. Now what's the ((press free dom" situation in those three (~ques tionable" countries I chose deliber ately? Well, there are indeed restric tions. And sometimes the restric tions are severe. But when com pared with nations wherein presses and automobile plants can't be pri vately owned and operated for a prof it, the ((press freedom" situation is undeniably better in those nations that operate on the profit motive. It checks out in every instance. I can find no exception.

But couldn't it be different? Well, I've never heard of a theory that supports common ownership of the means of production and distribu tion in general but with private ownership of the presses. I don't see how it could be done. The Ends in View Determine the Means Used A government-directed economy of common ownership without to talitarianism is precisely as logical as a market-directed economy of 1978 SOME IDEAS ABOUT BUSINESS 71 private ownership without profits. Both concepts are, of course, illogi caL It is literally impossible for either ttcommon ownership" or ttpri_ vate ownership" to function if this basic motivation and regulator be hind each one is denied. In a socialist economy; how can the gov ernment ttdirect" production unless it compels us to conform to its direc tions? In a market economy, how can we indicate which product or service is most wanted if each item is equally profitable or non profitable to producers?

Encouragingly, the socialist communist intellectuals of Western Europe are now beginning to discuss this reality. Discouragingly, few of them have really faced up to the hard fact that it's always people, not economies, that are controlled. The officials of government can never control and direct things but only people. That's you and me. As Ar' thur Schlesinger, Jr., so aptly phrased it, ttA Communist party that regards the democratic process as anything more than a conveni ence on the road to monopoly power is a phenomenon the world has yet to see." Now for a quick look at private ownership and profit and its possible impact on another freedom that all of us value highly and will go to any extreme to keep-freedom of reli gion. In East Germany, production and distribution facilities are generally owned in common and .are used for the benefit of everyone in stead of for the profit of a privileged few. In West Germany, the means of production and distribution are gen erally privately owned, and the prof its (frequently enormous profits) sometimes go to just a few owners.

Who Owns the Churches? This ownership arrangement and the system of government necessarily required to support it-is the only essential difference between those two halves of a once' united country. Now in which of those two nations, West Germany and East Germany, would you ex pect to find the greatest degree of freedom of religion? The choice' isn't even close, either in theory or reality. For it's absurd to imagine that a religion based on private ownership of churches and seminaries can be· openly practiced for long in a political system based on common ownership of all lands and buildings. The owner deter mines the use. The clergy who im agine they can work out H a viable arrangement" with a socialist gov ernment dedicated to common own ership have-already given up their freedom to preach what they think. Most clergymen still believe in pri vate ownership, you know-along with uresponsible stewardship." But they can't preach that philosophy in the common-ownership countries.

72 THE FREEMAN When you can logically explain to yourself why this is necessarily so, you will have a rather dramatic (and, I find, convincing) story about the necessity and desirability of prof its, including high profits, that are basic to the system of private own ership. You see, your facts and figures on the market economy and profits will then support what the reader wants-a free press and religious freedom. If you can explain to him and her how they hang together, as they do, their attitude toward pri vate ownership and profits is likely to be favorable. Finally, it's surely desirable to point out to the reader that the profit-motivated market economy of Proof of Worthiness private ownership also produces more and better products and ser vices at lower prices than does any other known economic arrange ment. It's also helpful to tell him and her that these products and ser vices are widely available to almost everyone, if the market is truly free.

And the jobs generated by this economic arrangement are the highest paying in the world. But, by and large, the statistics on these economic rewards should be pre sented last and as a sort of secondary benefit. Surely the most persuasive fact is this: The profit-motivated economy of private ownership offers the only possible arrangement for the existence of human dignity and freedom itself. @) IDEAS ON LIBERTY PROFIT is the proof of the worthiness of production; loss is the proof of its unworthiness, of the waste of the energy and thrift that provided wrong tools of production, or of the job-destroying rapacity of tax gatherers or of workers employed in their operation. The greater the profit, the greater the incentive for expanding production and progress, while loss is the proof that progress has stopped. It is not profit that is evil; it is the enemies of profit who are evil; for if they prevail, millions must die as a spreading dearth of tools blights capacity for survival production.

With tools men can produce ten to twenty times as much as without them, with the tool providers getting but one-twentieth to one-tenth of the multiplied production. ENDERS M. VOORHEES, "The Uncommon Man"