Business and Ethics; E. Opitz

Mr. X is wholly dependent on will ing customers, over whom he has no leverage except the appeal of his product, plus the persuasiveness of his advertising. Mr. X has a profit able business, and his customers profit too; owning a gismo makes life more pleasant. There is an overall upgrading of the level of human sat isfactions on the part of everyone in volved: Mr. X, his employees, and the users of his product. By any def inition of the term, Mr. X is per forming a public service; everybody profits, nobody is coerced. Mr. Y manufactures thingama jigs. There was once a brisk market for this gadget, but times have changed and the item is no longer 735 736 THE FREEMAN December fashionable. Sales decline steeply and the firm slumps into the red. Mr. V's firm is on the verge of failure. Now, no one likes to go down the drain, although in the profit and loss sys tem of the free economy-usually called "capitalism" -some firms are bound to fail; customers simply stop buying, an act of free choice on their part, consumer sovereignty in ac tion.

Mr. Y, although he has lost most of his former customers, has friends in Washington; so he lobbies for a handout. The politicians and bu reaucrats respond by bailing him out with taxpayers' money. What does this mean to the average citizen? People who had refused to volunta rily pay their hard-earned dollars for one of Mr. V's thingamajigs now have a portion of their earnings confis cated by the taxing authority in or der to keep Mr. Y and his company afloat. Doesn't seem right, does it? As long as Messrs. X and Y oper ated in the private, voluntary sector of society they had no power to coerce anyone. Neither man could force anyone to work for him or buy his products. The rules of the market place forbid this. Under these rules Mr. Y faced failure, so he entered into an arrangement with govern ment, and now the law forces every taxpayer to spend a fraction of his time working for Y, and another fraction to subsidize the sale of Y's product.

There are many real life situa tions that parallel the case of Mr. Y. Most recently in the news, and therefore fresh in our memories, is the Chrysler caper. The firm is a large one, and its products have merit. But for a complex set of rea sons the American public turned to other makes of automobiles. The free market-which is the playing field where the rules of business hold sway-began telling Chrysler to go into some other line of business, or fail. This adverse business judgment on its products turned Chrysler toward politics. The several hundred thou sands of people who make up Chrys ler-management, labor, and stock holders-refused to accept the verdict of consumers, who chose to buy other makes of cars. Instead, they turned to Washington and got help. They got a political remedy for economic failure, as have countless others. UnbusinesslikeConduct A business or industry endures only so long as it pleases customers.

When a business ceases to please customers it ceases to exist as a business. At this stage of the game it may succeed in pleasing politi cians, who have the power to force taxpayers to support the new opera tion. This is a different ball game. A failed business propped up by a gov ernment handout is no longer a business; it's a hybrid which de1983 BUSINESS AND ETHICS 737 serves criticism as an unethical raid on the public treasury. It doesn't matter much what you label this politicized industry, so long as you realize that it operates in defiance of the rules which define a business or industry in a free society. A businessman per se operates within the framework of rules laid down by "the market"; when he op erates outside this framework, and by a different set of rules, he is something other than a business man. "The market" describes the process of social cooperation under the division of labor, where free and virtuous people specialize in a com plex variety of tasks in anticipation of a consumer demand for the goods and services they produce. This is stage one of the market, and it is followed by stage two-multiple voluntary exchanges of these goods and services where people give over something they value for whatever it is they value more. The end they have· in view is maximum satisfac tion of creaturely needs for food, clothing, shelter, recreation, or whatever.

Most of those involved in busi ness, industry, and trade operate within the framework laid down by "the market." They have a genuine desire to serve consumers; they take a craftsman's pride in the honest workmanship embodied in quality products which make the life of all of us safer, healthier, or more pleasant. And they feel a moral obliga tion to give value for value received; they have adopted and try to live up to a code of "business ethics," a praiseworthy effort, at which most businessmen succeed far better than many in other walks of Hfe. I was discussing this ethical point with a friend who had taught eco nomics to a generation of students at a fine midwestern college, where he also served for some years as Dean. We were talking about our two professions-teaching and preach ing-some of whose seamier sides we had experienced from the inside. "You know, Ed," he said to me, "a thoroughly dishonest man can last longer as a professor or a preacher than as a used car salesman!" I had to admit that there was more than a grain of truth in Ben's cynical obser vation; and further, that these same intellectuals have a tendency to look down their noses at business, indus try, and trade, as if the people in volved in commercial activity are a lesser breed-a mean and mistaken opinion which I reject completely.

The Customer Is Boss In a genuinely free society, a lais sez faire society in the early sense of this much abused phrase, the busi nessman is a mandatary of con sumers; the customer is boss. Con sumer sovereignty! Is this the way the businessman likes it? Of course not. Our businessman would like to 738 THE FREEMAN December think of himself as the man in charge, hands on the reins, running a tight ship. But who is he kidding? He doesn't have even the power to set wages in his own factory, or fix the prices he'll charge for his prod ucts! His competition, his employ ees, and his customers make those decisions for him. If he tries to lower wages he will lose his best workers to his competition who pay the going rate or more. If he tries to raise prices people buy elsewhere. He's stymied, and that's why he's tempted on oc casion to persuade some politician to bend the rules in his favor, just enough to give him a little "fair ad vantage." But when a businessman yields to this temptation he forfeits his standing as a businessman and becomes something else-a branch of the government bureaucracy with a status similar to the postal ser vice.

Wealth has a universal appeal, but wealth production is a dull affair. There's nothing about work to make the adrenalin flow or the heart to leap; there's no poetry, dash, or glamour about commercial transac tions-which is why the literacy tribe turns its back on the realm of trade. John Ruskin, for example, admired the buccaneer and freebooter type, calling him the Baron of the Crags the knight with his castle atop a hill. The modern man of wealth Ruskin referred to contemptuously as the Baron of the Bags-money bags, that is. The businessman tends to accept this caricature of himself and his function, vainly trying to conceal it under a false, and somewhat ridicu lous image. If only business radiated some of the magic that invests royalty, or reflected some of the panache of the military! So dreams the man of bus i ness, who then finds wish fulfill ment, of sorts, in assuming titles such as The Spaghetti King, The Chew ing Gum Czar, The Fast Food Ty coon, and so on. Captains of Indus try meet with their Lieutenants at the Admirals' Club to work out the strategy and tactics of the next "trade war." Inside the plant or in the board room our tiger is referred to with af fectionate dread as The Boss, or The OldMan.

The Function of the Businessman Is to Serve the Customer There is an inversion of values here, as well as a gross misunder standing of the role of the business man in society, a misunderstanding on the part of the businessman him self, which is shared by friends and enemies alike. Kings and dukes in the precapitalistic ages did not produce or earn the wealth they en joyed; they seized the wealth produced by others. They lived by "The good old rule, The simple plan, That they should take who have the power, And they should keep who can."

1983 BUSINESS AND ETHICS 739 Royalty and the nobility exercised vital functions at the time, but work was not one of them; and the same might be said of the military. As necessary as a military establish ment is for the defense of the nation, is it not obvious that military action results in the consumption and de struction of wealth? The business man appeared on the scene as a different breed altogether; the busi nessman earns whatever wealth he obtains, and the method he employs increases the well-being of others. He is on an ethical par, to say the very least, with those who rule and those who fight! "I take what I want," said Fred erick the Great; "I can always get some pedant to justify my actions." The thief also takes what he wants, and so does the pirate and the rack eteer. The king, the crook, the buc caneer and the gangster pursue their naked self-interest directly, operat ing in terms of a ruthless egoistic hedonism. Bemused by these glam orous figures, apologists for capital ism have explained the motivation of the businessman in terms of the same egoistic hedonism. With friends like this the businessman doesn't need enemies!

It is a truism to say that everyone tries to improve his circumstances, to upgrade his level of well-being. The question is How? Pursuing one's self-interest directly, at the expense of other people, is the way of the powerful and the crooked. Serving one's self indirectly by advancing the well-being of other people is the op erational principle of the free mar ket economy. To illustrate: the successful buggy manufacturer with a deep personal commitment to this means of trans port and pride in his product finds business falling off. Consumer taste is gravitating toward the new-fan gled horseless carriage. Our entre preneur, if he wants to stay in busi ness, must swallow his pride and put his time, talents and capital at the service of those who want automo biles. The ruler of this tiny indus trial empire, as he fancies himself, surrenders, and agrees to put him self at the disposal of consumers.

Everyone's welfare is upgraded in the only way possible for this to occur. The Good Society The latter part of the 18th century marks a watershed in human his tory. Walter Lippmann, writing about the capitalistic era which opened two hundred years ago, ut ters an incandescent truth about this startlingly novel way of conducting our economic affairs: "For the first time in human history men had come upon a way of producing wealth in which the good fortune of others multiplied their own." Read that one again, for it is the basic axiom of the free market economy, so fundamen tal that it is overlooked by friend and 740 THE FREEMAN foe alike. Lippmann continues: "For the first time men could conceive a social order in which the ancient moral aspiration for liberty, equal ity, and fraternity was consistent with the abolition of poverty and the increase of wealth." (The Good So ciety, pp. 193-4.) This was the social order origi nally known as Classical Liberal ism, built around the conviction that there is an inviolable essence in each person, which it is the function of the Law to protect. When the Law is limited to the administration of jus tice by securing the life, liberty and property of all persons alike, then people are free to peacefully pursue their personal goals, each respecting the right of every other to do the same. This is the good society oper ating under the moral law, the only kind of society in which a complex division of labor economy can flour ish.

There is a moral law whose man dates are binding on everyone of us. The moral law within each person his individual conscience-in structs us to "injure no man." It ob ligates us to work for justice and fair play in human affairs; to speak the Fred De Armond IDEAS ON truth in charity, keep our word and fulfill our contracts. This ancient code forbids murder, assault, theft and covetousness. These are the most important items in any ethical code, so universal as to seem part of hu man nature itself, and so compelling that most of us acknowledge them as binding even while we fail to obey them. There is not a separate ethic or set of moral principles trimmed or adapted to this group or that in so ciety, even though our common speech seems to suggest this. It is improper, strictly speaking, to talk about "legal ethics," "medical eth ics," "business ethics," or the like. Lawyers, doctors, businessmen are judged by the same moral law that applies to all the rest of us. Free market rules of business fall well within the moral law; and individ ual businessmen, large as well as small-so long as they stick to their last-measure up at least as well as members of other trades and profes sions. Only when a government grant of privilege is obtained is a moral principle violated. But when this happens the violator is no longer a businessman. ~ LIBERTY A MAN OF ACTION, intent on performance which is both successful and ethical, must strive to see that his actions are consistent with the prin ciples he professes. To fail in that respect is the worst form of incon stancy. "What is right?" is always a relevant question.