Is business a virtuous pursuit? Sadly, there are few well-known philosophers today who write about the moral obligations of the commercial world. In the past, it was different. The 18th-century philosopher Adam Smith, who, more than anyone, invented the entire discipline of economics, also wrote important books such as The Theory of Moral Sentiments, which analyses the subject in depth.
The question of whether companies are decent corporate citizens matters more to millennials than previous generations. So, in order to attract the best young employees, firms are trying harder to display their ethical credentials. However, the private sector as a whole still fails to make the broad moral case for capitalism. This may explain why so many people see the anti-business rhetoric of socialism as attractive — despite the abysmal track record of collectivist governments.
Business is a force for good on various levels. First comes its ability to generate work: the annual Gallup World Poll regularly shows that the most important single indicator of happiness everywhere is whether respondents have a good job. Employment provides income, but it also offers purpose and enables workers to learn skills and socialise. Citizens enjoy earning a living, being productive and making a contribution to society. Private firms enable them to do this.
Second, business provides the goods and services that consumers need and want — from food to transport, energy to homes, insurance to clothing.
Companies sell the necessities and the luxuries we consume and appreciate every day. Free markets, competition and entrepreneurship combine to deliver an extraordinary array of tangible and intangible items that make modern life possible. We have come to expect resources and human ingenuity that are marshalled to satisfy our demands.
Third, business is the chief engine of innovation in the economy. Private companies constantly invent new and better devices, and such relentless improvements provide us with enhanced health, a wider variety of entertainment, greater mobility and an increasing standard of living.
Choice is a feature of capitalism, with the rivalry of different enterprises producing more ideas, rising efficiencies and ever more beneficial technical solutions to society’s problems.
Business is also a factor in a healthy culture because it gives enterprising individuals the opportunity to start their own ventures. The freedom, satisfaction and independence enjoyed by entrepreneurs cannot be achieved in any other walk of life — I know, because I have talked to hundreds of them over the decades.
In addition, business pays the tax required to fund public services and welfare systems. Without corporates, our government could not function. Corporation tax, business rates and employer’s national insurance are all purely derived from companies, while taxes, such as VAT, are collected by them.
Businesses can generate fortunes for their owners. Despite all the attacks on the inequality this wealth creation appears to produce, such self-made capitalists are increasingly giving away these riches. Philanthropy is growing rapidly in most advanced economies, led by America. If the affluent are demonised, then they will have less to donate to good causes.
Finally, successful companies can offer financial returns to savers who invest in them — via dividends and capital gains. This means the retired with well-invested pensions can lead full lives, and not-for-profits can make returns on their endowments.
Sadly, all these basic functions of companies are rather taken for granted by most citizens. Environmental, social and governance (ESG) criteria are almost the only way in which investors, the media and consumers appear to judge the ethical merits of profit-seeking organisations. These issues matter, but they are by no means everything.
It is much easier for some companies to proclaim their virtue — simply because of the industry in which they operate. Typically, such firms do not employ many people, or do the difficult but vital things — such as mining or making new and cheaper products.
The business world is not perfect — there are scandals, corruption and bad behaviour. But a huge proportion of companies do the right thing, and play a paramount role in society’s well-being. We undermine them at our peril.