Monday, 16 January 2012

All business conducted within the law is good business...


What is it about politicians wanting to pass moral judgement about business? Today it’s Nick Clegg’s turn:

The Deputy Prime Minister will launch today a campaign for a “well-rewarded workforce”, saying that businesses owned by their staff are more dynamic and have higher morale.

He wants to encourage companies to follow the model of John Lewis, the department store group which is owned by its employees and distributes its profits between them.

Mr Clegg’s call for “responsible capitalism” will come as City firms are preparing to pay executives billions of pounds in bonuses, despite pledges from politicians to curb excessive pay and growing hardship among ordinary families.

Those words – “responsible capitalism” – echo the sentiment of interventionist politicians down the years.  From Heath’s “unacceptable face of capitalism” to Miliband’s crass distinction between ‘producers’ and ‘predators’, we find politicians seek political capital from the making of moral distinctions between ‘good’ and ‘bad’ businesses.

None of this is to say that it’s a bad idea to reward employees with shares – this cements their interest in the firm’s success and acts as a spur to profitability. But it is a matter for the owners of businesses not a concern of government – granting some sort of “right” to demand that the company gives shares to employees is a pretty gross intervention in those businesses however much we might think it a good idea.

It is simply not the role of politicians – however well-qualified we make think we are – to pass moral judgements about capitalism. I can respect someone who believes that capitalism is immoral – they are wrong but honestly wrong – but the person who says that some capitalism is bad and some capitalism is good is trying to have his cake and eat it.

For my part, I believe that capitalism is inherently moral since it is the only form of economic organisation that reflects the primacy of individual choice and preference. All other forms – those imposed by governments in a futile search for man’s perfectibility – are immoral since they require that some people are told “no you can’t make that choice”.

And when we look at the distinction made between ‘good’ and ‘bad’ business, it has more to do with the effectiveness of the different firms’ public relations than a real understanding of the morality or otherwise of that business. We like John Lewis because it does nice advertising and runs Waitrose (where the supermarket-hating commentariat prefer to shop) – if Provident Financial adopted the same ownership approach would we suddenly approve of selling expensive loans to poor people?

People start businesses with the intention of making themselves some money not as some noble social project. If people didn’t do this all the lovely stuff we take for granted – you know, the schools and hospitals – wouldn’t be there. If smart young people didn’t work eighty-hour weeks on trading desks the City of London wouldn’t be the world’s biggest financial centre producing £100 billion and more in added value.

If we start pretending that business isn’t about earning a living, if we begin to force our prejudices onto business owners, we set off down a road to a less wealthy, less creative, innovation-free society. Rather than condemning the city trader for his money, we should celebrate the fact that an ordinary guy from Dagenham or Sidcup can make that kind of cash and enjoy the good life that goes with it. It is wrong to make some moral distinction between the hedge fund manager and the artisan baker, to pretend that one is ‘good’ and the other ‘bad’.

All business conducted within the law is good business and the only irresponsible businesses should be businesses that fail.


1 comment:

Adam said...

What annoyed me about Clegg's comments was that he doesn't seem to acknowledge the reason why more companies don't run employee share schemes: the massive red tape that they have to wade through. I discussed the idea of setting up a share scheme for my small business with my accountant a little while back. She explained that I would need to get a considerable amount of help from a very expensive specialist accountant, and that the costs would probably be prohibitive for a business of my size. Rather than pontificating about the benefits of employee share schemes, I'd prefer it if Clegg actually made it possible for SMEs to do so.