One of the points of contention among the commentators on the U.S. presidential campaign is whether Mitt Romney’s business experience and success is an advantage, as those on the Republican side think or a source of guilt, as his critics argue. The Democratic critics have portrayed Romney as a heartless “robber baron” and an exploiter of people. This is not a political blog, but these assessments of Romney are based on two ideologically opposite views of business—business as a force for good or business as force for evil—and it is illuminating to analyze which view is backed up by facts. Such analysis will help you determine whether you should feel guilt or pride over your own success in business and how to judge businesspeople in general.
To judge business, we first have to ask: what is business for? Business firms produce and trade goods and services. Their owners (shareholders) need the incentive of profits to invest in creating material values—such as nutritious foods, vehicles to transport us from A to B, gas to fuel our cars, to heat our homes, and to power manufacturing plants; houses and condominiums, insurance plans, medications to treat illnesses, theatre productions, baseball games, etc.—that would otherwise not be available or affordable. In other words, business produces material values that are essential either to our physical survival or to our enjoyment of life. Without business, we would still be bartering with others. So fundamentally, business is a force for good. When firms compete with others in free markets, they strive to outperform their competitors by lowering their costs and prices or by developing new, innovative, and higher quality products that make our lives better by saving us time or money, or by enhancing enjoyment of life.
Businesspeople who create material values that enhance our lives should rightly feel proud of their accomplishments, and we should consider them moral creators and heroes—on the condition that they run their companies respecting the rights of others, in other words, without the initiation of physical force or fraud, freely competing to produce the best, least expensive products and services.
It is possible, of course, for businesspeople run their companies unethically, by exploiting others and violating their rights or by hiding their inefficiency or incompetence under government protectionism or favoritism. Such operations rightfully would be a source of guilt, even when temporarily profitable. But evil exploitation through force or fraud or hiding behind protectionist policies is not the essence of business. If exploitation of others or government favoritism were the norm, business could not exist and thrive, not in the long term. The minority of companies based on a fraud, such as the pyramid schemes of Bernie Madoff and of others, is not creating any real values and will eventually run out of investors, customers, and people willing to work for them. And thanks to more effective information and communication technologies—also created and produced by business—information about companies trying to profit by fraud and force travels fast and wide, exposing such companies more rapidly than in the past. Their exposure, and prosecution, would be even faster if the markets were freer and government intervention or corruption would not protect such companies. For example, consider Countrywide Financial under CEO Angelo Mozilo: it thrived much longer than it should have because of its alliance with Fannie Mae and favorable mortgage rates for high-level government employees and politicians.
Business success, achieved by creating material values without fraud, force, or government pull is a legitimate source of pride, a value to all of us—and an admirable accomplishment by a presidential candidate, or anyone else.