A recent survey by Canada West Foundation shows that almost half of the respondents (mostly Western Canadians) distrust the energy industry because “it is perceived as being motivated solely by financial gains.” And only 20% of the respondents trust the industry, because of its perceived economic contribution. The survey respondents also perceived the energy industry to lack “social responsibility” and “environmental sustainability.” Farming and even forestry were perceived more favorably.
Let’s digest what this means. Why should we be concerned about companies—not just energy companies but any business—being motivated “just” by profit? I argue that we shouldn’t be. Quite the contrary, we should be concerned if companies were motivated by anything else but profit —sustaining the environment, helping the poor, employing the long-term unemployed, etc. Why? Because only profit-seeking companies will create long-term wealth that will increase everyone’s standard of living and generate job opportunities for those willing to work, and because profit motive will prevent companies from violating others’ rights. Let me emphasize that I mean long-term profitability, not short-term profits sought by any means. Companies cannot make profits, not in the long term, by cheating, harming, or killing their customers or other trading partners, by damaging property by polluting, or by pilfering natural resources (owned by somebody). With whom would they otherwise do business, and with what resources?
As the survey responses of Western Canadians show, it is a widely shared view that the profit motive is evil and must be balanced with “noble” goals of “corporate social responsibility” and “environmental sustainability,” the counter-weights of profits in the so-called triple bottom line that companies are encouraged to pursue instead of “just” profits. But the view that the profit motive is evil and the undefinable goals of “corporate social responsibility” and “environmental sustainability” are noble is the reverse of the truth. It is the profit motive that is noble, and to counter-balance or complement it with so-called “corporate social responsibility” and “environmental sustainability” is evil—if human well-being and prosperity are the standards.
The profit motive is noble because it is consistent with what human flourishing requires. It is profit-seeking companies that produce and trade goods and services that make our lives better. Imagine living without the products of the energy industry: no fuel to power the farm equipment on which the production of our food depends; no energy to operate the factories that process food, clothing, medicine, and other goods that make our survival and well-being possible; no fuel to power the vehicles on which our transportation and of the goods we need depends; no energy to heat our homes and work places; and no derivatives of petroleum, such as plastics and synthetic fibers. To meet demand for all these products, and for new, innovative ones, the energy companies need to be motivated by profits. (Ever wondered why no life-enhancing innovations are produced by state-owned enterprises in socialist countries, such as Cuba or the former Soviet Union?).
“Corporate social responsibility” and “environmental sustainability”— whatever these hazy notions mean—are superfluous demands of profit-seeking companies. There is no conflict of interest between companies whose goal is to maximize their long-term profits and society (i.e., all the individuals that society comprises). Companies that want to maximize long-term profits must treat their employees well for them to be productive and happy. Profit-seeking companies must offer good value to their customers and a return to their shareholders’ investment. And such companies must cultivate good relationships with their suppliers in order to achieve competitive costs and quality. Similarly, destroying or wasting natural resources, or polluting their own or others’ property, is not in the interest of profit-maximizing companies.
There is one crucial social condition that is required to facilitate long-term profit maximization: capitalism—private ownership of property and protection of individual rights, including property rights, by government. Only in our mixed economy system (and in the socialist countries) can companies get away by exploiting others—witness government bailouts of companies, including those deemed “too big to fail”—and by pilfering “public” resources—such as crown forests in Canada, or by dumping harmful waste in the “commons.” If we had a social system where property was privately owned and individual rights were protected, there would be no reason for people to distrust energy companies (or any others). Motivation by profit would truly be in everyone’s interest.