Both economists and libertarians often emphatically state, “I’m not pro-business. I’m pro-market.” What does this slogan really mean?
Sometimes, they’re just saying, “I oppose mandatory cartels, bailouts, subsidies, protectionism, licensing, and other government intervention on behalf of politically-favored firms.” This is a perfectly sensible position. But why anyone would call such favoritism “pro-business”? Sure, these policies help some businesses, but they’re a burden on the rest. If you put a tariff on steel, you hurt domestic businesses that use steel. If you subsidize steel, you hurt businesses that make substitutes for steel. If you bail-out the steel industry, other businesses will ultimately bear much of the cost.
Often, though, the “pro-market, not pro-business” slogan is more about attitude than policy. It’s a quick way to announce, “I don’t favor markets because I like businesspeople. Contra Ayn Rand, they’re no heroes. Indeed, I’m quite suspicious of their motives. I favor markets because competition makes greedy, amoral businesspeople toil for the social good.”
This is a coherent position. But on reflection, it is deeply misguided. Yes, businesspeople are flawed human beings. But they are the least-flawed major segment of society. If any such segment deserves our admiration, gratitude, and sympathy, it is businesspeople. We should be pro-market and pro-business.
Why, you ask? My prima facie case begins with this basic fact: Businesses produce and deliver virtually all of the wonderful, affordable products that we enjoy. Contrary to millennia of economic illiterates, businesses rarely do so by “exploiting” their workers. Instead, businesses provide gentle but much-needed leadership. Left to our own economic devices, most of us are virtually useless; we don’t know how to produce much, and we don’t know how to find customers. Businesspeople solve these problems: They recruit workers, organize them to vastly raise their productivity, then put these products in the hands of customers all over the world. Yes, they’re largely in it for the money; but – unlike every government on Earth – business rarely puts a gun to your head. Businesses assemble teams of volunteers to meet the needs of willing consumers – and succeed wildly.
But doesn’t every business benefit from some act of government favoritism? Sure, but who doesn’t? Before you dismiss anyone as a parasite, look at their net contribution – the difference between the government benefits they receive and the taxes they pay. I’m amazed by the chutzpah of professors at public universities who sneer at Walmart for negotiating with local governments for tax breaks. Walmart gets a modest discount from a government monopoly. You professors enjoy tax-funded dream jobs for life!
Complaints about government favoritism carry a lot more weight, I’ll admit, when businesses are close accomplices of the politicians who are handing out the favors. The defense industry bears no small part of the blame for the bloated defense budget; the health industry bears no small part of the blame for Medicare and Medicaid. But we should remember the many businesses that push in the direction of freedom. Imagine how hard it would be to build housing if the construction industry weren’t constantly lobbying for permission to build. Imagine how little immigration there would be if employers weren’t constantly lobbying for permission to hire. Populists may seethe with rage when business thwarts the will of the nativist, NIMBY majority, but economists and libertarians should cheer.
To their credit, both economists and libertarians routinely acknowledge that businesses provide good customer service. After all, firms have to protect their reputations. But this gives businesses too little credit. I love businesses because they treat me the way I like to be treated. When businesses want me to buy their products, they almost never nag, shame, preach, condescend, or troll. They make offers, politely say “If you have any questions, you can reach me here” – and then leave me in peace. I know business doesn’t love me, but it would be awkward if it did. What I seek is common decency – and that’s what business almost always offers.
You could reply, “I understand your admiration and gratitude for business. But why sympathy?” Simple: Despite its many virtues, business remains a go-to scapegoat. Yes, business leaders are rich, but we unjustly treat them like our moral inferiors. Until business has society’s respect, it has my sympathy.
Many will think me naive, but there are few more disillusioned than I am. I don’t believe that good or truth wins out in the end. I don’t believe in the American system of government. I don’t believe in the wisdom of the American people. I don’t believe in religion. I don’t believe in the media. I certainly don’t believe in our education system. I believe in my immediate family, my closest friends, my own ideas. And business. It’s not perfect, but it’s still nothing short of a miracle.
READER COMMENTS
P Burgos
Aug 2 2018 at 4:15pm
It seems like there is some inconsistency in having little faith in government but having faith in business people. It isn’t that business people are bad and government is good, or vice versa. It is the simple observation that power corrupts, which is an idea that goes back to at least Machiavelli, who in turn I believe got the idea from Aristotle and other ancient thinkers. The idea being that in a “polity” or well governed state, there is a balance of power between the many and the ambitious few that produces virtue (this is definitely Machiavelli’s point of view). There is a lot less competition and contestation of power in government than there is in business in the US, so businessmen in the US look more virtuous than politicians. In China, well, maybe not so much.
“Business leaders are rich, but we unjustly treat them like our moral inferiors. Until business has society’s respect, it has my sympathy.” Should business have society’s respect? I don’t think it should be automatic, anymore than anyone with power and influence should be respected. If people are asking the question “what have the nation’s business leader’s contributed to the public good?” than I think that is a healthy thing, as that is the standard by which the powerful should be judged.
It is definitely true that some leading business people are entrepreneurs who “recruit workers, organize them to vastly raise their productivity, then put these products in the hands of customers all over the world. ” But many leading business people are not entrepreneurs, but rather people who have found a way to climb to the top of an existing business that had already figured out how to “recruit workers, organize them to vastly raise their productivity, then put these products in the hands of customers all over the world,” long before the current board members, C-suite occupants, and senior VPs were involved with the company. If anything, those people should be judged by their stewardship of an existing institution (much like politicians, of which those people are of a sort).
Additionally, if you look at the behavior of financial firms (predatory and/or discriminatory lending), or the political behavior of mining companies, petro-chemical companies, and some manufacturers (constantly attempting to influence the government to set environmental regulations in such a way that those businesses can literally poison other human beings without paying a cost for it), than I think one should be sympathetic for the viewpoint that businesses and business people should only be trusted insofar as you have some leverage over them (but that is true of most all people who aren’t your immediate family or close friends).
John Papola
Aug 2 2018 at 7:33pm
Bryan,
This is the article I’ve been wanting to write for a while now and you beat me to it!!!
BRAVO. This is my favorite blog post by anyone all year.
Far too many academic free-marketeers are quick to backpedal on “business” as a way of softening their admiration for the abstraction we call “the market”. This is self-defeating folly on several fronts, but most of all on the public sentiment and narrative front.
It’s no surprise that Ayn Rand would celebrate business. She was, after all, a novelist. She understood that abstractions like “the market” don’t manifest themselves in stories. Stories demand methodological individualism because a story needs specific characters with motivations.
“The Market” is not a character, it’s a concept. But businesspeople and what they do are real. People understand what you mean when you say business. Normal people. Normal people understand competition. They understand serving customers.
One of the reasons Keynesianism has such a strong narrative impact is because it relies on a fallacy of composition that treats the nation like a giant firm, and national income like the income of an individual firm. People get the idea that if their employer experiences less demand, they might lose their job.
People don’t understand markets. They don’t understand emergent order. I love getting that lightbulb to go off with someone, but man oh man is it hard and it’s even harder to have it stick. It’s doesn’t implant in soul. It’s just too abstract.
I believe that of all the public intellectuals to promote free enterprise, John Mackey has done the best with his work around conscious capitalism. He’s done so by celebrating business as field and a process. Business is about serving customers. It’s inherently, naturally good. As Mackey puts it, business is heroic. Of course he’d think so, being a hugely successful entrepreneur who has experienced all of the great highs and devastating lows that come with the job of building a successful firm. But he’s also DEAD RIGHT. And so are you, Bryan.
Business deserves praise as discipline. Honest businesspeople deserve to be admired. And corrupt businesspeople deserve EVEN MORE scorn precisely because they desecrate the beauty of enterprise.
If we don’t tell the story of free enterprise through the lens of business as an act of heroism, and business people as civil society’s most valuable heroes, we essentially disarm ourselves narratively and spiritually. What’s left is generations of college graduates saying “I want to work for a non-profit” because they are the ones that “do something good for society”. That’s baloney. Profit and loss is a vital feedback loop in measuring the good a firm does. Non-profits at best must rely on proxy measures, and most tending to become feel-good sellers with donors as their primary customer, despite the claims that donors are “investors”. Non-profits ARE, in fact, businesses. And the best non-profits operate like a business, with strong leadership, smart incentives and a drive to innovate and grow.
Markets are great. But there is no market without business.
Steven Hankin
Aug 6 2018 at 4:29am
Mr. Papola, I wish to add to your observation that “the market” is not a character (which I take to mean it is not an actor), but a concept. More to the point, I think it best to describe “the [free] market” as a process.
Alan Goldhammer
Aug 3 2018 at 9:00am
The major inconsistency with this post is the Babbit-like boosterism for business (perhaps Professor Caplan may want to re-read the Sinclair Lewis classic) and the negative view of the American way of government (not the first time this has been expressed). While business deserves to be celebrated, one cannot overlook the many problems that have arose during the course of American history (ill treatment of labor, securities fraud, anti-trust collusion, environmental damage, etc). In the absence of a government presence these practices would still be going on and the only remedy would be through tort law.
The post by P Buros who initiated the first response here is spot on. It would be appropriate, IMO, for Professor Caplan to address what is the appropriate role for government oversight other than letting the courts deal with the multitude of lawsuits that will arise.
Greg Esres
Aug 3 2018 at 10:00am
Is it possible to assert a straw-man argument or can one only be attacked? Anyway, I think you’re defending a definition of “pro-business” that most people don’t use. “Pro-business” normally means providing government support that benefits business-people at the expense of others in society. “Government support” might mean reducing regulation, so don’t get your libertarian hackles up. 😉
It’s possible to be pro-business, but still support business constraints that change the balance of power between business-people and others. Up to a point, of course.
Your defense of “pro-business” is on point only for those who are anti-capitalistic, such as communists.
Tom DeMeo
Aug 3 2018 at 11:40am
“Contrary to millennia of economic illiterates, businesses rarely do so by “exploiting” their workers.”
I guess this comes down to criteria. Would the following scenario constitute “exploitation” in your opinion?
A firm sells chicken products to supermarkets. The CEO makes more than $20M in annual compensation. It employs several thousand full time line workers at $10 per hour in their processing plants.
john hare
Aug 3 2018 at 3:25pm
No. Exploitation is if they are somehow prevented from going somewhere else to better their situation. If they are worth more elsewhere, they should go there. If they are not, then they are getting market value for their services. If somehow the employer is forced to pay more than they are worth, cuts or efficiencies will need to be made somewhere or the company will lose market share and eventually go broke.
The CEO paycheck is not relevant to whether they are being exploited. A CEO that makes nothing can exploit employees. Incompetent management is famous for lousy employee treatment, which is one of the arguments for hiring and compensating high quality management. I don’t see where a CEO needs $20M a year either, unless the competition will pay it and leave you with second class management which is possibly even more expensive in operational losses.
Tom DeMeo
Aug 3 2018 at 4:53pm
I do think your definition of exploitation is too narrow.
It is a loaded word to some, but you could argue that Rolex “exploits” their customer’s inclination to signal their wealth. This could devolve into a semantic argument fairly quickly.
Businesses exploit the difference between the cost of available labor and the value of the resulting output. I can hire people at X to produce Y and know I can sell Y for Z.
It is reasonable to question whether it is ever “exploitive” to cut a deal so imbalanced that the businessman/capitalist can earn a thousand times as much as the workers he employs without that being intrinsically exploitive.
I think an argument can be made that the only path to get from nothing to a dignified life is to start by submitting to some degree of exploitation and working you way up from there, and that if we are hostile to higher multiples of inequity, abject poverty will only persist longer. That may be true, but once you get over 100X multiple, it still feels like its time to hang the label “exploitive” on it to me.
john hare
Aug 4 2018 at 5:42am
Your (Tom DeMeos’) income and net worth is more than 100X that of the homeless here or the low end of the third world. It’s not because you are exploiting them, it is because you are worth more due to life skills and circumstances. Calling you an exploiter or damaging you does not improve their circumstances. Gates, Bezos, Buffet, and company do not damage my opportunities by being wealthy.
Unless the means to move up or out are being actively prevented or restricted, exploitation is not taking place. My company has failed to become highly profitable due to my management as well as some external circumstances, and pulling down others is unlikely to change that.
A successful company wants employees that can move up with the rising tide. People at $10.00 an hour are not likely to do that as it takes serious management to keep them productive at all. I think most miss how difficult it is to make money from low end workers. Focusing on the spread of 100X or 10,000X is mostly the politics of envy. A $10.00 an hour worker can become a $20.00 an hour worker only by improving their own capabilities. Taking from the more successful would not make them more valuable even if the math worked.
JohnWagner
Aug 3 2018 at 1:28pm
I think Bryan is right. We can and should be both pro-market and pro-business. Capitalism may revolve around the wishes of consumers, but economic success revolves around these organizations we call businesses.
P Burgos, for me at least, it’s not about having faith in businesspeople. Like any other profession, some businesspeople are good, decent people, and some are conniving jerks. The difference between government and business is that the competition of a (mostly) free marketplace conditions businesspeople to treat their customers well. Otherwise, they lose their customers, and their profits. Govt has no such disciplining constraint.
Here is my post on why we should ALL be pro-business: https://caseforcapitalism.wordpress.com/2017/07/06/why-we-should-be-pro-business/
P Burgos
Aug 6 2018 at 12:25pm
Business people aren’t just business people. They are also politicians (like the Kochs or George Soros). I think it is better to say that we should place some amount of faith in systems with enough competition to ensure accountability of those who hold power. When you have competitive markets, businesses do have the requisite level of accountability. But when you start talking about politics, then it is different, because that same level of competition and accountability doesn’t exist. Every business of sufficient size is always playing the political game as well, trying to shape and bend legislation and regulations in ways that benefit themselves. I think that it is less than fully honest not to acknowledge that capitalism necessarily entails the political economy of businesses and their wealthy owners trying to influence the government. This is in my opinion the huge blind spot of pro-business cheerleaders. That is to say, if you want to have free and competitive markets, you necessarily need a political counterweight to the political activities of businesses, and the anti-competitive and anti-libertarian activities of business are an inescapable part of any political or economic system. If you don’t have organized groups of people to oppose businesses at a political level, you cannot maintain a truly capitalist economy.
Pajser
Aug 3 2018 at 6:45pm
Exploitation of workers exist, exactly in sense Marx described it. Marx’s Theory of exploitation is often criticized on the base of the criticism of labor theory of value; but for Theory of exploitation, it is not necessary that labor is sole source of the price of the product; it is sufficient that it contributes to the price of product. Which it does.
Mark Brady
Aug 5 2018 at 4:47pm
Agreed. A theory of exploitation does not have to turn on the labor theory of value. I suggest that it turns, at least in part, on objections to the moral legitimacy of particular definitions of property rights. Among advocates of the free market, these considerations include what exactly constitutes free labor, the private ownership of the site value of land, and intellectual property (the scope and term of patents, copyrights, and trademarks).
Daniel Klein
Aug 4 2018 at 8:40am
Great post.
Philo
Aug 7 2018 at 7:00am
Agreed! I posted a link to it on Facebook, where I added the comment that the only point where Bryan shows some uneasiness about his endorsement of a Randian view of businesspeople is here:
“‘The defense industry bears no small part of the blame for the bloated defense budget; the health industry bears no small part of the blame for Medicare and Medicaid’.” (Etc.) But, really, even blaming an ‘industry’ for some bad public policy should not cause us to lose sympathy for the individual participants in that industry. No individual businessperson is actually personally responsible for the adoption of a bad public policy: this is, rather, a matter of ‘collective responsibility’–a very dubious notion–and, in any case, the voting public as a whole could easily thwart any one industry, so the voters are also ‘collectively responsible’. Furthermore, many, many non-businesspeople advocate bad public policies, so our verdict on policy advocacy should not be *especially* unfavorable to businesspeople.” In other words, don’t even *think* about backing down from full-bore Randism. (And of course Rand was fully aware that some businesspeople are energetic rent-seekers or otherwise imperfect human beings.)
John Alcorn
Aug 6 2018 at 11:22am
Bryan,
Compliments on a brilliant post, which corrects important biases. I think I have a disagreement that is more than a quibble.
Your analysis of business and government is incisive and balanced. Your analysis of business and consumers is inspired.
My disagreement: Your analysis of business and employees is true, but not the whole truth.
Unlike consumers, even model employees can’t count on being treated how they like to be treated. Corporations are rife with politics. Layoffs often strike the undeserving.
Yes, employees might dig themselves a hole with norms against nominal wage cuts. Yes, employees often implicitly trade job security for higher wages. Yes, businesses are risk-bearers. You cover all of this and much more in your online cornucopia of lecture notes for Labor Econ!
My point is a common-sense one, that the relationship between business and employees is a mixed bag. Reasonable people may differ about the balance in the mix.
N. Joseph Potts
Aug 6 2018 at 5:06pm
The last paragraph of this article is nothing less than a manifesto.
It’s exactly like mine.
Tom West
Aug 6 2018 at 5:33pm
Yes, they’re largely in it for the money; but – unlike every government on Earth – business rarely puts a gun to your head.
If history is any guide, the reason that businesses don’t put a gun to one’s head is because there’s a bigger, meaner government keeping up its monopoly on violence. I’d agree that businesses in general supply most of our needed services without compulsion, but praising them for doing so is like praising me for paying my taxes – government compels me toward doing the “right thing”.
So I will agree with praising businesses, but I’d like to add my praise for governments that are strong enough to prevent businesses from the natural tendency to make us their slaves, yet weak enough that they are blocked from the natural tendency to make us the government’s slaves either.
George James
Aug 20 2018 at 3:54pm
Perhaps the author of the original post entitled includes evolution in the ideas that he calls his own and in which he believes (even if he probably obtained that belief through education in which he professes not to believe !). If yes, then he should, perhaps, recall that Frédéric Bastiat, in his essay on “The Physiology of Plunder”, notes that man can obtain the goods and services that he needs either by production, or by plundering them from any fellow man that may have them. These are his very words :
” … There are only two ways of obtaining the means essential to the preservation, the adornment, and the improvement of life: production and plunder. … ”
Bastiat goes on to remark that
” … plunder is practiced in this world on too vast a scale, that it is too much a part of all great human events, for any social science—political economy least of all—to be able to ignore it.
I go further. “What keeps the social order from improving (at least to the extent to which it is capable of improving) is the constant endeavor of its members to live and to prosper at one another’s expense. … ”
Now, how did that “constant endeavor” to plunder come about, if not by evolution ? Essentially, over the millennia, in which human productivity kept growing at a glacial pace, one could only get rich by plunder and not by his creative inspiration alone, like Steve Jobs did in our time. It is no wonder that ancient mythologies exclusively glorify successful rapacious warriors, a feature noted by Thucydides already in the 5th century BCE. Hence the all-natural antipathy of most humans, even today, for holders of wealth. It is, simply, in our genes to assume that the holders of wealth have amassed that wealth through plunder. As was, indeed, the case for an untold number of generations. Six or seven generations only of industrial progress cannot erase this inheritance, even if we were sure that the gains of the industrial era are secure. Nor should they have erased it. The theory of investment under uncertainty indicates that the returns from irreversible changes should significantly exceed break-even before the attempt to change is made. It is telling that no industrial society has so far felt confident enough in the self-evident benefits of peaceful exchange to abolish its police and army. So, yes, professor Caplan you may “disillusioned”, but I believe he is nowhere near disillusioned enough. It is regrettable that the human condition is such, but one cannot bypass the feelings generated by one’s own genes. One simply has to endure it.
It is equally important to note the ancient antipathy of most humans for those who, supposedly, hoard their wealth. No wonder, since the variety of goods that was available in ancient times was so restricted that ultimate consumption by the hoarded could not conceivably be the end-purpose of any such accumulation. Hence, accumulation looked like an extremely anti-social act and a disease of the soul.
Economists, and that includes professor Caplan, usually study the world as though violence and plunder were something rare and exceptional. Bastiat, having lived in turbulent times, has shown that peaceful market-exchange of goods and services between consenting parties is the exception. Even purely commercial transactions contain an element of predation. Cars displaced animal-drawn carriages, supermarkets displaced street-corner grocers and smartphones sidelined Nokia mobile phones.
If one were to study the economic history of modern Greece (or of ancient Greece for that matter), one could see very clearly that legal plunder, by judicious use of one’s vote, is a social norm very close to the heart of most humans. It takes many forms beyond the familiar one of confiscatory taxation. Aggressive beggaring for the productive surpluses of other nations through serial defaults is another, very deftly practiced in our part of the world. It is not unknown in the US either, if the gold defaults of the US in 1933 and 1971 are any guide.
I consider the argument set forth above to be unanswerable. I beg to be shown otherwise.
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