Friday, February 12, 2010

In defence of business

Business has got a bad name in recent years thanks to the collapse of financial firms and, earlier, the jailing of celebrated business leaders, such as the CEO of Enron. Businessmen defend themselves with two arguments: they have concerns that go beyond business; and they have done much to advance prosperity.

Not enough, says the Schumpeter column of the Economist. The columnist advances three better arguments in defence of business:

The first is that business is a remarkable exercise in co-operation. For all the talk of competition “red in tooth and claw”, companies in fact depend on persuading large numbers of people—workers and bosses, shareholders and suppliers—to work together to a common end......

....Another rejoinder is that business is an exercise in creativity. Business people do not just invent clever products that solve nagging problems, from phones that can link fishermen in India with nearby markets to devices that can provide insulin to diabetics without painful injections. They also create organisations that manufacture these products and then distribute them about the world.

.... A third defence is that business helps maintain political pluralism. .............Companies have a difficult enough job staying alive, let alone engaging in a “silent takeover” of the state. Only 202 of the 500 biggest companies in America in 1980 were still in existence 20 years later.
These are all plausible defences. But, it would be idle to suppose that hostility towards business exists only amongst common folk, including those who are not employed by large businesses, or by the political class. Business- or, rather, businessmen or top management- today lack legitimacy within their own firms. Many are not liked or even respected by their own employees.

One reason could be that top management walks away with a disproportionate share of pay- inequality within firms has widened in recent years. Another is that so-called improvements in efficiency come at the expense of those down the line, in the form of lay-offs or reduced benefits. Thirdly, for all the talk of empowerment and enfranchisement, management and businessmen are seen as highly autocratic

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