Wednesday, April 27, 2011

The business community needs to change

Let me clarify the nature of my criticism of the current leadership in the business community:

1) Most fundamentally and problematically, they make money an end in itself: "how we keep score."

2) They believe they have no duties or responsibilities to others, or to the society as a whole. They accept no restraint on their own behavior for the sake of other people. They profess admiration for the poisonous, sociopathic "philosophy" of Ayn Rand.

3) They create a divide between themselves and ordinary working people, justifying big raises and bonuses for themselves, while making a virtue of keeping wages low by minimizing the contribution employees make to the success of the business, threatening to move abroad, to move to "right-to-work" states, to punish employees for supporting unions, and so on. This has resulting in wages failing to keep up with productivity increases, and a growing class division in the American economy and society.

4) They feel no compunction about taking advantage of others in business dealings, rather than trying to make sure that deals benefit both parties. Goldman Sachs recently paid an enormous settlement to the SEC for doing this in one particular case, but read books like Too Big to Fail or All the Devils Are Here and you realize how prevalent this has become, and how it contributed to the financial crisis.

5) Speaking of the crisis, the leaders of the finance industry have not stood up and said, "Yes, we messed up, and we have to change. Here's what we're going to do." Instead, they have resisted regulation tooth and nail, and basically said, "This was just a big accident, and there's nothing wrong with our industry. Just leave us alone." That won't do.

6) They press for tax breaks for themselves and their companies on the grounds that they will lead to job creation. There is no evidence that they will lead to anything of the sort. (In fact, the most effective ways to subsidize employment would be through the Earned Income Tax Credit and a single-payer health plan. Cutting the capital gains rate does not reduce the cost of hiring a worker.) This special pleading is entirely self-serving and lacks any sense of fairness. The special tax status of hedge-fund managers is a glaring case of this.

I am not "anti-business," and I do not believe that business leaders inevitably will behave this way. My entire career research program has been built on the idea that socially responsible, ethically informed business behavior is necessary to the proper functioning of a capitalist economy, and that business leaders play an important role in balancing and checking the power of government and the civil sector of society, in line with Michael Novak's understanding.

Furthermore, business leaders have not always behaved this way in our country. During the 1950s and 1960s our economy prospered in an atmosphere where we had a much greater sense of national unity and belonging, and where looking out for the interests of others was part of our national culture, including our business culture. There was then more of a sense that we were all contributing to the national project. There were many things about that era that were problematical, and I am not nostalgic for those "good old days." The point is that business leaders played a much more constructive role in our national conversation then.

My hope was that something good would come out of the current crisis, in that business leaders would recover a sense of themselves as servant-leaders, and lose some of the arrogance and hubris that they have acquired over the last 30 years. I have been profoundly disappointed. (This is a big reason that I plan to leave economic research and writing behind in my retirement.)