"The Obama Administration’s $862 billion stimulus bill was an expensive failure that increased the federal deficit, contributed to America’s deteriorating fiscal health, and failed to reduce unemployment. Instead of repeating this mistake, Congress should alleviate business fears and economic uncertainty by maintaining the current tax policy (extending the 2001 and 2003 tax rates) and freezing...
The Role of Business and Entrepreneurship: Private Profit for Public Good?
Are business and entrepreneurship fundamentally a positive force in society? This question has been debated for nearly as long as commercial activity has existed.
Throughout history, business has played a crucial part in the growth and advancement of civilization. Yet, people's attitudes toward it have always been mixed. Ancient philosophy, Aristotle being one example, recognized the benefits of commerce and trade, but considered philosophy, religion, and politics ultimately to be of higher value to society. This ambivalence carried through the Middle Ages and Renaissance, during which, even though crafts and trade posed a sought-after alternative to feudal serfdom and increased the general prosperity of Europe, the commercial class continued to rank below the aristocracy and clergy.
From the Judeo-Christian tradition's perspective, business and enterprise can be positive human endeavors if they express God-given gifts and talents while contributing to a greater good beyond petty self-interests, as opposed to simply being driven by greed or envy. As St. Thomas Aquinas put it: "trade, considered in itself, contains a certain unseemliness, inasmuch as it does not essentially involve any honourable or necessary end. Still though gain, which is the end of trade, does not essentially involve anything honourable or necessary, neither does it essentially involve any element of vice, or aught that is opposed to virtue. Hence there is nothing to hinder gain from being referred to an end necessary or even honourable."
The Christian view of business' potential as a noble activity, coupled with the ideas of natural rights--chiefly among them individual liberty and property rights--led America’s Founders to hold business in high esteem. Indeed, many of them were themselves endowed with the entrepreneurial spirit. Praising the spirit of industry and virtue which comprised the foundations of American commerce, the Founders advanced "the principle of self-interest rightly understood" as a vital source for achieving general prosperity, and dismissed contempt for private profit as "ill-informed jealousy." It was this philosophical and political climate that motivated immigrants to undertake the arduous journey to the new world in hopes of improving their lives' prospects through entrepreneurial success.
Arguably, America's focus on economic relations over political expansion--its early attitude of non-interventionism--enabled it to harness the philosophical ideas of the Scottish Enlightenment and the technological advancements of the British Industrial Revolution, causing it to grow into the world's foremost economic superpower by the end of the 19th century.
All the while, American entrepreneurs have always been aware of the benefits their success could furnish to society. John D. Rockefeller, the so-called Robber Baron, actually saw his ability to make a profit as a way to improve the lives of the poor: "Let the good work go on. We must ever remember we are refining oil for the poor man and he must have it cheap and good." Similarly, steel magnate and philanthropist Andrew Carnegie emphasized that "the laws of accumulation will be left free; the laws of distribution free," but that the successful businessman is also "a trustee for the poor; intrusted for a season with a great part of the increased wealth of the community, but administering it for the community far better than it could or would have done for itself."
Yet, even in America, business and entrepreneurship have never been viewed as unabashedly positive forces in terms of social progress. Government intervention, whether to improve the workings of the market or remedy its supposed failures--fraud, defective or hazardous products, exploitative labor practices, monopolies, trade deficits, outsourcing, recessions, environmental damages, to name just a few--has always been part of the picture.
Fundamentally, the question of whether the quest for private profit promotes the public good turns on an understanding of what makes profit possible. Entrepreneurs seek to find new ways to most efficiently utilize the scarce resources available (e.g. capital, raw materials, labor, time) to provide goods and services to the consuming public. Profit and loss then reflect an entrepreneur's ability to successfully identify and act on opportunities for creating and providing value to consumers. It is this process of "creative destruction" that facilitates problem-solutions, innovation, job creation, and economic growth--ingredients essential to the thriving of society. At the same time, any business' long-term survival depends on conducting itself morally: "The free market rewards polite, cooperative, tolerant, open, honest, realistic, trustworthy, discerning, creative, fair businessmen. Lying to and cheating other businesses, misleading consumers, and mistreating workers all have serious adverse consequences."
Today, there is much debate over whether or not the ultimate driver of material prosperity is a bottom-up effort by business and entrepreneurs, or a top-down management by academics, philosophers, and politicians. Those in favor of a top-down approach will argue that government needs to plan, manage, or direct the economy through education policy, tax and subsidy incentives, energy policy, regulations, monetary policy, and more. In doing so, they effectively create an environment of public-private partnerships wherein businesses that exploit the plans or directions of the managers stand to profit the most, rather than those companies willing to innovate new products that do not fit within a plan or the goals of the managing class. Such an environment, is argued as more stable and secure because it is managed, and therefore more beneficial to the public.
Those in favor of a bottom-up approach argue that government's role is to establish and enforce the rule of law with sufficient protections of property, contract law, individual freedoms, etc. not to manage or direct the economy. Within this environment, it is argued that business and entrepreneurs are free to compete with each other while new and unplanned innovations are able to be developed and implemented, thereby benefiting the public. They further argue that an innovative economy cannot possibly be managed, planned, or directed because the managers of the economy (academics, philosophers, and politicians) cannot conceive of all the possible new and potentially revolutionary products business and entrepreneurs could produce or how those products could change society. In their view, individual freedom cannot coexist alongside a planned or managed economy, because to manage or plan the economy requires planning or managing individual lives. From this viewpoint, the freedom for individuals and entrepreneurs to pursue their interests, while protected by the rule of law, is the ultimate good for the public, with the expectation that such an environment produces innovation, trade, and over time greater and greater material prosperity.
This topic overview explores the nature of business and entrepreneurship, their roles in a market economy, implications for the provision of what are commonly regarded as "public goods," such as education and health care, and their overall contribution to the development of a free, prosperous, and moral society.
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