- Economists Tyler Cowen, Deirdre McCloskey and Paul Seabright have written books that defend big business.
- They point out that big business helps create most of the stuff we enjoy and consume, and employs a large part of the population.
- A company can’t afford to be an ‘evil big business’, as its success depends on earning and keeping consumers’ trust.
Corporations have long been cast as Hollywood’s go-to villains, and in the past couple of decades, especially amid growing income inequality since the global financial crisis of 2008, this characterisation has only grown stronger. The fiercest critics lament that big business has undue influence, controlling politics and shaping our opinions and choices.
Many decent hard-working professionals in the employ of a big bank or major multinational have had the experience of being at a party and answering a stranger’s inquiry of ‘so what do you do?’ only to be met with a snide remark. But the pushback against this shaming of big business is gathering steam.
American economist Tyler Cowen wrote his latest book, Big Business: A love letter to an American anti-hero, after becoming fed up with this rising tide of sentiment against big business. Cowen, an economics professor at George Mason University in Virginia, says he was irritated by the “continual attacks” on big business in the news and amplified over social media.
Picture: American economist Tyler Cowen.
This barrage of anti-business sentiment, and calls to break up technology giants such as Amazon and Google – two companies Cowen regards as among America’s best and most successful – spurred him to pen his latest defence of big business.
Cowen argues that while businesses, like individuals, can act badly, being bad is not one of their inherent characteristics. “I thought a contrarian book was needed,” he says.
Among public intellectuals, the task of defending big business once fell most heavily on Milton Friedman. But in the 13 years since Friedman’s death, a new group of economist-philosophers has stated and expanded the reasons to encourage, foster and celebrate business even in its oft-despised larger size.
Cowen is one of the most notable of these, along with two fellow academics he admires: Deirdre McCloskey, the Distinguished Professor of Economics, History, English and Communication at the University of Illinois at Chicago, and Paul Seabright, an economics professor at the University of Toulouse.
The 18th-century philosopher and ‘father of capitalism’ Adam Smith declared: “I have never known much good done by those who affected to trade for the public good.” Cowen, McCloskey and Seabright agree with him. They do not argue that business makes itself virtuous through sustainability or philanthropy. They argue, instead, that Business people do good through the day-to-day act of doing business.
Their arguments assume this ‘goodness’ regardless of whether the businesses in question are peddling life-saving drugs or landmines, and completely irrespective of the more popular measures of enterprise virtue, such as whether they funnel cash into philanthropic trusts or meet diversity targets.
Business as a civilising influence
Cowen opens Big Business by arguing that business has two straightforward and, indeed, essential virtues: it creates most of the stuff we enjoy and consume, and it gives most of us jobs. Big enterprises efficiently provide us with most of our food, electricity, transport, clothing, voice communications and internet access. Wall Street raises capital to fund advancements in technology, medicine and energy.
And while the general public may not appreciate it, Cowen is full of admiration for the efficiency of corporations, describing their ability to “find money to pay workers each fortnight” as “nothing less than a heroic act”.
Cowen argues the orthodoxy that big business controls politics was “comprehensively demolished” by the ascendancy of President Donald Trump, a candidate to whom not one Fortune 100 CEO donated money in the lead-up to his 2016 election. He notes Trump has since both helped that group with big tax cuts, while also hindering them with soaring budget deficits and erratic but mostly protectionist trade policy.
As for the idea that multinationals rule the world through their mastery of our data, Cowen argues they have instead “evolved into a relatively vulnerable interest group”. Uber, Facebook and Google have retreated from China; the European Union continues a regulatory battle against tech giants; and emerging economies often regulate such multinationals into second-tier players.
But Cowen’s defence of big business against today’s attacks is built on a more grandiose argument still: that business itself is inherently morally virtuous. Someone who shares this belief is McCloskey, whose 2006 book The Bourgeois Virtues: Ethics for an age of commerce (the first of her Bourgeois Trilogy completed in2016) influenced Cowen.
It set out to not only justify the commercially minded middle class, but to bring morality back into economics. It asks and answers the question: “Is being in business – or being a consumer, for that matter – intrinsically corrupting?”
“My answer is ‘no, it’s not’,” she says, before clarifying her point. “A more sophisticated answer is ‘yes, of course it is, but so are all the other possibilities’.”
Humans can be corrupted in many ways, she argues, but fundamentally she agrees with Cowen and Seabright that commerce is a “civilising influence”.
Positioning big business as ‘a miracle of cooperation’
Seabright’s 2004 book, The Company of Strangers: A natural history of economic life, impressed both Cowen and McCloskey with its powerful yet rarely heard central idea: that economic activity is a miracle of unplanned cooperation.
To make something as simple as a commercial-quality shirt is beyond any one person, Seabright argues. A shirt might require cotton from India sown from US-developed seeds, cut with German machines, assembled with Portuguese synthetic thread by Malaysian seamstresses, with a host of contributions from elsewhere on the planet.
To Seabright, the commercial processes and chains needed to make this shirt are an astonishing human construct. “We evolved as primates in close-knit families and small tribes on the plains of East Africa, distrustful of outsiders and prone to attacking them,” he says. “Yet here we are, doing commerce. We don’t always know each other well or even speak the same language, yet we can nevertheless work together, without overseers or violence, and with incredible efficiency –a company of strangers, producing miracles.”
Picture: Paul Seabright, Economics professor at the University of Toulouse.
“We can nevertheless work together, without overseers or violence, and with incredible efficiency –a company of strangers, producing miracles.”
Modern humans don’t wonder at this, but they should, Seabright reckons – noting that “we probably wouldn’t believe it if we didn’t live with it every day”.
Indeed, he argues, business does good precisely through its pursuit of commercial aims. It doesn’t just make goods cheap; it changes their makers.
To work in the company of strangers is “inherently civilising” as you must learn to work closely with other people, Seabright says.
“You must trust not just familiar co-workers, but customers and suppliers and regulators and everyone else who touches the business,” Seabright says. “They can be black or white, male or female, straight or gay, intellectual or earthy.”
And bigger businesses produce wider webs of such relationships than any other type of entity on the planet.
McCloskey observes that a commercial society will promote and celebrate the virtue that is prudence, the virtue that gets things done – “what Saint Thomas Aquinas called the executive virtue... It’s a foundational virtue for any society, but it’s especially admired and emphasised in a middle class society.”
She adds that: “Companies get big because they do what customers want, massively. Amazon is big because it does its job very, very well... There’s this deep confusion people have between bigness [sic] and monopoly.” If people don’t understand the difference, she says, “they think, well, if something’s big, it must have got there by stealing”.
“Companies get big because they do what customers want, massively.”
Good ideas need resources
Our current system uses large corporations to knit money together with many of the brightest ideas. Seabright sees this as crucial. “In any system of modern production,” he explains, “the people who have good ideas and the resources that are necessary to implement those good ideas are often not the same people.” Capitalism allows productive arrangements between those two types of people, Seabright says – those with resources, and those with good ideas.
McCloskey agrees with this but dislikes the term ‘capitalism’. “It’s a silly word,” she says. “It draws our attention from what is actually going on.” She prefers the term ‘innovism’, though she admits it “broke her ears” at first.
Picture: Deirdre McCloskey, Distinguished Professor of Economics, History, English and Communication at the University of Illinois at Chicago.
“It draws attention to what actually happened, which is innovation – institutional innovation, organisational, mechanical, biological, new-new-new-new, new ideas.”
If the modern world is a ticking watch, innovation is “the spring that made the watch”. And large businesses are the source of much innovation.
In big we trust
The three economists also argue that, contrary to popular rhetoric of a gaping “trust deficit”, large businesses actually breed trust.
It is a peculiar fact that even as consumers curse the big banks as a group, the average bank customer will tell researchers they are satisfied that their own bank does a very good job for them. This was evident in the 2019 Edelman Trust Barometer and is a consistent theme in local Roy Morgan Research.
Seabright says trust is “really at the heart of what makes big business successful.” Large businesses train many people in the same procedures and rules, so that they can deliver the same experience to many thousands of people, allowing trust to grow over time, he argues.
Cowen couches the same argument in more personal terms: “I’m sure Amazon has a delivery failure rate, but from my own experience it must be remarkably low,” he says. “I get more than a package a day on average. I can’t recall the last time something just didn’t show up.”
He concedes there is a need for better privacy legislation to temper the behaviour of the technology giants but is clearly frustrated by the idea being explored by the US Federal Trade Commission that companies such as Apple, Facebook, Google and Amazon might have “too much power”.
The idea that technology companies are destroying democracy and should be dismantled is “pretty close to crazy”, Cowen says.
He believes Google has plenty of competitors, pointing to Microsoft’s Bing as a rival in search, and Facebook (as well as traditional media) as rivals in the advertising space. And data-based monopolies tend not to last, he notes: small rivals can quickly scale up if consumers take to them.
“Google’s an incredibly innovative company,” Cowen reflects. “If people say, ‘well, in search, they favour their own services too much,’ there’s a good chance that’s true.” But he notes that such behaviour can easily be regulated, just as Microsoft was restricted in favouring its own browser some years ago.
The US was wise not to break up Microsoft, he says, and should not now break up Google or its rivals. “Those are amazing concentrations of human talent, which for the most part give us incredible products for free.”
Big business has its failings
That big business is essentially useful does not mean it is without sin. For instance, neither Cowen, Seabright nor McCloskey wants to get rid of laws against pollution; Cowen describes air pollution as “a major institutional failure, and... I do mean major.”
For Cowen, one of big businesses’ greatest sins is that they encourage us to anthropomorphise them, “turning them into people in our minds, and also in our hearts”.
From the US insurance company (MetLife) that for decades used comic strip character Snoopy as a mascot, to the airlines with ‘loyalty programs’, corporations want to persuade us to treat them like people, usually friendly and listening to our concerns.
While corporations brand themselves with human characteristics, they remain, as Cowen puts it, “abstract, shark-like legal entities devoted to commercial profit”. If we confuse them with a nanny and caretaker, if we judge them like people, we are destined for disappointment. We should lower our expectations, leave fine-tuned moral rules and social welfare to governments, and trust corporations to supply our needs within the rules of society, he argues.
Maintaining a social licence to operate
Yet Cowen notes that businesses such as McDonald’s and General Electric are also social leaders. He gives them credit for defining health and other legal benefits for same-sex couples before the US legalised same-sex marriage. Big business doesn’t want any group of customers to feel put out or discriminated against, he argues. A local baker may be reluctant to make a wedding cake for a gay couple, but Sara Lee, selling to a national market, will happily take all comers.
Business conduct will not always be entirely virtuous, no matter what our rules. But as McCloskey observes, it’s better than any available alternative. And the size of a business, she notes, is generally an indicator of its ability to meet people’s needs. A big business means that “you’ve done something right”.
Cowen encourages those in big business, particularly accountants, to celebrate what their organisation does, and be ready and able to articulate it. “Accounting is the backbone of capitalism,” he says. “You start getting modern capitalism in the Italian Renaissance, right after accounting arises in late medieval times.
“Businesses need to be able to calculate but, of course, modern accountants do much more... management and compliance, making sure nothing goes off the tracks, limiting fraud. All of those are incredibly important things to do in a business... People who are doing good jobs should be very proud of that.”
“Businesses need to be able to calculate but, of course, modern accountants do much more... making sure nothing goes off the tracks, limiting fraud.”
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