Capitalism & Morality: A Response to Craig Carter

As I mentioned a while ago, Chris Lewis kindly had me post something on the Evolving Church blog. I obliged and Craig Carter responded on his site. This is a response to his, err, response:

Dan Gouge, in his post at the Evolving Church “Kingdom Economy Conference” blog entitled “What Marxism Shares with Christianity,” argues that having the sole goal of profit-making makes business corporations evil. Since the business corporation is a central feature of capitalism, he therefore concludes that capitalism is something to be overcome – not in the eschaton after the return of Christ, but in history. He approvingly quotes Zizek to the effect that the meaning of being a Marxist is asserting this faith that something better than capitalism is coming.

Actually, I deliberately left it unclear as to whether I thought there would be some kind of other system instituted between now and then. The reality is we have no idea about anything like eschatology timing (unless you want to throw in with Jack Van Impe). So, who knows, I think a suggestion that we are at the “end of history” is presumptuous (and even Thatcher agrees with me there, she called the “end of history” the beginning of folly or something to that effect). Either way, I do not expect capitalism to be around forever.

There are some serious errors in logic in this post that need to be pointed out. But the most serious problem is thinking that capitalism ought to be opposed and, if possible, abolished in the name of morality. The line of thought in this post is interesting because it is so typical of how many people think and that is why I want to engage it.

Huh? I would like to see where I wrote “capitalism should be abolished in the name of morality.” I was pointing out there are serious moral problems with capitalism, I didn’t rhetorically storm any barricades or bid the workers of the world to unite.

First, Dan in this post notes that a corporation is a legal person and therefore able to own property, conduct business transactions etc. Then he proceeds to treat the legal personhood of the corporation as if it were a real person instead of an artificial legal entity. It is sort of like treating a robot or a computer as if it were an actual human being. He rightly says that a person who had no goal in life except to maximize profits would be a psychopath and a jerk. But saying this about a corporation makes about as much sense as calling a factory a psychopath and a jerk because it has no goal except to produce goods. Is a factory to blame because it has no friends and no hobbies? Is a corporation to blame because it does not go to church? A human being with no goal in life except to produce goods would be a severely cramped person, but a factory is not a real person and neither is a corporation.

Actually I still think Joel Bakan’s thought experiment about corporations-as-people holds up.

Second, Dan argues that for the corporation to focus solely on profits inevitably leads to it acting immorally and exploiting people. But the fact that some corporations act in such ways does not prove (1) that doing so is intrinsic to having profit as their goal or (2) that seeking profits is immoral in and of itself.

Let us take the second point first. To seek a profit is, in effect, a matter of the business corporation paying its bills, just like paying for electricity or salaries or any other legitimate business expense. The shareholders invest money that is used by the corporation as a tool to make more money and those shareholders need to be paid for making this investment. When the corporation borrows money from the bank to finance the expansion of a plant nobody calls it immoral for trying to make enough money to include paying back the loan with interest as one of its legitimate business expenses.

Amoral, not immoral. It’s not that a corporation will always and everywhere do immoral things, it’s more that a corporation acts in an amoral fashion – without morality as consideration. Now what about those organizations that like to trumpet their recycling programs or their work with inner city children or something? Well, when you hear these things you feel good about buying whatever it is you buy from these companies. Even – or perhaps especially – psychopaths know when and how to turn on the charm. If we go back to Milton Friedman, he states that a business doing charitable deeds is of course good if it improves sales or obtains some kind of tax advantage.

The investors give the money without charging interest and they take a much bigger risk than the bank (which usually requires collateral) and so they deserve to earn dividends and see the share price increase as just compensation for their investment. The fact that you potentially can earn more return by taking a risk encourages investment, job creation and more taxes paid by the corporation to the government – all of which make the community richer and enable government to provide a social safety net for the poor and vulnerable. How is that immoral? Actually, it is not immoral at all – it is a positive good.

Again, it’s not that it’s necessarily immoral, merely amoral. See, here Craig Carter is in full agreement with Karl Marx that capitalism is a machine for demolishing limits that can, in fact, generate money.

As for the first point, the assumption that having profit as a goal automatically leads to immoral behavior is simply false. A desire for profit more often leads corporations to moral behavior because if you don’t serve the actual needs people have – if you don’t provide a good or service at a price people can afford – then you go bankrupt. Corporations that try to cut corners with immoral behavior often end up cutting their own throats.

Really? What about predatory payday loan companies? The tobacco industry? Lots of companies sell lousy products that they know they can foist on people. Moreover, companies create needs at least as often as they fulfill them. Fifteen years ago I recall teeth-whitening as being something that only celebrities on TV needed so they’d look perfect on TV. Now we are told that we all better have white teeth and so we dutifully divert our resources to strips and mouthwashes and even some kind of laser/UV thing at the dentist. Right now Apple is working to convince us that we need a computing device to fit between a phone and a laptop, while that insipid Vince guy tries to get us all to buy a product that any good knife should render obsolete.

Now it is true that in a certain percentage of cases it appears that corporations can engage in immoral behavior and get away with it. But there is nothing in the profit motive itself that mandates this. As I argued above, the corporation is an artificial person – actually a tool of real persons – and real persons (unlike artificial ones) have moral obligations. It is the responsibility of the managers of corporations to act in a moral manner even if that decreases profits and it is the responsibility of shareholders to hold management accountable for doing so. Failure of either to do so may result in legal action against the corporation (and a resulting loss of profits) or a public boycott and shaming (which may also result in a loss of profits). The fact is that the profit motive is a powerful incentive not to act immorally, rather than a guarantee that one will act immorally.

Here’s where Friedman’s argument is most compelling. A sole-proprietorship or a partnership would allow the owner(s) of business to decide what kind of values they would like to uphold in running their organization. But the executives and the managers of a corporation cannot know the values of all their shareholders. The one thing that they do know is that all their shareholders want to make money, it is unlikely though that there’s much agreement on anything else.  The reality is that the many shareholders invested in a corporation likely all have different concepts of morality. We may judge some of these codes better or worse, but that’s not the point here, the point is that a businessperson cannot ring up every shareholder and ask each one what they think. I personally think that suburban sprawl is aesthetically, socially, economically, spiritually, and environmentally destructive. Should I, if I were a CEO of a chain of stores refuse to build shops in the suburbs even if that would lose money. I mean, I’d be trying to be moral, wouldn’t I? But perhaps some of my investors don’t care what I think about sprawl, they want good returns! Why should I be allowed to spend their money on my pet projects?

But, you object, corporations do in fact act in immoral ways: they pollute, they exploit, they price gouge etc. Yes, they do act immorally sometimes just as people do and just as governments do. Sometimes individuals take illegal and harmful drugs, smoke, over-eat and indulge in other forms of self-harm. They do this in spite of the clear motive we all have to take good care of our own bodies for the sake of our health. The world has fallen into sin and sin is pervasive. But to blame sin on the profit motive is a false analysis. It is to locate what actually resides in the human heart in a structure of the business world and it is thus an evasion of human responsibility.

The structure of the business world is of course a human-created structure for which we human are responsible. I mean it’s not a naturally occurring thing like stalagmites or gravity or something. Human beings passed laws that create corporations and give them legal protections. Throwing one’s hands up an saying, oh, this is just a business structure is every bit a denial of responsibility as anything.