Saturday, November 28, 2015

Business Ethics: Ethics That Means Business

There is a hackneyed anti-business cliché saying that business ethics is a contradiction in terms. In fact, however, it may well be the case that the opposite is true – that business ethics is not so much an oxymoron but a tautology.

With its emphasis on profit-maximization, business is often described as amoral at best. After all, the story goes, given their goals, businesspeople are constantly subject to the temptation of trading ethics for money. This, however, is a very naïve vision of business. Business is not just any kind of money-making – it is money-making through voluntary exchange of productive goods and services. In other words, business embodies the principle of respect for persons and their wants. Coercive, fraudulent or thieving business is not bad business, but no business at all. Likewise, business based on political connections or privileges ceases to be business and becomes politics – the extraction of resources through the use of institutional violence. Thus, far from eliminating businesspeople’s temptation to trade ethics for money, political “regulation” of the market exacerbates it like nothing else. In other words, the more businesslike and the less politicized society becomes, the more ethical it will be.

But the connection between business and ethics goes even deeper. The essence of successful business is entrepreneurship, which is a phenomenon that involves productive creativity, alertness to profit opportunities, and stewardship of scarce resources under the conditions of uncertainty. This implies that a successful entrepreneur has to display the full set of cardinal virtues: prudence, justice, temperance, and courage. Thus, entrepreneurs are uniquely qualified to build robust and innovative bridges between business and ethics, that is, to make ethics ever more profitable and profits ever more ethical. This way, successful entrepreneurs can even address the notorious challenge of bringing charitable activities under the ambit of sound economic calculation.

Economic theory describes the logic of human action, but it is entrepreneurship that puts human action to productive, socially beneficial use. In other words, economics is a sound understanding of the logic of human action, while entrepreneurship is its sound application. Likewise, ethical theory identifies and spells out various significant features of morally good actions – satisfying the greatest number of wants of the greatest number of persons, treating others as ends in themselves, fostering the development of virtues, etc. – but entrepreneurial thinking is needed to apply them to specific circumstances of time and place in a smart and sustainable manner. In the hands of a successful entrepreneur, ethical principles become sources of profit, which is the ultimate proof that such principles can genuinely serve human betterment rather than being little more than wishful imaginings of second-rate ethicists.

And while making ethical principles profitable in a narrow, monetary sense is particularly important for entrepreneurs understood as owners of companies, everyone else should strive to develop a broadly entrepreneurial mindset in the context of thinking about and acting towards solving individual and social problems. We all live in a world of ineradicable scarcity of resources and uncertainty of the future. Such a world is likely to confront us with a steady stream of intellectual surprises and moral dilemmas. Thus, it won’t do to simply memorize as many ethical theories as possible and try to apply their precepts in a mechanical fashion to whatever morally problematic situation arises, hoping that they will happily converge and yield an unambiguous solution. Instead, we should train ourselves in the use of moral imagination to be able to anticipate potential clashes of values and conceive of the ways in which the joint application of various ethical theories could help us to minimize their negative impact. Only then will we acquire the kind of practical wisdom that allows for the unification of economic profitability and moral praiseworthiness in the face of irreducible social complexity.

Politics tries to simplify the world with the use of the crudest and most ruinous tool imaginable: institutional violence. In other words, its only solution to the problems posed by social complexity is to destroy it, or at least sweep it under the rug. This, of course, not only aggravates the problems in question, but also erodes people’s ability and willingness to compete in a free marketplace of contextual, creative, and farsighted, and thus genuinely viable solutions to them. If such solutions are to be developed and implemented, it is essential to push towards depoliticizing society and consciously embrace the entrepreneurial way of thinking.

The fact that not only intelligent laypersons, but even self-proclaimed specialists in the area of business ethics often claim to see a contrast between business and ethics shows that the entrepreneurial way of thinking is still familiar only to a distinct minority. So is the understanding of its necessary prerequisites: unconditional respect for private property rights, freedom of association, and productive specialization. This has to change if our ever more complex society is to deal successfully with its ever more complex challenges. And perhaps bringing about such a change is precisely the greatest entrepreneurial challenge that all simultaneously business- and ethically-minded individuals have to overcome.

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