Revisiting Adam Smith: Defending Capitalism
I am concerned that too many companies and executives take a mechanical view of capitalism. Just because something is legal, it sells and is profitable, does make it ethical, right or moral. It is instructive to go back and reread the original doctrine of Adam Smith.
Adam Smith was a philosopher and not an economist as most people believe. A major prerequisite for the success of his economic philosophy; “the invisible hand”, was that capitalism must be built upon a strong foundation of cultural morality. The engine that keeps capitalism vital and productive, is integrity and ethics, which form the framework and scaffold by which investment and resource allocations are made.
In many ways, Adam Smith’s capitalism contained a strong flavor of market paternalism.
Today’s capitalism often appears to be based on the philosophy, that as long as it not explicitly illegal, then anything goes and let the market decide. These shadow capitalists even use the US Constitution in defense. “Freedom of Speech” etc. Bust ask yourself, Does the economy really need sex and violence on television? Violent and disgusting movie trailers during prime time family viewing? In a country with an epidemic of childhood obesity, do we really need to be pushing nutrition free, sugary breakfast “foods” directly to children? How about marketing pharmaceuticals directly to consumers that have no medical education? What about companies that market totally ineffective nutriceuticals and homeopathic remedies? The economy is filled with products and services that are ineffective and destructive, but profitable.
It’s not just the sellers of goods that should take a moment and reflect. Media companies, talk show hosts and even news reporters tout “stories” that help to market products that are wasteful, fallacious and in fact down right dangerous. This is not capitalism, but exploitism. Capitalism is the engine of productivity and productivity is the only way in which a society, economy and an individual attains greater wealth. By allowing and encouraging consumers to spend resources on ineffective and destructive products and time wasting endeavors, the entire economy suffers. I am not advocating legislation, governmental control on any other “anti-free market” intervention. I am simply asking for business leaders to simply be leaders and stand up and defend true capitalism.
The business press is awash in books on leadership. One of the most important aspects of leadership is doing the right thing when under pressure to make the numbers, and focus on the wealth of the shareholders. Business leaders should constantly be asking themselves; “does this product or service really benefit the consumer and society”, not simply, “will it increase earns per share”.
Just because something is legal does not mean it is right. Just because you can sell something, does not mean the world will be a better place because you produce it. Have some backbone and lead. Say, “I could, but it’s not right, therefore, I won’t”!
My favorite quote and a personal guiding thought is: “Manners are more important than Law”.
Respect the consumer, the economy and the core tenet of capitalism. Do what is right.
October 29th, 2007 at 13:57
The article on Defending Capitalism hits an important truth of our present society. We seem to have developed into a “if it feels good, do it” or “if it good for me, it is good” society. Freedom is great, but it comes with responsibility.
If you look at two of the largest industries that we have in the US today, Trillion Dollar Industries, they seem to have forgotten that they have a responsibility to their customers. The two Industries that I refer to are the Food Processing and Sickness Industry (Health Care).
We do have an epidemic today in our country. We are getting fatter and suffering from many aliments that are unnecessary. The source of the problem is nutrition or the lack there of in our lifestyle. Instead of addressing the source, we medicate it. Why is the problem growing so fast, because it is very profitable.
I want to be clear, I am not against profit. Forward thinking and the motivation for profit is what drives innovation. Without innovation, we would not have the freedom or lifestyle that we have today. It is, however, critical that we do not pursue profit at the expense of the very people we should be trying to serve.
If you serve others and do what is right, you will have profit. Not only can you win in the short term, but you can have something that will be sustainable. Let’s get back to focusing on the big picture and not the quick win.
January 7th, 2008 at 09:23
As we all know business ethics discourse does not resonate very well in executive circles so I will keep this short and sweet. Ultimately we’re responsible for what we sell and how we sell it. We’re responsible for the effects (and the side effects) of our actions. It is 100% our decision. Whatever the decision is, you need to own it. If you can’t look that decision to market a product or service in the mirror, market something else. It’s that simple.