Business vs. Free Markets
A new Savanta ComRes opinion poll from the Centre for Enterprise, Markets and Ethics makes some interesting reading. They asked members of the public, as well as church and business leaders, what they thought about business and its contribution to human welfare. The results are disturbing, especially if you support free market economics.
Do people trust businesses? Not much, it turns out, though the level of trust in small and family-run businesses is very much greater than that in large companies in general and multinationals in particular.
When asked if business should be taxed more, 49% of the public and of church leaders agreed. But remarkably, 60% of the business leaders thought that businesses should be taxed more. Likewise, when asked if business leaders were paid too much, 64% of the public and 75% of church leaders said yes, but so did an amazing 70% of business leaders.
When asked if they thought profitable businesses were incompatible with societal happiness, minorities of the public (37%) and church leaders (20%) agreed, but a clear majority of the business leaders (60%) thought profit and happiness incompatible. And the larger the business, the bigger the majority was.
Business leaders think they are paid too much, don’t contribute to human happiness and should be taxed more — what’s going on here?
The report’s authors do not speculate, but I’m happy to. It could be that large businesses have become large bureaucracies. So, executives do not think of themselves as running an enterprise that brings benefits to everyone by delivering great products and services, but see themselves as mere functionaries in an institution that just rumbles on making them money. Small and family business owners have to be very aware of the needs and demands of their customers, and of how much they love or hate those products and services. As owners of the business, their fortune depends on it. But company legislation has taken shareholders, the owners of big businesses, out of the management of those companies and handed it over to an executive class.
That is why it is no good saying we have to defend capitalism. That would just be to defend the very distorted form of capitalism that our political system has created. And people have already rejected that. We could do a lot to restore faith in capitalism, though, by getting rid of the distortions.
I’ve already mentioned the power of executives over shareholders. We also tax firms in perverse ways that promote the growth of big companies, but make life much harder for small companies and pretty much kill off family firms. That is, the tax system creates the sort of capitalism that people distrust and stifles the sort they trust. Over-regulation of things like banking once again promotes gigantism and strangles competition — big firms can afford big compliance teams and small ones can’t. In fact, big firms rather like regulation: they say it helps keep markets clean and sound, but in fact they know that regulation will kill off smaller, nimbler competitors.
I don’t think we free marketeers should be too downcast about these poll figures, therefore. People will trust capitalism if it is dominated by diverse customer-focused firms rather than a few big oligopolies. Undistort capitalism, and they will come. Our job is not to defend business as it is, but free markets as robust as they can be.