Saturday, March 29, 2008

Misuse of Adam Smith's Name Again

On Jim and Joe’s Authenticity Journal (HERE)

Doing Good by Doing Well’ by Joe Pine quotes The Economist: ‘How good should your business be? Ethical Capitalism’

Some people complain that this sort of “good corporate citizenship” is merely another form of self-interest. Correct — and good. That’s the way capitalism works. Adam Smith was right: Businesses have done more good for the planet by pursuing their own self-interest than any other earthly entity.’

‘A dangerous myth is gaining ground: that unadorned capitalism fails to serve the public interest. Profits are not good, goes the logic of much CSR; hence the attraction of turning companies into instruments of social policy. In fact, the opposite is true. The main contribution of companies to society comes precisely from those profits (and the products, services – experiences and transformations too! – salaries and ideas that competitive capitalism creates). If the business of business stops being business, we all lose
.’

Comment
Generalisations like those above can be misleading because they ignore the defects in the perfections claimed in them, enabling them to make extravagant claims.

Adam Smith was right: Businesses have done more good for the planet by pursuing their own self-interest than any other earthly entity.’

It’s not quite what Adam Smith said. His main criticisms of a certain number of ‘merchants and manufacturers’ are well known, specifically their proclivity for creating monopolies, for their ‘narrowing the market’, for their lobbying for tariff protection, and for their misrule in India. Hardly rallying cries for them ‘pursuing their own self-interest’.

Adam Smith supported competition in markets and was not slow to point out that the worst interferers in markets and the most dogged opponents of competition were 18th-century businessmen and their allies among legislators and those who influenced them.

The problem with statements like ‘Businesses have done most good for the planet’ that this ignores those businesses that have pursued ‘their own self-interests’ and who have undone much of the good that competitive businesses could do for the planet if they represented the overwhelming majority of their ilk.

The sentence ‘If the business of business stops being business, we all lose’, would have needed severe qualifications in Smith’s day. Can we really say that it does not require similar qualifications today?

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