How Business is Damaged

Commerce and enterprise are economic necessities, while productive work is also a psychological and spiritual need. Working to earn a living keeps us in contact with reality, enables us to be creative, helps us know ourselves and keeps us relating to others.

But work and commerce are never allowed to flourish naturally, because the presence of hardship and suffering from human or natural causes activates feelings of entitlement (leading to rage and violence) and compassion (leading to guilt and intervention).

The urge to have our wishes, preferences and impulses gratified, without concern for reality, leads to serious temporary distortions of markets and even permanent dysfunctional institutions. Either there is a ● loss of focus on profitability and business is exploited for social ends; or business is ● undermined by good intentions.

Losing Focus on Profitability

Market-centred people are incapable of losing the focus on profitability.
Kinship-centred people put the family before the employer, so a family crisis may produce a business crisis. In a family-controlled business, nepotism may lead to senior positions going to ill-equipped family members.
Power-centred people prefer corrupt practices to hard work. Cronyism may substitute for competitive tendering. Rivalry about dividing the cake may displace efforts to increase profits. Calculated criminality involves assigning oneself the right to obtain money or goods dishonestly or by force, for example by insider dealing, fraud, extortion, theft, &c.
Cause-centred activists may use their job within a firm to pursue their own cause, thereby deliberately or perhaps inadvertently subverting the business.
Community-centred people often advocate creating artificial or make-work jobs, to reduce levels of unemployment that are felt to be unacceptable.
Perspective-centred advisors see the wider social ramifications of business and market manipulations and may devise complex regulations and subsidies for vocal and influential groups. Once in place, these distortions become the status quo and difficult to reverse.
Reality-centredness: The importance of profitability as a principle is affirmed together with an insistence that, in an extremity, greater weight may temporarily need to be given to other principles in order to cope.

The Cost of Good Intentions

Market--centred people prefer to compromise to maintain social peace. They tend to accept the status quo, acquiesce to public pressure and keep within the law despite the inevitable costs.
Kinship-centred people desire self-sufficiency and their suspicion of the state leads to a tendency to withdraw from the official economy.
Cause-centred crusaders who are socially conscious (e.g. for more safety, for less pollution, for clearer labelling) invariably generate costs for businesses.
Power-centred entrepreneurs target human desires that are usually restricted by law, for example drug-dealing, prostitution and gambling. Their earnings, when laundered through lawful businesses, provide them with an unfair advantage.
Community-centred policy-makers seek to redistribute wealth via taxation. This may reach levels that inhibit the entrepreneurial spirit. Similarly, egalitarian policies for the workplace often interfere with the efficient running of a business and actually generate unemployment.
Perspective-centredness: Regulations are imposed not only to ensure fair operation of the market (which is unavoidable), but also to protect the public from being misled or harmed. Such protective measures invariably generate increased overhead costs.
Reality-centred individuals advocate humanitarian ideals and note violation of values in ways that reveal the limitations and shabbiness of much everyday commerce. This can be a costly distraction for particular firms, as well as bringing business into disrepute.

Return to the overview of business and markets.

Originally posted: July 2009