Singing the Praises of ‘Big Business’

by Matthew Bishop – Book Review for The New York Times.

BIG BUSINESS
A Love Letter to an American Anti-Hero
By Tyler Cowen

Anti-business feelings in America now run so strong that even some leading bankers and hedge-fund bosses want capitalism reformed. Socialism (of some kind) is espoused by a growing number of Democratic politicians. A Harvard University study found 51 percent of 18- to 29-year-old Americans do not support capitalism. The business bashing is not solely from the political left; Donald Trump has tweet-attacked plenty of companies for offending his populist instincts. Voices demanding higher taxes and tougher regulations grow louder. Echoing the vigorous trust busting of the Progressive era, there are calls to break up Facebook and Google, the increasingly dominant tech platforms, while the titans of Silicon Valley are rebranded as 21st-century robber barons, heirs to what the Progressive president Teddy Roosevelt lambasted as “malefactors of great wealth.”

Amid so much criticism, who would dare dispute that there is something rotten about the state of corporate America today? Enter Tyler Cowen, an economics professor who has written a determinedly positive book about business that he subtitles “A Love Letter to an American Anti-Hero.” Cowen did not become one of the world’s most-read bloggers on economics without understanding the value of a well-timed contrarian blast. He showed this to great effect in 2011 in a best-selling e-book, “The Great Stagnation,” arguing that the rate of increase in median income had slowed since the early 1970s as a direct consequence of a falling rate of innovation in the American economy, which was thus likely to continue to struggle to grow for the foreseeable future. Now he is back “to speak up for business, to persuade you that it deserves more of your love and less hate.”

If you are hoping for a billet-doux to set your heart aflutter, remember that the author is a practitioner of the dismal science; the romance in his love letter is less Harry Met Sally than Demand Meets Supply. Still, there is no shortage of passion from Cowen. His beloved is the source of “most of the stuff we enjoy and consume” and gives “most of us jobs.” Business may not be the face that launched a thousand ships, but it built them; indeed, he enthuses, without business we would not have ships, trains and cars; electricity, lighting and heating equipment; most of our food supply and lifesaving pharmaceuticals; clothes for our children; telephones and smartphones; books; and access to the world’s online information. Cowen also argues, persuasively, that America tops the world in the quality of its corporate management — if Chinese firms were managed equally well, they would be up to 50 percent more productive. American business is also the leading innovator globally in many areas.

So, as Cowen poses in his concluding chapter, “If business is so good, why is it so disliked?” He dismisses the familiar complaints made by critics of corporate America: that it is too corrupt and fraudulent to be trusted; that greedy executives are paid too much; that it hurts consumers by wielding too much monopoly power; that cronyism gives it too much influence in Washington; and so on.

Some of his defense of business is more nuanced and less certain than his positive headline message suggests. He devotes a chapter to refuting accusations that Big Tech companies are evil, only to confess to worrying about the threat they pose to personal privacy, which he fears will get dramatically worse as facial recognition and voice-recording technologies become ever more ubiquitous. (Still, perhaps business will rescue us even from this, he reassures himself: “In the future privacy-protecting technologies will outrace privacy-denying ones” — well, maybe.) He argues that business should be trusted more, despite so many high-profile scandals, because it is less prone to lying and cheating than governments or nonprofits, or indeed than regular people going about their everyday lives. This could be read not as a ringing endorsement but as damning with faint praise.

For Cowen, the real reason business is so unpopular, despite all it does for us, is that we humans tend to anthropomorphize companies, turning corporations “into people in our minds, and also in our hearts” (and even writing love letters to them). We take on this illusion, that business really cares about us, “to make our lives feel bearable and to help us feel more in control.” Companies play along in this charade, because it pays them to do so, branding themselves with human characteristics like being friendly and listening to our concerns. Inevitably, we feel let down when they turn out instead to be “abstract, sharklike legal entities devoted to commercial profit.” In reality, Cowen says, “we, as consumers or workers, are never really quite as much in control as we might like to think. And thus we are perpetually disappointed in corporations.” Thus writes a man who knows, deep down, that his love is doomed to be unrequited.

Cowen’s explanation is not particularly convincing. Nor is his two-part advice for clearing the current atmosphere of distrust. First, the public should accept that business will always fall short of our unreasonably high expectations, and get over it. Second, rather unexpectedly from a member of the famously libertarian and pro-capitalist economics faculty at George Mason University, he wants business to try harder at being socially responsible.

In 1970, The New York Times Magazine published an extraordinarily controversial article by Milton Friedman, titled “The Social Responsibility of Business Is to Increase Its Profits.” At the time, this shocked even much of corporate America, never mind the regular New York Times reader. The article was intended to defend business against heavy-handed government regulation, including of prices and wages, that threatened to squeeze dynamism and innovation out of corporate America. Yet over the years, as deregulation and market liberalization spread across America and then the world, Friedman’s words were, I believe, twisted by many investors and business leaders into a simplistic justification for doing anything that increased profits — and their pay packets — regardless of the consequences for society and the planet.

Risking the ire of his colleagues at George Mason, Cowen rejects Friedman’s definition, arguing instead that the “social responsibility of business is to come up with the magic of a vision that will help us trust it more, whether as consumers or workers.” The great Nobel laureate’s article reflected “significant ideological blinders,” he says; “goals other than simple profit maximization often end up boosting both business and social profits.” For Cowen, business at its best is a “fundamentally ethical enterprise” and (preserving his libertarian credentials by citing Ayn Rand in support of it) “can be a vehicle for the achievement of heroic goals.”

This would have been a far better book had Cowen focused more on how to overcome the negative consequences of the spread of the Friedman Doctrine, which I believe has clearly helped socially irresponsible, greedy, unheroic business leaders flourish at the expense of the heroic kind. As a result, the rise of corporate profits to historic highs as a share of America’s G.D.P. has been due not just to the much needed productivity improvements and innovations celebrated by Cowen, but also to shortsighted, selfish decisions that have harmed society and heated up the planet.

Happily a new generation of more socially responsible business leaders is emerging, like Marc Benioff of Salesforce, the Chobani founder Hamdi Ulukaya and Indra Nooyi (until recently at the helm of PepsiCo). If only Cowen had shown less unconditional love for corporate America as a whole and instead concentrated on its best bits, and on what needs to be done to ensure that being ethical and heroic becomes business as usual. That “love letter” would have left most readers hopeful that there might yet be a Happily Ever After.