Monday, January 30. 2012
Capitalism and the free market economy are, as anyone can tell you, based on some interesting assumptions. They assume, for example, perfect information and that everyone makes dispassionate, informed, rational decisions. Both of these are demonstrably (and frequently demonstrated again and again) untrue. But that isn't the fallacy that I wish to address today.
Free market economists, along with most other people, use the idea of success in the free market as a measure of goodness. Companies that make a profit are, de facto, good ones. We can argue this - charities aim to do good work and don't make a profit, is a company that makes a profit selling riot control devices to a country that uses them to suppress its population's legitimate protests good? - but by and large it's not a terrible measure of a company.
The problem comes with the most widely accepted, historically at least, extension to this. If a good company makes profits, more profits makes for a better company. This, it seems to me, is the fallacy of the 1-percent.
Apple, by this standard, is clearly the best non-energy company in America. While I think Apple is a good company, that's not based on their profits for the quarter and the obscene amount of money they've got lurking around.
Similarly, although I'm invested enough in the idea of the government providing universal health care that I'm fundamentally opposed to private health care companies, I can accept in other countries they exist and can theoretically provide good care. I am, however, inclined to the opinion that the best private health care company could well be the one with the smallest per capita profit, not the biggest profit - a company that I pay to care for my health probably needs to make some profit from my payments but I want the payments I make to mostly be used to cover my health care thanks very much.
Although I'm not sure that global outsourcing is necessarily bad - shipping finished products is usually more sensible than shipping raw materials for example - if I live in a city where the biggest employer has just shut down the factory to send the work abroad I'm certainly less sanguine about it.
Moving call centres for customer enquiries abroad rarely seems to work well, except in terms of the bottom line. Too many queries and calls end up frustrating the customer with problems with accents, poor connections and the like. As my deafness increases, this is becoming more and more of an issue for me - even though when I was younger I rarely found the accents to be a problem. It is certainly enough of a problem that one bank and an ISP both advertise "100% UK based call-centres" as a positive.
Of course counting "goodness" by other means is hard. Counting the quarterly balance is easy - there's a single figure to look at and think about. Considering if it's more good to have short supply chains for raw materials and longer chains for finished products (good from a green as well as a financial perspective) or to have more jobs locally is much harder. Measuring happiness, wellness and the like, and considering how your actions, your company's actions if you are in a position to make those choices, affects that - definitely hard. But, almost certainly worth doing.
Don't believe me?
Well, I'd like to see some hard numbers (but you have to buy the book), and I'm not naive enough to consider these graphs prove causality - but they are rather interesting. It rather strongly suggests that while making a profit might be good, making a profit that is more widely shared is almost certainly better.
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