(Note: Mackinac Center Senior Legislative Analyst Jack McHugh recently participated in a campus event where he debated the head of a university "sustainable enterprise" program on the subject of "corporate social responsibility." What follows are excerpts from McHugh's remarks.)
In a "Christmas Wish List" published last December by a so-called "sustainable enterprise" institute located within one of our major university business schools, item-one was that companies create "real social and environmental benefits in return for the privileges and protections of incorporation."
That's an odd demand. Thanks to incorporated enterprises pursuing individual self-interest under the free-market system described by Adam Smith, every member of our society has more comforts and conveniences, broader horizons, greater mobility, more leisure time, improved educational opportunities, better communications, miraculous health care, access to arts and music, safer and more varied foods and countless other blessings.
The wealth generated by free-market capitalism has given us lower infant mortality, less poverty, longer life expectancy, better health at all ages and more opportunities for women and minority groups than any other society in the history of our species.
Before this system took hold — and in places in the world where it has yet to — 90 percent of the population lived at bare subsistence level. Where this system prevails, anyone not consumed by destructive habits can enjoy a standard and quality of living that our recent ancestors could not have even dreamed of.
Does that institute, whose outlook typifies most of the so-called "business ethics" departments entrenched in our nations' college business schools, not think that all those blessings are "real social and environmental benefits?"
We can enjoy those benefits only because entrepreneurs can pool the savings of many people, allowing them to acquire and develop on a large scale the tools and techniques that make these things possible.
Incorporation gives investors two assurances, without which this wouldn't happen: It means the enterprise won't end when the capitalist quits or dies; and if its managers do something evil, the investor can only lose the money he invests, not his freedom and all he owns.
These are the "privileges and protections" for which this particular institute wants to extract an additional pound of flesh, by making corporations behave in ways contrary to their self interest but in keeping with its political agenda. A rational person might conclude from that list of benefits that society has made a pretty good bargain already.
Indeed, going for more now is like a mafia loan shark who, when a borrower starts making money, wants a piece of the action. He wants to take over the firm.
The attitude represented by that view is typical of most of the so-called "business ethics" programs in the modern academy, including ones that include the new buzzword "sustainability" in their title. They really aren't about creating useful ethical guidelines for people in business. In reality these are political organizations pursuing political goals. "Business ethics" is just a piece of street theater where they can promote a broader political and ideological agenda.
That agenda is statist in that it fervently believes, against all evidence, that complex human needs can be met by creating more government bureaucracies, regulations, wealth redistribution, economic central planning, etc.
The agenda is stasist because, also against all evidence, it believes that in the future, innovation and human ingenuity will no longer keep growing our economy and improving human well-being, as they have for the past 200 years. Believing that the economy is more of a "fixed pie" than a growing one, the focus is on redistributionism.
It also has a quasi-religious component that condemns self interest as a morally valid motivation for human action. Implicit in these entities' policy preferences is a belief that self-interest is at best amoral, if not immoral, notwithstanding the manifold blessings that self interest-motivated enterprises have given us.
These tax-supported entities promote their agenda in two ways: First, they publicize it by "scolding" businesses, condemning them for behaving honestly in ways conducive to their own self interest. Second, they lobby for laws that increase the extractions, intrusions and manipulations of government in the lives of the people and the economy, including wealth redistribution.
Let me finish with some remarks about that new buzzword within these circles, "sustainability." When you cut away all the weeds this comes down to using less energy, in particular less fossil fuels.
That Christmas "sustainability" wish list I referred to at the opening included adopting carbon "cap and trade" schemes, imposing a ban on so-called "vampire appliances" (ones that use electricity even when they are not operating), and mandating that 20 percent of the food served in school lunch programs be from "local" farmers.
Besides all being about energy, these have something else in common, too. They call for heavy-handed government interference in markets and the lives of citizens. The primary effect of the big item on that list — carbon cap-and-trade — would be to increase the power of politicians and enrich rent-seeking special interests.
So here's my question: If reducing energy consumption is what they really care about, why don't these "sustainability" scolds instead just endorse a simple carbon consumption tax? If such a tax was made revenue-neutral by reducing personal and corporate income taxes and payroll taxes by the amount the new tax raises, I wouldn't even oppose it.
If a sufficiently high carbon tax were gradually phased-in over a couple decades, no mandates, prohibitions, or government central planning would be needed to reduce energy consumption. The tax would align the incentives of businesses and consumers with the stated goal of phasing out the burning of fossil fuels. Self-interest would make every motorist, householder, manufacturer and service provider into a conservation maniac, and would drive innovative entrepreneurs to provide non-carbon energy sources and cost-effective conservation tools.
Under such a system, winners and losers would be selected by providing value in the marketplace and finding ways to use energy more efficiently. We saw last summer how fast behavior changed when gas rose above $4 per gallon, so we know this would work.
Personally, I think trying to artificially accelerate the transition to a post-fossil fuel economy is foolish. To avoid an argument here I'll "pretend away" our 500-year supply of coal and focus on just oil: Sometime over the next century depletion will make it no longer cost effective to burn what today is industrial civilization's primary fuel.
Does this mean "we're all gonna die!" or that our descendents will revert to the hardships and narrower horizons of our pre-industrial ancestors?
Absolutely not. The history of profit-driven capitalism informs us that as this happens, entrepreneurs and investors motivated by self interest will innovate and discover substitutes, most likely by creating an all-electric economy powered by breeder nuclear reactors, possibly big solar heat concentrators covering thousands of square miles of deserts, and possibly geothermal sources. The transition will come about on its own, "organically," without any public policy interventions now or in the future.
But if you're in a hurry, a carbon tax is the only honest, effective, transparent, and, if truly revenue-neutral, non-economically destructive way to make the transition happen sooner rather than when needed.
Here's what a revenue-neutral carbon tax wouldn't do, however: Unlike carbon cap-and-trade schemes it wouldn't grow government, empower politicians and bureaucrats or enrich special interests who make their money through political favor-seeking rather than by providing value to consumers in the marketplace.
It also would shrink the field for statist corporate scolds wanting to grow government and delegitimize self-interest as a valid motivation for human action. So don't expect to hear very much about carbon taxes from so-called "corporate sustainability" advocates whose real goals are actually something very different.
Jack McHugh is senior legislative analyst at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.
The Mackinac Center for Public Policy is a nonprofit research and educational institute that advances the principles of free markets and limited government. Through our research and education programs, we challenge government overreach and advocate for a free-market approach to public policy that frees people to realize their potential and dreams.
Please consider contributing to our work to advance a freer and more prosperous state.