Sydney, Monday, July 30, 2012
Thanks for inviting me to be your discussion starter tonight. I’m not sure how much help I’ll be in your continuing exploration of the hypothesis that ‘there are identifiable values that contribute to the resilient prosperity of a culture’, but I’m happy to give you some observations to spark off - even if they convince you that I’m not on about what you’re on about.
On the question of business ethics, let me just say my strongest feeling on the subject is that businesses ought to be built on the principle of treating people well: producing a product you can be proud of, giving customers value for money, doing the right thing by suppliers and shareholders, and treating employees well. This means developing a high degree of mutual trust and loyalty between management and workers, putting effort into making employees’ work satisfying and fairly paid, giving them a degree of autonomy in their work and using these things - rather than KPIs and performance pay - to keep workers motivated, hard working and committed to the company’s objectives. I’m a great believer in emphasising intrinsic rather than extrinsic motivation: doing things well for their own sake, not for any external, monetary or status rewards good work may bring. I really believe it should be a high priority to make work more satisfying. I don’t believe in treating ‘em mean to keep ‘em keen. That’s not ethical - and it’s certainly not Christlike.
Much as most people hate change, this doesn’t mean aiming for a workplace that never changes in response to advances in technology, changing customer needs, competitive pressures (or a continued high exchange rate). Businesses must change, and sometimes - as now for many industries, including mine - change needs to be rapid and sweeping, with a lot of people losing their jobs. The ethical position is not to avoid change or even minimise it, but to bring it about in a considered and reasonable way, with never-ending explanation of why it’s necessary, consultation about the best response and considerate treatment of people who lose their jobs or have their jobs changed or moved. The ethical position is not to bluntly assert management’s right to manage without adequate explanation, and pull on a stand-up fight with the unions (or to ride roughshod over workers who are un-unionised). I believe there’s growing evidence that running businesses in this pro-people way leads to higher productivity and profitability. But even if there were no such evidence it would still be the right thing to do.
The other thing I wanted to say is to propose the notion of ‘balance’ as one of the values that contributes to resilient prosperity. A closely related value or virtue in my mind is ‘self-control’. One of the most useful ideas in economics is the notion of trade-offs and optimisation (rather than maximisation) leading to balance or equilibrium.
The world consists of many desirable, but conflicting, objectives. They’re in conflict mainly because of opportunity cost: we never have sufficient resources to satisfy all our desires, so we’re forced to choose. The world also consists of useful but rival means to achieve our objectives; again, we have to choose. It’s rarely the case that best outcome - the one yielding the most utility or satisfaction or prosperity - comes from choosing all of one and none of the others. The best outcome almost always arises from some combination of the conflicting objectives or the rival means to achieve objectives. This is what puts much of the challenge into life - including business life: finding the most desirable, optimising combination of conflicting objectives. We may profitably spend much of our lives seeking to improve the trade-offs we face. And the best trade-off may change over time as our preferences change and the environment in which we make our choices changes.
So the thing we’re seeking is the right balance. For many years my motto as a commentator has been Hard Head, Soft Heart. I want to think carefully and logically about how the world works and what I want out of life. But just as I don’t want to lead a life driven by instinct and emotion, so I don’t want to lead a life devoid of emotion. Emotion is very important; it’s emotion that makes us human. Take away emotion and we become calculating machines. We need emotion because it determines our preferences and goals - our ‘ends’ - but we need rationality, logic to determine the most efficient means to achieve our ends. So I think hard head, soft heart ought to be everyone’s motto. After all, who wants to be soft-headed or hard-hearted?
Such a motto helps us get the right balance in our lives. And one of the big risks and failings in life is lack of balance - going overboard in one direction or the other. Market economies - and the theory of market economies, conventional economics - tempt us to go overboard in the direction of self-interest, depersonalisation and materialism. Market economies are motivated by - powered by - self-interest, they encourage us to be terribly conscious of our needs and emotions, but to avoid thinking about the needs and emotions of the people we deal with, many of whom we don’t know. Market economies and conventional economics, with their focus on efficiency, tempt us to prioritise our material needs at the expense of our social, relational and spiritual needs. The material aspect of our lives is very important - no one could deny it - but there are other aspects of our lives that are also important. And, particularly for people in a country as affluent as ours, I find it hard to see how we can make increasing our material standard of living such a high priority - personally and as a government objective. That’s why I trust your definition of ‘prosperity’ is wider than just material prosperity. It needs to take account of the state of the natural environment (still material), but also the treatment of people: the fairness with which material prosperity is distributed, and the extent to which the pursuit of material comfort comes at the expense of people’s relationships and their spiritual life. For what does it profit a man if he gains the whole world and loses his own soul? True prosperity involves trade-offs, optimisation and balance.
I want to finish with an observation about a paradox at the heart of the market economy: for an individual to do well in that economy, he or she has to put a great amount of effort into resisting its blandishments. Its advertising and other marketing tempt us to eat too much, drink too much, spend too much and save too little, borrow more than we can handle, and sit round being entertained when we should be working, studying or exercising. Success in a market economy is reserved for those people who exercise all the virtues advertisers urge us to set aside: disciple, restraint and the ability to delay gratification - in short, self-control.
Don’t you think it’s strange that to succeed in a capitalist economy you have to be so good at not doing what the capitalists urge you to do? And that’s just material success. Making sure the temptations of modern life don’t damage your relationships with your spouse and your family - or with God - requires an even higher level of conscious effort.
