Doing Virtuous Business
by Theodore Roosevelt Malloch
Encounter Books; 150 pp, $21.95
THE PRIVATE SECTOR corporation is so ubiquitous in our economy that it's easy to overlook the vital role it plays. Yet these "little republics" are the essential wealth-creating constituents of free economies and free societies in the West.
The philosophy and spirit that animates private sector companies therefore has an enormous impact on all of civil society. The more companies strive to treat their employees and customers with justice and respect, the less need or excuse government will have to interfere with their liberty. As the great philosopher of freedom Edmund Burke said: "Men are qualified for civil liberty in exact proportion to their disposition to put moral chains on their own appetites...Society cannot exist unless a controlling power upon the will and appetite is placed somewhere; and the less of it there is within, the more there must be without. It is ordained in the eternal constitution of things that men of intemperate minds cannot be free. Their passions forge their fetters."
Elevating the spiritual values that founders and employees invest in their companies is the goal of this important book by Theodore Malloch. The nub of his argument is that moral and economic values are not in competition. In the business context, to pursue the first is to obtain the second--to the great benefit of society.
Malloch begins with the concept of "social capital," the accumulated social resources inherited by each new generation from its predecessor. He demonstrates that the same freedom that produces the capitalist economy also produces the social capital it needs to run successfully. And one of the most creative ways to build social capital is by pursuing free enterprise as a calling, rather than merely to make money.
Theodore Malloch's thesis is that religious faith and spiritual commitments change business for the better. The faith commitments of founders and employees gives businesses an asset he calls "spiritual capital." It can arise from a wide variety of faith traditions, and provides a significant advantage to the firms that develop it.
Spiritual capital, he contends, has an economic function and potential comparable to other forms of capital. "When people join together in an enterprise they create a new person, the firm itself, which is something greater than the sum of its parts. It too has a soul, and if its members honor God, then it too honors God. If its members aim to do good, it too aims to do good."
Malloch also conducts an enlightening debate with the disciples of Karl Marx and Charles Darwin. The full title of Darwin's 1859 book is On The Origin of Species by Means of Natural Selection, or The Preservation of Favoured Races in the Struggle for Life. In 1860 Marx wrote Friedrich Engels "Darwin's book is very important and serves me as a basis in natural science for the class struggle in history." The Marx/Darwin focus on struggle provides the foundation for the leftist critique of businessmen as greedy predators who exploit workers in the zero-sum struggle for scarce resources that only the all-encompassing state can distribute justly.
Malloch argues that thanks to the Austrian and Chicago economists, we can now see that cooperation and trust, rather than struggle, are the essential attributes of capitalist society. "The overthrow of the labor theory of value, and the recognition of the role of the entrepreneur and risk-taker, and the development of capital theory have all helped refute those old and resentful pictures of capitalism . Enterprise is a cooperative venture, founded in contract, in which rewards are distributed according to the risks undertaken and the responsibilities incurred, and in which every member has an interest in according to others their due. In other words, justice is the internal binding principle of an enterprise, and where it is absent the enterprise is in jeopardy."
A classic example of the falsity and irrelevance of the socialist critique is America's venture capitalists, who insist that every employee of the growth companies they launch receive stock options or grants of stock. Company-wide employee equity plans, which transform all employees into co-investors with the founders, are America's secret weapon in global competition--and blasphemy to Marxists.