The “Social Benefits” of the Private Sector

It seems that the world of business has started to become alarmed by attacks on it from people who should know better.  We expect it from the likes of Vince Cable — wise old owl turned headless chicken.  But we expect better from the Conservatives.   Yet Cameron joined in the feverish rhetoric against the bankers.  OK, the bankers behaved unwisely, but let’s not forget that the current crisis started with politicians and national treasuries, not with commercial banks.

Now Cameron has made a speech criticising the “snobbishness” that leads to mindless criticism of the private sector.   I’m not sure it’s snobbishness — more ingrained socialist prejudice, and a hatred of the profit motive (that great driving force for progress and prosperity).  The result?  With the Prime Minister blowing hot and cold, the Captains of Industry hardly know what to think.  Never mind — at least Cameron’s latest offering was positive, and as the Good Book says, there is joy in heaven over one sinner that repenteth.

Yet examine Cameron’s speech, and it’s clear he sees the social benefits of business in terms of senior executives going out into the “real world” (as if the Boardroom and the factory were not the real world!).  They should be meeting with hoodies, mentoring deprived young people, renovating youth clubs, partnering with universities on research and on start-ups, promoting apprenticeship schemes, perhaps even sponsoring the arts (though of course the arts are a bit suspect and élitist).

Now I’m sure all these activities are excellent and commendable.  If companies choose to undertake them as part of their corporate responsibility programmes — or more cynically as corporate PR — that’s fine by me.  But it’s not what they’re there for.  It’s not their primary purpose.  It’s not on their mission statement (or shouldn’t be).  It’s not what the markets will judge them by.

Let’s not be ashamed to admit that the main function of any business enterprise is to use assets productively to generate a return on capital employed.  Any organisation which fails to do this over time will go bust, and rightly so.  This is Schumpeter’s famous “creative destruction”, which allows assets to be released from a loss-making situation, and gives others the opportunity to employ them better.

In the course of delivering a return on capital, just about all companies need to employ people, and just about all companies need to produce a product that consumers out there will buy, and keep on buying — and this means a product or service which is attractive, reliable, of acceptable quality and value.  Let’s never forget that the end purpose of any production process is consumption.  If the consumer doesn’t buy it, you’re dead.

So a successful enterprise first of all delivers jobs, and to sustain its workforce it must offer competitive employment terms, and benefits, and training, and so on.  Secondly it delivers products or services that consumers (or intermediate processors) want to buy.  Third, it delivers a return on capital, which underlies saving and investments and pensions.  That’s where our unit trusts, and ISAs, and pension funds are (and we had the best pensions in Europe until Chancellor Brown decimated them.  Thanks a bundle, Gordon).

Social benefits?  Aren’t jobs and products and services and investment opportunities “social benefits”, for heaven’s sake?

As the Good Book didn’t quite say: “Seek ye first a decent return on capital employed, and all these things shall be added unto you”.

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3 Responses to The “Social Benefits” of the Private Sector

  1. maureen gannon says:

    Cameron runs with the hare and chases with the hounds, he is destroying our country in his wheeling and dealing ,and survives by divide and rule. the sooner the man is no longer in power the better.

  2. Phil Richmond says:

    Roger I think you realise that Cameron is not a Conservative, he lied to get where he is now, his mate Osborne is completely clueless and the country is continuing to sink without trace.
    I pray someone within the party is planning a coup d’etat.

  3. Sarah says:

    As usual it’s somebody else fault, let’s make the most successful (and remote) take the slack up (even more than they already do) to allow those who don’t (and hardly ever have) feel just in their misguided ways.

    Cameron will never win the next election, he’s such an arse.

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