by Barry A. Liebling
If you appreciate that individual liberty is essential to human flourishing you understand that business activity must create value, be honest, and all dealings should occur by mutual consent. The use of coercive force to achieve business objectives is out of bounds and is criminal.
To what extent is it easy to communicate this to the general public? It depends on the specific circumstances. Sometimes nearly everyone can tell when someone is engaged in bad behavior. But there are cases where horrendous actions are viewed as acceptable if the perpetrator is using the government as a weapon.
I teach management at a graduate school of business in Manhattan. The location of the university is relevant because the overwhelming majority of New York City voters have for many years supported candidates of the left. Occasionally, a republican is elected, but when that happens it is newsworthy.
Over several years I have conducted an experiment with my MBA students where I ask them to evaluate three different scenarios which describe tactics for competing against a rival’s business. For each situation the students are instructed to label it as acceptable or not acceptable and to explain the reasoning behind their judgment.
Here is the first scenario. Using a recipe you developed yourself you bake chocolate chip cookies and open a store in midtown to sell them. Your business is functioning well, and you are turning a profit. One day you notice that a new store will soon open one block away, and it will sell cookies that are similar to yours. You worry that the new store will take business away from you.
You contact the owner of the new store and say that there is not enough demand in the neighborhood for two chocolate chip cookie vendors. You assert that another chocolate cookie store would create “destructive competition.” You tell the owner that you were here first, and the new store should find a location that is far away from your established business. Furthermore, you inform the owner that if the new store opens close to yours you will confront and block customers from shopping there. You threaten to harass the owner and anyone who works at the new store, and you will get physical if verbal badgering does not work.
When I present the first scenario every student agrees that the behavior is horrendous and entirely unacceptable. They say that I am describing the conduct of a thug. A large proportion of the graduate students point out that threatening the proprietor of a new business is illegal, and anyone breaking the law is surely in the wrong.
It is noteworthy that for many of my graduate students the crucial element in this example is the law. Of course laws change all the time. Sometimes what is legal and what is not legal corresponds to what is right and what is wrong. But in a lot of cases laws are not legitimate. And it is common for actions to be technically legal but unquestionably vile. My advice is that when you judge the ethical status of behavior you consider what is acceptable regardless of what specific laws are in effect.
Let’s move on to the second scenario. Everything is the same, but this time you do not contact the owner of the new business. Instead, you hire someone else to intervene for you and menace the proprietor with the threat of bodily harm.
Again, all of my students recognize that hiring a hoodlum is utterly dreadful. Some say it has exactly the same problem as the first scenario. They argue that there is no moral difference between behaving badly or hiring someone else to do your dirty work. Some point out that the second scenario is what gangsters do when they send their goons out to victimize citizens. Others opine that it is worse than the first situation, because the perpetrator does not have the courage to do it alone. And there are always students who point out that the action is illegal.
At this point I present the third scenario to my students.
When you notice that a competitor is starting a business near yours, you go to officials of the local government. You explain that you have a business that is a credit to the community and is paying taxes to the city. You complain that an interloper is attempting to open a similar business one block away from yours. You assert that there is not enough demand for chocolate chip cookies to support two stores in the immediate vicinity. Since you were operating first, it is only fair for the government to insist that the new store locate somewhere far away.
My description of the third scenario elicits mixed responses from the MBA students. Most of them assert that using the government to squash competition is acceptable. The reasoning is that a key role of government is to resolve disagreements. The officials will consider the request and, if they are doing their job correctly, will either forbid the store from opening or explain to you why you do not have a good case. Either way, petitioning the government to shut down a rival is not at all unusual. It has been done, often successfully, for as long as private businesses existed.
Many of the students who endorse government intervention as a legitimate competitive tool explain that it is legal. Citizens have a right to make requests, and – the students believe – government bureaucrats will usually base their decision on what is “fair.”
A small minority of the MBA students recognize that the third scenario is functionally equivalent to the second. If it is detestable to hire a goon to intimidate and vanquish your rival, it is just as bad to request maleficence from the government.
The source of the disagreement among my students is their conceptualization of government. They all understand that government actions can be right or wrong. But most of them believe that in the world of business the strong controlling hand of government is benign.
Those of us who support the philosophy of individual liberty have to explain our case more clearly and more often.
*** See other entries at AlertMindPublishing.com in “Monthly Columns.” ***