How often have you heard a line something like the following: “Because businesses care only about making money, they and their executives are hard-hearted towards their customers and employees.” Even some people who think that, on net, businesses are good for our economy, often characterize them as being hard-hearted because of their profit motive.
I don’t defend all businesses. That would be silly. But I want to point out a recent case and a case about twenty-three years ago, about businesses going above and beyond. While these two cases are probably outliers, anyone who has been around businesses much can probably vouch for my claim that businesses are more caring than the above quote claims. Moreover, because people who make the hard-hearted claims often want government to regulate, we should realize that governments are typically much worse.
These are the opening two paragraphs of my latest Hoover article, “Are Businesses Hard-Hearted?,” Defining Ideas, May 9, 2024.
Also, take a look at my discussion of Oskar Schindler.
Read the whole thing.
READER COMMENTS
Fazal Majid
May 9 2024 at 4:28pm
There is this concept in both business and accounting called “goodwill”. It only applies in competitive markets, however, and the increasing concentration of business in the US at least is leading to smug complacent monopolies who know they can abuse customers without repercussions.
David Henderson
May 9 2024 at 5:44pm
It is true that good will is important in competitive markets. But it’s also important in markets where firms don’t face competition, but just not as important.
You can’t measure, though, the degree of competition by the degree of concentration. Industries often become concentrated because firms succeed in the competition and higher-cost firms drop out or lose market share.
Jon Murphy
May 9 2024 at 5:00pm
Good stuff David, especially the story of Schindler. I first read that insight in your Joy of Freedom and I like to share it in all my classes. One of the things I emphasize in all my classes is how economics, all economics, is about human behavior. And, part of that human behavior, is getting to know one another. People do not stop being people just because they work in business (or government, for that matter). Consequently, decision-makers in firms can go to long legnths to avoid layoffs or wage cuts (indeed, I suspect one of the reasons wages are sticky is that managers do not like cutting wages). They may still have to, but layoffs are often a last resort.
john hare
May 9 2024 at 5:22pm
One of the reasons layoffs are a last resort is the ill effects when rehiring. Locally, the best people are already working elsewhere when you get ready to build back up. The ones that aren’t employed elsewhere are usually the ones you could do without. Rounds of layoffs and rehiring can take the business down.
David Henderson
May 9 2024 at 5:45pm
Good point, John.
David Henderson
May 9 2024 at 5:44pm
Thanks, Jon. I’m glad you use that in your class.
Craig
May 9 2024 at 6:14pm
Describing businesses as ‘hard-hearted’ might capture some sentiments, but it’s also common to hear the advice not to treat coworkers as friends. This phrase typically leaves out the boss, which is so universally understood it hardly needs mentioning. Given that most Americans are employees, this has significant implications: the majority of us spend most of our ‘economic’ lives—and often the majority of our waking hours—in workplaces where relationships are, by default, not founded on friendship.
Jon Murphy
May 9 2024 at 6:31pm
There is a wide range of relationships beyond just “friends” and “not friends.” Working together with people builds relationships. Some of those may turn into friendships (or even romance), but they do not have to either.
Jon Murphy
May 10 2024 at 9:42am
Sorry, let me finish my thought:
I do not think it’s bad advice to say “don’t be friends with coworkers.” For most coworkers, you want a professional relationship. But the coworker relationship is different from more mercantile relationships.
Fonna Forman, who is a professor of political science at UC San Diego, has an excellent book called “Adam Smith and the Circles of Sympathy.” In that, she develops Smith’s circles of relationships we have with various groups. Some, like family, are the smallest circles, and they are the ones we sympathize the most with and owe the most. As we move further and further away from the self (both in terms of geography and familiarity) to neighborhoods, towns, countrymen, and the world beyond, the circles get bigger (encompassing more people) but what we owe and how we symapthize gets smaller.
Coworkers are one such circle in this model.
Craig
May 10 2024 at 11:08am
There is often a disconnect between the amount of time people spend with colleagues at work and the depth of the relationship.
steve
May 9 2024 at 6:28pm
As you said some are hard hearted but there are lots of examples where businesses go out of their way to help employees. From small things like letting people come in late when kids are sick to actually carrying people for months while they were receiving cancer care that left them too fatigued to carry out all of their work but they needed the income. I have generally found it to be a good investment. It helps with retention and can develop actual loyalty. We have people who dont file for overtime pay when they could because they feel they have a debt for the help they received.
The other side of this that employees dont see is that it is hard for us to fire many people. Rather than the power trip that they think it is you may be firing people you actually like but they just couldn’t do the job anymore. Some managers are so prone to conflict avoidance they dont fire people who obviously need to go.
Steve