Dr. William H. Peterson was Professor of Economics at New York University’s Graduate School of Business before joining the staff of United States Steel Corporation in 1964. This article is reprinted by permission from the February 12, 1966 special 75th anniversary edition of Farmand, oldest business journal in Scandinavia, published in Oslo.
Dr. Trygve J. B. Hoff, 70 last November and editor of Farmand since 1935, has won friends around the world with his staunch and undeviating stand for a society characterized by law and order, freedom, and respect for the individual and the dignity of man.
Dr. Peterson is one of the several members of the Mont Pelerin Society contributing articles on various aspects of business and economics to this commemorative issue of Farmand.
Copies of the 240-page anniversary edition, in English, at $1.50 each, may be ordered direct from Farmand, Roald Amundsensgt. 1, Oslo 1, Norway.
· ITEM: "The hero," said Thomas Carlyle to a London audience in 1840, "can be poet, prophet, king, priest, or what you will, according to the kind of world he finds himself born into."1 Significantly, in the midst of the Industrial Revolution, in the midst of probably the greatest single — and still ongoing — surge of material well-being for the ordinary citizen, Carlyle did not mention the businessman among his possible heroes.
· ITEM: In the 1880′s social philosophers Herbert Spencer in England and William Graham Sumner in America viewed the businessman as a most creative and vital member of society. In the same period Horatio Alger’s rags-to-riches novels, largely on successful businessman heroes, reached their zenith in popularity.
· ITEM: Each of the 450 freshmen at Antioch College in 1964 was asked to name his personal hero —i. e., any twentieth century person whom he most admired. The top ten heroes of 104 named were Mohandas Gandhi, John F. Kennedy, Winston Churchill, Franklin D. Roosevelt, Martin Luther King, Albert Schweitzer, Bertrand Russell, Eleanor Roosevelt, Albert Einstein, and Woodrow Wilson. Yet not a single one of the 104 turned out to be a Carnegie, Ford, McCormick, Nobel, Rothschild, Rockefeller, Morgan, or any other industrialist or financier. In other words, no Antioch freshman viewed any businessman as his hero although, probably, many fathers of the freshmen are businessmen.
So, even though the businessman has had his ups as well as downs in public esteem since 1840, his image at this hour of history still appears less than wholesome and constructive. For example, Amherst College reports 48 per cent of its alumni are businessmen, but fewer than 20 per cent of recent graduates have been entering business. Again, Harvard University reports only 14 per cent of its class of 1964 planned business careers, down from 39 per cent five years earlier, although part of this decline may be attributed to the growing popularity of working for advanced degrees. Said, in a typical vein, Arthur Lyon Dahl, a June 1964 graduate of Stanford University, of his classmates: "I know of almost no one who even considered a business career."2 This situation seems to betray an ambivalent business image and does not bode well for the prospects of freedom and free enterprise. Images are important; they reveal our thinking, our creeds, our inner conflicts; they influence our actions.
Now, if the word on the campus is that business is for the birds, if the word elsewhere is that the businessman is to be regarded as a suspicious creature who must be publicly controlled if he is to be privately tolerated, it follows that the climate for business will hardly be conducive to the full flowering of trade and investment or, more importantly, of individual values and human liberty.
Hence, saint or sinner, oracle or ogre, hero or hellion; what is the proper image of the businessman in a free society? The inquiry is fraught with some complication.
The Anticapitalistic Bias Among Intellectuals
For one, I think his image varies with the era, its values, and especially its intellectuals. Intellectuals are crucial in the art of image-making. And as a rule the intellectual, from Plato and Aristotle on, has rarely turned a kindly eye on the businessman, as may be inferred, for example, from the ancient and medieval castigations against usury and trade. In a typical vein, Cicero wrote in his De Officiis: "Those who buy to sell again as soon as they can are to be accounted as vulgar; for they canmake no profit except by a certain amount of falsehood, and nothing is meaner than falsehood."3
Similarly, from that durable milieu of what von Mises calls "the anticapitalistic mentality," one should note the introduction to the Modern Library edition (1937) of Adam Smith’s Wealth of Nations. For in this most popular edition in the United States and Canada, an edition read by countless college students, the introduction is made by Max Lerner, who does not hide his dis-sympathy with the business system, not withstanding the fact that the Adam Smith work is a classic in defense of capitalism. Lerner labels Smith as "an unconscious mercenary in the service of the rising capitalist class," holds that Smith gave "a new dignity to greed and a new sanctification to the predatory impulses," maintains that the father of modern economics developed his essentially labor theory of value awkwardly and hence, "it remained for Marx to refine it, convert it into an instrument of analysis, and extract from it the revolutionary implications that were inherent in it from the start."4
Keynes, giant of economic theory in this century and image-maker extraordinary, also seemed to have had little love for the businessman. Free private investment, he held, swings on "the nerves and hysteria and even the digestions" of private investors, on "whim or sentiment or chance"; and "enterprise only pretends to itself to be mainly actuated by the statements in its own prospectus." Well, if businessmen are so whimsical, nervous, hysterical, pretentious, and untrustworthy to invest for the general welfare, what then? Keynes gives his prophetic answer: "I expect to see the State, which is in a position to calculate the marginal efficiency of capital goods on long views and on the basis of the general social advantage, taking an ever greater responsibility for directly organizing investment."5
Plainly, then, to many thinking people, especially intellectuals and college and university students, business does not come across as a preferred institution among other social institutions in a free society. Plainly the businessman is not always regarded as a constructive, forward-looking member of the community. Apparently the typical college student prefers to enter teaching, social work, scientific research, government work, the Peace Corps, or the professions of medicine, law, architecture, etc. Apparently many a student — and professor — looks upon business as little more than a dog-eat-dog world, dominated by the law of the jungle, corrupted by the drive for profit, and blind to almost every decent human value; and many other students and professors view business as a world of superficiality and conformity, a treadmill on which the individual gets nowhere and says nothing.
Productivity, Purpose, and Incentive to Save
Yet a big rub with such views of business and, indeed, with the whole problem of the image of the businessman, boils down to this: Precisely, what is a businessman? For business is an extremely protean and equivocal term and what people commonly assume to be a "businessman" may be altogether too arbitrary and too narrow a view. So much so that perhaps with a clearer understanding of just what a businessman is and what he is trying to do, the public may, hopefully, adopt a better image of him. But realistic, meaningful, and broadly applicable definitions of business — a word derived from "busy" — are hard to come by (as are, by the way, definitions for work and labor.6) For example, the editors of the four-volume World of Business (1962)—editor Edward C. Bursk of the Harvard Business Review, librarian Donald T. Clark, and business professor Ralph W. Hidy, all members of the Harvard faculty — concede that business is not easy to define and wind up not defining it. Similarly, Beardsley Ruml in his Tomorrow’s Business (1945) also admits that defining business raises problems. For example, he is not sure whether farmers and professional people can be properly classed as businessmen. Still, his definition appears broad enough to include them, viz: "This is the business of business: first, to get things ready for use; second, to provide people with purposeful activity; and third, to give people a way to save productively a part of what they earn."7
In my judgment, the only workable definition of a businessman is necessarily a broad one, in that it should cover executives and entrepreneurs, bankers and sole proprietors, merchants and industrialists, professional men and newspapermen. Indeed, who in this advanced age of division of labor doesn’t "profess" some specialization, some marketable skill? Hence, a more satisfactory definition of a businessman would appear to be simply that of a person who is continuously engaged in voluntary trade or exchange of goods or services, including his own, for profit. The two key words here are "voluntary" and "profit." Voluntary involves choice for both the buyer and the seller, and means free, without coercion, and would be inapplicable to individual economic action under socialism. Profit — the term derives from the Latin profeetus, meaning an improvement or advance — means benefit or gain, not necessarily pecuniary gain, and as a goal recognizes that human action is motivated directly or indirectly by profit, including psychic profit, or conversely, by the avoidance of loss, including psychic loss. Socially, profit is a means of control and a measure of usefulness. The successful corporation is a demonstration of social worthiness; the unsuccessful corporation is a demonstration of social unworthiness. So through profit-and loss signals the public rewards success, penalizes inefficiency and controls investment—and businessmen—providing them with strong incentives to adjust to society’s wishes. Thus do private incentives and business policy strongly tend to reflect the public interest.
To Each His Own Business
Under a broad definition of businessman, then, everyone from the street vendor to the head of General Motors or American Telephone and Telegraph is a businessman. And so, at least in some degree, is the accountant, actor, architect, artist, carpenter, doctor, engineer, musician, newspaperman, plumber, and, ironically, the intellectual—the writer, scientist, professor, playwright, etc. Each of these craftsmen sells his labor in the open market and buys goods and services on his own account. Frequently the motivation in these buying and selling activities is pecuniary. But even if not — and money, it must be remembered, is not an end in itself — it is still profit-oriented. The professor seeks gain in the form of the advancement of knowledge and the spread of education; the musician profits from musical enjoyment by himself and others; the physician derives psychic income from making sick people well; and so on.
Thus, as businessman Donald C. Cook of the American Electric Power Company observed in his "Intellect and Business: the Dialogue and the Challenge," the seventh annual Business Leadership Lecture at the University of Michigan in 1964,8 every intellectual is in some degree a profit-oriented businessman and lives in a world shaped by business. Equally, every businessman worthy of his calling is in part an intellectual and is moved by the great ideas of his time. Each—intellectual and businessman — helps to create conditions to which the other responds; each is the customer of the other, giving and taking, buying and selling, and sharing generally.
At any rate, under a broad definition of the businessman, many in a free economy who do not consider themselves businessmen are actually already very much in business. Perhaps recognition of this broader definition could bring about an updated version of Molière’s gentleman who discovered that he had been talking in prose all of his life. In other words, the public, hopefully, could come to the realization that practically everyone, male and female, young and old, rich and poor, is in business in one way or another, that in the words of Shakespeare, "every man has business and desire, such as it is." Even the housewife is in business for, when you think about it, the average American family currently earns and largely spends some $8,000 annually which, if multiplied by 45 years of employment, comes to better than one-third of a million dollars — and that’s quite a business. Thus, every "worker," through his labor and the power of his purse, is at once a producer and consumer, a buyer and seller, an employee and employer, a customer and supplier.
Consumer Sovereignty
The point is that if everybody is to some significant extent in business, is a part of business and must carry out business functions in his daily life, it follows that he is part businessman, that a widely-held negative image of the businessman is incongruous and not a little masochistic. Can one logically find fault with a segment of society for doing what the whole of society is at least in part already doing and, indeed, must do?
Too, the easy identification of the businessman as the boss does not seem to be overly logical with far-reaching division of labor and social cooperation. For, in the final analysis, every free agent from office boy to chairman of the board works for the same boss —the consumer. To be sure, the office boy may report to the office manager and the chairman of the board to the board of directors and the stockholders, but all — including the "independent" businessman, the man who says he is his own boss — take their ultimate orders from the customer, the quite sovereign consumer.
The customer, as merchant John Wanamaker noted, is always right, ever the final court of appeal. It was Grandfather who, in effect, put the buggy whip manufacturer out of business when he bought a Model T. It was the consumer who made Henry Ford big, who did in the Stanley Steamer and the Stutz Bearcat. It was Mother who did in, economically, the ice man when she bought a refrigerator. It is today’s consumer who makes board rooms quake through his purchases and non-purchases. It is through this power of purchase and nonpurchase that democratically the consumer in effect directs business, hires and fires people, and generally puts the nation’s resources to work.
Of course, consumer sovereignty as a concept has not been widely accepted by the intellectual who, for that matter, frequently does not also seem to be especially aware of the highly pervasive nature of business. Still the intellectual’s criticism of business and businessmen has served at times to correct abuses, to redress needful balances and to maintain humanistic and esthetic values. Unfortunately, the criticism has, on occasion, also induced so-called "reforms" which have been harmful to the business system — and to the consumer. To take an extreme example, intellectual Karl Marx, who regarded businessmen as inhuman exploiters in the nineteenth century, helped to bring about the Communist Revolution in the twentieth century. On the other hand, in the eighteenth century, intellectual Adam Smith saw the businessman as a creative and vitally necessary member of society, and helped to establish the Industrial Revolution and the capitalistic order which still prevails in the Western world today.
A Businessman Serves Self by Serving Others
I agree with the Smith view and hold the correct image of the businessman is neither that of hero nor villain. Businessmen can be good; they can be bad. They run the gamut of the moral spectrum. Businessmen have founded museums, universities, hospitals, charities, foundations, etc., while serving in their main social f unction of promoting, organizing, and managing production to create goods and jobs. Some black sheep businessmen, to be sure, have indeed engaged in coercion, theft, and misrepresentation.
So a generalized hero or villain image of the businessman is not, in my judgment, tenable. A good image is tenable, however, because in the construct of the business system it is clearly in the interest of the businessman to give his best to his customers — e., to society — or else his competitors will, or his profits will fall. As Adam Smith pointed out, we do not speak to the butcher and the brewer of our need but rather of their advantage.
In any event, I believe the proper image of the businessman is neither that of knave nor knight, villain nor hero. He has a job to do—directly for himself, indirectly for society — and he does it. He is under the social discipline of profit and loss, under the iron rule of the consumer. And he should think well of his calling. For as Alfred North Whitehead spoke of the Great Society before that phrase became fashionable: "A great society is a society in which its men of business think greatly of their functions." It follows, then, that with a better understanding of the businessman, everybody should have a better image of him — and of business.
—FOOTNOTES—
1 On Heroes, Hero-Worship and the Heroic in History (London, 1871), p. 78
2 The Wall Street Journal, November 10, 1964. ‑
3 Quoted by Lewis H. Haney, History of Economic Thought, 4th edition (New York, 1949), p. 79.
4 p. x.
5 The General Theory of Employment, Interest and Money (London, 1936) p. 164.
6 For a searching analysis of this problem, see Roger M. Blough, "Work and the Individual in the Modern World," in The One and the Many by John Brooks and others (New York, 1962) pp. 173-208.
7 p. 32.
8 Michigan Business Review, July 1964.
9 Adventures of Ideas (New York, 1933) p. 124.
William H. Peterson (1921-2012) was an economist, businessman and author who wrote extensively on Austrian Economics. He completed his PhD at New York University in 1952 under the supervision of Ludwig von Mises.
