Monday, 21 December 2009

In defence of business

The word business is nowadays accompanied by a metaphorical holding of the nose. Post the financial crisis, businessmen would probably rank just above bankers and below more traditional last placers like real estate agents, in the list of reputable professions. Readers of this blog would know that the author is a staunch defender of business and advocates the view that the profession is unfairly maligned. An earlier post had touched on this subject.

It was gratifying to read The Economist’s Schumpeter column, The Silence of Mammon, which argues that business people should stand up for themselves. The article recounts the two arguments it says proponents have put forth in defence of business – that many firms are devoted to good works and that businessmen have done more than any other institution to advance prosperity. It opines that these are not enough and puts forth three more arguments to counter the critics of business who have dominated the discussion on corporate morality – that business is a remarkable exercise in cooperation, that business is an exercise in creativity and that business helps maintain political pluralism. All excellent arguments, in an eminently readable article.

I wade into this debate with unbridled enthusiasm. I have little sympathy for those who taint businesses as immoral with a broad brush. At the cost of oversimplifying a complex matter, I set out a central theme in defence of business and industry.

I come from a poor country, India, and now live in another one, China . I have seen how degrading poverty is to humanity. And it is China that I want to present in defence of business. In 1981, 84% of China’s population of a billion plus was below the poverty line of $1.25 a day. In 2005, in the same China, the percentage of population below the same poverty line had decline to just 16% (source : World Bank working paper 5090). Yes SIXTEEN per cent. That equals to 700 million people who have climbed above the poverty line. We all know how this was done.

Show me any other way of pulling 700 million people out of poverty and I’ll abandon all defence of business.

14 comments:

Durga said...

Critics will remian critics all their lives. Unless we roll up our sleeves and get down to dirtying our hands with tools, we cannot fancy prosperity and progression. Everything looks hunky dory when you sit on your couch with your feet up, when all you have to do is make eloquent speeches about the deplorable conditions of the country and progress is the need of the hour. It is another to get down to doing something about it. And China is the best example of the business community walking the talk.

Srivats said...

I used to think just like others about business before i started reading your blog. Now that you have changed my views completely I would even stand behind you in supporting such discussion.

In India business have done so much, much more than any politian did. And I am sure many climbed out of poverty line here too.

Sandhya Sriram said...

Businesses are not saints. they are here to create value for their share holders. and in the process of value creation, they have indeed given back to the society in many many ways. But it is the political will of the country which drives an industry to a win-win.

I am sure, no industry would have set shop in the terror prone, infrastructure ailing North east india if not for the fiscal benefits. but in the process, they have elevated a segement of the society to a new level of social and economic status

Having said this, it is a double edged sword. when himachal was declared tax exempt, in the mad rush to set up factories, the land prices sky rocketed to such an extent that many farmers sold off their farming lands to middleman who in turn made super winfall gains rationing the available land to different aspiring industries.

Industries have the muscle. politians have the power. the choice is ours - whether we want to flex the muscle using our power or power the muscle and make it work wonders.

Deepa said...

Well! Nobody maligns the Rich farmers of Punjab and Haryana. They make millions, and please, they don't toil in the sun to do it. They employ the poor, landless tenants (by the way these tenant farmers don't have any unions and labour rights like the industry). They drive around in Mercedes but don't pay a single penny in taxes, thanks to the tax exemption on agri income. So they aren't contributing to the society even indirectly. When there are about a zillion laws governing 'business', stringent labour laws, even enforcing corporate governance; agricultural sector is exactly the opposite. The skewed nature of prosperity and the lack of it in agri sector, is primarily because of pampering that sector and letting them be as they are... unregulated. Whats glorious about that? Lets say an industrialist is interested in this rich farmer's land to build a factory there... I wonder if he could exploit him and extract his land from him!

Anybody who earns a living and creates opportunity for others to do the same is respectable. Morality is a different debate altogether.

Ramesh said...

@Durga - Well said. Armchair crticism is fine, but when you get your hands dirty, things can happen. After all, that's the way India has progressed over the last 30 years. Can we even recognise the India of 1980 now ??

@Sri - Oh yes - A lot has happened in India as well, and we should be rightly proud of it. The example of China is to illustrate what is possible - the same poverty line numbers for India are 60% in 1981 and 40% in 2005. Its a sobering thought that in 1981 China had twice the proportion under the pverty line as India and by 2005 India had two and a half times China's number. China is truly a miracle.

@Sandhya - This whole competition based on fiscal benefits is something I am fundamentally against. Subsidising industry hoping that it would lead to employment is a mirage. When the subsidies are withdrawn as they have to be, industry will go away. The money is better spent on education, infrastructure, creating skills. Industry will then automatically come and stay. For eg, If there was great infrsstructure in the North East and an abundant pool of English skilled labour, IT & BPO will automatically go there.

@Deepa - The issue of molly coddling agriculture is a big topic by itself. The politicians love for the farmer is sheer humbug. Wrong policies have stymied agriculture for years - Punjab growing huge quantities of rice is a perfect example of this. Maybe a post one day ...

Savitha said...

I respect your stand for your profession, Ramesh. I have voiced against business in this very space-excuse me for that. I know it is easier to be away from and voice against - anything for that matter. If only all businessmen were you, the scenario will have been far better!

Pardon my ignorance.Is the statistical comparison of population below the poverty line in the mentioned years done with the same $1.25? Just curious to know. If so(which I hope is not), is that not unfair to compare -- with the cost of living skyrocketed in the 20yrs, crippling the buying capacity at $1.25 a day?

Ramesh said...

@Savitha - Of course, I respect your opinion; so anti business comments are very welcome !!

The S1.25 is in 2005 prices - so its a like for like comparison across the years.

J said...

Mind-boggling statistic on China's poverty. Business definitely played a role but I wonder if there was also a pent up ambition in the people at large that they seized every opportunity. I am quite impressed by the improvement in India but I guess we want more...So is the failing of India that we (read government) have not created an environment conducive to business through taxes, subsidies etc or is it a shortcoming of the public at large where we are reconciled to poverty as fate?

Ramesh said...

@J - Yes, I am still gaping open mouthed at what China has achieved, even after 2 years here. In India we started really only in 1992 or so. Governments (and opposition leaders) do not need to give subsidies or tax breaks - they just have to let industry grow - not allow a Singur to happen, not sit on overseas investments for 5 years, not politicise every industrial project, get out of creating union trouble, --- I could go on and on. One easy way to achieve this - make it compulsory for every MP/MLA, etc etc to spend 6 months in China.

VA said...

Wow...

Of course, the idea is fantastic for MP/ MLA to visit China once for 6 months. On a lighter note, I hope while on this trip, they would not look out for another avenue to transfer their illegally amassed wealth... ;-)

I think that poverty eradication is directly proportional to money generating capability of the economy and there is no better way than the business to generate money. However, the business needs to be done with the larger picture in mind and malpractices must not be in the heart and head of such an organization.

Well, I just flipped through pages of latest edition of Business Today and it says this decade has been India's best decade and coming decade is going to be stupendous provided there would be outstanding government influence.

May not be the way China has done it, but definitely business is the only way!

Ramesh said...

@VA - You are right - the only way to eradicate poverty is to stimulate economic activity. China grasped this beautifully. India has grasped this, but only reluctantly. Last decade was glorious for us, no doubt. Next decade will be even greater. But its always good to compare ourselves with the best in class, not the average !

VA said...

Your point of view is very correct, Sir! I am hopeful that we would be able to match up with China someday especially given the facts that the demographical profile of our country is better than that of China and opportunities are enormous.

gils said...

"sin" lies in the middle of any business..so..wat else to expect :)

Ramesh said...

@gils - trust you to find this. Touche my friend (I can't translate that into Tamil !!)

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