Ayn Rand and Contemporary Business Ethics, Part Two

Ayn Rand and Contemporary Business Ethics, Part Two

Stephen Hicks Ph.D

10 Mins
December 14, 2018

Business Ethics in the Context of the History of Ethics, Part Two

In the context of the history of ethics, this is not surprising. Business ethics is an applied discipline, and one would expect it to apply the dominant ethical theories.

In Plato and to a lesser extent in Aristotle we read that practical concerns are low and vulgar. It follows that business, as an inherently practical enterprise, is hardly worthy of esteem. Given the place of Plato and Aristotle on the intellectual landscape, we have a partial explanation of the disdain that members of the cultural elite have always exhibited toward business.

In Immanuel Kant we read that there is an absolute duality of moral motivation (duty) and interest motivation (inclination): any hint of an interest destroys the moral worth of an action. But since business is driven by interests, it follows that business is inherently amoral.

In John Stuart Mill we read that altruistic self-sacrifice for the collective is the standard of morality and that there is nothing worse than someone interested primarily in his own “miserable individuality.” But obviously business is driven by self interest rather than altruism, individualism rather than collectivism, the profit motive rather than the motive of self-sacrifice; so business is immoral or amoral.

In Christianity and Marxism, we read the same moral themes: collectivism and human sacrifice. Christianity’s core parable is Jesus’ voluntarily undergoing crucifixion in order to cleanse humans of their sins. The parable illustrates (1) the necessity of human sacrifice: Jesus is strong and moral while the others are weak and immoral, and we solve the problems of the weak and immoral by sacrificing the strong and moral; and (2) collectivism: all humans get a share of Jesus’ sacrifice whether they have earned it by their own efforts or not. (The same theme of collectivism is illustrated in the doctrine of Original Sin: responsibility is not individual; rather all humans bear the responsibility for Adam and Eve’s actions.) Marxism’s core slogan is “From each according to his ability, to each according to his need.” The slogan illustrates (1) the necessity of human sacrifice: some humans are strong and able while others are weak and needy, and we solve the problems of the weak and needy by sacrificing the strong and able; and (2) collectivism: each individual is seen as a collective asset, and his assets are redistributed to everyone whether they have earned it or not. For both Christianity and Marxism, self interest and morality are opposed.

So it is not surprising that the discipline of business ethics today is simply applying to business what the dominant voices in the history of ethics have been saying for thousands of years.

This in turn explains why business ethicists tend not to be shy in calling for businesses to sacrifice their profits and why most business professionals are uneasy about the subject of business ethics. Business professionals are concerned with their self interest, with making profits, and are well aware that most business ethicists, carrying the mantle of moral authority, either frown upon such things or put them in the category of lower priorities.

The duality of self interest and morality is taken as a general and fundamental philosophical thesis in current business ethics, and it is as a general philosophical thesis that it must be addressed and, in my view, rejected. Defenders of business can and have expended great energy showing that particular self interested business practices are both productive and win/win—the formation of limited corporations, the introduction of futures and “junk” bonds, and so on. But these particular demonstrations have done little to lessen general suspicion of about business.

An analogy to some brands of environmentalism is helpful here. For some environmentalists the beliefs that we are running out of resources and that industrial chemicals are poisoning everything function psychologically as general, axiomatic truths. Scientists and other experts can refute a particular fear—e.g., by showing that there is still plenty of oil and that Alar is benign—but the general thesis is left untouched: the environmentalist is still primed to expect the worst, and will continue to expect the worst even if the next dozen scares turn out to be groundless. Similarly, the general thesis that self interest is outside of morality leads to a general suspicion of self interest in business. So explaining, e.g., that some kinds of insider trading are not so bad after all is not going to change anyone’s mind about the moral status of business: most ethicists will still be primed to expect the worst from the next manifestation of self interest. It is the general thesis about self interest that must be addressed.

So why have philosophers traditionally put morality and self interest in different categories?

Self Interest as Amoral/Immoral

Self interest is argued to be a problem in business in two ways. First, the profit motive can lead one individual to harm another—that is, self interest leads to sins of commission. For example, a standard argument about insider trading is that the insider is in a position to take unfair advantage of the outsider, and his self interest leads him to do so. Second, the profit motive can lead individuals not to help the less fortunate—that is, self interest leads to sins of omission. For example, the standard argument against plant relocations is not that the company is harming the rights of the workers; rather, since the workers will be in a more desperate situation, the moral company would be willing to give up the profit opportunities that a plant relocation would offer them.

The sins of commission worry is that self interest puts individuals at odds with their obligations not to harm the interests of other individuals, and the sins of omission worry is that self interest puts individuals at odds with their obligations to be altruistic. In both cases, morality is seen as requiring self-sacrifice. To avoid sins of commission I have to sacrifice an opportunity to gain, and to avoid sins of omission I have to sacrifice an asset. In both cases, conflicts of interests among individuals are taken to be fundamental. Let us take self interest’s two kinds of ‘sins’ separately.

Self Interest and Sins of Commission

In greater detail, the sins of commission argument runs as follows:

We start by noting conflicts: business versus consumer (fraudulent advertising, monopolistic pricing); business versus employees (racist/sexist hiring, plant relocations); business versus other businesses (cut‐throat pricing, insider trading).

We ask, What causes the conflicts? (a) Self interest: in order to make a profit, the business is willing to cheat its customers, exploit its employees, do nasty things to competitors, harm the environment. (b) Relative weakness: consumers, workers, some competitors, the environment are not in a good position to defend themselves.

We next ask, What are the consequences of such conflicts? The stronger party prevails, and the weaker party loses.

We then generalize the problem: self interest/the profit motive and the existence of inequalities of ability and power cause conflicts of interest and lead to the strong profiting at the expense of the weak.

Next we offer general ethical and political solutions: (a) Ethical: We require businesses to restrain their self interest—i.e., to forego profit opportunities; (b) Political: We ask the government to regulate or impose restraints on business; and we ask the government to grant special rights to the weaker parties and/or limits the rights of the stronger parties.

So we get the negative solution: Business ethics is primarily about restraining self interest and profit seeking.

The starting point of this analysis is also that there are fundamental conflicts of interest between businesses, consumers, and employees, and among businesses themselves. Once the conflicts are allowed as fundamental, one has to make a principled choice: Is one pro-business (and thereby anti-consumer and anti-labor), or pro-consumer and pro-labor (and thereby anti‐business)?

The most important question here is: Why should we take conflicts of interest as fundamental? What is the source of this premise? If we are to say that a general and fundamental truth about morality is that self interest should be sacrificed or set aside, then we must have as a premise that as a fundamental and general truth interests conflict. So the question is: Why are there seen to be general conflicts of interest?

Two global considerations about the human condition have traditionally been used to show that conflicts of interests are fundamental to the human condition. One is a premise about human psychology and biology; the other is a premise about economics.

Limited Resources

Let us take up first the economic premise: The claim that we live in a world of scarce resources. The concept of scarcity is used in a number of ways. A fairly neutral way is to say that humans always want more than they have. This is not the way in which it is used to attack self interest. If the problem is simply that we want more, we can say that the solution then is to produce more.

But in traditional ethics, producing our way out of scarcity is not seen as an option. Scarcity is used in a Malthusian or zero‐sum sense: there is not enough to go around. This puts us in conflict with each other: your need for food, for example, and my need for food cannot both be satisfied, so one of us has to sacrifice or be sacrificed. The problem then is deciding who it should be.

This is the reason for the popularity of lifeboat scenarios. Lifeboat scenarios illustrate what is often seen to be a fundamental economic fact that morality has to react to: That your self interest and my self interest are in fundamental conflict because of economic scarcity.

A lifeboat situation gives us a tough choice. The choice is either to act in stereo-typically selfish fashion or to act altruistically. If I put my self interest first, I will take whatever steps necessary to ensure that I get enough food and drink, thereby ensuring that someone else dies. I gain at the expense of someone else. If I put others first, I willingly sacrifice myself for the sake of someone else. Others gain at my expense. On the one hand, if everyone or anyone puts his self interest first, a free for all battle will ensue, thus endangering the safety of the boat. On the other hand, an uncritical altruism might result in the only person with navigational skills throwing himself overboard, thus endangering the safety of the boat. Consequently, the argument runs, the reasonable thing is to adopt a collectivist standpoint— we should all put our self interests aside and think what’s best for the boat as a whole: whose needs are greatest, who has the most to contribute to the boat’s survival?

What this implies for moral philosophy is that self interest is dangerous. In a world of scarce resources self interest leads to brutal competition, the harming of the weak by the strong, and the endangerment of society as a whole. What this implies for business is that profits must be made at the expense of others. In a world of scarce resources, business is fundamentally a zero-sum game: the profit motive leads to brutal competition, the exploiting of the weak by the strong, and the impoverishing of society as a whole.

According to this argument, then, conflicts of interest are necessary because of a fundamental economic truth: limited resources.

Gyges/Original Sin/the Id

The other major argument for fundamental conflicts of interest is grounded in claims about human psychology and biology. Consider the following quotations.

Here is Brian Medlin, author of a widely cited critique of ethical egoism: “[The egoist] canʹt even preach that he should look after himself and preach this alone. When he tries to convince me that he should look after himself, he is attempting so to dispose me that I shall approve when he drinks my beer and steals Tom’s wife.” Here is Charles Sykes, a conservative intellectual:ʺThe essence of naked egotism is imposing one’s likes and dislikes and the subtle prejudices and whining annoyances of the self on others. Society exists to put limits on the desire of the ego to make itself the center of the universe.ʺ Here is a quotation from Anthony Burgess, a well known contemporary British novelist:

That the sadomasochistic impulse is in all of us we no longer doubt. There is some obscure neural liaison in the brain between the sexual urge and the desire for domination—and the latter phrase I have deliberately left ambiguous. We are, quite rightly, scared of letting the sadomasochistic get out of hand: it is all too easy. Weʹre all pretty bad inside; it’s what we do outside that counts.

What we have here are claims of what is thought to be the raw material, the basic human nature, that ethics has to deal with. We are by nature beings that want to steal from each other. We want to make cuckolds of each other. We are prejudiced and whiny and overbearing. And, if we are honest, we will admit that we get sexual pleasure out of beating and humiliating each other.

This has been a dominant theme in the history of arguments against self interest. Most major philosophical opponents of self interest have also advocated a grim picture of human nature. The moral of the Myth of Gyges, argues Plato, is that all people have in-built vulgar and unruly appetites that only a few, after long effort, will be able to subdue. Christianity’s basic thesis is Original Sin: we are all born destructive, rebellious, we all have the mark of Cain the murderer on us. Sigmund Freud’s concept of the id is of an irrational and nearly uncontrollable set of instincts that lead us to want to abuse our neighbor—or, in his own words, “to exploit his capacity for work without compensation, to use him sexually without his consent, to seize his possessions, to humiliate him, to cause him pain, to torture and kill him. Homo homini lupus.”

Claims such as these go to the heart of the project of ethics. If these claims about human nature are true, then each individual is fundamentally in conflict with each other. We then have only two choices. We can be self interested and let our animal natures run wild. But if we do, then obviously life will be nasty, solitary, brutish, and short, and civil society will collapse. The alternative is to attempt to make civil society possible. This project will require an anti-self interest force—namely, a moral code that places priority on taming the self, on getting the self to suppress its in-built interests. Since human nature does not change over time, this project will also have to be an ongoing one: Ethics will always have to mean resolving fundamental conflicts of interest, and its solution will always be the sacrifice or restraint of self interest.

Applied to business, we get the principle that antagonism and dominance, rather than cooperation and mutual benefit, are more natural to individuals. Short-term desires—for quick profits or expressions of power— will be a constant temptation. We get, for example, the view of business advocated by marketing professional Roger Dawson: “When you destroy the guy across the table, that’s negotiating. When you make him thank you for it, that’s power.”

In order that cooperation and long-term relationships can exist, the fundamental thesis of business ethics will be the suppression of self interest. Business ethics will have to be eternally vigilant in the search for ways to thwart self interests desires to slip it's restraints.

We now have two arguments that support the conclusion that conflicts of interest are fundamental. The argument about limited resources is heard more often from leftists, in keeping with their emphasis on nurture over nature factors, and the argument about destructive human nature is heard more often from conservatives, in keeping with their traditional emphasis on nature over nurture factors. Common to both, though is the conflict of interest conclusion and the consequent conclusions that self interest is in need of restraint and that ethics is the tool of restraint. For both, in other words, morality and self interest are in fundamentally different and opposed categories.

Self Interest and Sins of Omission

We find the same conflict-of-interest conclusion when we consider the sins of omission argument against self interest. The argument runs as follows:

  • In life some individuals are able to support themselves and some are not.
  • If the able do not give charity to the unable, the unable will suffer or die.
  • But the self interest of the able is not to sacrifice for the needs of the unable.
  • Therefore, the interests of the able are in conflict with the interests of the unable.
  • Altruism’s premise: The interests of the unable are more important than
  • the interests of the able.
  • Therefore, the able should sacrifice what is necessary to satisfy the needs of the unable.
  • Therefore, self‐interest is immoral (via the 6th and 3rd lines of the argument).

The starting point of this analysis is that the interests of the unable put them in conflict with the interests of the able. If we think of this conflict as fundamental, then we have to make a principled choice: Since only one set of interests can be satisfied, we have to decide whether, in general, to sacrifice the interests of the able (as altruists do) or those of the unable (as, for example, Friedrich Nietzsche and Social Darwinists do). Requiring sacrifice from the able to help the unable is unpleasant, but not as harsh as not requiring that sacrifice seems. So we get the altruist conclusion: The needs of the unable should take precedence, and since the self interest of the able is opposed to this, self interest must be sacrificed.

Again it is a premise about conflicts of interest that is crucial here, this time by taking human inability as a fundamental that ethics has to respond to. If we take need and inability as fundamental for ethics, then conflicts of interest are inescapable and someone must be sacrificed. Altruism sides with those in greater need and thus rejects the self interest of the able.

Applied to business ethics, we get the general conclusion that business ethics is partly about getting businesses to sacrifice their self interest to the interests of the less able. Such altruism leads to (a) urging businesses to redistribute their profits to parties with greater need, and (b) support for government redistribution of wealth (e.g., by taxation, rent control, minimum wages).

Summarize: Why Conflicts of Interest?

Three considerations, then, lead to the conclusion that conflicts of interest are fundamental. In each case, sacrifice of self interest is argued as an ethical fundamental: either the self is required to restrain itself or it is required to give away some of its assets.

If we take these background theses from ethical theory as general truths, we will turn to the applied field of business ethics with the two following assumptions in place:

  1. Business is about making profits. But we suspect ahead of time that profits are made at the expense of others: business is generally win/lose
  2. So business is immoral to the extent that it is profitable.

Business is not altruistic in intent, i.e., business is not lose/win. But we know ahead of time that one is supposed to be altruistic or at least that one gets moral credit only for altruistic acts. So business is amoral or immoral.

Stephen Hicks Ph.D


Stephen Hicks Ph.D

Stephen R. C. Hicks PH.D. is the Senior Scholar for the Atlas Society, Professor of Philosophy at Rockford University, and the director of the Center for Ethics and Entrepreneurship at Rockford University. In 2010, he won his university's Excellence in Teaching Award. Professor Hicks has written four books; Explaining Postmodernism: Skepticism and Socialism from Rousseau to Foucault, Nietzsche and the Nazis, Entrepreneurial Living, and The Art of Reasoning: Readings for Logical Analysis.

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