On Giving Back

To celebrate the centennial of its founding, the big accounting firm KPMG Peat Marwick made September 22, 1997, “KPMG World of Spirit Day.” The firm’s 130 offices were closed that day so that, as the letter announcing this event stated, “over 20,000 KPMG partners and employees will spend the day serving our local communities.” The letter went on to say that Peat Marwickians are “excited about our opportunity to give back to the communities that have enabled us to endure for 100 years.”

I don’t mind if a lot of accountants take a day off. Perhaps whatever “community service” projects they have planned made those 130 communities just a bit nicer. Perhaps KPMG got some good PR out of the event, although I find it hard to believe that many businesses will say, “KPMG people cleaned up the park—let’s take our accounting business to them.” If KPMG’s management has concluded that a day of community service is more valuable than a day of accountancy, it’s their call.

What bothers me about “World of Spirit Day” is that its justification—the supposed need to “give back” to the community—is an implicit attack on one of the most fundamental propositions of capitalism, namely that trade creates a mutuality of benefit, leaving both trading partners better off. The “need to give back” rhetoric unwittingly reinforces the mistaken view that businesses profit at the expense of the people they serve.

Capitalism rewards people who figure out how to make products or provide services that consumers value more than the resources used (evidenced by their willingness to pay). Voluntary transactions that produce profits for businesses like KPMG also yield benefits to their customers. Profitable businesses no more have an obligation to “give something back” to “the community” than “the community” has an obligation to give something back to them—or to unprofitable businesses, for that matter.

Successful companies and individuals have already served “the community,” or to shed this useless abstraction, people in the community with whom they have voluntarily dealt. The wealth of Michael Jordan, Warren Buffett, KPMG’s partners, and other successful individuals was all earned. It was earned by selling goods and services that people willingly paid for. If for any reason such individuals desire to give up some of their time or money to assist others, they are certainly free to do so. But they shouldn’t do so on the specious grounds that they are obligated to “give something back.”

It has become almost de rigueur for the successful to utter the phrase “giving back to the community” prior to any act of philanthropy. Not surprisingly, groups that consume rather than produce wealth have picked up on this. Recently a consortium of community activist groups demanded that Bankers Trust donate to them an amount equal to the pay of its top five executives—$72.9 million last year. In their letter, the activist groups stated that “this $72.9 million compensation package occurred at the expense of the bank’s mandate to serve our flocks.”

To its credit, Bankers Trust did not cave in to this moral blackmail, but no doubt there are many people who’d say, “Right on!” to the activists’ demand. When “community activists” come knocking at KPMG’s door, will they be satisfied with the answer, “We picked up trash and painted over graffiti on our ‘World of Spirit Day’”? I don’t think that will be nearly enough “giving back.”

Subverting the Market Order

“World of Spirit Day” and similar events may be good public relations (although I doubt it), but the rhetoric is subversive of private property and the market order. There are a great many Americans who expressly or implicitly believe the Marxist idea that profits come at the expense of workers and consumers and are morally no better than theft. Every time a successful business implies that it owes something to “the community” to atone for its profitability, it makes it harder for those of us who advocate private property and free markets to counteract that pernicious belief.

Put yourself in the position of a student who has been taught in government-run schools. In grade school you are taught that greedy businesses threaten the planet’s fragile environment. In junior high you are taught that greedy business owners underpay and mistreat their workers. In high school you are taught that greedy businesses routinely shirk their “social responsibilities.” Throughout this “education,” you have heard little or nothing about entrepreneurship, risk, management, voluntary exchange, and consumer sovereignty.

Moreover, many of the television shows and movies you have seen depict businessmen as malevolent and sometimes even criminal. Your view of business is decidedly cynical if not overtly hostile.

Now you hear that a businessman is donating a lot of money to build, let us say, a museum. He publicly declares that he is making this donation because he feels a sense of obligation to “give something back” to the community. Does this cause you to rethink your position and see business in a favorable light? Or does it reinforce your belief that business profits are ill-gotten? After all, the millionaire or billionaire owner has just said that he feels that he must give something back. The “giving back” language implies that he has been in possession of something that wasn’t really his.

It is more likely, I believe, that the words and action will be interpreted as those of someone with a guilty conscience, an attempt to atone for past wrongs. The readings and discussions on the “social responsibilities of business” will come back to mind and the obvious question will be, “Is this enough?” If the businessman has given back $1 million, isn’t it likely that he is just trying to get off cheap? With so many “unmet needs” in the world, why stop with a measly million for a museum?

Thus does careless talk, intended to project a warm and fuzzy image of a company or individual businessman, accomplish the opposite. And even if it doesn’t do that, it does no good either. We need to educate people on the moral and economic virtues of capitalism, not just portray businesses as plush toys.

Protecting the “Soil of Liberty”

In Business as a Calling, Michael Novak argued that businesses have a moral obligation to “protect the political soil of liberty.” “Businesses,” he continues, “are plants that do not grow in just any soil; they depend on specific sorts of political environments. People in business therefore have a responsibility to be watchful over their political society, even as a matter of survival.”

I concur. People in business should act so as to fend off, as much as possible, the encroachments of state power and to disabuse people of socialistic misconceptions about business and capitalism. Unfortunately, the message of “World of Spirit Day” is one that leads to further erosion of the soil of liberty. We don’t need any more of that.