Business scandal mode

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The indictment of former Enron Chairman and Chief Executive Officer Kenneth Lay and the scheduled July 16 sentencing of home decorating maven Martha Stewart will once again draw attention to the numerous business scandals that have tarnished the image of free enterprise.

With such mega-corporations as Ahold of the Netherlands, Parmalat of Italy, Santander Central Hispano of Spain, and Skandia of Sweden, this is not a uniquely American phenomenon.

Even before the scandals, many people considered unscrupulous behavior the norm in the business world, with captains of industry seen following only one commandment: "Thou shalt not get caught."

But suppose one inverts this viewpoint? Suppose one argues that free enterprise, economic liberty and their accompanying institutional and legal framework promote the moral health of society?

Such a position is likely to shock some people: those who consider free enterprise inherently disreputable; those who support free enterprise, but claim the material prosperity generated by business is sufficiently moral in and of itself; and those who believe free enterprise can only prove its moral worth by giving money to politically correct causes.

The idea free enterprise can itself be moral is hardly new. "Trade is the natural enemy of all violent passions," 19th century French social philosopher Alexis de Tocqueville wrote in his much-quoted work, "Democracy in America." "Trade loves moderation, delights in compromise, and is most careful to avoid anger. It is patient, supple, and insinuating ... it leads them to want to manage their own affairs and teaches them how to succeed therein. Hence it makes them inclined to liberty but disinclined to revolution."

This is true for commercial relationships outside a country as well. It is no coincidence peace tends to prevail between nations that trade with one another.

Free enterprise shows its inherent morality in another significant way: By its very existence, it makes difficult unreasonable governmental restriction of our choices.

St. Thomas Aquinas once wrote the power of households to manage their own economic affairs -- a power that depends on the assurances that come with property ownership -- makes it possible for individuals to keep the state's rulers from overstepping their powers. It is surely no coincidence that wherever commercial societies emerge, governments lose their capacity to behave tyrannically.

Even something as fundamental to free enterprise as legally enforceable contracts contributes to society's moral health. When people enter into a contract, they engage in a recognized legal practice.

Contracts are really no more than promises. They encourage our willingness to be truthful and keep our word. They require us to act in a manner that is practical and reasonable -- and often, therefore, more moral. In short, we commit ourselves to perform certain actions. Contracts would be null and void without such commitments.

This is not to say free enterprise and free markets are all a society needs to be morally healthy. Clearly, they are not. Other institutions of civil society, such as churches, schools, and local community associations, play an indispensable role in forming the moral culture in which we live.

Yet we ought to remember that involvement in business per se provides people opportunities to develop virtuous habits. Every successful entrepreneur knows habits such as prudent risk-taking, thrift, honesty and industriousness are essential for success. Even exercising creative insight, as business executives must do daily, can be a morally enriching activity.

It's important for the American people to understand the valuable contributions free enterprise makes to the moral, as well as the economic, health of our country.

It's also critically important to remind people in these troubled times that the business world isn't the natural province of robber barons and petty crooks, but a crucial element of a free society -- and an institution that significantly strengthens society's moral fiber.

And that's exactly what the Acton Institute will continue to do, Enron and Martha Stewart notwithstanding.

Samuel Gregg is director of research at the Acton Institute for the Study of Religion and Liberty, which was recently awarded a Templeton Freedom Prize for ethics and values from the Atlas Economic Research Foundation.