Speech by John Ralph, presented to the Senior Business Executives group of the Inter-Church Trade & Industry Mission (Victoria), Melbourne, July 25, 1984.
John Ralph has been a Director of CRA Limited since 1971 and Managing Director since August 1983. He is also Chairman of Comalco Limited, Chairman of the Australian Manufacturing Council and a member of the Executive Committee of the Australia-Japan Business Co-operation Committee.
I welcome the opportunity of speaking to you this morning, though at first I felt rather diffident about the prospect. I thought that some of you may some along expecting to hear a sermon. I can assure you that I am not equipped to deliver that, even though it may be currently fashionable for mining executives to venture into quoting biblical texts.
My topic, “Profits and Christianity”, may seem somewhat incongruous to many. The two concepts are rarely linked and may seem mismatched. Yet I believe that it is important that Christians speak up in favour of profits. We often tend to be apologetic and feel uncomfortable about defending the role of profits, particularly when discussing matters in an ethical or social context. Too often however profit is confused with profiteering and is equated with greed.
Profits are frequently attacked as somehow being bad, and the integrity of those of us who are involved in the often-difficult task of earning them is under attack, even within our Churches. Yet the role of profits and of those involved in the productive economic system are fundamental to alleviating the economic and many of the social problems which are of concern to our Churches and their members. I believe that we are more involved in providing the means for curing society’s ills than we are in their causes.
This is not to suggest that everything about our economic system is good, nor that there are not flaws and abuses, nor that there is lack of charity, nor many inequities. We can focus solely on these negative aspects, as many do, and fail to weigh the other side of the equation — that the systems in which free enterprise is allowed to operate have permitted the lifting of the living standards of their people and have permitted greater freedoms of the individual than have other systems, whether they be totalitarian of the right or the left.
Profits and the community
Profits are fundamental to all the freedoms we enjoy — not just the freedom to make profits or losses. A state cannot begin to constrain the ability of its citizens to make their own decisions on how they will earn their incomes and how they will spend them, without beginning to place shackles on the liberty of those citizens. (No reasonable member of the community would argue against their needing to be some constraints on individuals in the interests of the common good. The question is where that line is drawn.)
The more a Government constrains enterprises and individuals in their abilities to earn profits, the more it must continually attack the freedom of its citizens in their decision-making processes. The two are inextricably interwoven. When economic freedom is removed, other freedoms cannot survive. History confirms this.
Profit has become an emotive word. For many, it is associated with capitalism, yet it is not really a feature of any particular economic system. It is simply a word to describe the surplus or residual remaining after deducting the costs from what is received for providing goods and services. It is fundamental to any exchange of goods and services, and is equally relevant to any economic system. Sometimes it is called profit, sometimes it is called surplus.
Profits (or earnings) can be consumed currently, or part can be put aside for later consumption. That which is saved provide the capital to fund investment which, if wisely undertaken, generates an increase in the wealth-creating capability of the community.
From the wealth created the community has to decide how this wealth is to be distributed. There is no lack of debate on that topic and there will always be differences of views on the priorities of claims for the shares of the economic cake. It is fundamental to democracy and to the freedoms we cherish that this should be so.
What should be crystal clear, but unfortunately seems to be so frequently overlooked, however, is that the first and prior objective should be to ensure that the cake is as large as we can reasonably make it. Then it will be possible to come closer to satisfying all those demands for shares of it.
Jobs and economic growth
There is little evidence to suggest that those most concerned with a fairer distribution, or those who just want more of what others produce, have significantly changed their views about the role of profits. But this is not the case with those more closely involved. I believe that many in the working community, and particularly those who represent them in the union leadership, have come to understand much better the link between profits, investment and jobs. They have seen the inevitable consequences of higher unemployment, and the misery that this brings, when profits become inadequate and investment dries up.
The surest way of alleviating unemployment is through the rejuvenation of the economy. This goes hand in hand with, and will be enhanced through, the opportunity of making profits. The evidence for this is to compare the U.S.A. and Europe. In the last 18 months, 2.5 million new jobs (equal to nearly half of all the jobs in Australia), have been created in the U.S.A., while there has been no net increase in jobs in the E.E.C. The result is that the U.S.A. has been able to accommodate a much greater participation in the workforce, while at the same time dramatically reducing its level of unemployment. Yet in the E.E.C. the number of out of work continues to show no sign of declining. The marked difference between the two economies is that in the former the market has been encouraged to work through deregulation, lower taxes, etc., while in the latter, rigidities abound.
On the basis of this we should expect that more who are genuinely concerned about the unemployed would be calling for measures to encourage profits and new investment. The silence is deafening!
It can be argued that people should be motivated to work on an unselfish basis and contribute to the best of their abilities for the good of others. Many, of course, do, but not in sufficient numbers to keep the economy going. Because they are less than perfect most people need to see that the benefits for themselves outweigh their personal costs or inconvenience. Throughout history, people have understood the need to work to enable them to satisfy their current needs, and have appreciated the wisdom of putting something asked for less propitious times.
Our society is founded upon individual initiative, private enterprise and the market economy. Yet increasingly these principles are attacked, and attacked savagely, by those who benefit greatly from them. What is more surprising to those of us with a close association with one branch or other of the Christian Church, is that some of the attacks come from within the Church itself and are couched in more and even theological language. To anyone familiar with the relationship between the Christian work ethic and the surge in the standard of living in Western economies since the industrial revolution, this is extraordinary. To any responsible Christian in business, it is offensive. But perhaps we have mainly ourselves to blame, because of our relative silence in a world of mass communication where almost any idea, however spurious, will find a ready reception if it is put forward insistently and repetitively.
Having said all this, I would also wish to emphasise that I do not regard profits as the be-all and end-all of business enterprise. While they are ultimately essential, they are not an end in themselves and in no way should one advocate their pursuit at the expense of freedom or justice. Christians in business do have a major responsibility for ethical behaviour and for influencing their colleagues in that direction. In my own Company, for instance, we have published a booklet “Good Business” which not only provides guidance to employees of what the law requires but also informs them of the Company’s expectations in relation to ethical behaviour.
Christian principles regarding work
Today I want to address these philosophical and theological questions and to assert that not only is the pursuit of profits appropriate for the Christian, but that if properly qualified by relevant ethical considerations it is a high calling for Christians to be so engaged. While such an assertion is far from new in the history of Western civilisation, especially since the Reformation, I believe it needs careful restating today.
At the most fundamental level, work is itself intrinsically good. In Genesis 1 & 2 we see that God himself is creative and productive and that his work results in order. Creation reveals the character of God, and in particular mankind is made in his image and is appointed to have a representative function in the world. Therefore work as creative endeavour by man is the most natural and appropriate aspect of his existence. It expresses his responsibility in the world, as distinct from the modern emphasis on rights.
It follows from this that people’s creative work should and will steadily improve our lot on earth. We have been given the resources of the earth to enable this, and for the most part human history has shown the benefit of applying work to those resources. The concept of “value added” starts in Genesis and gains reinforcement in New Testament writings. Writing to the Ephesian Church for instance, Paul echoes the creation of theology in talking about regenerate people being created for good works which God has prepared for them.
Pope John Paul II pointed out in his 1981 encyclical “Laborem Exercens” that the Church has constantly emphasised work as “a fundamental dimension of human existence on earth”. He goes on to canvass its application in spheres of science and technology, he emphasises the dignity of work and finally he asserts that it is man himself “who is the purpose of work”, i.e. work is for people and not people for work. This is strong stuff for an age when work is too often seen as something to be avoided and where the purpose of life is understood more in terms of leisure than toil.
The reformers were no less forthright in their time. With perhaps a streak of asceticism, they preached the strong message of works as a sign of grace and expressing a continuation of God’s commission to Adam in Genesis. Thus arose the so-called Protestant work ethic, which regarded “the fulfilment of duty in worldly affairs as the highest form of moral activity” and encouraged “restraints … on the consumption of wealth” to provide for “productive investment of capital” (Max Weber). These concepts are arguably responsible for the productive endeavour and generation of capital which is the basis of our Western civilisation! Certainly it at least had a major positive influence on the standard of living we all take for granted today.
Surprisingly to some, Australia may be well placed in respect to attitudes to work. Last year’s Australian Values Study Survey showed that Australians, when asked what they sought most in a job, gave top priority to “a job that is interesting”, second priority to “a job where you feel you can achieve something” and, uniquely in the world, placed “good pay” as low as sixth place. Whether this is some long-lasting hangover of the Christian work ethic or whether it relates to some other aspect of our national ethics I will leave to others to speculate.
Our common wealth
But let me return to profits. Creative, constructive work we can understand but why this disreputable economic concept? The answer is simply that all this work is able to generate capital which one way or another can be invested to yield more capital and so our common wealth grows. Profit is simply the indicator of whether the tender economic plant is growing or not. If some earnings from work are saved and are invested as capital, and if the capital does produce a profit, then there has been growth and the creation of wealth. If not, then we are regressing in economic terms. The likely consequence is greater deprivation for the less fortunate. This is equally true whether it occurs in Melbourne or Moscow.
So Christianity and profits are linked through work, which is fundamental both in a secular sense of providing for our material needs and adding value to resources or in the Christian sense of expressing and fulfilling created human nature. Profits are the means by which that work is ultimately manifest as improvements in our global real estate, cultural heritage and standard of living. And despite the nuclear weapons threat, there is little reason to suppose that the future is not even brighter.
There is enormous scope to improve the lot of hundreds of millions of people on earth both materially and culturally. It will require both our hard work and theirs and it will require the creation and reinvestment of resultant profits over many years. Our children and grandchildren will have exciting opportunities and responsibilities before them.
This leads to the question of objectives. In this context I want to risk stating the obvious in order to outline future objectives concerning which I believe there is general agreement.
A desirable objective for any community, I suggest, is wealth creation and economic growth. This is not so we can have bigger cars or houses but because as Christians and citizens of “the lucky country”, we should be acutely aware that many people on the fact of the earth (and indeed some in Australia) are living in absolute poverty. Without economic growth they will remain where they are. In the case of the Australians, they will be dependent on those who are working to earn enough to pay the taxes to fund the welfare which supports them. This is an increasingly unstable situation as the welfare bill grows and national productivity fails to keep pace. We need to reverse these trends, not only from an economic viewpoint but more importantly in the interests of social cohesion.
It is intriguing and desperately sad that so many people in addressing the needs of the poor, especially in the Third World, can come up with only the prospect of more handouts in redistribution of wealth away from where it is being produced.
Social and economic freedoms
They apparently cannot see how wealth has been created in the West and fail to appreciate how, over only a few short generations this has substantially lifted the living standards of the average citizen. Why are the lessons of the West’s economic growth not applied in the Third World? Vigorous economic growth in Third World countries certainly has the capacity to do more than foreign aid is ever likely to achieve. This is not to suggest that there is not a role for foreign aid. There is, and we should encourage developed countries to give generously to those who are less fortunate. But there is also another requirement of Third World countries which want to achieve freedom for the individual. History tells us, of course, that one is not achievable without the other.
Socialism of course is an attractive doctrine, especially to those noble souls who forever see human nature in terms of what it should be. If we were all perfect, or nearly so, and were prepared to work without further incentive for the common good, then socialism would probably work. Christian thought regarding mankind’s role in the world has oscillated between socialist ideals and an emphasis on the depravity of human nature. While it is all very well for people to justify socialism on the basis of what it ought to deliver, I believe we have to look at the track record. For countries which have embraced socialism, in the sense of highly regulated centrally-planned economies, the results have been mostly disastrous or at best unimpressive, while free enterprise and mixed economies have much more to show. But competitive free enterprise cannot be put forward on its own. It must go with other freedoms — freedom of democracy, freedom of speech, freedom to invest or not to invest, freedom to fail. We can’t divorce these freedoms from one another, and capitalism without other freedoms is a cruel parody.
In respect to the economic system best able to cater for human needs and aspirations I cannot do better than quote the words of Sir Peter Walters, head of BP in London, when speaking to a Christian businessmen’s conference last year:
I am opposed to businessmen feeling shame or embarrassment over their involvement in the process of wealth creation. While we in the West may regretfully over-indulge ourselves when others are lacking life’s essentials, I still believe that both history and experience point to the competitive free-enterprise system as being the most efficient method of increasing wealth on both a local and an international scale, and of ensuring that the benefits are widely spread.
Secondly, I do not believe that free enterprise should be pilloried for working with, rather than against, the grain of human nature. If there is a need for moral resurgence in the West, free enterprise at least allows the individual the freedom to take his own moral decisions and accept responsibility for his actions.
I was also interested to see that Mr Edward Seaga, Prime Minister of Jamaica, had some strong words recently about the need for developing nations in the Caribbean to pay for progress out of economic growth, rather than through a levelling or “pulling-down” process, as he put it. His policies set out to prove that domestic private enterprise and deregulation coupled with extensive foreign investment are the best hopes for underdeveloped nations. Surrounded as he is by various socialist experiments in government and inheriting the legacy or another one, he can claim some authority in the matter.
Economic and political power
Allied to freedom is power. According to the comic-book caricatures published by the Commission of Justice and Peace in my own denomination [Catholic], I and certain mining industry colleagues are supposed to be some of the most powerful people in the country! Presumably this is because we have responsible roles in large companies which bring together a lot of financial assets. But I put it to you that there are one or two well known union executives who have demonstrated that they are far more powerful than I, as a senior company man, can ever be. I cannot at my whim put builders out of business or decide the limits of a city square. I can, however, in a modest way contribute to decisions which set up new businesses and add value to the nation’s resources so that productive jobs are created. And yet who does our enlightened Church agency attack, with the short-lived blessing of my bishops?
At the root of this is confusion about the nature of power. In our society economic and political power have traditionally been separate, though regrettably politicians seem to be intent on closing the gap. In popular left wing or “new class” myth, economic power dominates politics and this gives rise to the push for reversing the alleged situation, so that economic activities should become utterly subservient to politics, as in socialist states. But the protection of the community from dictatorship is best accomplished by a wide dispersion of economic power and the separation of economic power and potential power. It is also vital that the holders of both political and economic power remain clearly accountable to their relative constituencies.
This then highlights some issues. How do we ensure a strong democracy without allowing its destruction by those who would destroy freedom for others? Do we need safeguards to protect us from those who would set out to gain political power to abuse it? Does democratic egalitarianism in Australia need always to be expressed as a pulling down rather than as creating opportunities for others to pull themselves up? These are some of the questions which Christian leaders, both lay and other, need to address urgently if they are not by default to concede the field to those who disparage the values and objectives I have outlined.
I believe that we, as active laymen in the Churches, need to take a much stronger role in how the Churches teach and act in relation to economic issues. It is just not good enough to have the sort of nonsense expressed in the anti-mining comic I have referred to and in Changing Australia foisted upon the Australian public in the name of enlightened concern. It is bordering on scandalous that we meekly allow the concerned and well-meaning members of our Churches to be misled by that material, with hardly a word of dissent.
The Churches need, if they are to be credible in economic issues, to take a good look at how wealth is created, as well as (but not only) how it might be redistributed. There is a need to dust off the theology of work, along with the doctrine of creation which undergirds it, and expound it to a hedonistic world.
And there is a need to help reinforce the strengths of democracy and freedom of speech, for where these are eroded, the Church is first to suffer.