Do successful business people benefit others when making their money, when spending it, both, or neither?

Business people are executives who transact business. This essay explores the impacts of businesses following Friedman’s mantra: "The social responsibility of business is to increase its profits." [1] and the following quotes from Rey Sheng Her “Economy of Goodness is based on mutual benefit, not competition.” [2], and “Economy of Goodness is one of shared prosperity, hoping that all lives can thrive within a collective greater self through mutual assistance and mutual benefit.” [3] Whether intentionally or not, businesses benefit those around them, though not necessarily always true. I contend that successful business people can benefit others both by making and spending money.

Success is defined as the achieving of the results wanted or hoped for (Cambridge Dictionary). Economic benefits are usually gains that can be expressed in financial terms as the result of an improvement in facilities provided by a government, local authority, etc. (Oxford Reference) Businesses engaging in successful profit-making create jobs, stimulate demand for goods and services and encourage innovation-key building blocks of economic growth.

When it comes to profit, the business person’s ability of wealth accumulation would immediately come up as this causes their net worth to increase. Wealth is much more unequally distributed than labour earnings and income, and the wealthy will continue to save at high rates, which leads to the emergence and persistence of very large fortunes. [4] The Gini Coefficient, in the Lorenz curve context, can be used to measure income or wealth inequality within a society. (Fig. 1)

Fig. 1: The Gini Coefficient Equation in the Lorenz curve context [5]

Note that they can also be written as both integrals for continuous distributions, and sums for discrete distributions on Area A & B The Gini coefficient is an index by which wealth inequality can be measured, where the higher it gets (closer to a value of 1) then indicates that one person owns all the goods and right up until just under 0. As a result of influences such as variations in capital returns, inherited wealth or lack thereof savings rates and investment options - all factors that disproportionately benefit the wealthy.

However, the act of acquiring wealth will not result in adverse social outcomes automatically. It is these savings that, if continually reinvested into business effective management catalyses a range of good things to happen. More concretely, those investments can boost employment and raise wages - in other words, spur growth. This, in turn, can help to make a more even distribution of economic wherewithal across the population and hence aid in reducing inequality (as assumed by targeting a minimal Gini coefficient). As a result, the efficient distribution of wealth at an individual level can become a wider social good - leading to increased levels of economic inclusion and prosperity.

Furthermore, another primary way of benefiting others is through job creation, especially when unemployment has been a major issue for young people as job deterioration and experiences with layoffs and job threats are creating pessimism. [6] From a microeconomic perspective, firms require labour inputs to scale their operations—an imperative not only for corporate growth but also for macroeconomic stability. Job creation not only allows people to be financially independent but there is also a cascading set of economic multipliers that follow. For instance, a person like Jeff Bezos who founded Amazon has tremendously influenced the local economy due to his high job creation means-factor.

As of 2024, Amazon employs approximately 1,521,000 full-time and part-time employees. [7] The direct jobs multiplier is magnified by Amazon´s large network of distribution centres, corporate offices and technology hubs, filling up the company's hometown in Seattle. Since 2010, the company has generated more than $129 billion in economic activity in Washington State and added $112 billion to Washington’s GDP. [8] This vast workforce helps boost local businesses as these employees consume the products and services, thereby generating more consumption-oriented demand at a regional level. Economically, this growth in employment drives lower rates of unemployment and higher average incomes which also helps the stability of those regional economies that Amazon operates within.

Consumer spending is perhaps the most important short-run determinant of economic performance and is a primary component of aggregate demand, [9] representing more than 70% of the US GDP. [10] To increase the amount of consumer spending, consumer satisfaction is essential. Satisfied customers are willing to pay more and increase product usage, which as a

result will boost future consumer spending, hence generating economic growth. [11]

Innovation is a driving force for job creation. New technologies, including Artificial Intelligence (AI) can be applied to many areas to develop new products which simply become part of everyday life. The AI market size is expected to reach $407 billion by 2027 and have an estimated 21% net increase on the US GDP by 2030. [12] This clearly demonstrates the effect AI has on economic growth and the impact it will make on numerous industries such as retail, customer service, healthcare, and many more. Another example is the economic development of China from 1985-2019. [13] This development was heavily impacted by the technological innovation of businessmen such as Jack Ma and Ma Hua Teng. Both of their companies brought convenience to the Chinese people’s lives alongside numerous job opportunities. Using the Kuznets Curve (Fig. 2) hypothesis, which indicates income inequality rises as a country first industrializes, then falls in the later stage of development. [14]

Fig. 2: The Kuznets Curve [15]

The financial Kuznets curve hypothesis is valid for China’s economy in the long run, as it gradually changed from a developing economy to a developed economy, indicating an inverted U-shaped relationship between financial development and the urban-rural income gap. [16] This indicates that tech innovation has a positive effect on the urban-rural income gap, which benefits a big percentage of the Chinese population.

Beyond wealth creation, successful business people play a pivotal role in benefiting others through their spending behaviour. Consumer expenditures, particularly by the more affluent among them, thereby animate economies creating a general demand for goods and services accompanied by an impetus to produce those goods.

Multiplier effects are one of the fundamental mechanisms of local and regional development and occur when one type of economic activity affects another and is primarily driven by market forces. [17] They are the changes in demand, income and employment arising due to the interaction of two or more sectors in an economy. This effect is formalized with the following multiplier formula:(Fig. 3)

Fig. 3: The Multiplier Formula [18]

There, k is the multiplier and MPC is the marginal propensity to consume (how much of a $1 change in income will get spent by consumers rather than saved). As an example, if the MPC is 0.8 then k = 5, meaning each dollar spent would in turn increase total economic output by five dollars. This process starts when an initial capital investment such as a businessman paying big money for some product or project is made into the economy This new income received by workers and suppliers increases their consumption which again fuels this money in the economy. This goes on ad infinitum, and each round of expenditures creates less net income than the last because some are siphoned off to savings and taxes. But when those spending rounds are combined, that total allocation has a far greater impact than the original investment. Hence, besides increasing the output, it adds buttress to economic recovery and growth by enhancing financial policy effects, especially during recensions with a surge in multiplier effect This observation reinforces the strategic importance of fiscal stimulus in contemporary economic policy design-buffering and counter-cyclical efforts.

In addition, philanthropy is arguably the most immediate and transformative route to ensure our success touches other lives. It is this agility that enables philanthropists to try out solutions which can be easily scaled by larger institutions. Successful entrepreneurs are usually public figures, and their engagement can help bring more attention and resources to important matters. If we succeed in involving them, they will help to inspire others and generate the chain of actions that move communities/stakeholders. While business success allows significant philanthropic donations, it usually comes with influence that inspires more entrepreneurs to make effecting change on a large scale -- demonstrative acts create waves which echo their commitment to others’ welfare.

Traditional philanthropy often fails to solve large-scale social problems. However, catalytic philanthropists take a more active and responsible role in driving social change. [19] The four key practices of catalytic philanthropists are: taking responsibility for achieving results, engaging others in a compelling campaign, using a wide range of tools, and creating actionable knowledge. [20] For instance, Thomas Siebel, the CEO of C3.ai, founded a non-profit organisation in Montana, USA in 2005 to help teenagers to stop taking methamphetamine (meth) by graphically depicting the negative consequences of meth use. As a result, from 2005-2010, meth usage in Montana declined 63%. [21]

Nevertheless, it is not invariably the case that successful business people confer benefits upon others through their financial activities or earnings. To enhance the ethical decisions of successful businesses, corporate social responsibility (CSR), as voluntary firm endeavours, further protects the benefit of society. [22] Environmental, social, governance (ESG) criteria for CSR strategies ensure that companies address a broad spectrum of issues that benefit the public. Firms may engage in CSR due to altruistic reasons, as a form of "window dressing" to appease stakeholders, to attract and retain employees, to appeal to customers, or to reduce production costs. [23] In terms of the environment, companies work to minimize carbon emissions and maximize efforts in environmental sustainability which battles against climate change and aids a more liveable planet. The socially oriented CSR initiatives focus on working conditions, fair trade and investment in the community (Schmiedheiny 1992) thereby trying to combine social fairness with all stakeholders. Suitable governance ensures that companies conduct their business transparently and ethically, which is essential to building trust as well as stability in the market.

An example of corporate malfeasance [24] would be Robert Maxwell, an extremely influential media tycoon and known for his larger charisma, Maxwell was to business circles what royalty once was. His victory was a camouflage for some unethical conduct and lies. Maxwell was able to exploit the lack of effective corporate governance and oversight to engage in fraudulent activities, including the theft of over £933 million from his public companies' pension funds. [25] More than 30,000 workers were left wondering what happened to their pensions when the Maxwell empire collapsed. [26] Fortunately, the funds were ultimately mostly paid by the government and an out-of-court settlement. [27] In addition, not only had Maxwell almost destroyed individual lives but also eroded public trust in corporate leadership and financial institutions.

Through her actions, Maxwell embodied how unethically conducted business can have catastrophic consequences for society at large and obstruct a model of commerce which businesses could (and should) be good. CSR has demonstrated its prominence in analogous circumstances as a standard of behaviour to guarantee the general welfare at large.

In conclusion, this essay has closely examined how achieved businesses contribute to society and explained reasons why they earn or consume values with business models as well as negative societal effects due to business practices using two competing perspectives of Milton Friedman's profit-seeking orientation versus Rey Sheng Her' economy of goodness inclusive perspective. The pursuit of profit does indeed mean economic expansion and, in turn, innovation; but it also means the perpetuation of wealth inequality and problematic corporate practice. Her, by contrast, supports mutual benefit, shared prosperity and ethical practice for a fairer more sustainable tomorrow.

Moving forward, corporate strategists are going to have to factor ethics into their planning. Financial success can be a path to build the more equitable and prosperous world we urgently need, by reconciling this tension between economic aims and social obligations. It is ethical leadership and corporate responsibility that will contribute to building a future where businesses are part of social progress and environmental sustainability.

Bibliography & Endnotes:

1. Milton Friedman, “Friedman’s Doctrine – The Social Responsibility of Business is to Increase its Profits”, New York Times, Sep 13, 1970 https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html

2. Economy of Goodness—The Philosophy and Practices from the Perspectives of Altruism (善經濟：經濟的利他思想與實踐)by Ray Sheng Her, p30 of Introduction

3. Economy of Goodness—The Philosophy and Practices from the Perspectives of Altruism (善經濟：經濟的利他思想與實踐)by Ray Sheng Her, p30 of Introduction

4. De Nardi, M., Fella, G. Saving and wealth inequality. Review of Economic Dynamics (2017), http://dx.doi.org/10.1016/j.red.2017.06

5. Wright Muelas, Marina & Mughal, Farah & O’Hagan, Steve & Day, Philip & Kell, Douglas. (2019). The role and robustness of the Gini coefficient as an unbiased tool for the selection of Gini genes for normalising expression profiling data. Scientific Reports. 9. 17960. 10.1038/s41598-019-54288-7.

6. Starks, B. (2003). The New Economy and the American Dream: Examining the Effect of Work Conditions on Beliefs about Economic Opportunity. The Sociological Quarterly, 44(2), 205–225. https://doi.org/10.1111/j.1533-8525.2003.tb00555.x

7. Fabio Duarte, “Number of Amazon Employees (2024)”, Exploding Topics, June 10 2024 https://explodingtopics.com/blog/amazon-employees#how-many

8. John Stearns, “Since 2010, Amazon Has Generated $129B in Washington State Economic Activity”, W[REPORT] https://getthewreport.com/local-economy/since-2010-amazon-has-generated-129b-in-washington-state-economic-activity/#:~:text=According%20to%20Amazon's%202021%20Economic,well%20as%20investment%20in%20infrastructure

9. The Investopedia Team, “Consumer Spending: Definition, Measurement, and Importance”, Investopedia, Dec 26, 2023 https://www.investopedia.com/terms/c/consumer-spending.asp

10. Fornell, C., Rust, R. T., & Dekimpe, M. G. (2010). The Effect of Customer Satisfaction on Consumer Spending Growth. Journal of Marketing Research, 47(1), 28-35. https://doi.org/10.1509/jmkr.47.1.28

11. Fornell, C., Rust, R. T., & Dekimpe, M. G. (2010). The Effect of Customer Satisfaction on Consumer Spending Growth. Journal of Marketing Research, 47(1), 28-35. https://doi.org/10.1509/jmkr.47.1.28

12. Katherine Haan, “24 Top AI Statistics and Trends in 2024”, Forbes, June 15, 2024, https://www.forbes.com/advisor/business/ai-statistics/

13. Wang L-M, Wu X-L, Chu N-C (2023) Financial development, technological innovation and urban-rural income gap: Time series evidence from China. PLoS ONE 18(2): e0279246.

https://doi.org/10.1371/journal.pone.0279246

14. Clay Halton, “Simon Kuznets: Who was He and What is the Kuznets Curve?”, Investopedia, June 07, 2024

https://www.investopedia.com/terms/s/simon kuznets.asp#:~:text=Today%2C%20Simon%20Kuznets%20is%20best,the%20later%20stages%20of%20development

15. Saddique Ansari, “The Kuznets Curve”, Economics Online, June 19, 2023 https://www.economicsonline.co.uk/definitions/the-kuznets-curve.html/

16. Wang L-M, Wu X-L, Chu N-C (2023) Financial development, technological innovation and urban-rural income gap: Time series evidence from China. PLoS ONE 18(2): e0279246. https://doi.org/10.1371/journal.pone.0279246

17. Domański, Bolesław, and Krzysztof Gwosdz. "Multiplier effects in local and regional development." Quaestiones Geographicae 29.2 (2010): 27-37.

18. Wallstreetmojo Team, “Multiplier Formula”, WallStreetMojo, April 4, 2024 https://www.wallstreetmojo.com/multiplier-formula/

19. Kramer, Mark R. Catalytic philanthropy. FSG, 2009.

20. Kramer, Mark R. Catalytic philanthropy. FSG, 2009.

21. Philanthropyroundatable.org Editors, “Montana Meth Project”, Philanthropy Roundtable, 2005 https://www.philanthropyroundtable.org/almanac/montana-meth-project/

22. Sprinkle, Geoffrey B., and Laureen A. Maines. "The benefits and costs of corporate social responsibility." Business Horizons 53.5 (2010): 445.

23. Sprinkle, Geoffrey B., and Laureen A. Maines. "The benefits and costs of corporate social responsibility." Business Horizons 53.5 (2010): 445.

24. Clarke, Thomas. "Case study: Robert Maxwell: master of corporate malfeasance." Corporate Governance: An International Review 1.3 (1993): 141-151.

25. Clarke, Thomas. "Case study: Robert Maxwell: master of corporate malfeasance." Corporate Governance: An International Review 1.3 (1993): 141-151.

26. BBC News Editors, “The pensioners’ tale”, BBC News, March 29, 2001 http://news.bbc.co.uk/1/hi/business/1222736.stm

27. BBC News Editors, “The pensioners’ tale”, BBC News, March 29, 2001 http://news.bbc.co.uk/1/hi/business/1222736.stm