Illustration by Brett Ryder

HENRY HAZLITT, one of the great popularisers of free-market thinking, once said that good ideas have to be relearned in every generation. This is certainly true of good ideas about business. A generation ago Margaret Thatcher and Ronald Reagan did an excellent job of making the case in favour of business. Today it looks as though the case needs to be made all over again.

It is hardly surprising that business has fallen from grace in recent years. The credit crunch almost plunged the world into depression. The new century began with the implosion of Enron and other prominent firms. Some bosses pay themselves like princes while preaching austerity to their workers. Business titans who once graced the covers of magazines have been hauled before congressional committees or carted off to prison.

Business people have been at pains to point out that it is unfair to judge all of their kind by the misdeeds of a few. The credit crunch was the handiwork of bankers (who lent too much money) and policymakers (who fooled themselves into thinking that they had abolished boom and bust). Corporate criminals like WorldCom's Bernie Ebbers and Tyco's Denis Kozlowski were imprisoned for their crimes. Avaricious bosses like Angelo Mozilo, who pocketed more than $550m during his inglorious reign at Countrywide, are exceptions. The average American boss is actually paid less today than he was in 2000.

This is all true enough but hardly sets the blood racing. More ambitious defenders of business have advanced two arguments. The first is that many firms are devoted to good works. They routinely trumpet their passionate commitment not just to their various stakeholders (such as workers and suppliers) but to the planet at large. Timberland puts “green index” labels on all its shoes. GlaxoSmithKline makes HIV drugs available at cost to millions of Africans. Starbucks buys lots of Fairtrade coffee.

The second argument is more hard-headed: that businesses have done more than any other institutions to advance prosperity, turning the luxuries of the rich, such as cars a century ago and computers today, into goods for the masses. General Electric's aircraft engines transport 660m people a year and its imaging machines scan 230m patients. Wal-Mart's “everyday low prices” save Americans at least $50 billion a year.

The problem with the first argument is that it smacks of appeasement. Advocates of corporate social responsibility suggest that business has something to apologise for, and thus encourage its critics to find ever more to complain about. Crocodiles never go away if you feed them. The problem with the second argument is that it does not go far enough. It focuses exclusively on material well-being, and so fails to engage with people's moral qualms about business.

This is doubly regrettable. It is regrettable because it has allowed critics of business to dominate the discussion of corporate morality. For all too many people it is now taken as a given that companies promote greed, crush creativity and monopolise power. And it is regrettable because it has deprived the business world of three rather better arguments in its defence.

The first is that business is a remarkable exercise in co-operation. For all the talk of competition “red in tooth and claw”, companies in fact depend on persuading large numbers of people—workers and bosses, shareholders and suppliers—to work together to a common end. This involves getting lots of strangers to trust each other. It also increasingly involves stretching that trust across borders and cultures. Apple's iPod is not just a miracle of design. It is also a miracle of co-operation, teaming Californian designers with Chinese manufacturers and salespeople in all corners of the earth. It is worth remembering that the word “company” is derived from the Latin words “cum” and “pane”—meaning “breaking bread together”.

Another rejoinder is that business is an exercise in creativity. Business people do not just invent clever products that solve nagging problems, from phones that can link fishermen in India with nearby markets to devices that can provide insulin to diabetics without painful injections. They also create organisations that manufacture these products and then distribute them about the world. Nandan Nilekani, one of the founders of Infosys, put the case for business as well as anyone when he said that the computer-services giant's greatest achievement was not its $2 billion in annual revenue but the fact that it had taught his fellow Indians to “redefine the possible”.

Enfranchising, not enslaving

A third defence is that business helps maintain political pluralism. Anti-capitalists are fond of arguing that companies account for half of the world's 100 biggest economies. But this argument not only depends on the abuse of statistics—comparing corporate turnover with GDP (which measures value added, not sales). It also rests on ignorance of the pressures of business life.

Companies have a difficult enough job staying alive, let alone engaging in a “silent takeover” of the state. Only 202 of the 500 biggest companies in America in 1980 were still in existence 20 years later. Anti-capitalists actually have it upside down. Companies actually prevent each other from gaining too much power, and also act as a check on the power of governments that would otherwise be running the economy. The proportion of the world's governments that can reasonably be called democratic has increased from 40% in 1980, when the pro-business revolution began, to more than 60% today.

Most hard-headed business people are no doubt reluctant to make these arguments. They are more concerned with balancing their books than with engaging in worthy debates about freedom and democracy. But they would do well to become a bit less reticent: the price of silence will be an ever more hostile public and ever more overbearing government.