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It's Not Just Economics

I’m always uncomfortable when a family business discussion changes focus and becomes about wealth – or worse, about maximizing (or realizing) economic value. Not that I have anything against wealth or against maximizing economic value. I do not. What concerns me is that wealth is an abstraction, treated without reference to how that wealth was created and is sustained — as if wealth were the end rather than the means. Discussing wealth, however, is preferable to the even greater abstraction of “economic value” with its connotation that all value should be considered in terms of units of currency. Wealth at least implies assets which require management and stewardship. Currency is completely fungible, a medium of exchange, unidimensionally economic.

My discomfort comes from my own view that values are an inherently multifaceted phenomenon, and that to view enterprise from a perspective that is solely economic is to lose all the other values to be found in enterprise.

All those other values embody society, culture and humanity and to the extent that they are ignored, civilization suffers. I embrace family businesses because they represent the institution most likely to recognize a multitude of values within their enterprise and struggle to balance pursuit of a broad spectrum of goals represented by that portfolio of values.

I’m led to this musing by a couple of recent discussions, one small and one large. The small one took place with a group of highly liberal behavioral science college faculty members who were bemoaning the impact of “unbridled capitalism.” They did not deny capitalism’s benefits related to prosperity and freedom, but still were offended by the social, cultural and ecological destruction they perceived from a metaphorical capitalistic horse seeking only its own profitable direction rather than being directed by someone holding reins and bridle. Capital directed by families with long-term commitments to the communities in which their assets are embedded, I suggested, represents a kind of “bridled capitalism,” guided by a set of values broader than, but including economic value creation. Interestingly, my colleagues who typically look askance at business, readily agreed.

The large discussion is the ongoing national debate concerning repeal of estate and gift taxes. An interesting contribution to the debate comes in the form of an essay by Adam Pruzan entitled “Esau’s Delusion: Moral Consequences of the Estate Tax,” published by an organization called “Toward Tradition,” an education foundation dedicated to creating a national movement of Jews, allied with Christians, who want to apply traditional conservative ideas to America’s cultural, political and economic life (phone 800- 591-7579, website

Pruzan maintains that inheritance, in its fullest meaning, “includes transmitting not just material goods but also spiritual values.” The estate tax is part of a process that treats inheritance in a value-unidimensional fashion — all assets are treated and taxed as liquid, therefore allowing only consideration of economic value.

“We advocate repeal of this tax not for purely economic reasons (although we find such arguments extremely compelling in and of themselves),” writes Pruzan, “but for moral and cultural ones as well.”

“We rightly refer to marriage as the glue that holds society together. In the same way, inheritance is the glue that binds generations to one another. Or, to oversimplify only slightly, marriage holds society together within a given generation, and inheritance extends the social fabric through time....

“...Three principles of inheritance practically define the Torah conception of what it means to be human. First, we should see ourselves as both material and spiritual creatures, with a special obligation to balance and harmonize the two parts of our nature. Second, we have obligations extending both backward and forward in time; those obligations are embodied in our relationships with our parents and our children. Third, with regard both to our material possessions and our moral tradition, we are not owners but stewards....

“Modern heirs ... live in an extremely dynamic economy, in which few large fortunes are invested in idiot-proof and inflation-proof securities. On the contrary, (substantial wealth) ... almost always means ownership of a going business, in which merely preserving the value of the estate — let alone increasing it — requires very nearly as much talent and effort as the original entrepreneur possessed ....

“The Judeo-Christian ethic calls on us to be good stewards of our inheritance; this naturally includes a philosophy of education in which we transmit disciplines to our children in order to make them worthy heirs.”

The American electorate overwhelmingly supports the repeal of the estate tax on family businesses and farms. Voters are persuaded not just by the economic inefficiencies and unfairness of the tax, but because they recognize that the tax does damage not just to the economic fabric of society but its moral fabric as well.

Family businesses are precious neither just for economic nor societal reasons, but because they uniquely blend the two realms of our humanity.




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