It is juvenile to think business can be easily divided into good and bad, like characters in a fairy tale. Surprisingly Ed Miliband, leader of the Labour party, delivered a speech this week which suggested he believes in such a fantasy. Real life in the commercial world is rather more complicated and gritty than that.

To begin with, Britain’s economy is in a precarious condition. We simply do not have the luxury to be overly fussy about rejecting certain industries – as long as they abide by the law. Unless we want to end up as a bigger version of Greece, we must cut current unsustainable levels of government spending: and that means public sector job losses. If those ex-state workers are to be re-hired by the private sector, then we should retain a pragmatic approach when it comes to stimulating investment by business owners.

And how on earth would we decide which were good and bad companies? Ethical funds dislike industries that pander to our vices, such as alcohol producers, cigarette makers and gambling concerns. I have owned pubs, nightclubs, dog tracks, bookmakers and bingo halls, so know a little about such trades. All three sectors are major employers and contribute large sums to the state coffers in various duties. The government already regulates and taxes them heavily. What else would Labour do – shut them down altogether? In current circumstances the Treasury could not possibly afford it. Moreover, I suspect Mr Miliband’s union paymasters would object if their members couldn’t drink, smoke and bet any more.

And what about another industry shunned by ethical investors: the arms trade? Britain has a large defence industry and BAE Systems is our biggest manufacturing exporter. If we are going to be precious about how the nation earns its living, surely selling weapons of death is as immoral as it gets? But Mr Miliband, quite correctly, supports BAE. We must play to our strengths, otherwise we really are finished. Perhaps the prime minister-in-waiting knows that the internet itself was a spin-off from US military spending; and that Israel’s booking high-technology success is a direct result of army research and development.

Mr Miliband talked in vague terms about “predators” and “asset strippers”. Such emotional and nebulous language is of little practical use and betrays a politician using soundbites rather than a statesman making a profound argument. It also indicates a naive and simplistic view of capitalism. Mergers and acquisitions have been part of business affairs since the industrial revolution. They refresh and reorganise, usually for purposes of synergy and economies of scale. This process is healthy and necessary if we are to compete against China and India.

I do not believe our business culture is rotten and needs wholesale reinvention. Britain remains highly enterprising, with low levels of corruption. Perhaps Labour politicians should spend more time with entrepreneurs and risk takers, and less with their union paymasters.

Leftwing politicians frequently demonise private equity, and Mr Miliband is no exception. But studies show that buyouts actually grow faster and generate more jobs than comparable public or family companies. Sometimes there is too much financial engineering and companies fail. Yet overall, such sources of capital are a vital component of funding for industry – especially in a period when domestic new issues on the London Stock Exchange have almost become extinct.

Ultimately markets and entrepreneurs dictate the rise and fall of enterprises. When civil servants try to run companies they usually misallocate capital, with the taxpayer footing the bill. From DeLorean cars to Concorde, the saga of direct government intervention in industry is a litany of cock-ups and poor returns. Privatisation of sectors from ports to telecommunications to buses has invariably shown dramatic improvements in productivity and service. Proper incentives, competition, choice and management freedom have worked for all stakeholders. Who would go back to the dark days of a government monopoly, British Telecom and British Gas?

I chaired Channel 4 for six years. It has always been owned by the taxpayer, but has been a roaring success for more than a quarter of a century (never requiring any cash infusions) precisely because politicians and civil servants have nothing to do with running it. Sadly the Royal Mail is the opposite. Militant unions and political cowardice have prevented its modernisation, which would allow it to cope with the digital age. So its prospects are truly desperate. No doubt Mr Miliband sees it as a solidly “good” company; but how do we taxpayers feel, as we contemplate billions in subsidies for ever more?

Arguably, the worst sort of company is one that makes chronic losses. Inevitably they go bust and cause chaos as a result. Hence any “good” business must be efficient and profitable as a first principle. And that requires a company to be competitive and firm – with staff, suppliers and so on. I have learnt the hard way that soft companies, which are lax on costs and over-generous with staff and customers, soon sink. Business is not a charitable affair – it is an exercise in optimising margins, while retaining repeat custom.

My definition of a good business is one that I can be proud of owning. I provide patient capital to companies where I invest, and I try to help improve their performance. I despise hit-and-run investors, such as those hedge funds who hold assets for just weeks. And companies cannot ignore the costs they impose on a wider society, nor the communities where they operate. Owners know only too well that they have responsibilities.

Corporate undertakings are subject to the iron laws of supply and demand, however. If you are the boss who has to meet the payroll at the end of the month, then all the philosophical musings of our MPs are worthless. Your duty is to remain solvent, generate more sales, and make sure the cheque clears. Somehow I suspect Mr Miliband (who has never worked in business in his life) has no experience whatsoever of these life-and-death matters.

The writer runs Risk Capital Partners and is author of Start it Up

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