Thursday , October 6 2022

Milton Friedman is right, the benefit is the sole purpose of the company


In its unimaginable form, and with a turn of Canadian union, Jerry Dias is in a mini-crusade to overthrow the foundations of modern corporate capitalism. As the president of Unifor ratifies his actions against General Motors Co for his plan to close the assembly plant of the automobile Oshawa, Ont., Expands some of the ideas of the growing movement to replace the maximization of benefits with a greater focus on employees, communities, social problems, national impacts and global concerns.

By attacking the benefits of GM and plant closures as manifestations of corporate greed, Dias promotes long-standing principles proclaimed by the social and economic theorists who want to reform the corporate model. Instead of pursuing the shareholder's interest in achieving ever-increasing profits, according to what GM is supposed to be doing, they believe that corporations must adopt even higher moral goals.

At the other end of the corporate power structure, but on the same subversive ideological page, is Larry Fink, chief of BlackRock Inc., the world's largest fund management company. "Companies have a social purpose," he said. Governments, apparently, can no longer protect the environment, start social equity, alleviate poverty and solve wider social challenges.

In a new letter to the world's top executives, published on Thursday, Fink seemed to channel Dias. "Workers, not just shareholders, may have a bigger decision at defining the purpose, priorities, and even the details of their business." Reiterating a topic he launched last year, he added: "Interest groups are pushing companies to sensitive social and political issues, especially when they see that governments do not do it effectively."

Supporting Fink is a long list of academics, consultants, business leaders and politicians – many of them Canadians – who want to overthrow the idea that the main purpose of a corporation is to get shareholders to earn money.

In doing so, these corporate revolutionaries consider it essential to first overthrow one of the great advocates of the primacy of share capitalism: Milton Friedman, the final economist of the Nobel, who in 1970 wrote a seminal essay entitled The Social Responsibility of Business its benefits .

Like bands of activists struggling to destroy statues of historical figures in cities in North America, corporate reformers try to drag and bury Friedman through the pages of their books and documents. His efforts, however, effectively propose to destroy one of the engines of economic growth and the increase in people's living standards.

Once he was asked about greed, Friedman said that the only cases in recorded history in which the masses escaped the exhausting poverty "are where they have had capitalism and largely free trade." In his 1970 corporate essay, he explained in detail why the doctrine of social responsibility is "fundamentally subversive" to the fundamentals of the market economy that have generated prosperity and an increase in quality of life.

All this is ignored by the critics of Friedman. Friedman's last academic attack, which died in 2006, comes from Colin Mayer, a business professor at the University of Oxford and a long-term defender to shake up corporate dogma.

In Mayer's new book, Prosperity: Better Business Makes the Greater Good, grab a hammer on page two and start demolishing "Friedman's doctrine. One of the blurbs in the cover of the book even manifests that" marks the key ending to the military coffin of Milton Friedman ".

The message from his book, Mayer said, is that "the Friedman doctrine is not a law of nature. On the contrary, it is not natural; Nature abhors her, only because it has become the seed of destruction of nature ".

The longest society supports Friedman's vision of the corporation as an institution that maximizes profits, says Mayer, "the greater the damage inflicted on our societies, the natural environment and ourselves."

Then, with a rhetorical brush in the heart of Friedman's effigy, Oxford Prof. Makes a final shot against one of 20th The great economic thinkers of the last century: "Few theories on social sciences are so important and erroneous that they threaten our existence, but that is exactly what the Friedman doctrine does in the 21st centuryst century. "

Since its publication last November, Mayer's book has been repeatedly acclaimed by writers in the London Financial Times. A remarkable and radical new book, said Martin Wolf in a column that added: "We need to rethink the purpose of the corporation." Another FT writer called Prosperity a "new influential book", while a FT critic said the book is "a resounding pace and a radical roadmap towards a bright future for corporation and capitalism."

Shameful withdrawal from Friedman de Mayer is another on a long line of glib placements and layoffs of a note that does not resolve the fundamentals of Friedman's well-articulated objections to install corporate social responsibility and others "purposes" in the corporate model.

In a 2016 paperbook of several collaborators: Re-Imagining Capitalism, co-edited by Canadians Dominic Barton, former global director of McKinsey & Co., and Dezsö Horváth, Dean of the Schulich School of Business of the University of York: medium Twelve of references dismissed Friedman's idea about the role of corporations without even mentioning his reasoning.

The main essay on Re-Imagining Capitalism is Paul Polman, the recently exiled Managing Director of Unilever NV, who spent a decade preaching corporate do-goodism. As Chief Executive Officer, he gained large shareholder gains before confronting investor discontent last year to avoid a bid for the lucrative acquisition of Kraft-Heinz Co. of Warren Buffett and his plan to move the headquarters of the group of consumer goods of the company to the Netherlands from London.

Polman is a legend among corporate reform lawyers and often acclaimed as a pioneer. "Companies that do not see this business have a much greater purpose and social value than earning money, will struggle to survive. Society will reject them," writes Re-Imagining Capitalism. "But in the right hands, the business purpose can overcome the private financial gain. We can be a real force for good."

Polman, Barton, BlackRock and other executives and corporations also make cameo appearances in the book of Mayer, mainly for being among the few high profile promoters of a new corporate model in which the search for profits is replaced for the pursuit of "doing good". The corporation, writes Mayer, has "power … to be our savior and source of social and economic welfare."

The slogans for this new model of corporation as a savior have changed and have expanded over the years, but the underlying subversion of the principles of a market economy is identical.

In fact, the message has been the same for decades, from the rise of stakeholderism in the nineties and the lack of corporate social responsibility (CSR) a few years later to the "triple end" and current fixations in ESG (environmental, social, governance) and "impact investment", which is officially described as investments made in "companies, organizations and funds with the intention of generating a measurable and beneficial social or environmental impact on the side of the" a financial return ".

There is nothing in the capitalist movement to redefine that Friedman did not identify almost 50 years ago as a danger to markets and economic freedom. The concepts and principles reviewed in his essay of 1970, ignored by Mayer and all the reformers, are so relevant today as now.

Friedman warned that business executives like Blackink Fink, who ask corporations to take social ends, help "strengthen the already too frequent vision that the pursuit of profits is perverse and immoral and must be curbed and controlled by external forces. Once you adopt this vision, the external forces that put an end to the market will not be the social consciences, nevertheless very developed, by the pontificated executives: it will be the iron fist of the government bureaucrats. Here … entrepreneurs seem to reveal a suicide boost ".

In other words, the corporate promoters of sentimental social capitalism are likely to obtain more than they negotiated, including a greater intervention by the government.

For example, US Sen. Elizabeth Warren, the Massachusetts Democratic Senator and presidential hope, introduced a law of responsible capitalism last August, which would force corporations to say goodbye to employees, workers, social and social concerns, providers, local customers and global environmental conditions and other general public benefits.

No one should be surprised at this growing momentum for greater government control over corporations and the market in the name of making them more socially, politically and environmentally friendly. Certainly not the readers of the Friedman essay of 1970. He warned against "myopia" of business executives who can win "short-term", but pay big in the long term.

In general, Friedman would not have any problem with companies that dedicate themselves to signaling virtue. For example, the announcement of "toxic masculinity" by Gillette is an obvious attempt to sell small-scale products on a controversial social issue. Gillette acts for his own interest.

Friedman refused to report these corporate attempts to "generate goodwill" and draw attention to its products, although he warned that the strategic search for social approval and the conflict amounted to " hypocritical sideboards ".

He asks, however, what Friedman would have done of Canadian corporations that, as part of their social responsibility efforts, supported and even funded groups of environmental activists who demanded a stop for oils.

Over the 20sth Century, corporations have been worsened by their supposed failures and to concentrate on maximizing profits at the expense of society. These claims are still aggressively promoted today based on invalid descriptions of the role of companies in the economic history of the United States, Canada and much of the world.

It is absolutely false to portray companies as manufacturers of benefits at the expense of society. The corporations today of Microsoft Corp. GM to Inc., survive by producing goods and services that feed, dress, transport, entertain and provide benefits to billions of people.

The corporate adoption of social goals would cover these basic business purposes. Worse still, the expansion of the number of corporate goals places an unwanted undemocratic framework on corporate executives. As Friedman saw it in 1970, giving corporate and political responsibilities to business leaders installs corporate executives not elected in unelected places of power.

In Prosperitat, Colin Mayer proposes a new corporate statement of intent: "Doing well doing good", an appropriate slogan for any politician who seeks power. But corporations already do well under their current underlying mandates for profit search.

Businesses do well doing well in a mainly free market context. We have to leave it this way.

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