Thursday, January 22, 2009

The Social Responsibility of Business is to Increase its Profits, by Milton Friedman

I first became aware of Milton Friedman's argument against any sort of social responsibility of business while reading a summary of Friedman's 1962 book, "Freedom and Capitalism" by Brian Doherty in "Radicals for Capitalism".

Doherty writes that Friedman "attacks the idea of corporate responsibility (he thinks that a corporation's responsibility to its shareholders is simply to make profits; individual shareholders should be able to decide for themselves how much of their money they want going to other causes, not have that decision made for them by corporate executives)..."

Wikipedia is even harsher in their summary: The doctrine of "social responsibility", that corporations should care about the community and not just profit, is highly subversive to the capitalist system and can only lead towards totalitarianism.

Capitalism and Freedom - Wikipedia, the free encyclopedia

Following is a link to a "New York Times Magazine" article dated 13 Sept 1970 by Friedman on this subject.

The Social Responsibility of Business is to Increase its Profits, by Milton Friedman

Friedman argues in this article that

[what] the exercise of social responsibility... amounts to is an assertion that those who favor the taxes and expenditures in question have failed to persuade a majority of their fellow citizens to be of like mind and that they are seeking to attain by undemocratic procedures what they cannot attain by democratic procedures...

precisely the same argument applies to the newer phenomenon of calling upon stockholders to require corporations to exercise social responsibility... In most of these cases, what is in effect involved is some stockholders trying to get other stockholders (or customers or employees) to contribute against their will to "social" causes favored by the activists. Insofar as they succeed, they are again imposing taxes and spending the proceeds...

But the doctrine of "social responsibility" taken seriously would extend the scope of the political mechanism to every human activity. It does not differ in philosophy from the most explicitly collectivist doctrine. It differs only by professing to believe that collectivist ends can be attained without collectivist means. That is why, in my book Capitalism and Freedom, I have called it a "fundamentally subversive doctrine" in a free society, and have said that in such a society, "there is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."

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