Doing Well and Doing Good: Milton Friedman Was Wrong – Part II

Let us now consider one of Friedman’s primary concerns when he wrote his famous article entitled, The Social Responsibility of Business Is to Increase Its Profits. He warned readers of the preaching of pure and unadulterated socialism, labeling businessmen who talk of “social responsibility” as unwitting puppets of the intellectual forces that have been undermining the basis of a free society for decades prior. Let’s put this assertion to some analysis and rigorous reason. Is this concern for social responsibility in business really the genesis of socialism?

As I open Part II of the series, I repeat that I wish to do nothing but advance free markets, but am compelled to do so with the parallel advancement of virtue. Second, I wish to condemn any and all things that condone a communist/socialist ideology, as Friedman suggests in his article, is the motive for those who speak of any “social responsibility” in and from business.

By Friedman’s criteria set forth in his famous New York Times article, the 181 members of the Business Roundtable; CEO’s of some of the largest companies in America responsible for generating over $17 trillion of annual combined revenue; would be considered socialists. In 2019, the Roundtable issued a consensus decree redefining the purpose of the U.S. corporation to serve all of society and all stakeholders of an enterprise, not just the interests of shareholders. You can read the specific decree for yourself by clicking here.

 Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co., adds, “The American dream is alive, but fraying. Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”

Is this a clever and deceptive way to disguise what is the dogged pursuit of profits alone or an attempt to reorient the purpose of business to its rightful heading? Is this an indictment of the pursuit of profit as an enterprise’s sole social responsibility, or a strictly utilitarian mask to continue a corporation’s use of its employees, suppliers, and communities as means to the end of profit? Perhaps the CEO’s are acknowledging that the overly-simplified, singular “social responsibility of business” Friedman doctrine is a flawed calculus, affirming he was wrong. You can decide, but you must give some weight to this significant shift in thinking and values.

The term “social justice” is often used today to describe the desired outcome of “social responsibility,” though the term carries with it some undertones of systemic or structural racism that distracts some people from pursuing this explicit outcome.

Justice, though, is a good term to use for the desired outcome of social responsibility. The Catholic Church defines the cardinal virtue of justice as “the moral virtue that consists in the constant and firm will to give due to God and to neighbor. Justice towards men disposes one to respect the rights of each and to establish in human relationships the harmony that promotes equity with regard to persons and to the common good.” (CCC 1807.)

If justice is a fair word to describe what the Roundtable is attempting to accomplish, will this momentum and trajectory move us closer to socialism as Friedman suggests, or away from it? Let’s renew our application of reason to arrive at a logical answer.

In his book, Business as a Calling, Michael Novak suggests, “In the project of self-government, business is without doubt the single largest institution of civil society. The moral health of society, therefore, depends to a great extent on the moral character of business leaders.” This rationale suggests that the moral virtue of justice, among other moral virtues, is best served within the largest societal institution; that of business; else the moral health of our entire society diminishes. If justice is not manifested in the institution of business, then what are the alternatives? There are only a few logical ones. Those feeling unjustly treated can revolt, rebel, and protect themselves from the unjust institution of business. While this possibly provides some gains, it pits labor against capital or workers against owners contrary to the teachings of the Catholic Church (Rerum Novarum, 19).

Another alternative is that the people turn to the second largest institution in civil society for justice; the government. The Catholic Church instructs us that the State or government is responsible for overseeing and directing the exercise of human rights in the economic sector. (Centesimus Annus, 48) The document follows directly with the following, “However, primary responsibility in this area belongs not to the State but to individuals and to the various groups and associations which make up society.”

The responsibility for the exercise of human rights in the economic sector belongs to business leaders and other groups in society, with the State only as the “overseer and director” or ensurer. The government is to act as the backstop. Yet when justice is fleeting in business, people turn to the government as a source of justice.

When the government intervenes, as an indirect employer generating no revenue other than through taxation, they build programs to supplement what is the responsibility of others and they linger, catalyzing entitlement programs and unhealthy dependencies. In this way, these lingering interventions designed to be the responsibility of others, increase the intrusiveness of government, the power of government, and are the true genesis of socialism.

So, you have a choice to make. Is the pursuit of “social responsibility” with justice as its end a catalyst for socialism as Friedman suggests, or does the pursuit of justice through business, the largest institution in civil society, protect us from the same and preserve life, liberty, and the pursuit of happiness for all? Look for Part III of this series coming soon.

See the entire series here.

Image: Steven Depolo Flickr.

Dave Geenens

Dave Geenens

Dave Geenens is an Associate Professor and is the Assistant Director of the Thompson Center for Integrity in Finance and Economics in the School of Business at Benedictine College in Atchison, Kansas. His over 30-years of executive experience in addition to his Bachelor’s Degree, MBA, and CPA license (inactive) add a realism to his research and teaching. Dave has written four books and speaks often on the integration of faith and work and the critical role Christian virtue plays in protecting free markets and liberty. Since Dave writes on multiple topics including investing and philanthropy, nothing in this article is to be construed as investment advice and any investment of any kind includes a risk of loss.