Milton Friedman’s disastrous argument

I read Seth Godin’s blog every day. I think he’s smart and we share most of the same values. Today’s post is a wonderful example of that. Its insight is simple but profound.

The renowned and (in many circles) revered economist Milton Friedman made an argument half a century ago that says this: “there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits…”

Since then, business school deans, the Harvard Business Review and Fortune (among others) have published rebuttals. But, as Godin points out, the interesting thing is that this corrosive, destructive point of view has been used to justify irresponsible actions by many, many corporations since it was published. Why? It’s simple. It lets people off the hook. It gives them permission to act like brats. To pillage the rest of society, take the spoils and run. With impunity. What’s not to like, if it applies to you?

But if the human beings who run companies can’t find a way to act like human beings, then it’s incumbent upon the rest of us to protect our larger society from them. We do that in other areas where we see societal damage: We can’t put melamine in baby formula. We can’t sell cigarettes to children. We have building codes. Hell, we carefully regulate near-irrelevant areas like sports. So why should corporations be immune from accountability?

I’m not suggesting we prohibit profits. Just that we insist they be tempered with other obligations. The same ones we live with as individuals. Here’s Seth Godin’s suggestion:

A business is a construct, an association of human beings combining capital and labor to make something. That business has precisely the same social responsibilities as the people that it consists of. The responsibility to play fairly, to see the long-term impacts of its actions and to create value for all those it engages with.

This sounds like a great starting place to me. More here.

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