The corporate monster is destroying the world, tearing up its soil to gobble up its precious resources, fouling its air, polluting its water and damaging its climate, while rewarding the few with untold riches, but leaving the masses in poverty. That’s how things work, unless they are prevented. Free-market ideology is having a hard time right now. But maybe not hard enough.
So far as company management is concerned, the free market idea is symbolised by Milton Friedman’s statement that ‘Few trends could so thoroughly undermine the very foundations of our free society than the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.’
That message was taken on board by the CBI, the Institute of Directors, university economics departments and business schools across the land. It was lectured, promoted and lobbied till more or less every manager, not to mention politician (plus a large proportion of academics), believed it to be a true estimate of management’s responsibility. The same process was undertaken in the United States with the same result.
The exclusive focus on making money for shareholders requires companies to eliminate cost wherever possible. And where they can’t be eliminated they are passed on, wherever possible, for someone else to pay. The industrial company became an ‘unaccountable tyranny’ and the whole industrial sector a vast externalizing machine. Now we are all paying the cost.
Friedman was not the most consistent of gurus. He came to prominence proclaiming the importance of monetary policy – controlling the quantity of money was the key to growth and inflation. After his ideas had been adopted, he expressed his disappointment in monetary ideas (they nevertheless remain potent). He also claimed that low, flat rate taxes would remove the impetus for tax payers to avoid and evade. After his ideas were implemented, he was disappointed to find that the extra money from lower taxes put in the pockets of the wealthy was used to achieve ever more sophisticated ways of avoidance and evasion.
Then he revised his views about the responsibilities of corporate executives. In a late interview he proclaimed, ‘A corporation is simply an artificial legal structure … it’s neither moral nor immoral. It’s simply what it is. But the people who are engaged in it, whether they’re stockholders, whether they’re the executives, whether the employees. They all have moral responsibilities.’
‘They all have moral responsibilities’! The arch free-marketeer ended his days proclaiming company executives, like everyone else including stockholders, to have moral responsibilities! He didn’t identify what he thought they were. Nor did he offer any reflection on how he himself had exercised his own moral responsibilities. But it was a start. If only his followers had followed!