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Friedman, a classical flat earth economist, represents the peak of economic folly with his statement that, "A company's only responsibility is to increase profits for stockholders." This view of economics neglects all the costs the current market does not include, including a wide range of environmental and social costs associated with company operations. This nonsense is still taught in universities and colleges around the world.
I don't think it's economic folly: I think it's metaphysical folly.
I think Friedman's statement is probably correct and illustrates the sociopathic nature of "The Corporation" as a legal construct.
His "Economics" is therefore built upon a deeply nasty axiom, an unethical legal assumption to go along with the plain daft "Homo economicus" behavioural assumption and so on.
His economics is like a submarine - a wonderful piece of engineering, but with a malign purpose of sinking ships and launching nuclear missiles.
I would only make more explicit an assumption that I think Friedman would also agree with
a company's sole responsibility is to lawfully increase profit for its stockholders.
Respecting the law is at the heart of the market economy, so this is not an onerous addition, right?
Except that once this is made clear, it also follows that the State can decide to make companies behave in any way it wants by setting the laws and regulations to do so. Charge companies for pollution, put in place minimum wages, working hours, safety rules, etc... it's all possible and not at all incompatible with Uncle Milton's Rule.
Which of course brings us to what the laws applying to corporations should be, which is a whole other topic. Arguing that rules should be as light as possible for corporations is a completely different proposition to saying that corporations should only focus on profit. We move from having corporations as a tool to get things done efficienctly and profitably, to making stockholders' profits the focsu of policy. That distinction is worth making, because it is vital.
Corporations are a great tool, when properly applied. Corporations' stockholders do not deserve breaks, unless citizens choose so.
Which inevitably brings us to how laws are made, lobbyists, and who pays for them. It probably also brings up the concept of the personhood of corporations, and the rights that go with it. and this is where the real political debate should be. In the long run, we're all dead. John Maynard Keynes
Maybe my comment is clearly written by someone who has no background in economics. But your comment is clearly written by someone whose life has not been lived out in a country where Friedman's ideas have been given free reign. Also, did you not read the Shock Doctrine, or did you conclude its argument was unfounded?
I am sure I speak for others when I say I read economists here talking about these matters on a level so entirely removed from reality and am dumbfounded. Economics is a tool to serve society, not itself. The purity or consistency of some economic theory means nothing if in the end, the majority of people are not benefiting from it. It's navel gazing with lethal consequences. How we can sit here and rue the infinite number of crises facing humanity and turn around and state "a company's sole responsibility is to lawfully increase profit for its stockholders" when these crises are legally YES! legally benefiting corporations or even sometimes caused by them - I simply do not know.
Also, uhm, the laws are such around here that companies shape legislation more than citizens. Which is why their actions are legal. So we have to change the laws? Tell me, how we can do so and respect that a company's sole responsibility is to lawfully increase profit for its stockholders? We're in a catch 22 here and eventually if we do not accept that companies have a larger obligation to society, we have no argument on which to base, oh, a law that would require AIDS patients who cannot afford treatment have access to it anyway.
So easy to be a free-market proponent when your access to healthcare is guaranteed.
Or maybe you meant "primary" instead of "sole." "This is nothing compared to how Putin rigged Eurovision."
Perhaps it's that X thing - getting inculcated with a strong belief in the idea that a powerful and capable bureaucratic elite is the social actor with the primary responsibility for safeguarding society, as opposed to the more American individualistic one. ;)
Healthcare access is guaranteed because the State set it this way. Corporations are endlessly lobbying against it ("it's too expensive"), but thankfully the population won't go for that, so any changes are, so far, only at the margins. In the long run, we're all dead. John Maynard Keynes
You know, I profoundly disagree with you and the article about this, and agree with Milton Friedman: a company's sole responsibility is to increase profit for its stockholders.
That's not a disagreement: we are all - you, me, Friedman - saying that this is a Corporation's responsibility. Our disagreement, if any, lies in whether or not a Corporation is capable of being adequately regulated.
A Corporation exists to make a profit for its shareholders. I don't see anything sociopathic about creating value in interactions with other stakeholders.
The problem lies in the nature of these interactions.
It goes without saying that Corporations must act lawfully. In the same way that laws are made to regulate what individual "legal persons" may do, so it is that laws may be made that regulate what these artificial "legal persons" may do.
No disagreement there either.
My problem with Corporations arises from the nature of their privilege of limitation of liability, nothing else. It is the effect of this privilege which leads to Corporate Social Responsibility being an oxymoron.
Investors in "Corporations" do not compensate Society adequately IMHO in respect of the privilege of limitation of liability which they receive.
I believe that because of this privilege of exclusion of liability the relationship between Corporations and other stakeholders - suppliers, customers, staff, management and financiers/lenders all aka "Costs"- is "broken" in terms of the imperfect sharing of risk and reward.
This is why "costs" are "externalised" insofar as Corporations can achieve it within the law.
IMHO partnership-based corporate vehicles such as the UK LLP are emerging because they allow risks and rewards to be shared more equitably between stakeholders by "internalising" stakeholders as Members.
Within a partnership there is no profit, and no loss.
In short I believe that the UK government inadvertently made the Corporation obsolete on 6 April 2001 when they were blackmailed by the accounting and legal professions into legislating the LLP.
"Our business model is only financed by customers. So we have to pay a lot of attention to our customers. When the customer is happy then the worker is happy too and so are the suppliers. Then there should be enough money left for the shareholder. But that is the order of importance," he says. All of this is part of Mr Wiedeking's insistence that he is not a slave to the capital markets: "The question is: how can society allow capital to make all the rules? I have never understood shareholder value as it leaves so many things out. Shareholders give their money just once, whereas the employees work every day."
All of this is part of Mr Wiedeking's insistence that he is not a slave to the capital markets: "The question is: how can society allow capital to make all the rules? I have never understood shareholder value as it leaves so many things out. Shareholders give their money just once, whereas the employees work every day."
Of course he can say that since Porsche is more or less owned by two families.
The economic-legal debate for most of the 20th Century was whether society should promote efficiency so long as it was not too unjust or justice so long as it was not too inefficient. Friedman and his Neo-Austrians showed they were willing to throw efficiency and justice under the bus for the sake of profits while simultaneously claiming that the profits would create both efficiency and justice.
