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In fact they are—or would be if they or any one else took them seriously— preaching pure and unadulterated socialism.
I would think the type of social responsibilities the businessmen were preaching were benefiting socialism.
A group of persons might establish a corporation for an eleemosynary purpose—for example, a hospital or school. The manager of such a corporation will not have money profit as his objective but the rendering of certain services.
In either case, the key point is that, in his capacity as a corporate executive, the manager is the agent of the individuals who own the corporation or establish the eleemosynary institution, and his primary responsibility is to them.
Friedman agrees that businesses may have other primary goals than profit. I don’t understand why he considers it a responsibility to maximize profits then. The next paragraph:
Needless to say, this does not mean that it is easy to judge how well he is performing his task. But at least the criterion of performance is straightforward, and the persons among whom a voluntary contractual arrangement exists are clearly defined.
I’m not sure whether he’s implying that profit is the best criterion of performance for businesses with eleemosynary purposes or not.
IN a free‐enterprise, private‐property system, a corporate executive is an employe of the owners of the business. He has direct responsibility to his employers.
That makes sense.
But in these respects he is acting as a principal, not an agent; he is spending his own money or time or energy, not the money of his employers or the time or energy he has contracted to devote to their purposes. If these are “social responsibilities,” they are the social responsibilities of individuals, not of business.
Right. The CEO’s responsibility to his employers is to perform his job. He has other responsibilities in his free time.
The stockholders or the customers or the employes could separately spend their own money on the particular action if they wished to do so. The executive is exercising a distinct “social responsibility,” rather than serving as an agent of the stockholders or the customers or the employes, only if he spends the money in a different way than they would have spent it.
But if he does this, he is in effect imposing taxes, on the one hand, and deciding how the tax proceeds shall be spent, on the other.
I don’t think we can think of this as a tax unless we think of it as embezzlement. If the CEO spends the money for social benefit instead of for his own self-interest, it is still embezzlement if the money was spent without the permission of the business.
If the stockholders agrees about the social benefit spending with the CEO, then they aren’t imposing taxes on the employees and customers. The interaction should be voluntary and the employees and customers can therefore choose not to be involved. If they can choose not to get involved then they aren’t forced to pay. What about VATs, sales tax and other consumption taxes then? hmm, perhaps it is a tax? I assume the business and customer shares the burden of a VAT. Those taxes are forced, but the business spending on social benefits is proposing a deal where some of the money goes toward the social benefit spending. Are all conditions that result in higher prices for employees/customers a tax? I think taxes are a narrower concept necessarily involving politics. A voluntary business interaction involving conditions causing a price increase isn’t political.
This is the basic reason why the doctrine of “social responsibility” involves the acceptance of the socialist view that political mechanisms, not market mechanisms, are the appropriate way to determine the allocation of scarce resources to alternative uses.
On the level of political principle, the imposition of taxes and the expenditure of tax proceeds are governmental functions. We have established elaborate constitutional, parliamentary and judicial provisions to control these functions,
Friedman is saying that it is literally imposing taxes, not just as a metaphor. Otherwise he wouldn’t bring up government and the constitution.
On the one hand, suppose he could get away with spending the stockholders’ or customers’ or employes’ money.
So it is embezzlement.
In the present climate of opinion, with its widespread aversion to “capitalism,” “profits,” the “soulless corporation” and so on, this is one way for a corporation to generate goodwill as a by‐product of expenditures that are entirely justified in its own self‐interest.
I think Friedman is trying to defend self-interested profit motive against calls for self-sacrificial social responsibilities. I think Rand and Mises would agree.
Possible tactic of socialists:
- claim business has social responsibility to improve environment, fight poverty, fund art, etc.
- let those business that try lose in competition
- point out business isn’t fulfilling their moral responsibilities
- suggest regulation and taxes to implement the social benefits instead