Friedman: the advent of the dreaded “-ism”?
Here’s an interesting but weird debate debate between Milton Friedman and the CEOs of Whole Foods and Cypress Semiconductors. On the one hand you should probably read it and draw your own conclusions first, but I would like to give my own interpretation of it nonetheless. While I find it annoying on the specific level that the Whole Foods CEO uses the opportunity to shamelessly plug his own company throughout, and while I doubt that Whole Foods is the moral paragon he conceitedly claims it is, on the theoretical level, surprisingly, I find myself more in agreement with him on the general role of corporations in society. This is somewhat surprising, because I am generally quite suspicious of self-serving BS masquerading as idealist rhetoric about altruism. But at the same time I find Friedman’s and Rogers’, the Cypress CEO, outright hostility to the very concept of altruism even more baffling. Sadly, it seems to me evidence that Friedmanian economic thinking has hardened into a dogma. After all, who decrees that the purpose of a corporation is one thing or another? While Friedman and Rogers explicitly acknowledge that Whole Foods investors and anyone else has the right to to do with their money as they choose and invest where they will, they clearly disapprove of any proximate goal or use that is not tied to the ultimate goal of corporate profit maximalization. But this exclusive focus on corporate profit maximalization seems, as Mackey, the Whole Foods CEO, says, a bit narrow-minded. And, considering that the basic economic unit is the individual and not the corporation, doesn’t it seem a little, well, collectivist?
I, at any rate, certainly believe that corporate profit is itself only a proximate goal, and hence of variable value, and that the ultimate goal of capitalism, or any other social system, is to maximize the welfare of the constituent indviduals. Generally speaking I believe that individuals know in what their happiness consists better than anyone else, so I drift towards the laissez-faire end of economic philosophy, which is why I have to wonder, in a system of voluntary economic transactions, why the hell Friedman and Rogers are chastising other people for what they do with their money and won’t just be tolerant of it. Adam Smith was certainly correct that individuals often do the most good by taking care of their own affairs, but if that observation hardens into a principle it becomes as oppressive as any other orthodoxy. The foundation of a liberal society must be the awareness that no single mind can know what creates the most good or the greatest happiness for everyone, and that therefore decision-making power over how to pursue their own happiness must be granted to individuals (and defended from the depradations of others). Friedman and Rogers don’t seriously challenge that right, but their de-valorization of any economic action outside of corporate profit creation betrays a narrowness of spirit that fails to fully acknowledge that philosophical basis.
p.s. I admit the title of this post is a little opaque, but it stems from my belief that when any body of ideas has congealed the point that they can be identified as an “-ism” they are probably dead. Whether Friedman has gotten to that point with his fixation on corporate profit-maximizing, despite my admiration for a lot of his ideas, is unclear to me.
November 6th, 2005 at 12:19 pm
Friedman at least seems to believe not so much that altruism is bad, but that the most efficient form of altruism is strict adherence to profit-maximization. Mackey intimates the psychological importance of explicit philanthropy, which importance Friedman and Rodgers appear to discount altogether.
November 6th, 2005 at 1:11 pm
Yes, it’s quite obvious that Friedman finds profit-maximazation preferable to philanthropy, although I don’t think it would be correct or in the spirit of Friedman’s thought to call it “altruism.” I don’t think it is true that he does not recognize the “psychological importance of explicit philanthropy,” as that in fact seems to be the only value he ascribes to it. In any case, my point is that I don’t think it’s possible to decide whether altruism or profit-seeking is more beneficial in the abstract, without knowing the particular context or what the participants value most, and that this awareness of incomplete information is at the root of liberal society. The important thing is not actually pursuing profit but having the right to and ability to do so if one so desires. My personal suspicion is that arguing wih anti-capitalists all the time who insist that profit is evil has counter-radicalized Friedman, so that as a counter-punch he now essentially argues that only profit is beneficial, but that is merely unwarranted psychological speculation.
November 7th, 2005 at 1:21 am
From what I see in the real world, profits are the elephant in the room that everyone is aware of but what is talked about is doing the job right and satisfying the customer. Also doing this gives satisfaction beyond the monetary and serves the needs of society. However due to the fact of competition, warm and fuzzy will not substitute for profits and market share. A nonproductive company can’t capitalize, can’t attract investors, doesn’t employ many people or have many resources to be “corporately responsible� in the community. Of course good will is a business asset. Most people would rather work for a company that was not like a cigarette company producing a harmful product, but if the job puts bread on the table and is legal people can still do it. Thus a good corporate citizen might attract better employees. As far as environmentalism, a company would be putting itself at a competitive disadvantage if it spent large sums cleaning up waste while other competitors didn’t. That is why you need government regulations. I think Mackey is irritating because he overstates his case and sounds like a BS artist. Due to peoples ignorance of economics he can get away with it. Maybe he can brag now but if his company doesn’t meet sales/ growth and income projections there will be hell to pay in the stock market and elsewhere regardless of his corporate good citizenship
December 26th, 2005 at 3:03 pm
Philosophy aside, corporations are legal entities, governed by very specific legal rules. By law, beccause they are fiduciaries of other people’s money, corporations exist to maximize shareholder value. They do not exist to help workers have happy lives, or to support Truth, Justice and the American Way–except to the extent these things maximize shareholder value…and that, I suppose, is very much open to debate. But for Mackey to reject this principle out of hand is really foolish, and I am sure his coporate counsel choked when he read it. That is unless it’s all just a clever marketing slogan, designed to boost sales and the stock price. In which case, I salute him. Take the yuppies for all their worth!