Academic journal article Independent Review

An Appropriate Ethical Model for Business and a Critique of Milton Friedman's Thesis

Academic journal article Independent Review

An Appropriate Ethical Model for Business and a Critique of Milton Friedman's Thesis

Article excerpt

In 1970, when interest in the ethics of business was increasing to a degree that would soon cause the emergence of a whole new discipline, a controversial essay on corporate responsibility, "The Social Responsibility of Business Is to Increase Its Profits," was published in the New York Times Magazine. (1) It was written by Milton Friedman, distinguished professor of economics at the University of Chicago and regular columnist for Newsweek. Based on part of a chapter of Friedman's 1962 book Capitalism and Freedom, the essay has been one of the most widely cited--and criticized--of all Friedman's popular writings. (2)

My goals for this article are to propose a free-market model of business ethics for firms of all sizes and types (by describing a past attempt to promote such a standard), to comment on the history of regulation and on the emergence and teachings of the discipline of "business ethics," and to argue that Friedman's perspective on corporate responsibility as outlined in 1970 and his subsequent position on corporate lobbying are counterproductive to the furtherance of such a free-market model among leaders of the business community.

A New Ethical Standard

For five years, from 1979 to 1984, I was deeply involved in an effort to develop a new national business association through which it was hoped that a contingent of entrepreneurs and executives could be persuaded that their firms ought to refrain, to the maximum extent possible, from seeking to use government resources to achieve their objectives. (3)

Through publications and testimony, this organization worked to introduce, defend, and promote the following basic concept: for a corporation or other business entity to commit itself to compete solely, or primarily, through a free and open market, relying thereby for its success on the voluntary choices of consumers, is an ethical "high road." (4)

We believed that if we could convince even a modest number of prominent corporate leaders and associations to admit publicly that, whatever their practical constraints, they at least believed in and aspired to such a straight and narrow course, the public perception of economic competition and profits would begin to change and an appropriate standard by which to judge the social behavior of business enterprises would emerge. Public awareness of such a high road could not help but focus attention on those who seek privileges.

The organization began to promote its ethical model just as business-oriented journalists and editors were being confronted simultaneously by a new and presumably positive academic focus on business ethics and by a controversial and awkward political issue for business in the form of a massive bailout proposal for the Chrysler Corporation. In retrospect, how the media reconciled the two issues provides an interesting object lesson.

Our organization's view on the connection between ethics and the Chrysler proposal was simple and straightforward: a federal bailout of a private firm would be unethical. Regrettably, it was almost impossible to thrust that perspective into the public debate. Instead, the media, with help from new "philosophers of business," focused mainly on the "ethics" of saving jobs--the numbers exaggerated up to eight hundred thousand--and on the supposed "ethics" of the fact that Chrysler, merely because it was not as big as Ford and General Motors, "deserved" federal help (Weidenbaum 1986, 331).

That Chrysler was awarded $1.5 billion in federal loan guarantees did help to illustrate, along with other, similar initiatives, the acute differences between a policy that is pro-business and one that is pro-market. It also enabled us to stress that public confusion about this point is largely a result of efforts by spokesmen for high-profile firms, such as Chrysler, to advocate and defend policies that have nothing to do with a market economy.

The basic notion--that it is ethical for businesses to uphold the free market and renounce the use of politics--seems elementary, yet it is virtually impossible to overstate the degree to which the point is lost on, if not altogether taboo for, those who sit in corporate boardrooms, no less today than in 1980. …

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