Milton Friedman’s Profit Fiction: Part 6
This is the sixth of a six-blog series that simply and in plain language explains the dangerous fallacy of Milton Friedman’s “maximize profit” business ethic. Here we discuss the third, and likely most dangerous, of three egregious consequences of that ethic.
Consequence 3: By Any Means Necessary
In case you’re reading this last post of this series without reading the previous posts, or you could use a quick refresher before reading this one (I know I could), here’s a recap:
The first post of this series introduces a NYT article by Milton Friedman that ran in 1970. There he opines, “there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits ….” We assert this article is among the most influential business articles since 1970, even though it’s not supported by fact or logic. Rather, it relies entirely on one man’s perspective buttressed with equal parts bullying and fearmongering.
The next post provides just one common example of how Friedman’s maximize profit ethic creates abusive business mentalities and practices. These mentalities and practices, which some mistakenly think is capitalism as envision by Adam Smith, we term 'plantation economics.' The object lesson with our example is unavoidably and excruciatingly clear. The Friedman ethical fallacy – that the one and only social responsibility of business is to increase profit, leads to bending and breaking the rules while using the very wealth gained in the abuse to insulate the abuser from the effects of their abuses.
The third post takes issue with two more themes in Friedman’s article. Namely, Friedman’s assertions that acting in a social interest is at odds with the shareholder’s interests, and that corporations can’t and don’t have responsibilities because corporations aren’t people and only people have responsibilities. We rebut these additional ethical fallacies by stating the obvious: Corporations are a valuable part of society, as part of society they clearly have responsibilities, and it’s to everyone’s benefit for corporations to partner with the rest of society rather than work to bend society to their interests.
The fourth and fifth posts introduce a first and second consequence of Friedman’s maximize profit ethical. A first consequence, particularly considering the economic heft of our corporations, is that shareholders simply are not the only party with something at stake in a corporation. It’s now beyond reasonable debate that, in the pursuit of profits, corporations need to consider their stakeholders. A second consequence of the profit maximization fallacy is its utter ambiguity regarding time. Profit maximization for shareholder value today is not the same as for next year, the next decade, or the next generation, which in itself can create conflict among the various shareholders the fallacy purports to serve.
With that recap, let’s turn to the third and perhaps most dangerous consequence of Friedman’s maximize profit fallacy. Namely, that such an ethic is entirely end-orientated. This is the-end-justifies-the-means approach that carries the clear and present danger of ignoring the rights of others in pursuit of the maximum profit goal. If the one and only social responsibility or goal is profit maximization, then that purpose justifies far too many means. Even with laws in place, the myopic goal of profit maximization is a powerful temptation to bend or ignore those laws, and the damage is done before outsiders ever become aware. A purely end-oriented ethic will always carry the by-any-means-necessary risk and heartily supports plantation economics.
Photo Credit | Tim Mossholder on Unsplash
So. What now? Thanks to recent ethics thinkers, like Glen Stassen and David Gushee, we have the attractive and sustainable alternative of ethical reasoning to turn to. Seeing and understanding the need for us to collectively turn away from one guy’s maximize profit ethical fallacy (no matter how much a Friedman fan one might be), we collectively up our game and solve a world of failures – literally and figurately – by learning to incorporate ethical reasoning into our economic and business decisions.
So, let’s start with an introduction. Ethical reasoning considers the ways or modes in which moral norms function (form + function). Done well ethical reasoning integrates and uses three ways to structure a unified ethic for decision-making. Those three modes are 1) the rules we want or must follow (what we should do); 2) the goals we choose (what we could do); and 3) the character of the decision-makers (what we would do).
We look forward to explaining and illustrating a unified ethical decision-making in the next PartnershipEconomics blog post. Meanwhile, we invite you to connect, follow, provide us your feedback, and stay tuned.
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