Many corporations try to win warm-and-fuzzy images in the public mind by touting their charitable efforts. But as the saying goes, charity begins at home.
In the early 1970s, Milton Friedman wrote a seminal article titled “The Social Responsibility of Business Is to Increase Its Profits.” This echoes what he wrote in Capitalism and Freedom some years before: “In such an economy [i.e., a free economy], there is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud. Similarly, the ‘social responsibility’ of labor leaders is to serve the interests of the members of their unions.” (Chapter 8, “Monopoly and Social Responsibility,” the first paragraph of the section titled “Social responsibility of business and labor.”)
I thought of this line of argument after I heard yet another company boast, in a radio commercial, that it was “giving back to the community”–as if its products and services offered freely for sale were not already “giving to the community.”
Friedman points out several problems with the “social responsibility” model. “Can self-selected private individuals decide what the social interest is?” Who elected Ted Turner or Robert Murdoch as the arbiter of the social interest? Further, warns Friedman, “If businessmen are civil servants rather than employees of their stockholders then in a democracy they will, sooner or later, be chosen by the public techniques of election and appointment,” with all the attendant troubles.
He also addresses the question of charitable activities, arguing that they are an inappropriate use of shareholder’s money. “If the corporation makes a contribution, it prevents the individual shareholder from himself deciding how he should dispose of his funds.” Indeed. One can also make the same argument about government-funded social works. Given the choice between giving money to Habitat for Humanity and giving the money to HUD, I would … Oh wait, I don’t have that choice–at least for the money that goes into the federal treasury.
Another problem with the shareholder responsibility model is that it understates the importance of dispersing authority within society. Just as civil power is distributed among the federal, executive, and judiciary at the national level, there is also a distribution of power among state and national governments.
Equally important for a free society is the distribution of all kinds of power — cultural, economic, civil, religious — among various institutions. Governments should not be running businesses, schools should not engage in moral teaching contrary to the views of parents (separating morality from education is a difficult task), businesses should not be running charitable foundations, and so forth.
Consistent with this thinking is the Catholic thinking of subsidiarity. Says the Acton Institute, “nothing should be done by a larger and more complex organization which can be done as well by a smaller and simpler organization. In other words, any activity which can be performed by a more decentralized entity should be.”
From the Protestant side of Christianity, we have sphere sovereignty, which the Acton Institute (again) summarizes this way: “the family, the business, science, art and so forth are all social spheres, which do not owe their existence to the state, and which do not derive the law of their life from the superiority of the state, but obey a high authority within their own bosom; an authority which rules, by the grace of God, just as the sovereignty of the State does.”
I’ve spent too much time on this entry, so let’s jump a few paragraphs to my own conclusion: “federalism” is good. Let’s not limit its application to politics. There’s a place for government, but government should be in its place. The same can be said for other important institutions. Of course, where and how these spheres intersect, well, that’s when the sparks fly.
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