“Businessmen that take seriously their responsibilities for providing employment, eliminating discrimination, avoiding pollution . . . are preaching pure and unadulterated socialism.”
-Milton Friedman, 1970
Mr. Friedman is fairly narrow minded in this aspect. A business that wants to improve the lives and community within which it operates is a good citizen. A business that looks to increase profits at the peril of a community is irresponsible and simply unAmerican.
Unfortunately many CEOs have embraced Mr. Friedman’s business model. That is also the reason why we have a manufacturing sector that has been decimated and middle class that is working harder to achieve a minimal standard of living.
Thirty years ago, a middle class family could have been supported on one salary, where to day it requires two. A responsible business, or as conservative economist Milton Friedman would call it a “socialist” business would make a modest profit while paying the employees a living wage.
Today, the business model doesn’t encourage paying labor a living wage. It requires businesses to increase their profit margins at the peril of the communities in order to satisfy the appetite for increased dividend checks for their shareholders. In this current business model nobody is looking out for the stakeholders. The stakeholders include customers, employees and the entire community.
By focusing exclusively on the shareholders, it causes increase velocity in the stockmarket. In the past 25 years, institutions and people holding onto their stocks have fallen from eight years to six months. CEOs are focusing more on short term gains rather than long term growth. We saw this at the cataclysmic 2008 financial meltdown, where financial institutions over-leveraged themselves trying to satisfy shareholders’ demands without so much of a concern for the stakeholders, which is all American citizens.
In a sharp rebuttal to the conservative economic Darwinian philosophy, Michael Porter, and his co-author Mark Kramer have written an article in the Harvard Business Review:
“The Big Idea: Creating Shared Value.” They advocate that creating shared responsibility between companies and society and how it “holds the key to unlocking the next wave of business innovation and growth [and] reconnecting company success and community success.”
Once we can break through the Darwinian conservative economic policies that have plagued our country for 30 years, we can start focusing on “shared responsibility” as a new business model. This worked in the past and it can work now. This is one step toward economic stability and growth, and away from economic bubbles and busts that have only aided the very wealthy.