Manuel Suárez Mier
Friedman 50 years later.
September 13 marked the 50th anniversary of the publication of Milton Friedman’s influential essay, The Social Responsibility of Business is to Increase Profits, in the New York Times Magazine (NYT), which set the standard for business priorities until recently when some groups changed it.
The change made by the U.S. Business Roundtable was discussed in this column last August under the title Social Responsibility2, clarifying the context in which the definition was given and rejecting the caricature painted by Friedman’s detractors attributing to him that “greed is good.”
In a remarkable recognition of the importance of the essay in question, the NYT published a special issue of its Magazine in which it reproduced the original text, along with the opinion of economists, business people, and motley commentators, some of whom insisted on repeating the caricature alluded to.
As Russell Roberts of Stanford points out in his gloss, the term competition appears only once in the essay’s final paragraph. However, in Friedman’s view, competition underlies his entire argument.
Since the author believes that businesses should maximize profits and not more ambitious goals, people assumed that his position was pro-business, which he always rejected by saying that he supported markets and that businesses should always be subject to the most intense competition.
Businesses that treat their employees and customers well will survive the competition better, while those that do not will lose both and go bankrupt. Friedman often emphasized the oddity that business leaders labeled as capitalists often act just the opposite, seeking to insulate themselves from all the usual competition in free markets.
To do so, they spend enormous resources on lobbyists trying to get the government to give them tariffs and quotas to avoid foreign competition, as is now seen with U.S. agricultural producers, and they seek subsidies and other supports that further insulate them from a competitive market and give them monopoly powers.
Now that it is fashionable to look for or invent someone to accuse of racial discrimination, Friedman’s detractors accuse him of not including such an objective along with that of maximizing profits, even though he claimed that it was often more efficient to hire minorities and acted accordingly at his university.
I have the impression that this is an issue that will continue to be hotly debated for a long time since the rule of optimizing the value of companies for their shareholders has been largely responsible for the enormous creation of wealth in the last 50 years and the remarkable reduction of poverty worldwide.
It is a debate that must be had in Mexico, where business leaders genuflect before the government to receive contracts and perks to maintain privileges and monopolies, and those who do not are persecuted and punished.
*This column was originally published in Spanish on September 18, 2020, by Excélsior