The Public’s Business
By promoting behavioral norms that balance market and society, "stakeholder capitalism" is supposed to enable private firms to fill the vacuum created by the decline of traditional forms of regulation by national governments. Ultimately, though, the only viable solution is to make business itself more democratic.
CAMBRIDGE – Fifty years ago, Milton Friedman published an article in the New York Times that articulated what has come to be known as the Friedman doctrine: “the social responsibility of business is to increase its profits.” It was a theme he had developed in his 1962 book Capitalism and Freedom, where he argued that the “one and only” responsibility business owes to society is the pursuit of profits within the legal rules of the game.
The Friedman doctrine put its stamp on our era. It legitimized the freewheeling capitalism that produced economic insecurity, fueled rising inequality, deepened regional divides, and intensified climate change and other environmental problems. Ultimately, it also led to a social and political backlash. Many large businesses have responded by engaging in – or paying lip service to – the notion of corporate social responsibility.
That notion is reflected in another anniversary this year. The United Nations’ Global Compact, launched 20 years ago, takes direct aim at the Friedman doctrine by trying to persuade businesses to become agents for the broader social good. More than 11,000 companies operating in 156 countries have signed on, making commitments in the areas of human rights, labor and environmental standards, and anti-corruption.