Author Topic: Hurrah for "conscious capitalism"!! Down with Milton Friedman!!!  (Read 3781 times)

ctuser1

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<Mea Culpa>
Ok, so the heading was clickbaity!! Milton Friedman was a good faith professional (unlike the present day charlatans masquerading as if they still do economics - like Art Laffer) and deserves everyone's respect!!!
</Mea Culpa>

Just today, I heard something really interesting.

Qz article: https://qz.com/work/1690439/new-business-roundtable-statement-on-the-purpose-of-companies/

In 1997, the business roundtable declared that "The paramount duty of management and of boards of directors is to the corporation’s stockholders". This was heavily influenced by Milton Friedman's work.

The interesting part was not what was said, but rather what was not said!! Corporations would depend on all the benefits provided by the first world government, starting with a monetary system etc, but the don't have any responsibility to pay back. e.g. right-wing freeloading was considered to be baked into the definitions and purpose of corporations.

The new statement came out today. https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans...

It champions what is termed as "conscious capitalism". "Purpose of a Corporation to Promote ‘An Economy That Serves All Americans’" - it says.

Again, what is left unsaid is more important than what is said. It is heartening to see the corporate leaders suddenly figuring out that right wing mooching and freeloading is NOT okay!!! That corporate workers also deserve a place in the goals for the corporation - not just shareholder profits.

I wish they had baked in some bit about championing "economic efficiency" in the statement to make it less wishy washy and more concrete.

I guess you have to start somewhere. I'll take "Serves all Americans" over a narrow "shareholder only and nothing else" focus.

Purpose statements are important, even though they are mostly ignored in real life. If and when you are arguing what appears to be the losing side in a corporate politics -  tying your side closely to the "mission statement", "core value" etc is an often used strategy. :-D... Guess how I know!!

I hope this represents a pivotal point and eventually we get the Citizens United overturned and the BigMoney capture of US democracy (via an extremist minority) and institutions scrapped!!

Aelias

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Re: Hurrah for "conscious capitalism"!! Down with Milton Friedman!!!
« Reply #1 on: August 19, 2019, 12:50:20 PM »
I applaud your optimism.  Truly.  But talk is cheap, and I don't believe for a minute that Jamie Dimon or any of the rest of the CEOs who signed off on this are planning to make any significant changes to their business practices.

The biggest tell?  The promise to "Promote An Economy That Serves All Americans."

These companies are multinationals.  They're not "American" in any sense that a normal flesh-and-blood person would recognize.  They are no more American than they are British than they are Chinese.

Instead, they chose this tagline because they recognize that the tide is shifting.  So, they're making the following entreaty to the American people, "We'll be good this time!  We promise!  Just, please, don't regulate us!"

My prediction is that they'll make a few highly public gestures to convince people that they care about creating a more equitable society.  Like this high-minded statement, these will be largely hollow and their cost will be negligible.  They will use these gestures to support the argument that meaningful self-regulation is a desirable alternative to government regulation.  To be clear, it isn't; you can't expect a corporation to voluntarily make less profit any more than you expect a shark to eat fewer fish. 

I would love to be proven wrong.  But I won't hold my breath for any corporation to voluntarily raise wages, offer better benefits, cap executive pay, take action on climate change, or do anything else that would put a meaningful dent in their bottom line. Not without regulation that has some teeth.




Bloop Bloop

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Re: Hurrah for "conscious capitalism"!! Down with Milton Friedman!!!
« Reply #2 on: August 20, 2019, 01:54:30 AM »
What corporations do is up to their shareholders, subject to whatever laws the populace makes.

I don't care what approach Walmart takes to its operations, as long as it complies with labour and environmental laws.

I do want environmental laws to be tightened and also tax laws (to dampen multinational tax avoidance), but otherwise I don't think that a corporation ought to try to serve the public good.

ctuser1

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Re: Hurrah for "conscious capitalism"!! Down with Milton Friedman!!!
« Reply #3 on: August 20, 2019, 04:06:49 AM »
Should corporations be allowed to actively engage in trying to decrease economic efficiency?

90+% of the lobbying and political activities  in the US is in this category. The corporation is trying to do some form of regulatory or legislative capture in order to expand their rent-seeking.

Let me ask the question in a stronger form. Should corporations be allowed to engage in any activities without first making sure they are not impacting the overall economic efficiency in the marketplace?

American right wing libertarianism has been reduced to actively encouraging freeloading as long as the proper magic words have been uttered!! e.g. Ayn Rand was free to suck as much from Medicare as she wanted (despite only contributing for 3 years) because she uttered some magic words!! I’d be interested in what the Aussie libertarians think!!! :-d




rocketpj

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Re: Hurrah for "conscious capitalism"!! Down with Milton Friedman!!!
« Reply #4 on: August 20, 2019, 06:44:13 PM »
What corporations do is up to their shareholders, subject to whatever laws the populace makes.

I don't care what approach Walmart takes to its operations, as long as it complies with labour and environmental laws.

I do want environmental laws to be tightened and also tax laws (to dampen multinational tax avoidance), but otherwise I don't think that a corporation ought to try to serve the public good.

A corporation can take a broader view of its shareholders well being by recognizing that in order to maximize profits it needs a functioning economy and society to sell its products, and a functioning legal system to enforce its contracts and maintain a currency.

Or they can all be little Mafias and enforce their own contracts.  I'd prefer not.

Aelias

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Re: Hurrah for "conscious capitalism"!! Down with Milton Friedman!!!
« Reply #5 on: August 21, 2019, 02:33:11 PM »
Should corporations be allowed to actively engage in trying to decrease economic efficiency?

Should corporations be allowed to engage in any activities without first making sure they are not impacting the overall economic efficiency in the marketplace?


The question of what kind of activity businesses should or should not be permitted to engage in is generally answered by the government--that's what business laws and regulations are.  In functioning democracies, these limits generally arrived at by representative bodies who try to strike the balance between protecting the public good (which would include market efficiency) and allowing private enterprise to flourish and create a robust economy.

Asking businesses to "make sure they're not impacting overall economic efficiency in the marketplace" before taking any action is really too much to ask.   How is it fair to expect even a large corporation to consider the impact of their decisions on all stakeholders before taking action?  How are they supposed to go about figuring out what those interests are? And assuming they can correctly assess the impact of their actions on "overall economic efficiency", are we asking them to then voluntarily cut their profits in service of those interests?  Who will make sure they do that?

In fact, it's the role of government to gather the perspectives of all stakeholders and create a policy that strikes the right balance between those competing interests and then create a mechanism to enforce that policy.  Once those boundaries are set, it's the role of business to try to operate profitably within those boundaries.  Asking them to do the work of considering all possible interests is unrealistic.

ctuser1

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Re: Hurrah for "conscious capitalism"!! Down with Milton Friedman!!!
« Reply #6 on: August 21, 2019, 07:35:10 PM »
In functioning democracies, these limits generally arrived at by representative bodies who try to strike the balance between protecting the public good (which would include market efficiency) and allowing private enterprise to flourish and create a robust economy.

The balance arrived at today would likely be outdated in 20 years. And this is by design. Democratic government is supposed to be slow to allow a consensus to emerge - which often takes decades.

Example: social media opened up a new way to invade people's privacy. Laws to tackle that did not, and do not exist. In the meantime, anybody who read Facebook's T&C understood how invasive and abusive that was. Facebook definitely operated within the law, and yet was clearly abusive of the users privacy that was sanctioned from their highest levels.

Do the "users" have a recourse against such bad faith and abusive attempts? Or do I only get to be happy at their share performance as a part of the index in my investment portfolio? Should I get to choose?

Loads of other, often much more egregious examples exist with life and death impact in other old world companies with a more "libertarian" ethos.

Asking businesses to "make sure they're not impacting overall economic efficiency in the marketplace" before taking any action is really too much to ask. How is it fair to expect even a large corporation to consider the impact of their decisions on all stakeholders before taking action?

There are many legal standards that deal with whether a good faith attempt was made or not. Is such a set of standards too much to ask?
e.g. when it is clear that mandatory arbitration is an abusive practice enforced by monopolistic market power in legal contracts, should be corporations be made to pay for forcing that down consumers throat? Note: I'm asking about the "attempt" to erode efficiency of the marketplace here by forcing abusive contract - not the actual content of such contract.

In fact, it's the role of government to gather the perspectives of all stakeholders.....  Asking them to do the work of considering all possible interests is unrealistic.

Do you see the dichotomy here?
It is not "unrealistic" to consider corporations as person. i.e. giving them absurd rights of infinite lobbying power is not a problem. But of course, asking them to shoulder the responsibilities and consequences of their actions is unrealistic.

Shouldn't rights and responsibilities be linked? For a real person, e.g. yours truly, they often are!!