Milton Friedman is Dead

Re-reading Milton Friedman’s September, 1970 article in The New York Times Magazine or watching him interviewed on US TV offers a comforting sense of personal, philosophical and political re-assurance – and an affirmation that years of unfettered Thatcher-Reagan economics really were that destructive on the material wellbeing of the planet and its people. The Gordon Gekko mantra that ‘Greed is good’ is now oft-repeated in casual conversational references to an era passed, but those who still cling to the Friedman obsession with free markets and the doctrine that the social responsibility of business is to maximize its profits, appear about as relevant and convincing today as Nigel Lawson on the subject of Climate Change. Gekko provided the soundbite to enable us to avoid reading tomes of Friedman’s economic theory (while still getting the point), while Lawson famously claimed that environmental campaigners were forcing us all into an ‘age of unreason’. However, like Friedman before him, it was Nigel’s own adherence to a near-blind faith in the market mechanism that obfuscated the truth and a more reasoned approach to the world around us. Theirs is – and was – unreason without bounds: a determination that market principles must apply anywhere and everywhere; that there should be no limits to the rampant and rapacious nature of the individual; that companies (and Governments) just get in the way.

Citizenship, however, demands responsibilities from individuals. And such responsibilities are rooted in principled and virtuous actions that protect collective wellbeing, not just personal advancement. Hence there is such a thing as society, Maggie, and – yes – we are all very much part of it. Our first responsibility is to our fellow citizens and to our one planet, north and south.

In recent weeks, I have been party to a wide-ranging discussion about whether (metaphorically, at least) Milton Friedman is dead. I took issue back in February with the FT’s Stefan Stern when he wrote about ‘the hot air of CSR’ and while we should abhor the tick-box approach that certain companies now take to the Responsibility agenda, we should also recognize and embrace the fact that corporations can – and must – become agents for change. Furthermore, recent Trust data confirms that companies now need to consider the interests of their employees and those of their customers ahead of the interests of the shareholder – proof-positive of the shift from a singular shareholder to a multiple stakeholder focus for businesses and business leaders today. This move, in itself, puts the Friedman doctrine to the sword. In a global economy, even those nations thrilled at their liberation from centralized economic control will yet need to find a new harmony between freer markets and responsible, corporate actions.

While Trust data may provide reasoned statistical support for the argument, though, there is also a point here about higher principle. Where is the moral justification for putting money before people; or corporate profit ahead of the customer that helps build success; or the interests of the company ahead of the finite resources of the planet? The Economist hailed Friedman as the most influential economist of the second half of the Twentieth Century, but his theories were essentially as transient of those of Keynes before him. More enduring is the concept of co-operative ownership, mutual behaviours and active citizenship, as articulated on Citizen Renaissance before and which find greater historical precedent as well as greater modern relevance. Those who today advocate the economics (really, politics) of Friedman lack a historical perspective and shun their obligations to fellow-citizens and to the environmental economics of mother earth. They are also just not in tune with contemporary corporate thinking or, indeed, structure.

Business leaders today of course worry about ‘more regulation’ and all rush to agree of the preferable nature of ‘better regulation’ instead. But more principled (ie. more adult) behaviour will transcend the need for such regulation altogether – a new and progressive consensus will understand new boundaries of principle, not just the parameters of scale. Markets may be informative, but civic virtue can speak to a higher moral order. In this context, jostling around how / whether / to what scale regulation should contain the size of a Bankers’ Bonus (the scrap du jour) fundamentally misses the point. Regulation is a mere – and weak – manifestation of a rule compliant culture, where we have to put (childish) boundaries in place to stop (childish) people offending. Responsibility – not regulation – needs to be the watch-word of the Stakeholder society. And that can start from within.

Make no mistake – Milton Friedman is dead. The social responsibility of business today must be to address the new ecology of interests within business on a more equal footing. Business must speak no longer to only the individual or the shareholder – but must embrace the customer as citizen; the employee as citizen; and the corporate entity as a collective citizen of the community and the planet which it serves. No-one is trying to undermine the profit motive, per se – but Profit without Principle has no place in the new business ecology. Companies and brands including Quaker, Marks & Spencer, Cadbury and, of course, The Co-Op are mainstream, not maverick – but maybe the late Mr Friedman might disagree.