Americans were once deeply worried about the danger posed by powerful corporations. They may be useful, wrote James Madison to a friend in 1827, “but they are at best a necessary evil only.” This was an old republican intuition: Concentrated power in whatever form threatened the body politic. In recent years, however, business leaders have come to believe that what Madison considered a “necessary evil” is actually the last great institution capable of making the world a better place. For Silicon Valley entrepreneurs no less than Fortune 500 CEOs, the bottom line is out, and amelioration is in. Call it conscious capitalism. Or corporate social responsibility or environmental, social, and corporate governance (ESG) investing. Many consumers, regulators, and activists expect big-business executives to act like responsible citizens and steer their firms accordingly—maybe more now than ever before. Even 92 percent of executives in a 2022 survey agreed that corporate leaders should take a stand on social issues.
One imagines that Milton Friedman would be disappointed by all of this. Fifty-three years ago, the libertarian economist and eventual Nobel Prize winner wrote an article for the New York Times Magazine in which he took aim at the concept of corporate social responsibility.
His alternative to the social leadership of business executives became known as the Friedman Doctrine. Its core principle could not have been more emphatic: The sole responsibility of business is to maximize profits. Anything less, he argued, is a slippery slope toward the end of free enterprise and, after that, the collapse of democracy. Overstated and simplistic as it was, the doctrine had an undeniable elegance—attractive to its many adherents, crass and even insidious to its many critics.
Only having grown in notoriety since 1970, the Friedman Doctrine has served as a satisfying punching bag and a singular example of what not to think. At least that’s been the case for the hundreds of business school professors who regularly assign the article in classes on ethics and strategy. Generations of professional managers have been assured that Friedman’s ethical minimalism is out of step with the complicated world of modern business and the positive social role executives should play in it. And leading proponents of stakeholder capitalism in all its adjectival forms (conscious capitalism, just capitalism, sustainable capitalism, and caring capitalism, among others on a disconcertingly long list) continue to make the case for business reform with resolute renunciations of Friedman and all his works.