Friedman’s ideals in a modern world
20 March 2013
Posted by: Author: Matthew Lester
Source: Matthew Lester
WHEN I was a student 30 years ago, the hardline business
philosophies of Milton Friedman were very much in vogue. Some remember Friedman’s
1970 article in the New York Times, "The Social Responsibility of Business is
to Increase its Profits”.Today we say: "The world should be a kinder place and
generally work towards the triple-bottom-line approach (3BL) — people, planet,
This approach now has overtaken "re-engineering your
paradigm” as the catch phrase in any MBA.
Before we condemn Friedman to history, let’s examine his
ideals in more detail. In Capitalism and Freedom, he writes: "There is one and
only one social responsibility of business - to use its resources and engage in
activities designed to increase its profits so long as it stays within the
rules of the game, which is to say, engages in open and free competition
without deception or fraud.”After university I worked for the Receiver of Revenue. We were
always on the back foot, simply because the Income Tax Act ("the rules of the
game”) was a mess. The lack of rules made a farce of Friedman’s ideals.
When I lecture on tax, stewardship and governance today, I
think: "If only we could get business to keep up with developments in the law,
we will ultimately achieve 3BL without trashing Friedman’s ideals.”Events such as Enron, 9/11 and the global credit crunch
have enabled the worldwide authorities to crack down on harmful business
practices. Their work is by no means done. And business is left struggling to
keep pace with the rules of the game.
Perhaps the problem lies in continuing business education.
It is one thing for the authorities to legislate 3BL ideals, but can business
keep up with learning and implementing change for the betterment of people and
the planet while still concentrating on profit? Businesses that do not focus on
the profit implications of increased energy prices and related taxes will be
Are businesses, in the pursuit of 3BL ideals, taking their
eyes off the ball? For example, corporate social investment often gets confused
with marketing business image. Yet, are the proponents of such investment fully
compliant with all the rules of the game? Maybe not.