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Friedman’s ideals in a modern world

Wednesday, 20 March 2013   (0 Comments)
Posted by: Author: Matthew Lester
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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, profit.”

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.

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.

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 doomed.



Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

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