Barton precisely dates the moment Western capitalism started to go off the rails: it was 1970, when Milton Friedman first advocated maximizing shareholder value as the paramount duty of the chief executive. That notion—which reduced issues like employee well-being to “externalities” that shouldn’t concern a company’s manager—helped catalyze a divorce of business from society. As Friedman said, the job of business was business, and that was it. What made it possible to sell this version of capitalism to society was the promise that if business were allowed to simply get on with the job, all of us would be better off. Businesses were, as Mitt Romney’s 2012 presidential campaign had it, “job creators”; burdening them with additional responsibilities would be self-defeating. It is easy to forget that this black-and-white view of the role of companies replaced a very different philosophy. In the 1950s and ’60s, America’s business leaders widely believed they were responsible to the community as a whole, not just shareholders. They led their companies in a time when their workers’ wages increased faster than their own salaries. And they collectively advocated policies—like higher taxes—that went against their immediate class interests. That era, of course, had roots in a messier period that recalls our own. Business in the late 19th and early 20th centuries was red in tooth and claw, and inequality surged. One consequence was tremendous innovation. Two others were periodic financial crises and violent social upheaval—including the rise of communism. By the end of the Second World War, smart capitalists throughout the West realized they had to serve society as a whole, or be devoured by it. The communist specter no longer haunts Europe, of course, but the leaders of the sustainable-capitalism movement believe we are approaching a similar tipping point in the relationship between business and society.
Posted on: Fri, 29 Nov 2013 23:31:56 +0000
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