Corporate social responsibility - Fraser Forum The...

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by Jean-Luc Migué I n its January 22 edition, The Econo- mist magazine offered a well docu- mented and rigorous survey of a concept that has become a fad in intellec- tual circles across the globe, namely, the social responsibility of the firm. The magazine reiterated what any good econ- omist learns, that in maximizing its profit the capitalist firm makes its full contribution to social welfare and in so doing realizes the common good. It does not merely make money for its owners. Its employees gain in increased incomes. Consumers gain access to new services at lower prices. Capital is com- pensated at its proper return and innova- tors receive their deserved profit. Any normal businessman realizes that to suc- ceed in the long term, he must serve the interest of his employees, his suppliers, and the community. Concern for the bottom line is in no way contrary to the interests of these “stakeholders.” The benefits accruing to all these parties ex- haust the gains to be expected from the firm. There is no common good over and above these market contributions that a social welfare maximizer acting outside the corporation could produce. This is a restatement of a most orthodox economic doctrine first expressed by Adam Smith: “It is not from the benevo- lence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest” (1930 ed., p. 421). In the words of a modern economist, Milton Friedman, “the social responsibility of business is to make profits” (1962, p. 133). Com- paring people’s lives today with how people lived two centuries ago should convince most sceptics that business makes enormous contributions to social welfare by emphasizing profits. From this analytically tight statement, a consistent reader would conclude that government functions should be limited to enforcing contracts and securing the rights of free agents. Yet in concluding its presentation, The Economist finds it appropriate to state what it considers a radical opposition between the social role of the firm and that of the state: “The proper guardians of the public interest are governments, which are accountable to all citizens. It is the job of elected politicians… to deal with externalities, to mediate among differ- ent interests, to attend to the demands of social justice… to establish collective priorities… and to organize resources accordingly.”
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This note was uploaded on 11/16/2010 for the course NATURAL SC NATS 1505 taught by Professor Isley during the Spring '10 term at Columbia State Community College.

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Corporate social responsibility - Fraser Forum The...

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