The Cultural Contradictions of Capitalism

Matt Yglesias meet Daniel Bell. “Capitalism requires more of an ethic than ‘greed is good’” isn’t a new argument, on the left or on the right.

Here’s the thing, though: the statement “the social responsibility of business is to increase its profit” doesn’t really even make sense in its own terms, because “business” as such isn’t an active agent, and as such can’t have responsibilities of any kind.

Suppose I own a neighborhood bar. Does Milton Friedman think that I have an obligation to maximize the profits from the bar? But why? How does he know why I bought the bar in the first place, what function it serves for me? Maybe I bought it so I could hang out with musicians who I would invite to play there. Okay then – does it make sense to say that the bar itself has an obligation to maximize its profits? But what on earth does that even mean? I don’t have such an obligation. The staff of the bar all report to me, not to the “bar itself.” If I don’t have an obligation to maximize profits, then by definition the “bar itself” cannot.

You could say that the “social responsibility” of the “bar itself” was to serve drinks, inasmuch as if it didn’t fulfill that responsibility, then it wouldn’t be a bar. To generalize, the “social responsibility” of any business itself is to provide a product or service to a clientele. But who has a “social responsibility” to maximize profits?

If anybody does, it’s for-profit corporations, entities that behave as independently active agents in society, and which are structured in such a way that they are, indeed, formally obliged to produce profits for shareholders. But this isn’t part of some “essential nature” of for-profit corporations, because for-profit corporations aren’t natural entities; they are legal fictions. As such, to say “the social responsibility of a for-profit corporation is to increase its profit” is merely tautological – of course it is, because that’s what we set them up to do, but nothing whatever can be deduced from this about how things should be, or even whether such entities should exist. In theory, for-profit corporations could be structured so that they are obliged both to produce profits for shareholders and to account for the interests of other stakeholders – for example, giving workers’ councils a formal role in the management of the corporation would make the corporation accountable both to the interests of shareholders and those of employees. Would such a structure be better or worse than the legal regime we have now? I don’t know – but it would be equally natural (or unnatural), being equally a creation of the law.

In any event, I’m not sure that “ethics” are a solution to the specific problem Matt cites, because that problem has nothing to do with capitalism. Incumbent guild-members in the 13th century were no doubt very pleased with the guild system, and would have been quite put out by any suggestion that it be opened up to greater competition. I’m really not sure what Matt expects businessmen to do. Does he think individuals have a moral obligation not to take advantage of available tax loopholes if they don’t really “need” them?

It’s one thing to argue that people should feel shame from earning money in a socially destructive way – dumping toxins in the water, addicting people to nicotine, mainstreaming pornography; you pick your favorite “bad” business. But an ethics where people are going to turn down money for nothing? Seriously?