Milton Friedman’s Argument about Socialist Implications of Corporate Social Responsibility

Teivo Teivainen

Corporate Social Responsibility (CSR) talk has been created mainly to defend undemocratic governance of business. Despite these intentions, it expresses a crucial contradiction of capitalism. Among the great number of nonsense that has been written on CSR, the contradiction is clearly formulated in an often forgotten dimension of Milton Friedman’s famous CSR article. Also socialists and others interested in undermining corporate power might want to have a look.

Friedman wrote an influential and widely cited article on corporate social responsibility (CSR) that appeared in The New York Times Magazine on September 13, 1970. It has become an iconic reference in later debates. Almost every mention of the article focuses on one single thing. As the point is catchy and already in the title, it is easy to repeat and memorize: “The Social Responsibility of Business is to Increase its Profits”.

Friedman’s article also contains a much less discussed point that deserves more attention. In particular, I believe it should be taken more seriously by people ideologically opposed to the values associated with Friedman. The simple point is how Friedman argues that acceptance of CSR “involves the acceptance of the socialist view”.

Socialists interested in the political implications of CSR should take a minute to reflect on this argument. Perhaps not longer, but a minute would certainly be useful.

To squeeze my argument into a minute, my simplified reading of Friedman’s argument is the following: Friedman makes the point that through CSR companies assume a role that really belongs to the taxman. As this means they have a public role, they thereby become legitimate objects of democratization. No taxation without democratic representation, right? The final step in the argument is that democratic representation within business corporations would mean socialism.

I have been arguing for a while that claiming to be socially responsible can take private business corporations surprisingly far from their traditional comfort zone of capitalist legitimacy. Looking for similar arguments in the immense swamps of CSR literature has not been easy. I was somewhat surprised to realize that of all people it was Milton Friedman who had actually made a similar point, though from a very different ideological perspective.

For Friedman, the logical step from CSR to socialism means that companies should not engage in CSR. For me, it means that now that the companies are making CSR claims all over the place, socialists might want to point out the ideological dilemmas of this practice.

As the power of big corporations has become increasingly evident, their legitimacy may erode if they stop making claims about their social responsibility. The dilemma is that if and when they continue making these claims, they implicitly accept that capitalist corporation is no longer immune to social and moral claims by others.

“Social and moral” may not yet be the same as “political”. Perhaps CSR-touting corporations will be able to argue convincingly that they are only talking about such social responsibility that has no political implications. I would argue that CSR talk is, however, at least half a step toward accepting that business corporations are political. And, as feminists have taught us about power relations within patriarchal family, once you accept that something is political, democratic claims can suddenly seem more legitimate. The personal became politicized through feminist claims and legal regulation of family matters followed. Marital rape was one example, criminalized even in Finland only in the mid-1990s.

I am not suggesting that if we repeat the point that accepting CSR should logically lead to acceptance of democratic socialism, we will suddenly see benevolent business leaders putting socialism into practice. What I am suggesting is that pointing to this ideological contradiction can mean trouble for the legitimacy basis of the undemocratic power structures of capitalism.

Making the inherently political nature of business corporations visible is not sufficient for radically democratic transformations to take place. It may, however, be a necessary condition. No democratic transformation without politicization.

Teivo Teivainen
Professor of World Politics, University of Helsinki
Twitter @TeivoTeivainen

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3 thoughts on “Milton Friedman’s Argument about Socialist Implications of Corporate Social Responsibility

  1. Pingback: Milton Friedman’s Argument about Socialist Implications of Corporate Social Responsibility | Kenneth Carnesi

  2. Good post, and I agree with what you’re saying here. I also agree with your assessment that the quagmire known as CSR literature offers quite little on the implications CSR may have for the capitalist legitimacy of businesses. At the same time I’d say this is an idea that at the very least has been brewing on the sidelines of CSR discourse. Colin Crouch sketches, or at least dances around a similar argument in his book “The Strange Non-Death of Neoliberalism” (Ch. 6, p. 134-143) – this may well be known to you already, but thought I’d share this nonetheless, in case you haven’t read it. I recall there are others too, but fail to place them at this hour (of course the likes of Scherer and Palazzo, for example, obviously realize this but have taken a bit different route in dealing with the issue).

    As a sidenote, Stephen Dunne gives quite an original treatment of Friedman’s 1970 article in his 2008 dissertation “On The Question of Corporate Social Responsibility”. Most of what concerns Friedman can be found in pages 52-74 as well as a bit in the concluding section and some remarks here and there. The work itself takes an interesting angle to CSR, but is a rather ponderous read at the same time. If you want to take a look at it, you can find it here: http://criticalmanagement.org/files/DUNNE509450.pdf

  3. Yo Teivo I really like this, and it goes along somewhat with my conclusion in “Human Rights and Private Wrongs” on what I call “the invisible handcuff.” Did you see that recently CHINA asked some of its companies in Burma to take on CSR, in response to growing grassroots protest against development schemes as Burma opens up?

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