The Social Responsibility of Business is to Increase its Profits

Milton Friedman

In the article “The Social Responsibility of Business is to Increase its Profits”, Milton Friedman describe that he does not agree that business should take social responsibilities, in terms of responsible in desirable “social” interests. Believing in free-enterprise system, Friedman supports that the business should be concerned to its shareholders’ interest. He believes, only in socialist environment, business takes social responsibilities as its priority.

In free-enterprise, private-property system, a corporate executive is employee of the business owner, so that he/she has responsibility to fulfill his/her employers’ interests. That responsibility is to conduct business in accordance with their interests, which generally to make profit as many as possible while conforming to the basic rules of the society, both law and ethical custom. A corporate executive is also the fiduciary agent of business owners that run owners’ vision and mission.

A corporate executive is individual in his/her own right and responsibilities. As a free individual, he/she is free to choose roles in community and take social responsibility at own money, time, or other resources. But in his/her capacity as businessman, corporate executive should not act in some way that is not in employers’ interest, even though the actions are community’s interests.

In addition, exercising social responsibility is difficult, especially how to be proper in allocating employer’s resource and spend the proceeds for “social” purposes. The difficulty of exercising social responsibility shows advantage of private competitive enterprise. It forces people to be responsible for their own actions and makes it difficult for them to exploit other people for either selfish or unselfish purposes. They can do well at their own expense.

The bias using social responsibility harms the foundations of a free society. The political principle that underlies the market mechanism is unanimity. In an ideal free market resting on private property, no individual can coerce any other, all cooperation is voluntary, all parties to such cooperation benefit or they need not participate. There are no values, no “social” responsibilities in any sense other than the shared values and responsibilities of individuals. In contrary, the political principle that underlies the political mechanism is conformity. The individual must serve a more general social interest. The individual may have a vote and say in what is to be done, but if he is overruled, he must conform. It is appropriate for some to require others to contribute to a general social purpose whether they wish to or not.

Doctrine of social responsibility would extend the scope of the political mechanism to every human activity. Friedman describes social responsibility as a “fundamentally subversive doctrine” in a free society. He said that in such a society, “there is one and only one social responsibility of business–to use it 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.”