Milton Friedman free essay sample

â€Å"The Social Responsibility of Business Is to Increase Its Profits† in 1970, on the Social Responsibility of a business and his theory, which is called the â€Å"Efficiency Perspective†. In every article and book that I have read about social responsibility, Friedman’s â€Å"Efficiency Perspective is placed centrally. During my research I found that Friedman is often criticized for being too classical. Friedman believes that manager’s foremost objective or even moral obligation to the firm should be to maximize profits always. There is however one condition that makes his perspective more complicated, not only for me, but also for several well-known authors. According to Friedman, the managers’ obligations should be carried out: â€Å"†¦while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom†. This leads to one of the main questions of my essay: To what extent does Friedman’s â€Å"Efficiency Perspective† give foundation for responsible and moral international management behavior? And need we any concern if it fails to do so? To fully answer the questions, I first need to explain the two different parts of the first question: responsible international management behavior and moral international management behavior. We will write a custom essay sample on Milton Friedman or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page In businesses nowadays they combine these two parts, respectively responsible and moral become social responsibility in international management. The second question anticipates the other theories and models we need to consider when Friedman’s efficiency perspective does not give foundation for social responsibility in international management. However before I go in further detail, I first explain more about the concept social responsibility. After this I explain Friedman’s full theory, and how it related to these different models of social responsibility, and finally I will draw a conclusion. As any professional looking to have a position in the corporate level will soon recognize that recent years have seen an explosion in popularity of the idea of ‘corporate social responsibility’ (CSR). On top of spending twenty-five hours a day at their desks, prospective recruits are well-advised to feign enthusiasm about the prospect of spending their weekends planting trees in the local park to offset carbon emissions. Indeed, if this is going to make you even half as happy as the employees on the websites look, who can object? Milton Friedman published famous essay explained the idea that a business had any responsibility other than to maximize its profits within legally and ethically acceptable margins, arguing that ‘a corporate executive is an employee of the owners of the business. He has direct re ¬sponsibility to his employers. That responsi ¬bility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while con ¬forming to the basic rules of the society. ’ Anyone daring to dissent is, de rigueur, labeled a ‘socialist’. The argument has a certain appeal. If we can dismiss the concept of CSR as – in fact – irresponsible, we can save many overworked executives a lot of time on their days off, and increase the profits of shareholders. Yet, it must be said that Friedman simply begs the question. Of course, who doesn’t desire to make an unlimited return on his capital? But is this a good desire? The hidden assumptions here are that business is an activity to be exercised purely in the pursuit of unlimited private gain, that it has no social function, and that there is no limit beyond which returns on capital become unjust – practical definitions of greed, individualism, and usury. Some of those in the CSR movement seem to have swallowed Friedman’s critique, and by implication his vision of what constitutes a good business. It is not unusual to see CSR justified less by ethical imperatives than by the argument that it is ‘good for business’, for which read ‘increases profitability’. Yet, perhaps both the Friedman critique and the common practice of CSR are missing something important. It can argue that both Friedman’s thesis and the current practice of CSR lead to a lack of professionalism. Imagine we ask the question: what makes a good shoemaker? For Friedman, it is making plenty of money. For the CSR zealot, it is spending Saturday afternoon volunteering in the local animal shelter. Yet common sense tells us that neither is true, that the good shoemaker is the one who makes good shoes at affordable prices, because shoes are something that everyone in the community needs. Medieval philosophers – unlike early Christian writers who generally took a dim view of mercantile trade – appreciated that merchants perform a useful social function, not by maximizing the profits of their shareholders, but by relocating goods from areas of abundance to areas of scarcity, contributing to a more equitable distribution of the earth’s resources and to the satisfaction of legitimate wants. The function of a business – mercantile or otherwise – is not, according to this reading, to maximize private profit by making as much money as possible, but to maximize the common good by making goods and services available to those who are in need of them. True corporate social responsibility is not an ‘extra-curricular’ activity, but the practice of the virtues proper to a particular occupation and the will to act in accordance with the truth that the purpose of one’s profession is to fulfill as perfectly as possible some definite function within the community. Ultimately, it could be Milton Friedman’s vision which leads to ‘pure and unadulterated socialism’. When the public perceive that businesses are not interested in providing them with quality goods or services, but only in taking as much money from them as possible whilst staying on the right side of the law, it creates a ‘them’ and ‘us’ mentality which is a fertile breeding ground for unrest, and eventually for socialism. Arguments about the role of business in society have raged as companies subscribe to looking at methods to minimize the need for CSR or for ways to turn social responsibility in to a factor of profit making. Whilst some believe that CSR is a distraction that stops businesses performing to their potential and crippling the economy, I firmly believe that an effective CSR policy, coupled with efficient marketing and business strategy could help a business grow to larger profits whilst also benefitting society at large. Milton Friedman is one of the architects of the movement against social responsibility, writing what is considered by many the seminal piece of work disparaging CSR and the businesses who promoting their CSR credentials, saying, â€Å"Businessmen who talk this way are unwitting puppets of intellectual forces that have been undermining the basis of a free society these past decades. † (Friedman, 1970, p1) Friedman’s general belief was that only people can have responsibilities, not businesses, and the people who are hired by business owners have a responsibility primarily to their employers, to meet their desires which in most cases are profits. Friedman recognizes that an individual can have perceived responsibilities in areas away from the business, but says of this: â€Å"If we wish we can refer to some of these responsibilities as ‘social responsibilities. ’ But in these respects he is acting as a principal not an agent; he is spending his own money or time or energy, not the money of his employers or the time and energy he has contracted to devote to their purposes. If these are ‘social responsibilities,’ they are the social responsibilities of the individual, not the business. † (Friedman, 1970, p2) Friedman’s method is to de-assemble the personification of businesses in to individual businessmen and to instead present them as what he believes they are; collectives of individuals who are paid to work at the bidding of the owners. Therefore, the employees should be solely motivated to fulfill their responsibility to create profit for the owners and not to be concerned as to whether their role in the firm is benefiting society or not. One could almost argue that Friedman is saying that those with the desire to work with a social conscience have no place in the free market. Whilst I would agree there is an amount of sense in this argument, I cannot help feel that Friedman’s understanding of CSR is too narrow, focused purely on the business and its role in a free market and has become most definitely outdated for the contemporary culture. He makes valid points during his deconstruction of the personification of a business, however he forgets the main attribute that is CSR’s strength and that is the will of the general public. He may see the business in the factual manner of which he presented; employees lined up to work for the owner’s benefit, but the public do not. They view the company as a whole representative and if one man’s mistake leads to an error is social judgment, the public will judge the whole company, not just the one man. It has been proven time and again whilst CSR has yet to be harnessed to create a significant positive difference to profits, a negative policy can destroy profits. Unfortunately for Milton Friedman, corporate social responsibility has lasted long enough to no longer be considered a trend but a fully fledged strategy integral to a business that wishes to succeed in the contemporary socio-economic climate. Where it is widely believed that Karl Marx’s greatest mistake was discounting the natural human instinct of greed, Milton Friedman’s appears to have discounted the natural human need to survive by sticking with the herd. Had he understood that, perhaps he could have explored the opportunities that CSR presented in helping a company create solutions to social issues without affecting its profit performance, rather than trying to stifle the growth of one of the most important business strategies of the late 20th Century.