Corporate Social Responsibility

In his book, Capitalism and Freedom, (and in a famous New York Times magazine piece) the late economist Milton Friedman equates the rhetoric of corporate social responsibility with socialism.

There is one and only one social responsibility of business–to use its 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.

An article in today's Wall Street Journal makes the same claim regarding Bill Gates, in the wake of his accepting an honorary doctorate from Harvard and waxing on the merits of philanthropy to the students.

His implicit theme was that so far what he has accomplished may have been good for him and Microsoft shareholders, but it has been no great contribution to society. He suggested that with a personal fortune of about $90 billion (including what he has transferred to his foundation) it is time for him to give something back.

But the author, Harvard economist Robert Barro, disagrees.

I find this perspective hard to understand. By any reasonable calculation Microsoft has been a boon for society and the value of its software greatly exceeds the likely value of Mr. Gates's philanthropic efforts.

Read the whole article - it's very interesting. We shouldn't beat up businesses for creating wealth, as that wealth and the value those companies create for society through the products they create actually make for a better world. Philanthropy only augments the value created by businesses; we're fooling ourselves if we believe it replaces it.

Extra credit reading:

A lively debate, sponsored by Reason magazine, between two great libertarian thinkers, Friedman and John Mackey (founder and CEO of Whole Foods), on the merits of social responsibility.