I’ve missed this article by Martin Wolf, hosted by Pro Market in the context of the debate over the 50th anniversary of Milton Friedman’s New York Times piece on corporate social responsibility. Wolf starts by saying that he “used to think Milton Friedman was right. But I have changed my mind.” That he changed his mind is no big surprise, as he moved from being a free trader in the early 2000s to being a staunch proponent of whatever kind of government interventionism in recent years.
What is interesting, however, is Wolf’s argument. He changed his mind, he writes, because he doesn’t “believe in the contractarian view of the firm” any more. Corporations, writes Wolf, “are powerful entities able to exercise immense influence within society. Since corporations have been told that their only responsibility is to make profits and this has been internalized within their operations, the result is that society, including in particular its notionally democratic politics, is dominated by feral institutions.”
For the British journalist, Friedman’s point that corporations should play within the rules of the game is naive, as they contribute to writing the rules of the game and they do so by lobbying governments and their regulators so that they act in their interest. This is why, Wolf maintains, “there is a direct line from Milton Friedman to Donald Trump.”
Here comes this astonishing way of reasoning:
Why is this? Consider how one goes about persuading people to accept Milton Friedman’s libertarian economic ideas when, in practice, they shift economic rents upwards and desperation downwards. In a universal-suffrage democracy, it is impossible. Such libertarians are a minority. To win, they have to embrace ancillary causes such as culture wars, racism, misogyny, nativism, xenophobia, and that good old standby: nationalism. Much of this has of course been sotto voce and so plausibly deniable: “No, we are not in favor of discrimination, but your precious freedom does indeed include the right to discriminate.”
The financial crisis and bailout of those whose behavior caused it made selling the deregulated free-market even harder, as Mitt Romney’s 2012 failure showed. Afterward, it became politically necessary for libertarians embedded within the Republican Party to double down on those ancillary causes. Trump was simply the political entrepreneur best suited to do this. A natural demagogue, he was perfectly comfortable saying out loud what his predecessors had said quietly or let others say for them. This is why his supporters claim that “he says it like it is.” Those desperately-needed voters loved him for it because he respects their rage. Of course, his nativism, nationalism, protectionism, demagoguery, lying and now open assault on the notion of a fair election is a bit uncomfortable for corporate elites. But, if he gives them lower taxes and sweeping de-regulation, how many really care? If the result is to poison democratic politics forever, again, who cares?
So, to return to my main point: one cannot get away with stating that corporations should play by the rules when they create the rules they play by. The system for creating the rules of the game is corrupt.
When Friedman was referring to the “rules of the game,” he was likely thinking of the broader and more general principles of a liberal polity and of free competition: don’t hurt people and don’t steal their stuff, to quote the effective title of a book by Matt Kibbe. He was certainly not thinking of legislation à la cart and special privileges, that Friedman vehemently opposed. Moreover, in Capitalism and Freedom, where Friedman further elaborates his argument against the notion that corporations ought to have any “social responsibility” duty, he argues clearly that “if economic power is joined to political power, concentration seems almost inevitable. On the other hand, if economic power is kept in separate hands from political power, it can serve as a check and a counter to political power.”
Friedman, and libertarians at large, argue for a separation of government and business as clear as the separation between the church and the state. I’d like to have the reaction of some American friends, but I find the description of libertarians jumping on the Trump bandwagon quite laughable. If anything, perhaps the opposite has happened: that libertarians have emphasized their differences with the current US administration, focusing on matters that alienated them Republican support. Think about Cato’s top-notch work on immigration. Protectionism is a red flag for libertarians and that brought them to strongly distance themselves from the Trump camp. If you google Donald Trump and Milton Friedman, other than Wolf’s piece you’ll see things like this popping up.
In short, Wolf accuses Friedman of being blind to the issue of crony capitalism and to have a following which includes people eager to compromise for the sake of immediate political goals. The second claim would be an interesting matter of investigation. The first is plainly wrong.