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When faced with so-called ‘progressive business’, stay skeptical

In Capitalism and Freedom (1962), the economist


Milton Friedman once accused corporate social
responsibility of being a ‘fundamentally subversive
doctrine’. In Friedman’s view, the business of business
is business, not political causes, and certainly not
progressive ones. However, the view that businesses
fulfil a larger social purpose than filling the pockets
of shareholders has recently grown more popular
than ever.

Entrepreneurs, CEOs and business management writers have talked about ‘creative capitalism’ (Bill Gates), ‘creating
shared value’ (Michael E Porter), ‘conscious capitalism’ (John Mackey), or ‘inclusive capitalism’ (C K Prahalad). The
common underlying idea is that not all kinds of profit are equally legitimate. For them, ‘ stakeholders’ – not just
shareholders – should be taken seriously by the corporation. The invocation of responsibility towards stakeholders is
one way of claiming the social legitimacy of business corporations, whose social legitimacy and authority historically
has been questioned again and again. To be sure, these people have not changed the way that the vast majority of
companies in most countries actually work, running on traditional capitalist principles, short-termism, shareholder-
value maximization and historically unprecedented CEO compensation levels.

But many companies often find ways to brand themselves and to market their commitments to social purposes.
Today, international organizations including the United Nations have taken over a view of corporations as being
institutions that can be channeled in the direction of social purposes. This became particularly evident under the
leadership of the former Secretary-General Kofi Annan, who in an address to business people at a World Economic
Forum gathering in Davos in 1999 called for a new ‘compact’ between the UN and business. With the launch of the
UN Millennium Development Goals in 2000 and subsequently in the Sustainable Development Goals of 2015, the role
of business as a key partner in achieving these goals was also given much weight. In response to an economic
globalization with weak political international integration, the idea was that businesses should play a vital role for
development and poverty-reduction.

A more progressive spirit in the world of business wouldn’t be a bad thing. Most people wouldn’t rather live in a
world where entrepreneurs such as Gates couldn’t care less about human welfare.

However, it’s unlikely that more substantial and lasting progressive social change will come from a new corporate
ethic. While proponents of progressive business often proclaim to be at the vanguard of a new ‘revolution’ wherein
the role of business in society as we know it will change, it is worth noting that progressive business is by no means a
new idea.

For example, the book The American Business Creed came out in 1956. Written by a distinguished team of three
economists – Seymour E Harris, James Tobin and Carl Kaysen – and one sociologist, Francis X Sutton (the lead
author), it was the most comprehensive account of US business ideology ever written. The book laid bare a
conceptual tension between two kinds of business ideologies: ‘the classical business creed’ and ‘the managerial
business creed’. Where the former saw profit-maximization as the central goal of corporations, the latter saw social
responsibility as the key goal.

The defining characteristics of the classical creed – dominant up until the mid-20th century – was the belief in
competition, individualism, hard work, private property, materialism, meritocracy, limited government and free
markets. It praised the US business enterprise as the root cause of the historically unique increase in living standards.
While it saw self-interest as what Sutton et al called the ‘universal and immutable motivation of every man’, it was
skeptical about government interference and legislative reform from ‘intellectuals’ and ‘do-gooders’, who would be
‘apt to be naïve about human nature’.
When faced with so-called ‘progressive business’, stay skeptical

But the hegemony of the classical business creed was broken. Between the 1920s and the late 1940s, a
new managerial creed arose to supplement it; as Sutton and his co-authors wrote: ‘The doctrine that the evil days of
rugged individualism have now passed and that a new era of business responsibility has emerged wins increasing
praise.’ In the classical view, the owners are the enterprise, whereas in the managerial view the owners are ‘on par with
other groups who have stakes in, and just claims on, the organization’. The managerial view conceived of managers as
analogous to statesmen. They were to mediate between different groups, maintaining attention on justice and
wisdom in decision-making, and ‘consciously direct economic forces for the common good’. This also meant that
‘profits above a “fair” level are an economic sin’.

Since the 1960s, Friedman and others have labored hard – and successfully – to push back the managerial creed and
to revitalize the classical business creed. As a public economist, Friedman alone would attack the managerial creed
through books such as Capitalism and Freedom and journalism – not least his article ‘The Social Responsibility of
Business is to Increase its Profits’ (1970) – and in public lectures given at universities and elsewhere.

During the 1980s, a good amount of success was achieved in what became known as the ‘shareholder value
maximization’ revolution. ‘Managerialism’, however, with its ethic of business as being socially responsible to multiple
stakeholders, remained alive, a subordinate part of the business world. And since the 1990s, the spirit of progressive
business has resurfaced with ideals consistent with its early 20th-century predecessor: common good before private
good, stakeholders before shareholders, not all kinds of profits are morally legitimate.

The second decade of the 21st century, however, provides a very different context for the rise of a progressive,
managerial business ethos. Todays’ proponents of progressive business exist in our environment of historic inequality,
broken labor unions and a crisis of social democracy. The ‘managerial view’ first arose in response to the New Deal. It
was about securing the social legitimacy of US business in the context of the emergence of two new contending
institutions in US society: Big Labor and Big Government. Businesses needed to emulate their rhetoric – they needed
to build a new ‘moral economy’ of a US capitalism that was committed to ‘service’ and to the common good.

Where the managerial creed existed alongside a rising middle class, today’s proponents of ‘progressive businesses
find themselves in an almost contrary environment. There is no comparable, countervailing force to Big Business.
Where the mid-century managerial creed operated on the basis of there being a contradiction between being for-
profit and for-society, contemporary proponents of progressive business often reject that there is any. And where
progressive business people might increase the wellbeing of stakeholders to their particular corporations, other
institutions such as social democracy and labor and social movements would be necessary if the goal is to raise the
welfare of all citizens.

In brief, a corporation might very well provide health insurance to ‘its’ employees, but only the state can provide
adequate health care for all citizens, including the long-term unemployed. Similarly, a corporation might implement
more sustainable environmental and climate policies, but other forces such as strong environmental organizations are
necessary for a long-haul push. Progressive business is an idea with a longer history than commonly recognized. This
history shows that while progressive business can certainly help achieve good things, it should not be a substitute for
progressive politics.

Alan Slinkard, MS, MATS, PhD is a teaching fellow in the


University of Denver | Iliff – Joint PhD Program in Religious & Theological Studies
Areas of emphasis are World Religions, Religious History,
Ethics and Mythological Studies

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