Throughout corporate America, people are fond of quoting the red meat sound-bite Milton Friedman delivered in a 1974 interview. “So the question is,” the celebrated economist began, “do corporate executives, provided they stay within the law, have responsibilities in their business activities other than to make as much money for their stockholders as possible? And my answer to that is, no, they do not” (emphasis added).
Deliberately provocative, this pronouncement has become a slogan and mantra, a fierce battle cry, a defiant refusal to apologize or explain, an inspiration and item of faith for those who devote themselves to the uninhibited pursuit of wealth. Still, anyone who might be troubled by Friedman’s seemingly amoral stance may find reassurances in his carefully chosen words. In the first place, he specified that his remarks applied only to corporate executives acting in their official capacities, allowing even the most ruthless CEOs the possibility of private lives graced by altruism and generosity. Second, he made clear that the obligation to obey the law is absolute, a demand that protects society—as well as executives themselves—from their more rapacious instincts.
But Friedman’s creed contained a loophole, perhaps intentionally so. One way or another, it was rapidly found and exploited by others. Legal safeguards depend on an uncritical, if common, understanding of the law as an instrument for the common good and as something stable, reliable, independent, high-minded, and incorruptible. Yet we all know that laws are made by legislators, that legislators are human, and that human flesh is weak. We also understand that it is not illegal to change the laws, nor to seek influence with those who write them. Combining this with Friedman’s dictum, we come to realize that corporate executives—who are bound only by the imperative to maximize profits while staying within the law—can and should use every legal means possible to change the laws in ways that increase profit.
Like anyone else, corporate executives can do this through the simple act of persuasion. But no legal or moral strictures keep them from converting their assets into influence and then into more profit still. Assisted by the Supreme Court’s decision that protects political contributions as a form of free speech (Buckley v. Valeo) they hire well connected lobbyists to do their persuading; they launch advertising campaigns to reshape public opinion; they make campaign contributions to friendly candidates and defame politicians who are hostile; they wine and dine elected officials, bestowing favors, gifts, and vacations. And where antiquated laws define these practices as bribery, they press for “reform” of the statutes.
At precisely this point, the political sphere meets the economy, as the two corrupt and deform each other. However much Friedman may have abhorred government, the adoption of his views has led the state to grow, not shrink, for it has proven an eminently useful, obliging, and profitable partner-cum-tool of corporate America. While some cling to the quaint notion that law exists for the public good, others not bound by such sentimentality make it an instrument for their enrichment. In the marriage of convenience known as “crony capitalism,” government contracts, earmarks, deregulation, privatization, waivers, and favors all help funnel huge profits to well connected corporations, whose law-abiding executives wisely invested in the political process.
With the events of the past few weeks in mind, it is particularly ironic that at the very moment when the limitations and consequences of Friedman’s views are becoming most frightfully apparent, this University is laboring to establish a $200 million shrine in his honor. Itself hardly immune to the profit motive, the University hoped to cash in on Friedman’s brand, before its value abruptly fell with the financial markets he helped free up. At the moment, the need to defend his reputation surely has increased, and the University still hopes donors will write large checks, even in a bear market.
To date, gifts have been anemic. If they do ultimately roll in, donors are likely to understand them as long-term investments in theories that enriched them over decades past by promoting privatization, deregulation, and the guilt-free pursuit of profit. Surely, there will be some quid pro quo, as those who give one millions dollars and more are promised life membership in the “Milton Friedman Society” (an opportunity The Wall Street Journal was pleased to tout in a “Note to well-heeled readers”). Members in the elite society will “provide the Institute’s scholars with connections to leaders in business and government,” while attending private conferences, receiving private reports, and enjoying privileged access to the the Friedman Institute’s director, faculty, and visiting fellows. Within this cozy inner circle, the opportunity for inside information is clear, if implicit, as is the possibility of corporate penetration—or, one might say, hostile takeover—of a particularly influential branch of a great University.
Unsurprisingly, these plans have engendered fierce opposition. An ad hoc Committee for Open Research on Economy & Society (CORES) has garnered more than 1,100 signatures, 131 from the University’s own faculty, on a petition that details the case against the the Friedman Institute. In the face of this mutiny, President Robert Zimmer will assemble the full Chicago faculty for a discussion of the issue on October 15. This is the first such meeting since 1984, when the University debated divestment from South Africa and ultimately refused to do so, insisting that the institution ought to remain strictly neutral on all political questions.
Conceivably, this same principle might cause administrators to hesitate before reinvesting in Milton Friedman’s views and reputation.
Bruce Lincoln is the Caroline E. Haskell Professor of the History of Religions at the University of Chicago and co-chair of CORES.