As we watch the debacle that calls itself government around the world scratching its collective head at why the people are angry, it would be timely to point out a few home truths.
The economy is supposed to serve the people. It is supposed to have a point.
Economics started as a branch of moral philosophy whose aim was to try to create systems that would one day eliminate poverty and scarcity.
Our current system isn’t eliminating scarcity and poverty; it’s causing scarcity for most people and delivering extreme prosperity to a powerful minority. Wages have stagnated, even as productivity and profits have risen.
“Social contract theory posits that every citizen on the planet has inalienable rights, but to live among others in society, each of us must tacitly agree to yield some of those natural rights in exchange for the benefits of mutual peace and prosperity. Everyone living under the social contract has a duty to act responsibly, to obey the laws, and to abandon certain natural self-interest rights that conflict with the general good.
Since the origins of free market capitalism, however, many corporate founders and investors have argued that their companies are entities, not citizens, and so do not owe anything back to society.
In the 1970s, the noted economist Milton Friedman, who eventually guided the Reagan administration’s economic policies, launched an entire school of economic thought that famously insisted the only social obligation of corporations was to increase profits for their shareholders.”
As long as it is legal, companies can do whatever they desire to produce income for their shareholders. Meanwhile, by virtue of their legal status, corporations are protected from their mistakes by the grant of limited liability to their shareholders, except in cases of proven fraud or misconduct. Whatever effects corporations have on society, the shareholders are immune from liability.
But even as companies avoid liability and ethical responsibility, they seek to influence society through political lobbying and donations. As they actively pursue subsidies, concessions, deductions and bailouts from governments, they also seek to minimise their contribution back to society with profit their sole aim.
Small businesses and individuals are fully subject to the harshest aspects of capitalism while large businesses are exempt. So long as that’s true, capitalism cannot fulfill its promise. Global economic production keeps growing, but it can’t grow fast enough to eliminate scarcity if the fruits of all that production flow straight to a few large corporate dinosaurs. Big companies are the problem.
We need a new approach to the issues of corporate responsibility. It is time for consumers to demand social contract theory be applied to corporations, binding them to act like responsible citizens in return for the tacit authorization society gives them to operate. The new logic must be that corporations are no different from individuals; since they exist within society, which grants to them the right to do business among the people, they have an obligation to behave and give up some of their self-interest for the greater good.
As consumers, we should demand sustainable, ethical conduct from businesses and use our power to reward businesses with loyalty or punish them with boycotts and reputational damage.
Governments likewise could support socially responsible corporations by directing government business and concessions their way whilst remembering that economies are tools meant to serve the general good and that wealth means nothing on a dead planet.
We need access to higher education that doesn’t depend on crushing student loan debt. We need to look at health care as a right, not a service to be bought and sold. We need an adequate safety net that does not condemn the vulnerable to crippling poverty. It’s time for the government to stop investing in institutions and to start investing in individuals, to stop rampant greed and accept the responsibility of stewardship.
It is time for us all to start caring about something more than money.
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