John Mackey, Milton Friedman and the Capitalist Terrain

This post is a review of some recent remarks about defending capitalism  through an interview by the CEO American Enterprise Institute (a generally economic conservative think tank) of Whole Foods CEO John Mackey who has a new book called Conscious Leadership and who is an advocate for what he calls conscious capitalism.  Mr. Mackey is a donor to the American Enterprise Institute and he had done interviews recently in a number of other outlets about his new book.

He starts off the interviews by setting that there is a fundamental misunderstanding of capitalism.  He states that the purpose of a for-profit business is not to make money but to have a purpose (thus the so-called Conscious Capitalism).  This is at least in in some sense contrary to neoclassical economics textbooks where the purpose or goal of the first is to maximize profit (or in some rare cases something maximize sales).  Mackey argues that business exists "to create value for other people" and then he states that "business is the greatest value creator in the world by far".  He also stated that capitalism is the key to human prosperity and that socialism has been a disaster "forty two times". Mackey at least seems to recognize that there is balance between regulation and what he might term overregulation.

Mackey also cites Deidre McCloskey in that commerce and business people are victims. They (business people) are the victims from the elites and are generally hated in Mackey's (and McColskey's) view  by professors, clerics and the aristocracy.  For a major CEO, one would have to say that Mackey is quite consistent and open about defending the capitalist system whereas other CEO's tread lightly in this regard.

In contrast to Mackey, Milton Friedman argued that the purpose of business is to make money.  In the New York time Magazine in September of 1970, Friedman argued that the social responsibility of business is profit and no more.  Friedman argued that corporate executives are employed by investors and capital and their direct responsibility is to them solely.  If they wish to address racism, social issues or the environment, they can do that with their own money and time.  

Friedman also argues that if corporate executives give into the temptations of "social responsibility" (even if only for window dressing reasons), they may open a door to government control or socialism which they cannot close.  This was the same argument used by the Wall Street Journal Editorial Board in 2019 to admonish the CEO's of the Business Roundtable for stating that they would move beyond mere shareholder responsibility in an attempt to appease Bernie Sanders and what the WSJ termed the "socialists".  

Taking the view from Warren Samuels and other institutionalists, the question remains as to what kind ion capitalism and the details matter.  To say that "capitalism" is good and "socialism is bad simply defects the real questions of how much government.  Friedman wrote that  "That responsibility (business) is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to their basic rules of the society, both those embodied in law and those embodied in ethical custom." This seems at first glance like a reasonable statement.  The problem of course is that "law" and "ethics" are contested ground and of course Friedman later in the article opines on those issues.  

Friedman goes on to argue that, "In an ideal free market resting on private property, no individual can coerce any other, all cooperation is voluntary, all parties to such cooperation benefit or they need not participate. There are not values, no "social" responsibilities in any sense other than the shared values and responsibilities of individuals. "  Here we see the issue.  Friedman ethics and basic rules of society will be very minimal and only those that have unanimous consent.  Under any political system, this means very few rules if any will ever achieve this level of agreement.

Neither Mackey nor Friedman are willing to acknowledge that hard social choices must be made about the role of government or collective action in society.  Or at least that is what they would have you believe.  If you listen closely, they generally prefer the minimal state that protects property from civil disorder and courts of law to protect contractual rights for commercial transactions.  While the two may not agree eon all points and Friedman is more of a "minimal state" thinker than Mackey, these argues about defending capitalism leave many unanswered questions.

Mackey argues that business with a purpose is all that is needed.  Keep government generally out of the way and let the business people move society.  Of course, Whole Foods has benefited from all sorts of government regulation, like organic food rules, and corporate tax breaks.  Friedman is all about business is just about making money and that government should also generally stay out of the way.  Each off these parties has the right to argue their points for defending capitalism or the profit motive.  The bigger question is that these arguments leave out lots of questions about the contested realm of collection action and social ethics that must be addressed.