In 1970, Milton Friedman wrote a famous essay for the New York Times Magazine, arguing that “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”
For many years, the Friedman point of view prevailed: the job of a corporation is to serve its shareholders. A portion of Friedman’s argument rested on a bit of rhetorical sleight of hand—the notion that a “free market” also means “freedom.” Here is how Friedman put it: “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 no values, no ‘social’ responsibilities in any sense other than the shared values and responsibilities of individuals.”
Perhaps that is how an “ideal” free market would function. Forty-five years after Friedman’s essay, however, we still remain very far from that ideal state. Consider these unsettling facts:
- Although illegal, slavery and forced labor persists in many forms around the world. Researchers estimate there may be as many as 36 million people in slavery today—more than at any other time in history.
- According to a two-year study conducted by Verite, forced labor in Malaysian electronics factories is widespread, impacting one in three migrant workers.
- Last spring, the Guardian reported that “large numbers of men bought and sold like animals and held against their will on fishing boats off Thailand” are integral to the production of shrimp sold in leading supermarkets around the world.
- Every year the government of Uzbekistan, one of the world’s largest exporters of cotton, forcibly mobilizes children as young as ten years old to harvest their crops.
Many corporations are now well aware of these facts, and enforce codes of conduct at factories and fields around the world through regular monitoring. Some collaborate with labor unions and human rights groups, and actively seek to find the root causes of these abuses. They are changing the definition of “good business.” But these changes did not come about through the influence of a magical invisible hand of the market. These transformations are largely the result of concerted engagement by investors and civil society organizations repeatedly raising concerns with corporations for decades.
Milton Friedman allowed for profitable socially responsible activities—this is just good business after all, not “social responsibility.” He failed to see, however, how far away we are from his ideal free market, and the critical need to convince companies to act more responsibly, even when it is in their long-term best interests to do so.
In 2010, Domini convinced Nucor to adopt strong policies to address forced labor and slavery in Brazil. Read the case study.