Corporate Socialism

Tibor R. Machan

The idea that making a profit is somehow ignoble has ancient roots. Partly it stems from the utterly fallacious notion that when someone wins, someone else must lose. So if you go to the mall and purchase a sweater you really like, you must rip off the store where you do this. It is only after modern economics got going full blast that it became clear that when there is a purchase, both sides win. Or at least they understand themselves as having won. You got the sweater, they got the money, you both got a deal!

The myth of the zero-sum exchange, however, continues and politicians and social agitators capitalize on it all the time. So when people in business make profits, the social commentators--advocates of the alleged social responsibility of corporations and business in general--insist they are engaging in illicit exploitation, kind of the way a drug pusher does when selling drugs to a junkie. (Junkies have hardly any will power, so there the idea makes some sense.)

Now this zero-sum idea has been an influential one within the fields of political economy and business ethics. It gives rise to such silly notions as that people doing successful business must "give back to their communities," as if they had stolen their profits. So every time one is part of an exchange one finds satisfactory, one must have made gains illegitimately and needs to atone for it by "giving back".

An entire movement has sprung from these ideas. It is called the corporate social responsibility (CSR) movement. It basically advocates that successful people in business have an obligation to do pro bono work in their communities, to do service free of charge, to settle up with the folks there whom they have ripped off. Never mind that all those folks who supposedly were ripped off actually made good deals as they traded with the businesses that are supposed to owe them! Another name for it is "stakeholder corporate management" in line with which managers of companies aren't supposed to work for the owners and investors and deliver products or services at a good price to costumers so all are pleased with the results. No. Management is supposed to work for the community, for anyone who has his or her hand out for free goodies, for stuff that the business is supposed to pay for, not those to whom the business is providing work on mutually acceptable terms.

So what we have here is the slow but fundamental transformation of a commercial system into a socialist one where profit is demeaned, treated as something evil, and where people must become servants to each other and may not earn a profit from the work they do for others. This isn't supposed to be something to be expected in an emergency--say when there's a flood or earthquake--but the norm, the way businesses are supposed to carry on routinely.

We have here the basic idea that men and women aren't supposed to embark upon good deals through which they can prosper in their lives. No, they are supposed to be part of a huge organism in which everything is shared and no one is ever to be compensated for the work done for someone else. As if everyone were part of one's family or circle of intimates or even a bee hive. That's the central idea behind corporate social responsibility once clearly understood, as well as behind socialism.

And now it is getting worse. CSR might be advocated as a voluntary policy by those running businesses. The same with stakeholder management. Though still destructive of business, at least no one is being forced to serve others. But now in several states across the U.S.A.--among them California, Vermont, Maryland and others--politicians have created, by legislation, "benefit corporations" in which managers may proceed to do pro bono work without having to answer to shareholders whose resources are being used for this.

Normally if managers mis-allocate company resources, they could be sued by the owners for malpractice but with this law they will become immune. The only recourse by shareholders will be to sell their stocks and of course these stocks will have lost a goodly portion of their value given that the company isn't committed to making a profit any longer; nor does the management have to answer to the owners for abandoning this task.

Imagine if one were to hire a doctor to help with one's medical condition and this doctor decided that during the hour one has set aside to go for a visit several nonpaying patients will come to the office and take up the time one needs to get one's medical help. Such a doctor--indeed, any professional who is supposed to do work for clients--would be leaving his or her post, breaching his or her oath of office, which is to fulfill the terms of the contract with clients.

I teach classes at a university and my students can count on me to be there for them, given that they have been accepted by my institution on mutually satisfactory terms. But then imagine that I am told by local politicians and bureaucrats that instead of grading their papers, meeting them during office hours, and teaching them during class time, I must provide service to people in the neighborhood and if I do not, I will be in violation of the law!

We are certainly moseying toward a socialist system in which the decisions of professionals and clients are irrelevant and what matters is what the politicians want from us.