<div dir="ltr"><div class="gmail_default" style="font-size:large"><br></div><br><div class="gmail_quote"><div dir="ltr" class="gmail_attr">From: <b class="gmail_sendername" dir="auto">Jomo</b> <span dir="auto"><<a href="mailto:jomoks@yahoo.com">jomoks@yahoo.com</a>></span><br></div><br><div><div style="font-family:garamond,new york,times,serif;font-size:16px"><div id="m_-1679356672620551652ydpc4700ce1yiv4395106910"></div></div><div id="m_-1679356672620551652ydp5cdac681yiv4395106910yqtfd46767"><div><div style="font-family:garamond,new york,times,serif;font-size:16px"><span style="font-family:Arial,sans-serif;font-size:30pt;color:rgb(38,40,42)">Shareholder capitalism’s ugly legacy</span><br clear="none"></div><div id="m_-1679356672620551652ydp5cdac681yiv4395106910ydp66b37e98yahoo_quoted_1400610280"><div style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:13px;color:#26282a"><div><div id="m_-1679356672620551652ydp5cdac681yiv4395106910ydp66b37e98yiv4922490940"><div style="font-family:garamond,new york,times,serif;font-size:16px"><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:30pt;font-family:Arial,sans-serif"></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"><a shape="rect" href="http://www.ipsnews.net/author/jomo-kwame-sundaram/" style="color:rgb(149,79,114)" rel="nofollow" target="_blank"><span style="color:black;border:1pt none windowtext;padding:0cm">Jomo Kwame Sundaram</span></a></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">KUALA LUMPUR:</span><span style="font-size:13.5pt"> Milton Friedman’s <span style="border:1pt none windowtext;padding:0cm">libertarian economics advocating shareholder capitalism has influenced generations trying to understand the economy, not only in the US, but all over the world.</span></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">He was not just an academic economist, but an enormously influential celebrity</span><span style="font-size:13.5pt"> <span style="border:1pt none windowtext;padding:0cm">conservative ideologue who legitimized ideas for the like-minded, including the belief that ‘greed is good’. Now,</span> shareholder capitalism’<span style="border:1pt none windowtext;padding:0cm">s consequences haunt the world and threaten humanity with stagnation and self-destruction.</span></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><b><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">Friedman’s lasting influence</span></b><span style="font-size:13.5pt"></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt">In 1962, Friedman published his most influential book, <a shape="rect" href="https://docs.google.com/file/d/0BxgMqtna1BWDdDlnTENYaHNBYnc/edit?pli=1" style="color:rgb(149,79,114)" rel="nofollow" target="_blank"><i><span style="color:black;border:1pt none windowtext;padding:0cm">Capitalism and Freedom</span></i></a><span style="border:1pt none windowtext;padding:0cm">.</span> In September 1970, the <i><span style="border:1pt none windowtext;padding:0cm">New York Times Magazine</span></i> published his essay, <a shape="rect" href="https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html" style="color:rgb(149,79,114)" rel="nofollow" target="_blank"><span style="color:black;border:1pt none windowtext;padding:0cm">The Social Responsibility of Business is to Increase Its Profits</span></a>. </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt">The article -- reiterating the Friedman Doctrine, <span style="border:1pt none windowtext;padding:0cm">presuming perfectly functioning markets that only exist in the minds and writings of some economists --</span> is a manifesto for American shareholder capitalism. It inspired the counter-revolution against Keynesianism, development economics and other state interventions.</span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">The word ‘competition’ appears only once, in the last sentence. Yet,</span><span style="font-size:13.5pt"> <a shape="rect" href="https://www.nytimes.com/2020/09/11/business/dealbook/milton-friedman-doctrine-social-responsibility-of-business.html" style="color:rgb(149,79,114)" rel="nofollow" target="_blank"><span style="color:black;border:1pt none windowtext;padding:0cm">some supporters</span></a> <span style="border:1pt none windowtext;padding:0cm">insist that Friedman was not ‘pro-business’, but rather ‘pro-market’. But, unlike capitalism, the market has been with us for several millennia and has happily co-existed with unfreedoms of various types.</span></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">Perfect competition rarely exists due to inherent tendencies undermining it. Hence, various challenges to Friedmanite wisdom. For half a century, information and behavioural economics have challenged his many assumptions, certainly much more than the Austrian School advocacy and defence of capitalism.</span><span style="font-size:13.5pt"></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">Thus, Friedman conveniently ignored ‘market imperfections’ in the real world, although or perhaps because they undermined the empirical bases for his reasoning. So, even if Friedman’s logic was true, reality prevents profit-maximizing firm behaviour from maximizing societal welfare, if not cause the converse.</span><span style="font-size:13.5pt"></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">Meanwhile, Friedman’s monetarist economics has been discredited, and has little practical influence anymore, especially with the turn to ‘unconventional monetary policies’, particularly after the 2008-2009 global financial crisis. Yet, his ideological sway remains strong, as it serves powerful interests.</span><span style="font-size:13.5pt"></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><b><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm"> </span></b></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><b><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">Greed is good</span></b><span style="font-size:13.5pt"></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">Hence,</span><span style="font-size:13.5pt"> <span style="border:1pt none windowtext;padding:0cm">Friedman’s 1970 essay remains influential in the world, and has</span> <span style="border:1pt none windowtext;padding:0cm">long</span> <span style="border:1pt none windowtext;padding:0cm">served as the mainstream manifesto on corporate governance<i>.</i></span> Even then, <span style="border:1pt none windowtext;padding:0cm">Friedman</span> denounced dissenting CEOs as “unwitting puppets of the intellectual forces that have been undermining the basis of a free society”. </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">Generations of Friedmanites have insisted that ‘the only business of business is business’, and their sole responsibility to society is to make money.</span><span style="font-size:13.5pt"> He emphasized, <span style="border:1pt none windowtext;padding:0cm">‘‘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.’’</span></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">When Friedman insisted “make as much money as possible while conforming to the basic rules of the society”, he may have presumed that market imperfections do not exist, or were fully addressed by the ‘minimal’ state, although it is well-known that the rule of law has never been adequate to the challenge.</span><span style="font-size:13.5pt"></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">His singular focus on maximizing profits for shareholders justified ignoring all problems due to corporate practices. The doctrine thus absolved the firm of social responsibility. It</span><span style="font-size:13.5pt"> <span style="border:1pt none windowtext;padding:0cm">justified</span> <span style="border:1pt none windowtext;padding:0cm">and encouraged generations of corporate leaders committed to the primacy of ‘shareholder value’. Almost like religion, this thinking became the hegemonic ideology, legitimizing ‘greed-is-good’ behaviour.</span></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><b><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm"> </span></b></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><b><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">Government the problem?</span></b><span style="font-size:13.5pt"></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt">Friedman’s <span style="border:1pt none windowtext;padding:0cm">ideology spread throughout the world with the ‘neoliberal’ counter-revolution from the 1980s.</span></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">Unsurprisingly,</span><span style="font-size:13.5pt"> <span style="border:1pt none windowtext;padding:0cm">neoliberal economists’ claims have been discredited by their policies’ failure to significantly increase investments in the real economy in recent decades.</span></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">And without sufficient investments to enhance productivity, growth has declined, if not stagnated, while dimming future economic prospects. With labour incomes declining relatively, if not absolutely, consumer spending has declined, reducing aggregate demand while feeding a vicious circle of stagnation.</span><span style="font-size:13.5pt"></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">Meanwhile, deregulatory initiatives have not increased real investments and output growth.</span><span style="font-size:13.5pt"><a shape="rect" href="http://www.ipsnews.net/2020/03/share-buybacks-enable-predatory-value-extraction/" style="color:rgb(149,79,114)" rel="nofollow" target="_blank"><span style="color:black;border:1pt none windowtext;padding:0cm">Market finance ideology</span></a> <span style="border:1pt none windowtext;padding:0cm">claims that the stock market can best allocate investment resources among companies. But share buybacks imply that US corporations have no better investment options than to further raise already high, over-valued financial asset prices, thus reducing resources for real investments and future growth.</span></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">The Friedman doctrine also celebrated and justified short-termism, and undermining protection for employees and the environment to maximize shareholder value by increasing corporate profits.</span><span style="font-size:13.5pt"> <span style="border:1pt none windowtext;padding:0cm">This type of capitalism has spread throughout the world with the ‘neoliberal’ counter-revolution since the 1980s.</span></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">‘Getting government out of the way’, the neoliberal ‘free market’ mantra, was supposed to boost private investments. But more handsome corporate profits due to cost savings – from weaker anti-trust and other regulations, lower wages and taxes – have not significantly increased real investments in the US.</span><span style="font-size:13.5pt"></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">The 2007-2009 US financial crisis exposed some problems of short-termism, particularly related to financialization and ‘shareholder value extraction’. The crisis cast doubt on Friedman’s legacy and its implications, encouraging new challenges to corporate governance norms and regulations.</span><span style="font-size:13.5pt"></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><b><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm"> </span></b></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><b><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">Business and politics</span></b><span style="font-size:13.5pt"></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">Friedman would have us believe that power and politics are not exercised in free markets. But this ostensible insulation of politics from supposedly power-free markets is a fiction which thoughtful Friedmanites knew only too well, not least from their own advocacy, behaviour and conduct.</span><span style="font-size:13.5pt"></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">All markets are shaped by various historical and contemporary influences, economic, cultural, social and political. These are often driven by business and other lobbies. Thus, politics, collective action and advocacy shape policies, in terms of design, implementation and enforcement.</span><span style="font-size:13.5pt"></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt">To be fair, Friedman’s view of <a shape="rect" href="https://www.nytimes.com/2020/09/11/business/dealbook/milton-friedman-anniversary-sorkin-essay.html" style="color:rgb(149,79,114)" rel="nofollow" target="_blank"><span style="color:black;border:1pt none windowtext;padding:0cm">politics and business</span></a> seems contradictory. His writings argue that business should stay out of politics, and not use shareholder money to influence politics. But he is remarkably understanding when it happens: </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt">“I can’t blame a businessman who goes to Washington and tries to get special privileges for his company”. “If the rules of the game are that you go to Washington to get a special privilege, I can’t blame him for doing that. Blame the rest of us for being so foolish as to let him get away with it.”</span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><b><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm"> </span></b></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><b><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">Neoliberal inequality</span></b><span style="font-size:13.5pt"></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">Former Clinton Labor Secretary</span><span style="font-size:13.5pt"> <a shape="rect" href="https://www.nytimes.com/2020/09/11/business/dealbook/milton-friedman-doctrine-social-responsibility-of-business.html" style="color:rgb(149,79,114)" rel="nofollow" target="_blank"><span style="color:black;border:1pt none windowtext;padding:0cm">Robert Reich</span></a> <span style="border:1pt none windowtext;padding:0cm">has argued that larger US corporations have acquired so much influence over government, undermining US democracy. Instead, he argues for public financing of electoral campaigns while curbing corporate influence, e.g., via lobbying and campaign spending.</span></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">He cites an old study of 1,779 policy issues during 1981-2002 which found lawmakers acceding to the demands of big businesses with the most lobbying capabilities while the average American had “only a miniscule, near-zero, statistically nonsignificant impact upon public policy”.</span><span style="font-size:13.5pt"></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">With the Citizens United ruling in the new century, the US Supreme Court has legally enabled powerful corporate interests to lobby politically.</span><span style="font-size:13.5pt"> <span style="border:1pt none windowtext;padding:0cm">Unsurprisingly, corporate taxation has been dramatically reduced, while social protection and public investments, e.g., in health and education, have declined further.</span></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">Instead of gains being shared by top executives and shareholders with workers, as during the post-Second World War Golden Age,</span><span style="font-size:13.5pt"> <a shape="rect" href="https://www.nytimes.com/2020/09/11/business/dealbook/milton-friedman-doctrine-social-responsibility-of-business.html" style="color:rgb(149,79,114)" rel="nofollow" target="_blank"><span style="color:black;border:1pt none windowtext;padding:0cm">benefits have become increasingly skewed to the very wealthy in the past four decades</span></a><span style="border:1pt none windowtext;padding:0cm">, thanks to Friedman’s increased influence.</span></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt"> </span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif;vertical-align:baseline"><span style="font-size:13.5pt;border:1pt none windowtext;padding:0cm">From 1948 to 1979, US worker productivity more than doubled while wages fell slightly behind as the stock market grew over six-fold. But from 1979 to 2018, worker productivity rose 70 per cent, as worker pay rose by only 11.6 per cent, while CEO compensation rose almost ten-fold and the stock market 22-fold!</span><span style="font-size:13.5pt"></span></p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif"> </p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif"> </p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif">Link:</p><p style="margin:0cm;font-size:medium;font-family:Calibri,sans-serif"> </p><div><a shape="rect" href="https://www.ksjomo.org/post/shareholder-capitalism-s-ugly-legacy" style="color:rgb(149,79,114)" rel="nofollow" target="_blank">https://www.ksjomo.org/post/shareholder-capitalism-s-ugly-legacy</a></div></div></div></div>
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