“Workers First” should replace “profits first” as the motto of business
August 28, 2020— Milton Friedman absolved corporate leaders of social responsibility in his 1970 New York Times essay, perversely titled The Social Responsibility of Business is to Increase its Profits. It worked, and for decades the wealth created by American workers has been plundered for the benefit of the corporate elite. Visigoths and pirates would have been embarrassed at the scale of the transfer of wealth. As a result, wealth inequality in America today rivals that of third world countries.
Friedman addressed unions in his essay through the distorted lens of his thesis of profits above all other considerations.
This facet of "social responsibility" doctrine is brought into sharp relief when the doctrine is used to justify wage restraint by trade unions. The conflict of interest is naked and clear when union officials are asked to subordinate the interest of their members to some more general purpose. If the union officials try to enforce wage restraint, the consequence is likely to be wildcat strikes, rank-and-file revolts and the emergence of strong competitors for their jobs. We thus have the ironic phenomenon that union leaders--at least in the U.S.--have objected to Government interference with the market far more consistently and courageously than have business leaders.
His upside down view focuses on efforts by government – and opposed vigorously by unions – to restrain union power beginning with passage of the Taft-Hartley Act in 1954. Unions resisted those restraints not because of any fealty to Friedman’s principles, and certainly not out of a desire to practice “wage restraint.” Rather, the new restrictions on labor rights threatened to undo the enormous gains made by workers post-Great Depression and post-World War 2. Unions were not opposing “Government interference,” they were fighting against the roll back of labor protections that had been written in law in the 1920s and 1930s and had unleashed real bargaining power for organized workers.
The first social responsibility of business is to provide good jobs at a living wage. If your workers rely on public assistance then your business plan relies on shifting the cost of a decent living to the government. The same business leaders who whine about socialism at the first sign of a government program for the poor are quick to shift the burden of their low wages to the government. Why? Because Milton Friedman told them all they need to focus on is profits.
The second social responsibility of business is to stand back and allow their workers to form unions. At least 46% of American workers say they would join a union today and unions have a 64% approval rating. Instead, only about 10% belong to unions. That 36% gap – over 56 million workers – shows the impact of corporate spending that has made union busting a billion dollar industry itself. Friedman allows business leaders to rationalize that spending in the name of short-term profits. But, when the Railway Labor Act was written in 1926 (later amended to cover my airline industry) it provided that management had “no role” in workers’ self organization into unions. This was recognition by Congress that workplace democracy is a value to be promoted and that unions serve a salutary purpose in regularizing labor relations and equalizing the bargaining power of workers and management. That no-rule restriction should apply to all industries and all sectors, with enforcement.
The third social responsibility of business is to respect the right to strike. In America, the so-called right to strike has been hollowed out: In theory you cannot be fired for striking, but under law management can “permanently replace” you. It feels the same as being fired, just ask over 5,000 former TWA flight attendants permanently replaced by corporate raider Carl Ichan. Before President Reagan fired the air traffic controllers in 1980, businesses rarely fired strikers. Reagan made this draconian tactic popular, just as Friedman popularized profits above all other considerations. Both are wrong, and both have helped to erode the Middle Class. The Taft-Hartley Act of 1947, which stripped workers of their rights after numerous effective strikes in the preceding decades, should be repealed so workers will have the collective power to moderate corporate excesses.
The fourth social responsibility of business is to provide a safe and healthy workplace. Business leaders who fought the creation of OSHA and have worked to water down its protections are often the same ones who exploit workers with unsafe working conditions, long hours, and unhealthy work practices. The coronavirus pandemic has exposed for all to see the lack of adequate health and safety protections in the modern work place. Many workers lauded as “essential” and applauded in the streets for their service are the ones most at risk.
The final social responsibility of business is to provide retirement security for its workers. Before Frank Lorenzo gutted Eastern and Continental Airlines in the 1980s, pensions were sacrosanct in America. He exploited the bankruptcy law for the express purpose of destroying pensions and labor agreements. His actions were so egregious that Congress made a show of tightening the bankruptcy law by adding procedural hurdles that, in reality, did nothing to prevent scores of airlines and other companies from dumping their pension obligations. Even retiree healthcare plans, sacred for a bit longer than pensions, have since fallen to the bankruptcy ax. This would have all been okay with Friedman because, profits.
It’s a straight line from Friedman’s essay to Gordon Gekko proclaiming “greed is good” to today’s unsustainable jobs and employment picture. Even the Business Roundtable and the New York Times editorial board have recognized that the singular focus on profits and “shareholder value” has gone too far. “Workers First” should replace “profits first” as the motto of business. If business leaders take that advice, they will find that profits – and a revived Middle Class – will follow.
The New York Times asked AFA-CWA President Sara Nelson to contribute her thoughts on a 50 year review of Friedman’s essay. Read the full New York Times article.
