The Outdated Purpose of Business
Updated: Apr 12, 2021
How on earth did we get to the idea that the sole purpose of business should be to deliver profit?
Milton Friedman – the American economist – has a lot to answer for.
On 13th September 1970 his seminal article on the role of business was published in The New York Times. In this article, Friedman argued that...
"there is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits." Anything else, he argued, is "unadulterated socialism."
Consequently, western capitalist societies applying this philosophy travelled down a path which led to what can only be described as environmental vandalism and social compromise, all in the name of Shareholder Capitalism.
The need to maximise short-term shareholder returns gave the green light to business-for-profit at any cost, so long as they worked within the letter of the law. Environmental destruction at scale. Cultural destruction. The exploitation of people, particularly in developing countries. Sweat shops. Deliberately misleading marketing. Unethical business practices.
Today, as the consequences of this approach have become impossible to ignore, we have become wise to it and as employees, customers and shareholders, we are demanding more.
Shareholder Capitalism is falling on its sword and giving way to a new type of Capitalism, called by different names but espousing similar philosophies to each other – Stakeholder Capitalism, Moral Capitalism, Ethical Capitalism, Conscious Capitalism, Shared Value. The western world is waking up to the realisation that Capitalism took a wrong turn and we now have to correct. We have to find a new path; one that respects planet, people and our biodiversity.
This brings us back to the “Purpose” of business.
For too long, business has operated under one core purpose above all else- to make money.
As we face the consequences of this approach, we look to a future that holds new possibilities for the purpose of business.
How will we define this, as we make our way out of the dark side?