Just thinking some more about yesterday’s post on the profit motive and shareholder value as the only responsibilities of business. I remembered a recent interview with Noam Chomsky where I thought he explained very well why profit maximizing entities do not automatically serve the greater good:

In market systems, you don’t take account of what economists call externalities. So say you sell me a car. In a market system, we’re supposed to look after our own interests, so I make the best deal I can for me; you make the best deal you can for you. We do not take into account the effect on him. That’s not part of a market transaction. Well, there is an effect on him: there’s another car on the road; there’s a greater possibility of accidents; there’s more pollution; there’s more traffic jams. For him individually, it might be a slight increase, but this is extended over the whole population. Now, when you get to other kinds of transactions, the externalities get much larger… Destruction of the environment is an externality: in market interactions, you don’t pay attention to it. So take tar sands. If you’re a major energy corporation and you can make profit out of exploiting tar sands, you simply do not take into account the fact that your grandchildren may not have a possibility of survival — that’s an externality. And in the moral calculus of capitalism, greater profits in the next quarter outweigh the fate of your grandchildren — and of course it’s not your grandchildren, but everyone’s.

What makes the gospel of shareholder value so insidious is that it gives the human beings inside corporations a shield to hide behind – an excuse to not ask any questions about right and wrong in their daily actions. I think Milton Friedman has it right that a business corporation on paper is a completely amoral entity. Now it appears that business corporations are evolving and molding a whole new species of human beings in their image! As children we are taught to think about right and wrong every day, but then as adults we don’t have to any more. This is not human at all, and we can reject it – the managers and employees at the car companies and energy companies have a responsibility to think about right and wrong every day and to make choices that are consistent with what they think is right. If the only thing that is right is not working for that company, then so be it. Consumers can do the same. The political system can provide somewhat of an ethical framework for society from the top down, but we individual humans need to take responsibility for our daily actions and meet it halfway.