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A Free Market Manifesto That Changed the World, Reconsidered

Milton Friedman’s libertarian economics influenced presidents and inspired “greed is good.” So what did Friedman get right — and wrong?

Sept. 13 is the 50th anniversary of a seminal moment in the world of business: the publication of Milton Friedman’s essay in The New York Times Magazine entitled “The Social Responsibility of Business Is to Increase Its Profits.”

Friedman, who died in 2006 at the age of 94, was no mere economist; he was a kind of celebrity. He became a regular on the talk-show circuit. PBS even gave him a 10-part series. His economic theories, among the most consequential of the 20th century, still hold sway over large parts of corporate America, maybe none more so than this 1970 manifesto on corporate governance. (For more on the historical context in which Friedman’s essay landed, see this essay by Kurt Andersen.)

At DealBook, we wanted to mark the occasion by stirring a series of discussions and debates. So, in conjunction with The Times Magazine, we assembled 22 experts — including C.E.O.s, Nobel laureate economists and top think-tank leaders — and asked them to respond to Friedman’s essay. Some cited specific passages, and some took on (and took issue with) Friedman’s entire argument.

You can read the original essay in its entirety here. Below are quotations from Friedman’s landmark essay, along with the experts’ responses.

‘The Social Responsibility of Business Is to Increase Its Profits’

MARC BENIOFF, chief executive of Salesforce

I’ll never forget reading Friedman’s essay when I was in business school in the 1980s. It influenced — I’d say brainwashed — a generation of C.E.O.s who believed that the only business of business is business. The headline said it all. Our sole responsibility to society? Make money. The communities beyond the corporate campus? Not our problem.

I didn’t agree with Friedman then, and the decades since have only exposed his myopia. Just look where the obsession with maximizing profits for shareholders has brought us: terrible economic, racial and health inequalities; the catastrophe of climate change. It’s no wonder that so many young people now believe that capitalism can’t deliver the equal, inclusive, sustainable future they want. It’s time for a new kind of capitalism — stakeholder capitalism, which recognizes that our companies have a responsibility to all our stakeholders. Yes, that includes shareholders, but also our employees, customers, communities and the planet.

MARTIN LIPTON, senior partner at Wachtell, Lipton, Rosen & Katz

The most significant part of the Friedman essay was the headline. For a half-century, this phrase has been used to summarize the essay, and Friedman’s earlier economic writings, in support of “shareholder primacy” as the bedrock of American capitalism. The Friedman doctrine precipitated a new era of short-termism, hostile takeovers, junk-bond financing and the erosion of protections for employees and the environment to increase corporate profits and maximize value for shareholders. This version of capitalism was ascendant in the 1980s and continued until the 2008 financial crisis, when the perils of short-termism were vividly illustrated and the long-term economic and societal harms of shareholder primacy were becoming increasingly urgent.

Since then, the Friedman doctrine has been widely eroded, as a growing consensus of business leaders, investors, policymakers and leading members of the academic community have embraced stakeholder capitalism as the key to sustainable, broad-based, long-term American prosperity. This is illustrated ...