The Business Roundtable (BR), a group of chief executive officers (CEOs) of some of America’s largest corporations, recently released a statement claiming that businesses have a broader purpose than simply making profit. By contrast, in a famous essay economist Milton Friedman argued that the social responsibility of business was to increase its profit. The BR statement may perhaps be pure public relations. Still, should we regard profit as less important than other potential business goals?
Answering this depends on the nature of profits. In the market, all transactions are voluntary. No business, however large, can compel anyone to buy their product, work for them, or loan them money. Profit must be earned by producing valuable goods or services. Customers will only buy a product that delivers more value than comparably priced goods, or similar value for a lower price. Workers will only work if the pay and conditions compare favorably to other jobs.
In a market economy, profit cannot be made through exploitation. Some people unfortunately do not have very good alternatives. Many Americans do not consider a minimum wage job attractive; the person willing to work for $7.25 an hour is better off, given their other options. We might lament the lack of better alternatives but any better opportunity is an improvement.
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