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135 MIN READ TIME

WHO OWNS CORPORATIONS?

IN 1962 MILTON FRIEDMAN- the economist who, more than anyone else, worked to undo Keynesian theory—published his landmark book, Capitalism and Freedom. In it, he argued for many of the policies we now call libertarian or neoliberal: free markets promote freedom, government intervention does not, and therefore government should be extremely limited. But the book was also crucial in advancing what is now known as the theory of shareholder primacy, the idea that corporations have no higher purpose than maximizing profits for their shareholders. “Few trends”, Friedman wrote, “could so thoroughly undermine the very foundation of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.”

By 1970 he was expanding on this theory even more. Since markets are efficient, he argued, corporations should be constituted like markets; and since shareholders are the only stakeholders in the company who assume risk, the corporation’s purpose should be to generate returns for them. The messy and complex power dynamics of group interactions were thus written out of the story, and decisionmaking within corporations, Friedman and his acolytes argued, should focus on a singular goal, an “optimum”: maximizing shareholder value. “The key point”, he wrote in an essay for the New York Times Magazine, “is that, in his capacity as a corporate executive, the manager is the agent of the individuals who own the corporation …and his primary responsibility is to them.”

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Find the complete article and many more in this issue of Boston Review - Economics After Neoliberalism (Summer 2019)
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About Boston Review

Economics After Neoliberalism offers a powerful case for a new brand of economics—one focused on power and inequality and aimed at a more inclusive society. Three prominent economists—Suresh Naidu, Dani Rodrik, and Gabriel Zucman—lead off with a vision “for economic policy that stands as a genuine alternative to market fundamentalism.” Expanding on “the state of creative ferment” they describe, Boston Review has commissioned responses to their essay from economists, philosophers, political scientists, and policymakers across the political spectrum as well as new essays that challenge the current shape of markets and suggest more democratic alternatives. Lenore Palladino explores the misguided logic of shareholder primacy and points to more equitable approaches to corporate governance—such as employee ownership funds. Amy Kapczynski examines how the courts have developed a new, anti-democratic First Amendment that protects corporate speech at the expense of regulation designed to protect public health and safety. And Robert Manduca explores the importance of public discussion about economics by revisiting Chester Bowles's remarkable book, Tomorrow Without Fear, which explained Keynesian ideas to the public after World War II.

Other Articles in this Issue


Boston Review
This publication was made possible by a generous grant from The William and Flora Hewlett Foundation
NEAR THE END of Capitalism and Freedom (1962), Milton
FORUM
We live in an age of astonishing inequality. Income
FORUM RESPONSES
FOR NON-ECONOMISTS on the left, “Economics After Neoliberalism”
A DEFINING FEATURE of Naidu, Rodrik, and Zucman’s essay
SINCE COMPLAINTS about the domination of market fundamentalism
LIKE NAIDU, RODRIK, AND ZUCMAN, I celebrate the advantages
AFTER NEARLY FOUR YEARS of working as chief economic
I WOULD LIKE TO FOCUS on Dani Rodrik’s scheme to combat
STRONG, INDEPENDENT LABOR MOVEMENTS have always been
(Eric Beinhocker, W. Brian Arthur, Robert Axtell, Jenna Bednar, Jean-Philippe Bouchaud, David Colander, Molly Crockett, J. Doyne Farmer, Ricardo Hausmann, Cars Hommes, Alan Kirman, Scott Page, and David Sloan Wilson)
“ECONOMICS AFTER NEOLIBERALISM” describes an economics
ECONOMICS STANDS DEEPLY COMMITTED to quantification
NAIDU, RODRIK, AND ZUCMAN are on the cutting edge of
THE RESPONSES IN THIS FORUM are too insightful to engage
ESSAYS
“LET’S BRING OUR EDITORIAL MICROSCOPE into focus on
HOW DO WE TALK about economics? Robert Manduca’s essay
IN 1962 MILTON FRIEDMAN- the economist who, more than
WE NEED METAPHORS to make sense of reality. But we
THE FIRST AMENDMENT has long been celebrated as the
Samuel Bowles is Arthur Spiegel Research Professor