Corporations as Job Creators

By Harry E. Berndt

In his book Capitalism and Freedom, Milton Friedman called Social Responsibility a "fundamentally subversive doctrine in a free society". In such a society, "there is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud." If the Supreme Court's ruling on Citizens United establishes the corporation as a person, or at least provides corporations the same rights as persons, does the Friedman principle still apply? Do persons have higher expected social responsibilities than what are expected for corporations?

All the discussion about job creators and the need to nourish them by lowering the tax rate brings to mind Adam Smith's dictum in The Wealth of Nations regarding those he refers to as Dealers. The Dealers' interests are always in some ways different and even opposite the interests of the public. Smith indicates that any new law or regulation suggested by the Dealers should be carefully examined, because their interests are not the same as the publics' interest and they generally are interested in deceiving and oppressing the public.

Corporations function, according to Friedman, to maximize profits, so long as they do it legally and without deception. But we see deception every day in corporate advertising and in the public statements of corporate officials. Adam Smith was correct in stating that corporate interests are not the same as the publics' and correct in stating corporations both deceive and oppress the public. Private equity firms are the most equivocal by presenting themselves as public servants, interested in creating jobs, while they strip companies and walk away with huge profits at the expense of workers, and often entire communities. I wonder if business leaders who point to Adam Smith and The Wealth of Nations as their model ever read the book. Adam Smith was a social philosopher who would not favor today's business practices.

The Supreme Court in its decision on Citizens United has essentially given corporations a new status; that of personhood. Money being defined as speech provides them with the tools necessary to fully participate as citizens. Are their responsibilities as persons now different? Rather than maximize profits as suggested by Friedman, shouldn't they now maximize employment opportunities? Rather than employ only to satisfy minimal staff requirements, should they not be innovative in job creation? They could, for example, initiate job sharing programs. In their manufacturing efforts, and other productive efforts in high tech industries, have four six hour shifts six days a week rather than three eight hour shifts five days a week. Goodyear had established a six-hour work day in 1932 to lessen the effects of the Great Depression among workers, by reducing layoffs and distributing work as evenly as possible among remaining employees. They returned to the eight hour day in 1935, but were required to reinstate the six hour day in 1936. All the major Tire and Rubber companies adopted the six hour day and it remained until at least the 70s. Why are corporations less innovative about job creation?

Industrial engineers and management analysts are successful when they are able to produce the same product with fewer workers, or more product with the same number of workers, or even better, produce more product with fewer workers. Corporations seek maximization of profits, and a recent story about Caterpillar Corporation in the New York Times (NYTimes7-23-2012) is an example of what to expect from "job creators". Although huge profits ($4.9 billion) were made by Caterpillar as a result of the work performed by employees, the company is demanding a six year wage freeze. The workers are striking and the company is using contingency or replacement workers to run the factory. The terms contingency or replacement workers are euphemisms for what we once termed "scab".

Corporations, regardless of Friedman's much quoted position, should have always maintained a corporate responsibility that included "job creation", and so their responsibilities did not change when the Supreme Court decided they were people. The problem is that they never met that responsibility, never accepted that responsibility, and society never really expected them to. The present mantra on job creators is really only one more instance of corporate deception. Repeating it often enough causes it to become a fact in the minds of many people. Corporations are not job creators, but they do require workers to satisfy their needs and their quest for profits. If they require people for a particular function, they fulfill a workers need for employment. Out sourcing and plant construction in low wage countries is an example of what corporations are really about; not job creation but profit maximization. Business leaders and politicians who continually refer to corporations as job creators are purposely misleading the public in order to attain their own goals. The public acceptance of this deception is nothing more than false consciousness and a willingness to continue special privileges for the corporate elite.