Heading towards a new “New Deal”?
How the mighty have fallen! Fifty years ago, Milton Friedman declared that the goal of a socially responsible business was to increase its profits and serve its shareholders, but the US economist got things wrong when he excluded other stakeholders.
This is a mistake that American companies are now struggling to remedy. Focusing excessively on financial results has often led to decisions that are damaging both for management and consumers, not to mention the environment and society as a whole. The current crisis is also demonstrating the intrinsic weaknesses of this resilient-lite system that has nevertheless managed to spread beyond the United States. A new “New Deal” could make it possible to abandon this outdated model for everybody’s greater good, butwhat would its main features be?
- Restore social dialogue
- Adapt minimum wages and workplace safety legislation
- Adopt an ambitious action plan to limit impact on the climate
- Upgrade anti-trust mechanisms and consumer protection
- Ensure that companies respect all their stakeholders
In a nutshell: a new “New Deal” would strike the right balance between value creation and social responsibility… unfortunately, not all investors are in line with this idea.
by Colin Mayer, Leo E. Strine Jr and Jaap Winter (Promarket, October 2020).
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