Do Market Libertarians Believe Their Own Hype?

In this moment of public anger over corporate malfeasance, plenty of people are ready to blame the economic crisis on the moral downfall of business, and ideas such as Becker's will make it easier for them to do so. But a more subtle reading of the effect of the shareholder value of business morality is not that it made business executives markedly less ethical, but that it insulated them in a comfortable cocoon of ignorance, encouraging them to think about what they were doing in the narrowest possible terms, telling them that if they took care of the stock price (and themselves), there was nothing to worry about. It is a formula for avoidance, for never thinking about what can go wrong.

At some point in the future, folks will read Becker's ideas about corporate social responsibility and wonder how anyone could really believe them. They will seem as dated as the 19th century musings of writers like Herbert Spencer do now. But one of the most perplexing things about reading Uncommon Sense is that it ultimately leaves you wondering just how much Becker believes his own rhetoric.

Toward the end of the book there is a chapter that takes on Yahoo’s and Google’s

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[GOOG  Loading...      ()   ] dealings with the government of China, which has tried to use the records of Internet companies to identify dissidents. For Yahoo

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[YHOO  Loading...      ()   ] to turn over the names of its users to an authoritarian state, however, is clearly going too far. Says Becker: "I do believe that it is reprehensible for Yahoo to disclose the names of Chinese citizens using its services, particularly when the information Yahoo has about one of them led to his arrest and imprisonment. Whatever one's beliefs about other rules of corporate behavior in China, disclosure of names of 'dissidents' who face arrest and punishment is unacceptable."

It's hard to see what the bright-line difference is here between this and "other rules of corporate behavior." Yahoo's justification for doing that was that it was merely following the local laws. And why shouldn't it? Surely getting an edge in China is in the shareholders' interest. The most plausible explanation here is pretty simple. It's that Becker doesn't really think much of corporate efforts to raise foreign living standards or avoid bribery (possibly he doesn't care much, but, more charitably, it's clear that he doesn't think they do anyone any good) but does care about the speech rights of dissidents in a dictatorship. I think this last part is to his credit, but it is also devastating to his thesis, which just shows how quickly an absolute rule on the preeminence of shareholder rights, like many similar uniform principles, falls apart when it collides with an issue you really care about.

There's the rub of the minimalist view of business morality: When it's pushed far enough, nobody really believes it, and corporate chieftains who operate on its precepts climb its steps to find not a lectern but a hidden noose. The more assertively that industries—from health insurers who sell plans whose fine print makes them worthless to power generators hooked on coal—have embraced the “whatever serves the shareholders” mode of operating, the more they have found themselves on the defensive. Forty years ago, maybe capitalism really did require a contentious defense, but now the moral minimalism looks like a very tattered seam in the social fabric, and even Becker can't fully rouse himself to stitch it back together in the same old way. The shareholder value theory is ethics on the cheap, a low cost way of justifying anything you want, but like the cheap straw house in the fable, it tends to fall over at the first wind—and right now, the winds of outrage are blowing really hard.