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Joe Leider

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Where corporations end and people begin

March 19, 2015 by Leave a Comment

I saw a few interesting articles on corporate social responsibility today. The first one showcased a TED talk touting how we need to force corporations to be better citizens and help us end inequality. Now, I’m left of center on a few issues, but I have to break with anyone touting such nonsense.

The Economist and Kevin Erdmann had far more reasonable views on where the pursuit of shareholder value ends and that of stakeholder value begins. In fact, this Milton Friedman statement sums it up best:

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.

Case in point, health care. In the United States, we have one of the only systems by which we force companies to provide a social good: health insurance. That way we avoid the charges and help society become more egalitarian. How is that working out for us?

Terribly. We have one of the most expensive, most inefficient health care systems on the planet. With corporations pursuing a goal peripheral to their core competence, we’ve seen our wage increases replaced with ever-growing insurance premiums. Where are these premiums going? To ever-more-expensive tests. Only in America, a supposedly market system, could hospitals charge 10x the median price for a diagnosis without any price pressure.

How can some hospitals charge exorbitant amounts for procedures, even when their competitors are far more reasonable? Because we’ve outsourced our out-of-pocket expenses.

Corporations could feasibly do much social good. But they (rightly) focus on making money. Is it really that surprising that outsourcing health coverage to our employers has resulted in massive expenses, huge windfall profits and poor results?

Let’s keep companies focused on their core business. Let’s keep them competing with each other in an open marketplace. And let’s not force them to “do good” for the rest of us. If we want universal health insurance, we should tax ourselves efficiently to pay for it.

Filed Under: Policy

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