Doctrine feeds social problems

Macklem has upside-down economics, Nov. 19

Tiff Macklem’s counterintuitive approach to inflation control (more unemployment, lower wages) is based on the sandy foundation of Milton Friedman’s economic theory. Some 50 years ago, Friedman birthed the “greed is good” view that is still taught in business schools. He created the idea of shareholder pre-eminence, declaring a company’s only obligation is to shareholders, whose returns must be maximized by any and all means. That view has dominated corporate governance for five decades, creating the tyranny of the quarterly report.

It launched the era of massive increases in executive pay while average employees were squeezed, and countless other short-sighted costcutting measures. Investors deserve to be rewarded for putting their money at risk in support of corporate ventures, but not always first and foremost and not at any cost.

Companies also have obligations to the communities in which they do business. That means more than sponsoring an occasional feel-good golf tournament or funding some other PR marketing sop.

It means investing serious expertise and resources in helping to solve significant social problems.

But, until the Friedman doctrine of shareholder pre-eminence is tossed on the trash heap of bad ideas, corporate greed will continue as a root cause of many of those problems.

Geoffrey Rowan, Toronto

‘‘ Companies also have obligations to communities in which they do business.

GEOFFREY ROWAN, TORONTO