Corporations and Profit

From Mother Jones:

Private equity billionaires are looting the country, leaving everyday Americans to clean up the mess—and fight for the scraps….

For a long time, corporations worked in the plain way that you’d imagine they should work: They created a product or provided a service, and if they did a good job of it, they turned a profit. ­Houdaille, for example, grew to be a valuable company by making first-rate car parts. Simple enough.

But a confluence of factors in the 1970s flipped that model on its head. Suddenly, the value of a business was measured less by how well it served its customers, and far more by the profits it reaped for its investors. University of Chicago economist Milton Friedman helped propel this change with a 1970 manifesto in the New York Times. Corporations, he wrote, need not worry about “providing employment, eliminating discrimination, avoiding pollution and whatever else.” They were accountable to the wallets of their shareholders: nothing more, nothing less. “There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profit,” Friedman added….

Soon, businesses came to be viewed less as productive enterprises and more as bundles of assets to be bought, sold, and endlessly manipulated for financial gain. Rather than doing the hard work of investing in new value—innovative products or fresh approaches to societal problems—financiers began focusing on ­extracting existing value, again, and again, and again.