Profit, justice, and charity

There's plenty of blamestorming about the causes of our current economic troubles. Some look to George W. Bush, some to Clinton, some as far back as Nixon. But I have another proposal to make: let's blame the Supreme Court.

No, not our current Court. Let's blame the 1919 Court, who decided Dodge v. Ford Motor Company. According to this Wikipedia article, (I know, Wikipedia! -- but it covers the main points so non-lawyers can understand, and it links to the actual ruling), the argument was over whether a company should use its profits to enrich shareholders or to engage in charitable activities. That's not really accurate, as the quotes show: the real argument was over whether a company's first responsibility was to the shareholders or to the products (or services) it was providing -- and selling for a profit. The Court ruled that the shareholders have a right to a significant share of the profits.

As the article notes, this ruling has been used to justify a policy of maximizing profits for shareholders, of making profit the primary motive of businesses and the purpose of being in business in the first place. That is, the purpose of business is seen to be creating wealth and "growing" the economy.

The article also notes that the ruling does not necessitate this interpretation; but this is the interpretation that has ruled business practices and business law for nearly a century -- almost to the extent that we cannot imagine another purpose for business.

I'd like to propose one: what if business' first priority was to provide goods and services to society, to promote the common good, to make society a better place. I'm not saying that profit would disappear, nor should it; but it would come second to improving the a company's ability to provide needed or appropriate goods for the community. In other words, what if Henry Ford had won the case that the Dodge brothers brought against him?

Perhaps then, banks would not pursue such risky courses of investment in search of higher profits. Perhaps then, companies would not use cutbacks and layoffs as the first defense against a slumping market. Perhaps then, the computers and cars and toasters we buy would not be built to break down three days after the warranty expires. Perhaps...?

I'm no economist, but it seems to me that these are possibilities worth exploring. What do you think?

(Crossposted at The Good, The True, The Just)