Opinion

OPINION | SILPA KOVVALI

No, Donald, you can’t run a government like a business

U.S. Republican presidential candidate Donald Trump speaks during a campaign rally at the Allen County War Memorial Coliseum in Fort Wayne, Indiana, U.S., May 1, 2016. REUTERS/Kamil Krzaczynski

Kamil Krzaczynski/REUTERS

Donald Trump spoke during a campaign rally in Indiana on Sunday.

The premise of Donald Trump’s presidential campaign is that America ought to be run as a business and that, as a successful businessman, he is best suited to lead the charge. Those who have wondered how this business-like approach might translate to foreign policy have received no shortage of gratuitously cruel answers from Trump. He has promised to halt American investments in mutually beneficial global alliances; impose taxes on foreign imports to encourage American firms to manufacture goods domestically; invade countries and then rob them of their natural resources, i.e., “take the oil.”

As writer Bill James explains, “It is the responsibility of IBM officials to do what is best for IBM, and not to worry about how the people who run Microsoft feel. . . . [T]he president needs to do what is best for America, without any concern whatsoever for what the Europeans or the Asians or the Mexicans think.” Trump’s characterization of his foreign policy has been grounded in the twin ideals of “make America rich again” and “America First.” In James’s blunt phrasing, it says “tough crap.’’

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This is certainly an approach to business, but it is hardly the only one. There are a diverse array of theories of corporate social responsibility that one might learn in, say, a mandatory ethics class at the Wharton School, where Trump earned a degree. Trump’s foreign policy analogizes quite well to shareholder theory, the notion — put forth in 1970 by the iconic Milton Friedman — that the sole responsibility of a corporation is to increase profits. The less extreme stakeholder theory posits that corporations also have a moral responsibility to stakeholders like employees, clients, and their communities. There are broader theories still of corporate citizenship, which might justify investing in philanthropic causes or advancing social justice.

Friedman’s defense of his controversial theory was not grounded in economics, but ethics. He argued that markets are an optimal mechanism for allocating scarce resources, and that an executive’s sacrifice of shareholder returns to advance unrelated goals amounts to taxation or theft.

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But shareholder theory gets disturbing when taken to its logical ends. Is it acceptable for a water company to knowingly poison people to cut its costs? For a bank to provide mortgages to subprime candidates before shorting its own position? For this reason, Friedman qualified. Businesses must “make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.”

However, such qualifications amount to a different position entirely. Determining what constitutes the “basic rules of the society” is an entirely separate consideration from shareholder returns. A society’s ethical customs are not rigid codes of behavior, but fluid and ever-shifting mores, in no small part governed by the values of its most influential members, titans of business included. Yet shareholder theory rests firmly on the principle that pure profit-seeking promotes the best interests of all. If corporations ought to refrain from unethical behavior, even if doing so lessens profits, shareholder theory is indistinguishable from more encompassing views of corporate citizenship.

The small-government conservative has also conceded that laws are a necessary protection to prevent irreversible harm. Products must meet baseline safety requirements. Hedge funds cannot short-sell stocks during a financial crisis. “The political principle that underlies the market mechanism is unanimity. . . . The political principle that underlies the political mechanism is conformity,” Friedman wrote. “I do not see how one can avoid the use of the political mechanism altogether.” This distinction reinforces that the role of government is different from the role of business, and the former cannot be run like the latter.

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Given the lack of codified, enforceable prescriptions for international conduct, mutual respect and conscientiousness are of profound import. Ultimately, “tough crap’’ diplomacy is likely to hurt both America’s standing and its people. As the world grows increasingly flat, our nation has a vested interest in promoting international well-being.

But just as business ethics seeks to hold companies to moral standards beyond their bottom lines, America’s conduct must also be justified on ethical grounds. Killing the families of terrorists, as Trump has proposed, is not wrong because it fosters extremism. It’s just wrong. America’s status globally makes stakeholders not just of its citizens, but of Europeans, Asians, and Mexicans as well. Trump’s policies are apt to harm them all. The United States can ill afford to declare moral bankruptcy.

Silpa Kovvali is a contributor to Salon. Follow her on Twitter @SilpaKov.
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