The view has been gaining widespread acceptance that corporate officials and labor leaders have a "social responsibility" that goes beyond serving the interest of their stockholders or their members. This view shows a fundamental misconception of the character and nature of a free economy. In such an economy, 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. Similarly, the "social responsibility" of labor leaders is to serve the interests of the members of their unions. It is the responsibility of the rest of us to establish a framework of law such that an individual in pursuing his own interest is, to quote Adam Smith again, "'led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade is for the public good."

Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible. This is a fundamentally subversive doctrine. If businessmen do have a social responsibility other than making maximum profits for stockholders, how are they to know what it is? Can self-selected private individuals decide what the social 'interest' is? Can they decide how great a burden they are justified in acing on themselves or their stockholders to serve that social interest? Is it tolerable that these public functions of taxation, expenditure, and control be exercised by the people who happen at. the moment to be in char of particular enterprises, chosen for those posts by strictly private groups? If businessmen are civil servants rather than the employees of their stockholders then in a democracy they will, sooner or later, be chosen by the public techniques of election and appointment.

And long before this occurs, their decision-making power will have been taken away from them. A dramatic illustration was the cancellation of a steel price increase by U.S. Steel in April Press 1962 through the medium of a public display of anger by President Kennedy and threats of reprisals on levels ranging anti-trust suits to examination of the tax reports of steel executives. This was a striking episode because of the public display of the vast powers concentrated in Washington. We were all made aware of how much of the power needed for a police state was already available. It illustrates the present point as well. If the price of steel is a public decision, as the doctrine of social responsibility declares, then it cannot be permitted to be made privately.

The particular aspect of the doctrine which this example illustrates, and which has been most prominent recently, is an alleged social responsibility of business and labor to keep prices and wage rates down in order to avoid price inflation. Suppose that at a time when there was upward pressure on prices -- ultimately of course reflecting an increase in the stock of money -- every businessman and labor leader were to accept this responsibility and suppose all could succeed in keeping any price from rising, so we had voluntary price and wage control without open inflation. What would be the result.? Clearly product shortages, labor shortages, gray markets, black markets. If prices are not allowed to ration goods and workers, there must be some other means to do so. Can the alternative rationing schemes be private? Perhaps for a time in a small and unimportant area. But if the goods involved are many and. Important, there will necessarily be pressure, and probably irresistible pressure, for governmental rationing of goods, a governmental wage policy, and governmental measures for allocating and distributing labor.

Price controls, whether legal at or voluntary, if effectively enforced would eventually lead to the destruction of the free enterprise system and its replacement by a centrally controlled system. And it would not even be effective in preventing inflation. History offers ample evidence that what determines the average level of prices and wages is the amount of money in the economy and not the greediness of businessmen or of workers. Governments ask for the self-restraint of business and labor because of their inability to manage their own affairs-- which includes the control of money-- and the natural human tendency to pass the buck.

One topic in the area of social responsibility that I feel dutybound to touch on, because it affects my own personal 'interests, has been the claim that business should contribute to the support of charitable activities and especially to universities. Such giving by corporations is an inappropriate use of corporate funds in a free-enterprise society.

The corporation is an instrument of the stockholders who own it. If the corporation makes a contribution, it prevents the individual stockholder from himself deciding how he should dispose of his funds. With the corporation tax and the deductibility of contributions, stockholders may of course want the corporation to make a gift on their behalf since this would enable them to make a larger gift. The best solution would be the abolition of the corporate tax. But so long as there is a corporate tax, there is no justification for permitting deductions. for contributions to charitable and educational institutions. Such contributions should be made by the individuals who are the ultimate owners of property in our society.

People who urge extension of the deductibility of this kind of corporate contribution in the name of free enterprise are fundamentally working against their own interest. A major complaint made frequently against modern business is that it involves the separation of ownership and control-- that the corporation has become a social institution that is a law unto itself. with irresponsible executives who do not serve the interests of their stockholders. This charge is not true. But the direction in which policy is now moving, of permitting corporations to make contributions for charitable purposes and allowing deductions for income tax, is a step in the direction of creating a true divorce between ownership and control and of undermining the basic nature and character of our society. It is a step away from an individualistic society and toward the corporate state.