Profits, Politics, and New Deal Liberalism: Corporate Social Responsibility in the Postwar Era

Scholars have explored the ideology of shareholder democracy and the New Deal political economy of regulated corporate capitalism, but few have given attention to how those legacies came into conflict in the postwar era. This paper highlights those conflicts by showing how the New Deal acceptance of a corporate form founded on the proprietary claims of securities markets supplanted a liberal vision of a business institution obligated to a range of social responsibilities. Focusing on the 1960s and 1970s, it draws attention to conservative intellectuals and activists in the emerging law and economics discipline. It was Milton Friedman’s dictum, for example, that the sole social responsibility of business is to make profits. But the robust case for such a narrow view of the corporation came from intellectuals like Henry Manne, William Meckling, and Michael Jensen who argued that the corporation was nothing more than a collection of individual contracts, answerable only to the efficient movements of the stock market. This intellectual revolution gave weight to the era’s political economic turn toward deregulation and shareholder value. Conversely those among the new left coalition like Ralph Nader and Saul Alinsky resisted this increased marketization of the corporate form. Pioneering new forms of activism like proxy resolutions, board campaigns, demonstrations, and boycotts, they called for corporations to embrace social responsibilities of safer consumer products, equal representation in employment, and more democratic governance. Nader, in particular, called for a new and revolutionary federal chartering system. Unlike conservative economics, these new leftists asserted that corporate power was political power. The corporation was, they argued, an institutional creation of the state and ought to be brought under liberal democratic norms. Both those on the left and the right, this paper argues, helped to destabilize the delicate balance between liberal social responsibility and market interests.