What Is a Company Actually For? Two Men, One Question

How a single idea reshaped the global economy – and what we lost along the way

The Sentence That Changed Everything

On September 13, 1970, the New York Times Magazine published an article that would go on to shape global economic thinking more profoundly than almost any political decision of the last fifty years. Its author was Milton Friedman, Nobel Prize–winning economist. Its title: "The Social Responsibility of Business Is to Increase Its Profits."

His core message was simple, radical and absolute:

"There is one and only one social responsibility of business: to use its resources and engage in activities designed to increase its profits."

No mention of employees. No mention of communities. No mention of environmental limits or long-term consequences. Just one principle: profit.

Friedman was not careless or cynical. His argument was internally consistent — within a theoretical world of rational actors, fair competition, and self-correcting markets. But that world does not exist. And when applied to reality, the consequences have been far-reaching.

Twenty-Two Years Earlier: A Different Answer

In 1948, in a devastated post-war Europe, another economist was grappling with the same question: What is a company actually for?

His name was Ludwig Erhard. His answer could not have been more different.

Having witnessed economic collapse, concentration of power, and systemic failure, Erhard concluded that markets must be embedded in a broader social framework. In his book Prosperity for All, he described what would become known as the Social Market Economy:

"The Social Market Economy unites the principle of freedom in the marketplace with social balance and the moral responsibility of each individual toward the whole."

For Erhard, markets were not ends in themselves. They were tools — powerful ones — but tools that required structure, rules, and responsibility.

Two men. One question. Two fundamentally different answers.

What the Profit Doctrine Produced

Over time, Friedman's idea moved from theory into practice. It shaped political agendas, corporate governance, and ultimately global economic behavior. Its effects are measurable.

CEO compensation in the United States, for example, has risen dramatically relative to average worker pay. According to the Economic Policy Institute, the ratio grew from around 21:1 in the 1960s to over 280:1 in recent years.

Companies increasingly prioritized financial engineering over real investment. Apple Inc. alone has spent hundreds of billions of dollars on share buybacks — capital that did not flow into wages, innovation, or long-term resilience.

And when risks materialize, they are often not borne by those who created them. The Global Financial Crisis demonstrated this clearly: profits were privatized, while losses were absorbed by the public.

These outcomes are not anomalies. They follow logically from a system designed to maximize short-term returns.

What Was Overlooked

Friedman's framework relied on a key assumption: that markets would discipline harmful behavior. In reality, markets reward profitability not responsibility.

A company can generate significant profits while shifting environmental costs onto society, exploiting regulatory gaps, minimizing tax obligations across jurisdictions, and externalizing long-term health and social impacts. And it can do so for years, even decades.

Organizations such as Oxfam have repeatedly documented how wealth concentration and cost externalization reinforce each other within this system.

A Different Model: Why It Once Worked

The Social Market Economy developed under Erhard followed a different logic. It combined economic freedom with structural safeguards: worker participation in corporate governance, strong competition laws to prevent monopolies, long-term ownership structures, and social systems that stabilize society and enable participation.

The result was not theoretical. For decades, it produced economic growth alongside relatively low inequality and social stability. It was not perfect, but it was balanced.

The Shift

Over time, many economies moved away from this balance. Financial liberalization, global capital mobility, and competitive pressures pushed systems toward short-term optimization. Long-term structures weakened. Social safeguards eroded. The logic of shareholder primacy gradually became dominant — even in systems that had once resisted it.

A Deeper Question: What Is a Company really?

At the core of this debate lies a more fundamental issue. Is a company purely private? Or is it, in part, a public construct?

Political scientist David Ciepley argues the latter. Corporations are created through legal frameworks. They are granted rights like legal personality, limited liability, governance autonomy by the state. They rely on public infrastructure, educated workforces, and stable institutions. They do not exist independently of society.

If that is true, then the idea that they carry no responsibility beyond profit becomes difficult to sustain. Not only ethically, but conceptually.

What This Means in Practice

The consequences of our current model are not only economic. They are social and human. Rising inequality, increasing psychological stress, and weakening social cohesion are widely documented across highly financialized economies.

Research, including work by Robert Putnam, has shown how social capital declines when economic systems prioritize individual gain over collective stability. These developments are not isolated trends. They are connected.

What an Alternative Could Look Like

The question is not whether markets should exist. They are essential. The question is how they are structured and what they are expected to serve.

Real-world examples show this is not theoretical. Germany's 'Mitbestimmungs-'model gives workers genuine board-level representation. The Robert Bosch Foundation controls over 90% of Bosch GmbH — one of the world's largest industrial companies — structuring ownership explicitly around long-term purpose over short-term returns. Denmark's flexicurity model combines open labor markets with robust social protection, consistently ranking among the most competitive and equal economies simultaneously.

These are not utopian experiments. They are functioning systems — imperfect, but measurably different in their outcomes.

A more balanced approach would recognize that profit is necessary, but not sufficient as a guiding principle, and that incentives shape behavior and can be deliberately redesigned.

The deeper idea behind the Social Market Economy remains relevant: economic freedom and social responsibility are not opposites. They depend on each other.

This is where our eticania.org project begins: with a question, not a conclusion.

What do you think a company is actually for? Share your first, well-considered thought in the comments. Every contribution ist very welcome — and maybe the best ones shape what comes next in the corporate world.

REFERENCES

Friedman, M. (1970). The social responsibility of business is to increase its profits. The New York Times Magazine. https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html

Erhard, L. (1957). Prosperity for All.

Ciepley, D. (2013). Beyond public and private: Toward a political theory of the corporation. American Political Science Review.

Ciepley, D. (2025). There are alternatives: Toward a stewardship economy. The Hedgehog Review.

Economic Policy Institute. (2025). CEO pay data. https://www.epi.org/publication/ceo-pay-in-2025/

Oxfam. (2023). Survival of the Richest.

Putnam, R. (2000). Bowling Alone: The collapse and revival of American community.