Business Is Getting Political—and Personal

As anyone reading this blog is undoubtedly aware, Sarah Huckabee Sanders, the current White House Press Secretary, was asked last month by the owner of a restaurant to leave the establishment on the basis that she and her staff felt a moral imperative to refuse service to a member of the Trump administration. The incident, and the ensuing turmoil, highlights the extent to which business has become another political battleground—a concept that makes many anxious.

Whether or not businesses should take on political and social responsibilities is a fraught question—but not a new one. Writing for the New York Times in 1970, Milton Friedman famously argued that businesses should avoid the temptation go out of their way to be socially responsible and instead focus on maximizing profits within the legal and ethical framework erected by government and society. To act otherwise at the expense profitability, he reasoned, is to spend other people’s money—that of shareholders, employees, or customers—robbing them of their agency.

Though nearing fifty years of age, much of Milton Friedman’s windily and aptly titled essay, The Social Responsibility of Business Is to Increase Profits, feels like it could have been written today. Many of the hypotheticals he cites of corporate social responsibility—“providing employment, eliminating discrimination, avoiding pollution”—are charmingly relevant in the era of automation anxiety, BDS, and one-star campaigns. His solution, that businesses sidestep the whole mess, focus on what they do best, and play by the rules set forth by the public, is elegant and simple—and increasingly untenable.

One reason for this is that businesses and the governments Friedman imagined would reign them in have grown much closer, even as the latter have grown comparatively weaker. In sharp contrast to the get-government-out-of-business attitude that prevailed in the boardrooms of the 1970s, modern industry groups collectively spend hundreds of millions to get the ears of lawmakers, hoping to obtain favorable legislation or stave off laws that would hurt them. Corporate (and other) lobbyists are known to write and edit bills, sometimes word for word.

You could convincingly argue that this is done in pursuit of profit: Boeing, for example, spent $17 million lobbying federal politicians in 2016 and received $20 million in federal subsidies the same year. As of a 2014 report by Good Jobs First, an organization that tracks corporate subsidies, Boeing had received over $13 billion of subsidies and loans from various levels of government. Nevertheless, this is wildly divergent from Friedman’s idea of business as an adherent to, not architect of, policy.

As business has influenced policy, so too have politics made their mark on business. Far more so than in the past, today’s customers expect brands to take stands on social and political issues. A report by Edelman, a global communications firm, finds a whopping 60% of American Millennials (and 30% of consumers worldwide) are “belief-driven” buyers.

This, the report states, is the new normal for businesses—like it or not. Brands that refrain from speaking out on social and political issues now increasingly risk consumer indifference, which, I am assured by the finest minds in marketing, is not good. In an age of growing polarization, every purchase is becoming a political act. Of course, when you take a stand on a controversial issue, you also risk alienating people who think you’re wrong: 57% of consumers now say they will buy or boycott a brand based on its position on an issue.

This isn’t limited to merely how corporations talk. Firms are under increasing social pressure to hire diversity officers, change where they do business, and reduce their environmental impact, among other things. According to a 2017 KPMG survey on corporate social responsibility, 90% of the world’s largest companies now publish reports on their non-business responsibilities. This reporting rate, the survey says, is being driven by pressure from investors and government regulators alike.

It turns out that a well marketed stance on social responsibility can be a powerful recruiting tool. A 2003 study by the Stanford Graduate School of Business found 90% of graduating MBAs in the United States and Europe prioritize working for organizations committed to social responsibility. Often, these social objectives can be met in ways that employees enjoy: for example, cutting a company’s carbon footprint by letting employees work from home.

In light of all this, the choice between social and political responsibility and profitability seems something of a false dichotomy. The stakes are too high now for corporations to sit on the sidelines of policy, politics, and society, and businesses increasingly find themselves taking on such responsibilities in pursuit of profitability. Whether that’s good or bad is up for debate. But as businesses have grown more powerful and felt the need to transcend their formerly transactional relationships with consumers, it seems to be the new way of things.

Political Polarization Isn’t All Terrible

Political polarization, it is said, is tearing this country apart. As politics creeps into everything, it can seem like America is increasingly becoming a battleground for liberals and conservatives, while a shrinking moderate majority suffers the collateral damage.

Witness the left-wing condemnation of Taylor Swift’s insufficiently anti-Trump stance or the right-wing’s sudden loathing for the NFL and it will seem childish. Consider that 45% of Republicans and 41% of Democrats now believe the other party is a danger to the country and it appears nothing short of malignant. Recall the recent politically motivated shooting of Republican legislators in June, and you will conclude it is downright terminal.

But in many ways, polarization is the unhappy consequence of the increased choice enjoyed by media consumers and voters — things that most would probably consider to be not only good, but essential to a healthy democracy. Like many unpopular-but-ubiquitous phenomena, polarization serves many important functions. First, and probably most importantly, polarization helps simplify an otherwise complicated question: for whom should we vote?

Often, votes are cast from a position economists refer to as rational ignorance – a situation in which the costs of educating oneself (in this case about the various candidates and issues) outweigh the benefits. In other words, since a single vote has next to no impact in a high-turnout election, most voters will rationally avoid spending too much energy diving into the nuts and bolts of candidates’ proposals. With distinct parties, one can vote for the candidate of one party or the other and, even without familiarizing himself with every position held by that candidate, have a reasonably good idea of what the person he’s voting for believes.

Voters, thus, know more or less what they’re getting themselves into when they head to the polls. Want a bigger government? Vote Democrat. Lower taxes? Vote Republican. In a completely unpolarized political landscape, the barriers to informed voting would be even larger than they are now. Voters might get discouraged and abstain or vote based on something other than policy.

Speaking of voter engagement, political polarization is theorized to help with that, too. Recent research has shown that high levels of polarization, coupled with the presence of few political parties, encourage more people to vote. Findings from the Pew Center’s 2014  study of polarization in the American public further support this conclusion: individuals at the edges of the political spectrum are shown to be most likely to say they always vote. Animus toward the opposite party appears to be a major motivating factor for such voters.

This increased passion seems to extend beyond voting as well. Voters with consistent liberal or conservative views are about twice as likely as those with mixed views to engage in  various forms of political activism. As polarization has increased, so too has the percentage of voters saying they’ve spoken to others trying to persuade them to vote for one candidate or another, according to data collected by the  American National Election Studies. However strong one’s distaste for the current tone of civil discourse, its presence is better than the alternative.

A final positive consequence of polarization is that it slows down the government. If you are a partisan with an agenda and opportunity, you probably don’t think that’s such a great thing: a year ago, liberals were heaping opprobrium upon a Republican Congress for obstructionism; now the president is leveling the  same accusation against Democrats. But once your party’s out of power, you might be a little more sympathetic to the idea that governments should move with deliberation and humility rather than speed and zeal.

Of course there really are things that require governments to move quickly and with decisiveness, and when polarization impedes that process, that can be bad. But through opposition and gridlock, minority party members perform the valuable public service of making sure the governing party does not do too much too fast. The public only has so many meaningful opportunities for input, and having trillion-dollar commitments met with some resistance until voters get to weigh in again isn’t the worst thing in the world.

All this isn’t to say that political polarization is a fundamentally good thing. It is very often tiring, unproductive, and petulant. As a self-styled moderate and small-L libertarian, I can attest to my personal dissatisfaction with the candidates, policies, and discourse produced by our two-party system. There are things we can, and in my opinion maybe should, do to foster a political system less inclined to bipolarity. But in the short-term, we have the politics we have, and it’s worth realizing that polarization is not only a consequence of but also a conduit for many of the things that are good about our system of government.

This article originally appeared on Merion West