Martin Wolf argues that Milton Friedman was wrong to claim that the only social responsibility of business is to increase profits. I agree with him, but I fear he under-rates two important facts: historical context and class power.

Friedman thought (pdf) that profit maximization promoted the social good only under two conditions.

One, stressed by Luigi Zingales, is that markets must be competitive. Where this is the case, corporations have little power to egregiously exploit consumers or workers. In fact, they must maximize profits or go bust - and going bust is rarely in the public interest.

The second is that profit-seeking is only socially desirable so long as the firm "stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud." This echoes Adam Smith, especially as interpreted by Jesse Norman (pdf) - that a well-functioning market economy depends upon social norms.

However, things have changed since the 1970s so that even if Friedman was right then, he no longer is. There are four, inter-related developments here.

First, markets have become less competitive, as Thomas Philippon has shown.

Secondly, social norms have eroded. In the 1970s, pharmaceutical companies did not deliberately sell addictive opiates as they do today*. And whilst misreporting of earnings was rare in the 70s, it is more common (pdf) today, albeit less so than a few years ago.

Thirdly, firms are makers and not just takers of the "rules of the game". As Martin says, they successfully lobby for favourable rules. The US healthcare industry alone spends over £500bn on lobbying, and employs five lobbyists for every one Congressman. Which is just profit maximizing behaviour. If it's cheaper to campaign for handouts or lax regulation than to develop good products then profit maximization requires that firms do just this. The upshot is that as Martin Gilens and Benjamin I. Page say (pdf):

Economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence

Fourthly, trades unions have greatly declined. In 1970 firms faced a countervailing power which inhibited them from cutting workers pay and conditions or jacking up CEO pay. Today, they no longer do so.

Now, these developments have been more pronounced in the US than in the UK or Europe. Their overall effect, though, Is to remove the conditions in which Friedman's claim made sense. Which leads to Martin's conclusion:

The challenge is to create good rules of the game, via politics. Today, we cannot.

That word "cannot" is important. Creating better rules of the game isn't primarily about technocratic fixes such as rules again lobbying, breaking up the tech giants, raising banks' capital requirements or (in the US) reforming healthcare. Any fool can have good ideas.

Instead, the issue here is power. The same forces that empower big corporations to make the rules also empower them to inhibit reform - or even to reduce the chances of a reforming government being elected at all; some of these forces are of course not under the deliberate control of specific capitalists but are rather emergent processes.

A lot of technocratic politics and economics is idle fantasising: "here's what I'd do if I were king". It misses the point: how do we achieve the power to restrain big capital?

Centrists criticise the left for failing to see that good ideas are useless unless you win elections. But we can turn this jibe around. From the point of view of restraining capital, there's a difference between winning office and winning power. As I've long complained, technocrats are too often blind to the realities of capitalist power.

The challenge for anybody wanting a healthy capitalism, then, is how to achieve the power, the leverage, to do so? Insofar as capitalism operated in the wider public interest at the time that Friedman was writing (which of course is a matter of dispute) it did so because it faced countervailing power. Today, it no longer does so to the same extent.

Here, the left has an insight, if not a successful application thereof - the need to build an anti-capitalist hegemony, something which can only be done outside of parliamentary politics.

There's general agreement that non-parliamentary action can create such hegemony. Rightists who complain about "wokeness" allege that the left has just done this in cultural domains. Perhaps a better example, though is Brexit. Farage and Ukip were negligible as a parliamentary presence, but achieved their aims anyway.

Neither of these hegemonies, however, have greatly challenged capitalist power: although Brexit is not in the material interest of some segments of capital, it has the redeeming virtue of having deflected blame for stagnation from capitalism onto the EU and migrants.

Which leaves the question: is it possible to create an anti-capitalist hegemony, and if so how? Technocrats have been insufficiently interested in this question.

* Corporations did, however, produce thalidomide and DDT, though the adverse effects of these might have been partly unintended.