Dr. Rado Bohinc: More research on how to reduce income inequalities is needed! (upcoming)


8 richest people had in 2017 assets that are equal in value to the remaining half of humanity (3.6 billion people) (Oxfam (2017)). The richest 10% in OECD countries is owned by half of all households, while the lower 40% owns only 3%. The top 1% owns 19%.  Income inequality (nowadays far greater than at any one time in the past) also affects equality of opportunities: education, access to modern technologies, health, culture, employment opportunities (welfare) is constantly increasing[. Precarious employment is becoming more and more evidently the accompanying social phenomenon (massive violation of labour legislation) of modern capitalism.

HISTORICAL BACKGROUND OF SOCIAL RESPONSIBILITY

Economic liberalism

History of fighting against social responsibility on societal and corporate level is the history of modern capitalism. It starts with the A. Smith’s Wealth of nation[1] and Theory of moral sentiments [2] (the Smith’s idea on invisible hand and the doctrine of laissez-faire have always been closely related) followed by Hyek’s Scientism and study of society[3] in early forties of previous century. Central to Hayek‟s theory is the notion of a „spontaneous order‟ of social life, which is better than any kind of artificially created order when it comes down to securing individual liberty and well-being (cf. especially Hayek 1944; 1973).[4] A. Smith advocated the abolition of government intervention in economic matters (no restrictions on manufacturing, no barriers to commerce, no tariffs, free trade, free competition, free to make huge profits). It is obvious, that A. Smith’s economic liberalism prevailed in the United States through the 1800s and early 1900 then led to great depression of the 1930s.  For the time we live nowadays Smith’s concept is not applicable theory and no social responsibility aspect could be found in his approach at all.

J. M. Keynes challenged liberalism saying, that full employment is necessary for capitalism to grow and it can be achieved only if governments and central banks intervene to increase employment. The belief that government should advance the common good became widely accepted. Social responsibility dimension could be seen in Keynes’s economic approach and such were the consequences in well-being of that time[5]. Keynesianism, was the dominant theoretical framework in economics and economic policy-making in the period between 1945 and 1970, but was then replaced by a more „monetarist‟ approach inspired by the theories and research of M. Friedman. Since then, „neoliberalism‟, i.e. monetarism and related theories, has dominated macroeconomic policy-making.

Economic liberalism swears that maximization of profits is the most fundamental and ultimate corporate responsibility and that social issues are not the concern of business people (the business of business is business). Freedman’s Capitalism and freedom[6] is the first serious critique of the CSR concept in the sixties. Freedman held that management has one responsibility and that is to maximize the profits of its owners or shareholders. Friedman argued that social issues are not the concern of business people and that these problems should be resolved by the unfettered workings of the free market system. Further, this view holds that, if the free market cannot solve the social problems, it falls not upon business. Obviously there is no social responsibility neither in societal nor in corporate level in such an approach.

Coase in “The Problem of Social Cost” (1960) suggests that well-defined property rights could overcome the problems of externalities. The Coase Theorem holds that, regardless of the initial allocation of property rights and choice of remedial protection, the market will determine ultimate allocations of legal entitlements, based on their relative value to different parties[7]. Economic liberalism is, basically, the belief that states ought to abstain from intervening in the economy, and instead leave as much as possible up to individuals participating in free and self-regulating markets[8].

Classical liberalism and modern liberalism

Classical liberalism is often associated with the belief that the state ought to be minimal, which means that practically everything except armed forces, law enforcement and other „non-excludable goods‟ ought to be left to the free dealings of its citizens, and the organisations they freely choose to establish and take part in. This kind of state is sometimes described as a „night-watchman state‟, as the sole purpose of the minimal state is to uphold the most fundamental aspects of public order.[9] Classical liberalism has thus much common ground with what we described above as „economic liberalism‟. And it is often the case that classical liberals are, with their tendency to favour laissez-faire economic policies, portrayed as leading proponents of „neoliberalism‟[10].

Modern liberalism is, on the other hand, characterised by a greater willingness to let the state become an active participant in the economy: to regulate the marketplace, and to have the state supply essential goods and services to everyone. The state must play a significant role in the economy, but there is still no room for social responsibility on neither on state nor on corporate level.

Neoliberalism

Neoliberalism is the conviction that the only legitimate purpose of the state is to safeguard individual, especially commercial, liberty, as well as strong private property rights; the state ought to be minimal or at least drastically reduced in strength and size. Neoliberalism is a set of ideas of how the relationship between the state and its external environment ought to be organised, and not a complete political philosophy or ideology (Blomgren 1997)[11]. In fact, it is not understood as a theory about how political processes ought to be organised at all. Neoliberalism is the revival of economic liberalism in last 25 years on a global scale. It tries to prevent schrinking of profit rates by cutting public expenditure for social services like education and health care, reducing the safety-net for the poor, and reducing governmental role in development of transport, energy and comunication infrastructure by selling state-owned enterprises (including banks, key industries, railroads, toll highways, electricity, schools, hospitals and even fresh water), done in the name of greater efficien