Many a reader who has followed the argument

Many a reader who has followed the argument this far may be tempted to remonstrate that it is all well and good to speak of Government’s having the responsibility to impose taxes and determine expenditures for such “social” purposes as controlling pollution or training the hard-core unemployed, but that the problems are too urgent to … Continue reading “Many a reader who has followed the argument”

Many a reader who has followed the argument this far may be tempted to remonstrate that it is all well and good to speak of Government’s having the responsibility to impose taxes and determine expenditures for such “social” purposes as controlling pollution or training the hard-core unemployed, but that the problems are too urgent to wait on the slow course of political processes, that the exercise of social responsibility by businessmen is a quicker and surer way to solve pressing current problems.

On the grounds of consequences, can the corporate executive in fact discharge his alleged “social responsibilities”

On the grounds of consequences, can the corporate executive in fact discharge his alleged “social responsibilities”? On the one hand, suppose he could get away with spending the stockholders’ or customers’ or employees’ money. How is he to know how to spend it? He is told that he must contribute to fighting inflation. How is he to know what action of his will contribute to that end? He is presumably an expert in running his company–in producing a product or selling it or financing it. But nothing about his selection makes him an expert on inflation. Will his holding down the price of his product reduce inflationary pressure? Or, by leaving more spending power in the hands of his customers, simply divert it elsewhere? Or, by forcing him to produce less because of the lower price, will it simply contribute to shortages? Even if he could answer these questions, how much cost is he justified in imposing on his stockholders, customers and employees for this social purpose? What is his appropriate share and what is the appropriate share of others?

without representation” was one of the battle cries of the American

without representation” was one of the battle cries of the American Revolution. We have a system of checks and balances to separate the legislative function of imposing taxes and enacting expenditures from the executive function of collecting taxes and administering expenditure programs and from the judicial function of mediating disputes and interpreting the law.

Here the businessman–self-selected or appointed directly or indirectly by stockholders–is to be simultaneously legislator, executive and jurist. He is to decide whom to tax by how much and for what purpose, and he is to spend the proceeds–all this guided only by general exhortations from on high to restrain inflation, improve the environment, fight poverty and so on and on.

that is not in the interest of his employers. For example, that he is to refrain from increasing the price of the product

in order to contribute to the social objective of preventing inflation, even though a price increase would be in the best interests of the corporation. Or that he is to make expenditures on reducing pollution beyond the amount that is in the best interests of the corporation or that is required by law in order to contribute to the social objective of improving the environment. Or that, at the expense of corporate profits, he is to hire “hardcore” unemployed instead of better qualified available workmen to contribute to the social objective of reducing poverty.

In each of these cases, the corporate executive would be spending someone else’s money for a general social interest. Insofar as his actions in accord with his “social responsibility” reduce returns to stockholders, he is spending their money. Insofar as his actions raise the price to customers, he is spending the customers’ money. Insofar as his actions lower the wages of some employees, he is spending their money.

Title: Credit availability and investment: Lessons from the “great recession” Author: Gaiotti, Eugenio

Source: European Economic Review; April 2013, Volume 59, Pp. 212–227
Abstract: The paper argues that the traditional difficulty encountered in finding evidence on the effects of credit availability on economic activity depends on the fact that these effects are powerful but rare and vary with the cycle. The global financial crisis offers an opportunity to test this assumption. The paper exploits a unique dataset, including direct information on credit rationing for 1200 Italian firms over the last twenty years. We find that the elasticity of a firm’s investment to the availability of bank credit has been significant in periods of economic contraction, but not in other periods (the ability to tap alternative sources of finance may arguably explain this result) and that during the global crisis the impact of credit quantity constraints on Italian investment in manufacturing was significant.
Note: Original research article
Database: ScienceDirect