A ‘societal’ Trojan horse

BlackRock chairman and CEO Laurence Fink. societal and social? The new word looks more serious, scholarly, scientific. This look is misleading. Economics, the discipline that scientifically studies social consequences, has done well using “social” for a couple of centuries. There may be a subtle drift to “societal” by more recent social-choice theorists who are suspicious of individualism and inclined to social engineering. The Encyclopedia Britannica suggests that “societal” connotes processes that modify the very structure of society.

How can a business know how its actions will impact society? Standard economic analysis suggests that, apart from voluntary exchange, which benefits all the contracting parties, any socialpolitical phenomenon (say, technological progress or a budget speech) creates winners and losers, even when the gains to some are larger than the losses to others. Evaluating these gains and losses, which is the field of cost-benefit analysis, is a complicated and often controversial matter. And why should a business care for anything other than its own interest, which it can normally pursue only by serving its customers?

A business would only care about its “societal impact” if it is trying to do something for and to “society,” that is, in favour of some individuals and against others in the wider society. Milton Friedman correctly argued that no private business has or should have such a mandate. Realistically and morally, a business should care only for its owners, which it does by competing, trying to maximize its profits, and serving consumers.

Some rare businesses have, for a certain period of time, a significant impact on the economy and society. They are the bearers of great innovations, exemplified by disruptive tech giants like Google, Amazon and Facebook. These companies become only more dangerous if they think of themselves as invested with some “societal” mission.

Another reason why a business would care about its “societal impact” is if it wants to please political cronies. Indeed, “societal” is preferred to “social” precisely to convey the idea that businesses must, over and above (and sometimes against) basic honesty, obey what politicians and government bureaucrats decide in cahoots with busybody mobs guided by the intelligentsia. Societal businesses were bound to discriminate against black people in South Africa and to collaborate with the Nazi government, instead of serving any profitable clientele on the market.

But isn’t “societal” just a word? The late Nobel Prizewinning economist Friedrich Hayek criticized “our poisoned language,” by which he meant the faddish buzzwords and related theories with which the intelligentsia justifies social engineering. Like “sustainable” and other magical words, “societal” is a mantra hiding the political agenda that some individuals want to impose on other individuals. If “social justice” has turned into a killer, wait to see what “societal justice” can do.

Nobody knows what “societal impact” means except the intelligentsia’s language engineers who manipulate words for political purposes, using them as Trojan horses to attack economic freedom. If businesses end up submitting to a mandate of “societal impact,” it wouldn’t be first time they’ve been intellectually eaten alive.