As though guided by an invisible hand Dylan Pahman and I – independently and without coordination – each posted an essay about Chick-fil-A’s philanthropic giving within minutes of one another, each with slightly different emphases. Readers may see this as a conflict; however, probing the space between these analyses helps make sense of customer backlash, illustrates why “woke capitalism” of any variety is a miasma, and underlines that charitable decisions are best made by private individuals.
Dylan quotes Milton Friedman’s argument that, if a CEO spends corporate funds for philanthropy:
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.
Milton Friedman’s reasoning is not entirely applicable to Chick-fil-A.
First, Friedman rightly notes that a CEO who funds a charity with the profits of a publicly held corporation spends the firm’s money, not his own. However, Chick-fil-A is a privately owned business, founded by Truett Cathy and owned by the Cathy family. The company represents their private wealth, and the family members presumably agree to these philanthropic actions, even if they reduce their individual profits. Thus, CEO Dan Cathy is not spending anyone else’s money; he is spending his own. “Is it not lawful for me to do what I will with mine own?” (St. Matthew 20:15).
Second, I confess that, as an editor, I’m uncomfortable with Friedman’s wording that a CEO who funds philanthropies instead of raising workers’ wages “is spending their money.” This implies that workers have a right to receive a specific wage from a specific employer (something Friedman regularly denied). If an employer pays his employees less than their productivity could earn elsewhere, they will seek out a new employer (unless they value something about their present job – benefits, hours, location, sense of purpose, personal relationships, etc. – more than money). The loss of the most productive employees will be borne by the employer. In any event, the CEO is not spending something that, by right, belongs to anyone else.
That leaves the potentially higher cost charitable giving imposes on consumers. Materially, the amount of Chick-fil-A’s giving represents such a small percentage of its profits that prices are not likely affected. Competition assures that if the chain raises its prices too high, customers will patronize another store. Theoretically, corporate charity could impose a higher cost on the segment of Chick-fil-A customers who just want a delicious sandwich and can’t get the monkey off their back at any other restaurant (although it burdens them no more than if the Cathy family priced in a profit margin large enough to give privately).
This leads us to the elephant in the chicken restaurant: Many of its customers gladly pay a higher price, because they see eating at Chick-fil-A as a means of self-expression and charity-by-proxy.
Expressing verboten views as a new consumer preference
A large segment of American Christians identify with, and eat at, Chick-fil-A precisely because its owners’ Southern Baptist beliefs find expression in their charitable donations. They are willing to pay more, because they see the brand as an extension of their own beliefs; by buying a sandwich, they are funding the causes the Cathys finance. The ability to express traditional Christian moral views, which are condemned by most organs of the culture, satisfies a felt consumer need which, if Chick-fil-A did not satisfy, another restaurant might.
By increasing brand loyalty, Chick-fil-A’s selection of charities almost undoubtedly increased its profits. Friedman notes that corporations often cater to the public by making “expenditures that are entirely justified on its own self-interest. …If our institutions, and the attitudes of the public make it in their self-interest to cloak their actions in this way, I cannot summon much indignation to denounce them.” Indeed, if such donations would increase stockholders’ profits and workers’ wages, by Friedman’s logic, wouldn’t the CEO be amiss not to make them?
It is true that consumer sentiment may be manipulated. Friedman writes that corporations which disingenuously fund uplifting causes to deflect criticism of their business practices are engaged in behavior “approaching fraud.” But what of Chick-fil-A, in which the family spends its own money on causes it truly believes in? Indeed, it is precisely the Cathy family’s private morality that stimulates both its critics and defenders. That is not fraud but authenticity, which their customers rewarded handsomely.
As I noted, about two-thirds of customers want companies to take a public stance on issues and seek to do business with firms that share their private views. One of the few businesses to publicly uphold traditional values seems to have stepped back, while none of those who revile such values ever do.
I wish the market acted more rationally and efficiently, and I deplore the ongoing politicization of all of the things. But as Ludwig von Mises observes in Human Action:
It is a fact that people in dealing on the market are motivated not only by the desire to get food, shelter, and sexual enjoyment, but also by manifold “ideal” urges. … [W]e must not overlook the fact that in reality no food is valued solely for its nutritive power and no garment or house solely for the protection it affords against cold weather and rain. It cannot be denied that the demand for goods is widely influenced by metaphysical, religious, and ethical considerations, by aesthetic value judgments, by customs, habits, prejudices, tradition, changing fashions, and many other things. To an economist who would try to restrict his investigations to “material” aspects only, the subject matter of inquiry vanishes as soon as he wants to catch it.
While we may not share the desire to let a chicken sandwich speak a mouthful about our moral values, Mises reminds us:
[E]conomics deal[s] with the means for the attainment of ends chosen by the acting individuals. [It does] not express any opinion with regard to such problems as whether or not sybaritism is better than asceticism. [It applies] to the means only one yardstick, viz., whether or not they are suitable to attain the ends at which the acting individuals aim.
A healthy proportion of Chick-fil-A customers decided its public stance gives – or gave – them a reason to shop there. That is precisely why the Cathys’ change of funding rocked so many of their (formerly) loyal customers.
This action – Hunter Baker called it a “surrender” – may open Christians’ minds to economic truths about the purpose of business. I hope Chick-fil-A’s action disabuses these customers of the notion of outsourcing their charitable activity to a corporation.
Stop buying your way into the culture wars
Ultimately, Dylan is right that a businesses’ primary responsibility is to deliver goods or services consumers wish to buy in a way that earns shareholders the maximum profit possible through ethical means. CEOs tempted to align their company with prevailing cultural trends must constantly adjust as social mores shift.
Economic efficiency may best help people seeking to channel their money toward greater social aims. Buying products based on their social consciousness opens the door to precisely the kind of disappointment and sense of betrayal that Chick-fil-A customers say they felt this week.
Filtering charitable donations through corporations is inefficient, to say the least. Pennies on the dollar reach the causes in question. Instead of the virtue signaling that conspicuous consumption allows in a woke capitalist culture, individuals can multiply their influence by giving directly to any cause they choose.
Let corporations produce goods and services and deemphasize pet political causes. Let individual shareholders fund the charity of their choice. This depoliticizes hamburger row and gives individual consumers the freedom to purchase products primarily based on price and quality again. Then, Americans would not labor under the delusion that by wearing a particular brand name or eating mor chikin they are participating in the broad cultural struggle, manning the ramparts, or expressing their inmost ethical views one bite at a time. Instead, they would take the savings and donate it to the charity of their choice. That enhances efficiency and productivity, lowers costs, maximizes charitable donations, and lets everyone follow his own conscience freely.
That is a recipe for a prosperous, free, and virtuous people.
(Photo credit: Hector Alejandro. This photo has been cropped. CC BY 2.0.)