In general, James Fallows’ “Why Local Money Matters” is a good article about the benefits that local business and local entrepreneurs can bring to their own communities … and, inferentially, why we should support them.
But I fear that Mr. Fallows builds a serious flaw into this “nut graf” that sums up the gist of the article:
“Of course everybody knows that family- and personally owned businesses can behave differently from publicly traded firms. For the big corporations, it is a compliment rather than a criticism to say that ultimately they care most about dividend growth and ‘maximizing shareholder value.’ Toward that end layoffs, outsourcing, cost-cutting, cheese-paring, union-busting -- you name it, and if it can arguably lead to greater long-run corporate profitability, then by definition it is what management should do.
“Of course everybody knows”? Hold on, Mr. Fallows. This point is too often and too easily forgotten: The shareholder return metric for corporations was neither accepted nor even widely recognized as moral before Reaganomics. It is not a timeless truth, and we currently reap the whirlwind of Milton Friedman's economics.
Must we accept this status as a given for large businesses, or should influential critics like Mr. Fallows dare to raise the possibility that it is wrong? Should we all?
Read the full article in Atlantic Cities.