Wayne Winegarden

It’s official. Nancy Pelosi is going to be the next Speaker of the House and Harry Reid will be the next Majority Leader of the Senate. Should the Left consolidate its power past 2008, the future of tax cuts and pro-growth legislation would be in doubt and economic growth would suffer as a result. There is, however, another less obvious implication from the election that may significantly affect the economic well-being of our country: the Democratic takeover of the Congress hands the political levers of power to people who support the efforts of the Corporate Social Responsibility (CSR) activists.

The CSR movement contends that the responsibility of a corporation is to serve the interests of broader society. It is not enough for a company simply to produce goods that customers want to purchase and in so doing provide profits to its shareholders. Now, in addition to these roles, CSR activists want corporations to perform public service programs; such as alleviate poverty, promote overall economic development, and safeguard the environment. Obviously, such activities blur the line between private and public activities. It creates a corporate conglomerate that combines the private business activities of a for-profit firm with the public government activity of a government legislative and regulatory body.

In the business world, well performing companies are focused. On Wall Street when two separate and unrelated companies are combined into a conglomerate, the performance of both companies typically worsens. This is why Wall Street generally dislikes conglomerates. It is also why CSR is such a dangerous trend. Left unchecked, the policies and activities that CSR proponents suggest will continually worsen the health of those corporations that succumbed to its policies; the other part of the CSR conglomerate (the social good) suffers in tandem.

Wayne Winegarden

Wayne H. Winegarden Ph.D. is a partner in the firm Arduin, Laffer & Moore Econometrics.

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