I thought the goal of companies is to return value to shareholders, not necessarily add value to the economy. I don't mean to sound cynical, but it's a fair statement with regards to how things are today.
Traditionally this wasn't so. The dominance of this idea that that companies are chimeric organisms whose only utility function is to return value to shareholders is actually mostly an artifact of the last 50~ years.[1] We have various defenders of leveraged buyouts and activist investor techniques to thank for it. Traditionally, corporations had an embedded duty toward the societies they formed in and their employees equal or above profit.[2]
The economic notion of "value" -- the quantity the economy optimizes -- is weighted according to wealth. "Value creation," as referred to in economic circles, is not about doing what people want, it's about doing what wealth-weighted people want. That really is the crux of it.
The idea is that "wealth-weighted" is weighted by what people want, because people get wealthy by doing what lots of people want (and are willing to pay lots for).
No, people get wealthy by doing what lots of wealth-weighted people want, who in turn got wealthy by doing what lots of wealth-weighted people want... the weight enters at every step, and that's how the system runs away from itself.
You can gauge its progress by looking at the wealth distribution. In a flat distribution, the economic notion of value coincides very closely with the colloquial notion of value. In a heavily skewed distribution, it doesn't correspond at all. Masses of starving poor people are of no concern to a system that assigns them 0 weight. Feeding them produces no value. In stark contrast, those with great weight can command the economy to devote great energy to highly counterproductive tasks such as consolidating and perpetuating their own power. This is an intrinsic problem of skewed distributions -- and the reason why "who's goals" is exactly the right question to ask.
Of course, you can't hammer the wealth distribution completely flat without eliminating the economy's ability to incentivize, because being on the advantaged side of an uneven distribution is the reward. You have to strike a balance. That shouldn't be controversial, but on account of the great energies mentioned above, it is.
By confusing the two notions of value, one can make the argument that you just did, and with that one subtle alteration the tendency of the system to run away is hidden. Note that the system you described could be obtained from the system I described by pressing a "reset" button and hammering the wealth distribution flat between each transaction. I'm sure that wasn't your intent, but it's a dramatic demonstration of how attaching the word "value" to the economic concept of wealth-weighted-value hides the problem from view.
The "the colloquial notion of value" is philosophically groundless. The reason economics uses a particular notion of value is because it's actually grounded in relatively consistent theory.
The economic notion is basically saying a mass of poor people have no value to anybody else if they're not able to do anything anybody else wants or each other want enough to pay for.
"Only shareholders matter" has been gospel for about a generation. And I do think that attitude is responsible for a lot that is wrong with the US.
But it is, I think, fair to note that corporations are not responsible for making sure the rules under which they function work for everyone. That particular failure belongs to government, or in the alternative, all of us for allowing such a shitty government.
Corporations spend a lot on lobbying to make sure those government rules work only for them. They should absolutely not get to avoid blame for corrupting the government with the tired excuse that government is supposed to be incorruptible.
Since money is free speech (via anonymous PACs), I don't know if it's fair to hold all Americans equally responsible for what has happened to our economic system. Money provides access to your government and wide influence on the laws that get passed.
Corporations as they exist in the US are a legal fiction. Just because you have the right to associate with people does not mean you have a right to be shielded from the ramifications of what your association does. However this is not the current law as it exists in the US with the corporate veil.
Because corporations as they exist are completely fictional, you bet your ass we can take those completely made up protections away from them once they stop being a net benefit to society.
If that were done, corporations would do an absolute shit job of returning value to shareholders.
Within the paradigm of the neoclassical synthesis [1], economic rent exists only in the short term, and as such creating value for shareholders by and large coincides with adding value to the economy.
Unfortunately, reality is a bit more complex than that.
However, economists have made big progress coming to grips with that complexity, and many proponents of small government and laissez-faire are actually acolytes of what James Kwack calls "Economism" [2], an adherence to Economics 101 that's simultaneously dogmatic, hugely selective, and pro business & anti regulation.
"Real" economists (including the frequently maligned "The Economist" magazine) are quite in favour of sensible regulation, government intervention, and progressive policies, more so than corporate lackeys and the Republican caricature of conservatism.
Lastly, that shareholder value maximisation should be the only goal of companies is a sensible result, yes, but only for a specific and narrow theoretical question (the principal-agent problem, embedded in a neoclassical framework). What the actual goal of actual corporations in the real world should be is up to us (subject to real world constraints, obviously).
I think that the key difference here is the function/purpose of individual companies vs the sector/industry in aggregate. So yes individual companies should be working to maximize profit, but at the systems level of abstraction they should be adding value to the economy.
When you see one without the other it indicates that the system is not functioning properly.
The goal of an individual corporation is to return value to its shareholders, but blah blah invisible hand blah blah, in aggregate this is supposed to add value to the economy and deliver social benefit.
What we are seeing is this may not always be the case.
The strongly pro-capitalist portion of America is really of two minds on this topic - half believe what you stated above (which I think is a correct interpretation), the other half believe that companies should be patriotic and providing social benefits through charity or other forms of their own volition. I think that half-n-half mind settling is the source of a number of our ills. In a correctly running society: Companies are in it for themselves - the government is in it for the people. To that proper regulation can support the growth of the economy while regulatory capture is slowly choking out small business ventures.
I think the less pro-capitalist portion of America is mostly aligned with viewing companies as being driven by profit, with varying amounts of support - judging, indifferent, endorsing - for their pursuit of profit depending on where that individual falls on the spectrum. The economic and political situation is getting pretty dire IMO.
