Businesses and Ethics
We live in a world that is not infinite and things are scarce. Everyone must make an effort to live and there is constant competition for the resources needed. On the other hand, there is the utopical story of Adam and Eve´s Paradise, a place were most of the people would like to go, but if things were infinite, there would not be any need for economics, no need for businesses, no need for greed or selfishness, no use for Maslow´s pyramid, and the power of individuality would not exist. But, since we live in a world where individual effort is embraced, and conflict is the only thing that is constant, we must create some rules for ethical behavior that prevent us from killing each other. Taking a realist point of view, where individuals are selfish and greedy by nature, we can say that capitalism itself should not be placed in an unethical-ethical scale, because it is just an economic model that copies nature. What is unethical or ethical is the behavior of humans managing that model.
Businesses must respond to many different interests groups, such as people, community, governments, shareholders, stakeholders, etc. They must provide good quality, well paid, decent jobs, and make good and reliable products. They must not pollute the air or the water; they must not make toys with lead paint. But they must also make a profit. This simple fact makes businesses act in the same way as individuals, so ethical rules try to promote the survival of capitalism, because it takes care of the buyers or consumers (that otherwise would not make it alive) that it needs to survive.
As in International Relations, anarchy best describes the actual globalized business world. There is the World Trade Organization and many other entities that try to regulate trade and such, but they do not have the power to really impose any sanctions that have a true effect. No entity is capable of avoiding conflict. So basically, war is the only option between corporations, and zero-sum (I win, you lose) is the rule. Ethical rules try to appease this.
The most recent case of unethical behavior that placed capitalism in danger is the financial crisis of 2008. As Paul Krugman states in his book, The Return of Depression Economics and the Crisis of 2008, moral risk taken by the financial companies, leaded by their greedy CEO´s, caused a great strain on the financial world. The individual CEO´s wanting to show their boards of directors short-term results and share value increases, incurred in very unethical behavior by granting loans to NINJAS (people with no income, no job, no assets), which in turn created a bubble in the housing market. When these ninjas were not able to pay their loans back, and their debt was bigger than the real value of their assets, a huge crisis was on the way. These companies took the moral risk, because they knew that the central government would not let them go bankrupt.
Another example can be depicted by the recent events in the Gulf of Mexico and the huge oil spill that will have tremendous environmental effects in years to come. Greed and unethical behavior by individuals that corrupted the government to allow deep-ocean drilling created a high risk, high profit situation for BP and for government officials that wanted to show good profits and results (Eilperin, 2010) . The funny thing is that individuals that manage capitalism are willing and able to socialize loses, but not profits.
In a more familiar case for us here in Colombia, we can all say that a Free Trade Agreement with the United States is a good idea in pure capitalist terms, because it would give us access to the biggest economy in the world. But, since our natural potential is in agriculture, and the United States subsidizes its farmers, we can argue that such an agreement is not ethical because it creates a zero-sum relation. But it is not capitalism that is unethical; it is the government leaders, obviously trying to protect its nationals, which act unethically.
In recent months, the World Economic Forum stated that one of the most important goals of the business world in order to guarantee the survival of capitalism is to shape the values and principles of business leaders (Turley 2009) . This means the creation of an Economic Council in the United Nations, based on the Security Council, which would regulate the individual behavior of the people that manage capitalism. It also seeks to promote accountability by the corporations for executives´ unethical behavior, and the push for the use of long-term results instead of short-term results for bonus assignments.
In conclusion we can say that businesses have a tremendous responsibility to maintain order in an otherwise anarchic world, but individual selfish behavior creates a danger for capitalism, because it only thinks in short-term profits. Capitalism is a good economical model, because it promotes creativity, innovation, and self-fulfillment. But if ethical, win-win models are not promoted, the expectations of human survival are very limited.
Bibliography
Eilperin, Juliet. "Environmental News." The Washington Post. May 5, 2010. http://www.washingtonpost.com/wp-dyn/content/article/2010/05/04/AR2010050404118.html (accessed June 16, 2010).
Turley, Jim. "Publications." Ernst and Young. 2009. http://www.ey.com/Publication/vwLUAssets/World_economic_forum_davos_2009/$FILE/World_economic_forum_davos_2009.pdf (accessed June 16, 2010).
