NOTE: Occasionally, new information is introduced in some of the questions. Of course, that might mean that a guess is required, but there is then every chance of the correct answer then being more readily recalled.
The answers to the questions can be found towards the end of this blog post.
Macro-economic theories (Fill in the gaps by inserting the words, phrases, titles and names in bold type directly underneath).
____________ is an economic system whereby the means of production [factories, machinery and so on] and distribution are owned primarily by private individuals and corporations. The prices of labour and goods are determined by the _________ __________ and not by ___________ _______________. _____________are claimed by individual company owners or, in the case of corporations, by _________________.
This form of economic theory has been the dominant one for the last forty years but dates back to the 18th Century and the writing of the Scottish moral philosopher and economist _________ __________. According to the theory outlined in his book, _____ __________ ____ ___________, people should act in a __________ or ethically egoistic way when it comes to making decisions to do with business. For example, an employee might selfishly want to secure the highest wage possible for their services, while an employer would understandably want to keep wages lower to maximise their profits. In the marketplace, a supplier would want to charge the __________ price possible for a product, while a potential buyer would want to get the cheapest deal on offer for the product they desire.
In a free market, making selfishly motivated decisions like this is not a problem because of the fair balance achieved in terms of ____________ and __________that results from them. I cannot ask for a wage that is too high, for example, because a potential employer would then hire someone prepared to accept less. Similarly, if I try to charge a price that is too high for a product or service, a competitor might step in to supply the same thing more cheaply.
Provided that there is _______________, and no-one is allowed to interfere with the workings of the market in such a way as to gain an unfair advantage (e.g. by having a ________________ over the supply of a product), Smith’s famous ‘____________ ________’ (a phrase which describes the natural equilibrium achieved by hundreds of thousands of decisions being made this way) ensures that a fair economic system results from all this activity, even though profit is involved.
According to modern supporters of _______ _________ ___________ such as __________ ____________ and ____________ ___________ (who are also known as ______________ ), too much ____________ ___________ (e.g. to tax company income or the pay of top executives) prevents the free market from producing stability and prosperity. So for capitalism to flourish, the state must remove itself from all economic activity except, in the words of Milton Friedman, for ‘the military, the courts and some of the major highways’. Note that ______________ and __________ do not feature on that list.
The most famous critic of capitalist theory was _______ __________, who essentially argued that capitalism requires profit and profit requires the ______________ (of employees and, perhaps, to update this theory for the 21st Century, the _____________). A modern example of this exploitation might be the ‘______________’. He therefore proposed _________________ as an alternative economic theory. This is an economic system whereby the means of ________________ and _______________ are owned by the workers and the state. The prices of goods and wages are fixed by central government instead of being regulated by the market. The whole economy is _____________ ____________, rather than determined by the random outcome of private initiatives.
However, Hayek was highly critical of planned economic systems, arguing that they cannot meet the needs of the individual because no one in power can know enough about those needs, so the wrong products tend to be produced or not made in sufficient quantities. He also thought that planned economies tend to be ______________ and end up being authoritarian and ________________ in style, which is immoral because there are fewer freedoms permitted to citizens of such societies and free speech is not permitted.
government intervention, Friedrich Hayek, supply, The Wealth of Nations, free market, competition, exploitation, distribution, highest, Capitalism, monopoly, Milton Friedman, shareholders, education, rationally planned, central government, demand, sweatshop, production, coercive, neoliberals, selfish, totalitarian, capitalism, Profits, Adam Smith, communism, health, Karl Marx, environment, invisible hand, free market capitalism
Criticisms of the main macroeconomic theories
1.Who argued that because of its obsession with money and profit, capitalism alienates us from our true selves and therefore can cause entire societies who subscribe to this economic theory to become insane?
a. Michael Sandel
b. Milton Friedman
c. Ha Joon Chang
d. Erich Fromm
2. Who has recently argued that free-market capitalist values have been allowed to invade too many areas of public life that they should be excluded from (e.g. American schools where in return for free and otherwise costly free televisions, video equipment and satellite links, pupils are forced to watch a daily news digest containing adverts for well-known branded products such as Snickers and Pepsi) ?
a. Michael Sandel
b. Friedrich Hayek
c. John Rawls
d. Ha Joon Chang
3. Who argued that poorer, Less Economically Developed Countries (LEDCs) that have opened up their borders to free trade have not flourished economically because their infant industries have not been able to withstand competition from Trans-National Corporations?
a. John Gray
b. Richard Wilkinson and Kate Pickett
c. Ha Joon Chang
d. Peter Singer
4. TRUE or FALSE? According to neoliberal economists, free markets respond to individual needs, so markets must be allowed to operate freely and government must be limited to allow the spontaneous economic equilibrium that arises from free market economics to arise.
5. Who has argued that capitalism is a defensible economic system because globally, over the last 25 years, it has increased the incomes of some of the world’s poorest people (though not the poorest 5%, while the incomes of the top 1% have risen by 60%)?
a. Milton Friedman
b. Peter Singer
c. John Rawls
d. Friedrich Hayek
6. TRUE or FALSE? According to the economic researchers Wilkinson and Pickett, in societies where there is less of a gap between rich and poor, levels of trust between its citizens tend to be lower, people have fewer friends, more people tend to suffer from mental health issues and obesity, and levels of self-reported happiness are lower. Overall, people in socialist economies do not tend to flourish quite so well as they do under capitalism, and the lack of trust means that there is less of a sense of community.
7. TRUE or FALSE? According to the philosopher John Rawls, if we had to choose the values of a society from behind a ‘veil of ignorance’ before we became members of it, not knowing in advance whether we would be rich or poor, intelligent or unintelligent, talented or unskilled, and so on, most of us would choose fairer principles, which in turn suggests that the fairest society might not be one based on free market capitalist principles.
8. Which of the following is NOT a criticism of Communist/Marxist economic theory?
a. According to Marxist theory, in a capitalist economy, the industrial proletariat or working classes will inevitably become richer and more revolutionary as they gain increasing freedom, until they eventually seize power from the ruling classes. But in all industrialised countries since Marx’s day, this has never happened.
b. Marxist economies are centrally planned and cannot therefore respond to the needs of the individual in terms of supply and demand
c. Centrally planned economies involve coercion and curtail the freedom of all, eventually leading to an unlimited totalitarian government. Competitive capitalism is therefore essential for political freedom.
9. Who has argued that capitalism ignores the possibility of a future environmental catastrophe because this system fails to recognise that the earth’s resources are not infinite, and so capitalism’s need for constantly expanding markets will eventually use them up, and and also that all this is a consequence of the view that environmental problems simply require ‘market solutions’ with the effect that the fragile ecosystem is treated as if it is a business providing services to humanity?
a. Kohei Saito
b. Mark Fisher
c. Peter Singer
d. John Gray
10. Who has argued that in the absence of any viable alternative, capitalist approaches to environmental issues are worthy of consideration, and that emissions trading can be defended on utilitarian grounds, as it is a system that allows richer countries that use more energy in the winter to exceed their emissions quota provided that they purchase a permit to do so from a poorer country with spare capacity for doing so, so that overall, everyone benefits?
a. Byung-Chul Han
b. Milton Fiedman
c. Peter Singer
d. Friedrich Hayek
Shareholders v Stakeholders
Once again, fill in the gaps by inserting the words, phrases, titles and names in bold type directly underneath
A s___________ is a person (or institution) who, in return for investing money in a company, legally owns a portion of it in the form of shares. In return for this they may receive a dividend, an annual payment made from any profits the company makes.
A s___________ is anyone who is affected by the activities of a company, for example, e _________, s__________, c___________, or the l_________ c_____________ (who may suffer any adverse environmental effects of the company’s actions).
The neoliberal economist M___________ F ___________ has famously and controversially argued that the sole responsibility of a corporation (or the corporate executives running it) is to m________ p_________ for its shareholders. He contends that when a company or corporation gives to c________ this means that it may not be fulfilling its responsibility to its shareholders to maximise profit. More generally, if corporate executives cut into profits to exercise their s_________ r___________ that they are not legally required to fulfil (examples might be to reduce any p___________ that a company causes through its activities beyond what the law requires, or to deliberately hire staff from an e_________ m________ according to the principle of a________ a___________) that this is like t____________ the shareholders to redistribute their wealth, something which is the business of g__________ and not the company itself. He also argues that a corporation is not a p_______ and that it cannot therefore be held morally responsible for its actions in the way that individuals can. However, he does believe that decision makers within the company are accountable for their decisions and that they should not behave in a f_________ or i_______ manner.
This view has been criticised by __ E_______ F_______ on the grounds that big corporations often contribute to political parties, who if they win elections might return the favour by not making laws about the environment and the rights of employees that are strict enough to ensure that stakeholders are legally protected from the worst effects of business activity, which might also include p________ g________ (overcharging for essential goods and services – a criticism that has been made of UK energy suppliers) and p______ f________ (where participants on the same side in a market agree to buy or sell a product or service at more or less the same price).
The modern philosopher N________ C__________ has been critical of the highly unethical behaviour of large, t______________ c_______________ (TNC’s) who put profits over and above any sense of responsibility to their own employees, their consumers or the environment. Chomsky maintains that corporations are obliged to act in ways that we would regard as pathological (i.e. dangerous and psychopathic) if that behaviour was exhibited by a human being. Chomsky’s comments are based on the research of psychologist R________ H______ , according to whom, large corporations are singularly self-interested, irresponsible, manipulative, lacking in e__________, have no c__________, experience no guilt about their actions and will lie readily and relate to others in a superficial manner. For example, they set out to destroy their competitors and are not especially concerned about what happens to the general public or the environment as long as people are buying their product. So in the documentary movie The Corporation, C__________ can be seen to disagree with Friedman’s view that corporations are not persons and should not be treated as if they are (with all the moral responsibilities that being a person entails). For C________, multinational corporations are dangerously amoral and the public need protecting from them in the same way that they might need protecting from a dangerous p____________.
Followers of the main teleological and deontological ethical theories might also criticise the view that the only moral responsibility a corporation has is to its shareholders. For example, a follower of K_______ e______ might argue that stakeholders should be treated not as a means to an end (profit) but as e_____ i _ t____________by corporate executives, a point which particularly applies to employees of a company, as everyone who works in one would be considered to be part of a ‘k________ o_ e____’, a community of rational, autonomous beings who deserve equal treatment simply because they are rational and autonomous.
Two of Thomas Aquinas’s P________ P______ in his Natural Law theory are to do with p_______ l_____and l______ i_ a c__________. Companies who operate in a manner that disregards the health and safety of their employees, as sweatshops often do, and that fail to recognise that they are part of a wider community, would be condemned according to these principles.
Both Kant and Aquinas would also consider a failure to address the problems created by n ________ e_____________ (external costs, created by the company but borne by someone else) to be immoral. One example of this was the decision of the F_____ m_____ c________ not to rectify a design flaw in the fuel tank of its Pinto model because bosses calculated that it would be cheaper to pay compensation to the victims who would have died or been badly burned as a consequence of accidents that caused the tank to ignite. Clearly this decision violates the respect for life that is so central to both of these deontological theories.
For U_________ who are followers of J________ B__________, actions which maximise t__ g_______ h_________ o_ t__ g_______ n______in terms of their consequences are to be preferred, which makes it inevitable that the wider happiness of stakeholders must be considered. Similarly, someone who follows the philosophy of r___ u____________ as formulated by J____ S_____ M____, would be aware of his famous H___ P_________, and might therefore argue that while companies exist to maximise profits, they must not do so in a manner that might damage the health of or cause physical injury to stakeholders, for example by neglecting h_____ and s_____ standards within their premises. Given that utilitarians are also concerned about the suffering of a_______ (who would also be regarded as stakeholders), they would obviously take an interest what goes on in the f____ i________, and would not want to see profits maximised through inhumane practices.
One of the most famous modern supporters of v_____ e_____, Alisdair MacIntyre would have fiercely disagreed with Friedman. The Greek philosopher A________ argued that the pursuit of profit was immoral and inimical to the shared values of a community, and the qualities which its citizens can only develop through participation in that community or p____. Similarly, MacIntyre contrasts the example of a fishing crew who at all times seek to cultivate excellence – described by the Greek term a_______ in the N_________ E______ – in what they do by honing the skills associated with their trade, with their competitors whose sole aim is to make a profit. For MacIntyre, only the first crew are truly moral, but it the second crew who would win out if both crews were in direct competition with each other. For MacIntyre, capitalism itself is therefore immoral because it simply cannot address the concerns of stakeholders.
However, a possible compromise between concerns of shareholders and stakeholders can be found in the work of R_____ S_____, a less well-known virtue ethicist who trains the management of companies to be more virtuous. He cites the empirical research carried out by J___ C______ at Stanford University, which indicates that when companies are led by managers who consistently exhibit the virtues of s___ – d_________, c_______ and p________ h_______,that the companies themselves tend to be more profitable and outperform their rivals. This conclusion tends to undermine the claim made by MacIntyre, and because it appeals to hard empirical evidence, must be considered to be more persuasive.
greatest happiness of the greatest number, virtue ethics, R. Edward Freeman, food industry, Kantian ethics, Jim Collins, Chomsky, living in a community, health and safety, conscience, person, make profits, price gouging, Ford motor company, ethnic minority, Roger Steare, shareholder, Utilitarians, ends in themselves, Harm Principle, rule utilitarianism, transnational corporations, fraudulent , social responsibilities, empathy, Aristotle, affirmative action, government, Primary Precepts, polis, stakeholder, Jeremy Bentham, psychopath, animals, negative externalities, local community, taxing, charity, Nicomachean Ethics, Milton Friedman, illegal, Robert Hare, pollution, price fixing, kingdom of ends, employees, suppliers, customers, preserving life, John Stuart Mill, arête, self-discipline, courage and personal humility, Noam Chomsky.
Miscellaneous additional questions
1.TRUE or FALSE? The title of Adam Smith’s book, The Wealth Of Nations is taken from the book of Ezekiel, in which the prophet describes his vision of a future time of prosperity.
2. TRUE or FALSE? According to Paul Oslington, Smith’s famous ‘invisible hand’ is the hand of God who – without making his presence felt – ensures through divine providence that even when sinful human beings behave selfishly, that economic stability and prosperity still result from this under competitive free market conditions.
3. Which of the following is NOT one of the ‘Firms of Endearment’ that have adopted a deliberately ethical approach to doing business that recognises stakeholder concerns AND performed well in terms of profit-making?
a. IKEA
b. Honda
c. Timberland
d. Enron
4. TRUE or FALSE? Acts 2v43-45 says of the early Christians that ‘All who believed were together and had all things in common; they would sell their possessions and goods and distribute the proceeds to all as any had need’. Biblical passages like this, which emphasise the virtue of charity and suggest that all our possessions are gifts from God that should be shared communally, according to the principle of koinonia or ‘things held in common’, are more supportive of socialism rather than capitalism.
5. TRUE or FALSE? Some Christian supporters of Liberation Theology believe, on the basis of Jesus’ commandment in John’s gospel to ‘set free the oppressed’, that the societies they are living in need liberating from capitalism.
6. TRUE or FALSE? Act Utilitarians would favour a zero-tolerance solution to the problem of employee exploitation in sweatshops: they should simply be closed down.
7. TRUE or FALSE? John Stuart Mill thought that instead of seeking protection from employers, workers should form new enterprises in which they themselves had a stake, so that they could ‘become their own employers’. Mill also took a lifelong interest in the formation of co-operatives and other methods by which workers could ‘make themselves capitalists’.
8. TRUE or FALSE? A Kantian ethicist would be opposed to the exploitative treatment of employees because he insists that all rational, autonomous beings be treated as ‘means’ rather than ‘ends in themselves’.
9. TRUE or FALSE? A follower of Kantian ethics would consider investing in a company that publishes pornography to be immoral because this industry exploits and objectifies women, which in turn violates the first formulation of the categorical imperative.
10. TRUE or FALSE? John Gray has criticized the consumer culture that capitalism encourages on the grounds that we end up treating other people as we do consumer goods, so that we may end a relationship or initiate divorce proceedings in the same way that we might trade in a used car that no longer makes us happy.
11. TRUE or FALSE? Bentham’s act utilitarianism may support the creation of a hedonistic consumer culture because of the vast amounts of collective happiness generated by it.
12. TRUE or FALSE? Act utilitarians making use of Bentham’s hedonic calculus may be opposed to the ethical practices of businesses that are implicated in the suffering of animals e.g. restaurants with foie gras on the menu.
13. Which of the following statements about globalisation is false?
a. The financial crisis of 2006 showed that globalised capitalism has introduced greater instability into the world’s financial systems.
b. The free movement of labour across national boundaries demanded by neoliberalism has provoked resentment among some citizens because of what they perceive to be excessive and unrestricted immigration.
c. In a globalised world, information spreads quickly, and so people frequently get to learn about unethical business practices on the part of multinational corporations and can choose to boycott their products and services. TNCs that cannot hide those practices are also encouraged to act more ethically.
14. Which philosopher has likened the constant economic growth demanded by capitalism and the consumer society that goes hand in hand with it to a metastasizing form of cancer that will end up killing the patient i.e. humanity?
a. Kohei Saito
b. Mark Fisher
c. Ha Joon Chang
d. Byung-Chul Han
15. TRUE or FALSE? A famous example of a whistle-blower was Karen Blackwood, a US plutonium plant worker who in the early 1970’s exposed lax health and safety practices at her organization and who subsequently died in a car crash, prompting persistent rumours that she was murdered.
16. TRUE or FALSE? A supporter of Kantian ethics may be motivated to blow the whistle on unsafe practices on the part of their employer because those employees are not being treated as ‘ends in themselves’, even if this places them in breach of contract, as the wider interests of stakeholders would take greater priority.
17. TRUE or FALSE? An act utilitarian may choose not to expose unsafe practices on the part of their employer as any hedonic calculus would have to take into account the EXTENT of their decision in terms of who is affected by it. This might include children and relatives who depend on their income, as well as the impact on their future employment prospects as they may have gained a reputation for trouble-making if their action breaches their contract of employment.
ANSWERS
Macro-economic theories
Capitalism is an economic system whereby the means of production [factories, machinery and so on] and distribution are owned primarily by private individuals and corporations. The prices of labour and goods are determined by the free market and not by central government. Profits are claimed by individual company owners or, in the case of corporations, by shareholders.
This form of economic theory has been the dominant one over the last forty years but dates back to the 18th Century and the writing of the Scottish moral philosopher and economist Adam Smith. According to the theory outlined in his book, The Wealth of Nations, people should act in a selfish or ethically egoistic way when it comes to making decisions to do with business. For example, an employee might selfishly want to secure the highest wage possible for their services, while an employer would understandably want to keep wages lower to maximise their profits. In the marketplace, a supplier would want to charge the highest price possible for a product while a potential buyer would want to get the cheapest deal on offer for the product they desire.
In a free market, making selfishly motivated decisions like this is not a problem because of the fair balance achieved in terms of supply and demand that results from them. I cannot ask for a wage that is too high, for example, because a potential employer would then hire someone prepared to accept less. Similarly, if I try to charge a price that is too high for a product or service, a competitor might step in to supply the same thing more cheaply.
Provided that there is competition, and no-one is allowed to interfere with the workings of the market in such a way as to gain an unfair advantage (e.g. by having a monopoly over the supply of a product), Smith’s famous ‘invisible hand’ (a phrase which describes the natural equilibrium achieved by hundreds of thousands of decisions being made this way) ensures that a fair economic system results from all this activity, even though profit is involved.
According to modern supporters of free market capitalism such as Milton Friedman and Friedrich Hayek (who are also known as neoliberals), too much government intervention (e.g. to tax company income or the pay of top executives) prevents the free market from producing stability and prosperity. So for capitalism to flourish, the state must remove itself from all economic activity except, in the words of Milton Friedman, for ‘the military, the courts and some of the major highways’. Note that education and health do not feature on that list.
The most famous critic of capitalist theory was Karl Marx, who essentially argued that capitalism requires profit and profit requires the exploitation (of employees and, perhaps, to update this theory for the 21st Century, the environment). A modern example of this exploitation might be the ‘sweatshop’. He therefore proposed communism as an alternative economic theory. This is an economic system whereby the means of production and distribution are owned by the workers and the state. The prices of goods and wages are fixed by central government instead of being regulated by the market. The whole economy is rationally planned, rather than being determined by the random outcome of private initiatives.
However, Hayek was highly critical of planned economic systems, arguing that they cannot meet the needs of the individual because no one in power can know enough about the specific needs that people have, so the wrong products tend to be produced or not made in sufficient quantities. He also thought that planned economies tend to be coercive and end up being authoritarian and totalitarian in style, which is immoral because there are fewer freedoms permitted to citizens of such societies and free speech is not permitted.
Criticisms of the main macroeconomic theories
- d
- a
- c
- True
- b
- False – where there is more of a gap between rich and poor, the consequences described by Wilkinson and Pickett tend to occur.
- True
- a – this is because the proletariat become poorer and increasingly exploited until they rise up against their capitalist masters.
- b – the philosophers Kohei Saito and Byung-Chul Han (see extension material) would also probably agree with Fisher on this.
- c
Shareholders v Stakeholders
A shareholder is a person (or institution) who, in return for investing money in a company, legally owns a portion of it in the form of shares. In return for this they may receive a dividend, an annual payment made from any profits the company makes.
A stakeholder is anyone who is affected by the activities of a company, for example, employees, suppliers, customers, or the local community (who may suffer any adverse environmental effects of the company’s actions).
The neoliberal economist Milton Friedman has famously and controversially argued that the sole responsibility of a corporation (or the corporate executives running it) is to make profits for its shareholders. He considers that when a company or corporation gives to charity this means that it may not be fulfilling its responsibility to its shareholders to maximise profit. More generally, if corporate executives cut into profits to exercise their social responsibilities that they are not legally required to fulfil (examples might be to reduce any pollution that a company causes through its activities beyond what the law requires, or to deliberately hire staff from an ethnic minority according to the principle of affirmative action) that this is like taxing the shareholders to redistribute their wealth, something which is the business of government and not the company itself. He also argues that a corporation is not a person and that it cannot therefore be held morally responsible for its actions in the way that individuals can. However, he does believe that decision makers within the company are accountable for their decisions and that they should not behave in a fraudulent or illegal manner.
This view has been criticised by R. Edward Freeman on the grounds that big corporations often contribute to political parties, who if they win elections might return the favour by not making laws about the environment and the rights of employees that are strict enough to ensure that stakeholders are legally protected from the worst effects of business activity, which might also include price gouging (overcharging for essential goods and services – a criticism that has been made of UK energy suppliers). and price fixing (where participants on the same side in a market agree to buy or sell a product or service at more or less the same price).
The modern philosopher Noam Chomsky has been critical of the highly unethical behaviour of large transnational corporations (TNC’s) who put profits over and above any sense of responsibility to their own employees, their consumers, or the environment. Chomsky maintains that corporations are obliged to act in ways that we would regard as pathological (i.e. dangerous and psychopathic) if that behaviour was exhibited by a human being. Chomsky’s comments are based on the research of psychologist Robert Hare. According to Hare, large corporations are singularly self-interested, irresponsible, manipulative, lacking in empathy, have no conscience, experience no guilt about their actions, and will lie readily and relate to others in a superficial manner. For example, they set out to destroy their competitors and are not especially concerned about what happens to the general public or the environment as long as people are buying their product. So in the documentary movie The Corporation, Chomsky can be seen to disagree with Friedman’s view that corporations are not persons and should not be treated as if they are (with all the moral responsibilities that being a person entails). For Chomsky, multinational corporations are dangerously amoral and the public need protecting from them in the same way that they might need protecting from a dangerous psychopath.
Followers of the main teleological and deontological ethical theories might also criticise the view that the only moral responsibility a corporation has is to its shareholders. For example, a follower of Kantian Ethics might argue that stakeholders should be treated not as a means to an end (profit) but as ends in themselves by corporate executives, a point which particularly applies to employees of a company, as everyone who works in one would be considered to be part of a ‘kingdom of ends’, a community of rational, autonomous beings who deserve equal treatment simply because they are rational and autonomous.
Two of Thomas Aquinas’s Primary Precepts in his Natural Law theory are to do with preserving life and living in a community. Companies who operate in a manner that disregards the health and safety of their employees, as sweatshops often do, and that fail to recognise that they are part of a wider community, would be condemned according to these principles.
Both Kant and Aquinas would also consider a failure to address the problems created by negative externalities (external costs, created by the company but borne by someone else) to be immoral. One example of this was the decision of the Ford motor company not to rectify a design flaw in the fuel tank of its Pinto model because bosses calculated that it would be cheaper to pay compensation to the victims who would have died or been badly burned as a consequence of accidents that caused the tank to ignite. Clearly this decision violates the respect for life that is so central to both of these deontological theories.
For Utilitarians who are followers of Jeremy Bentham, actions which maximise the greatest happiness of the greatest number in terms of their consequences are to be preferred, which makes it inevitable that the wider happiness of stakeholders must be considered. Similarly, someone who follows the philosophy of rule utilitarianism as formulated by John Stuart Mill, would be aware of his famous Harm Principle, and might therefore argue that while companies exist to maximise profits, they must not do so in a manner that might damage the health of or cause physical injury to stakeholders, for example by neglecting health and safety standards within their premises. Given that utilitarians are also concerned about the suffering of animals (who would also be regarded as stakeholders), they would obviously take an interest what goes on in the food industry, and would not want to see profits maximised through inhumane practices.
One of the most famous modern supporters of virtue ethics, Alisdair MacIntyre would have fiercely disagreed with Friedman. Aristotle argued that the pursuit of profit was immoral and inimical to the shared values of a community, and the qualities which its citizens can only develop through participation in that community or polis. Similarly, MacIntyre contrasts the example of a fishing crew who at all times seek to cultivate excellence – described by the Greek term arête in the Nicomachean Ethics – in what they do by honing the skills associated with their trade, with their competitors whose sole aim is to make a profit. For MacIntyre, only the first crew are truly moral, but it the second crew who would win out if both crews were in direct competition with each other. For MacIntyre, capitalism itself is therefore immoral because it simply cannot address the concerns of stakeholders.
However, a possible compromise between concerns of shareholders and stakeholders can be found in the work of Roger Steare, a less well-known virtue ethicist who trains the management of companies to be more virtuous. He cites the empirical research carried out by Jim Collins at Stanford University, which indicates that when companies are led by managers who consistently exhibit the virtues of self discipline, courage and personal humility, that the companies themselves tend to be more profitable and outperform their rivals. This conclusion tends to undermine the claim made by MacIntyre, and because it appeals to hard empirical evidence, must be considered to be more persuasive.
Miscellaneous additional questions
1.False – it is taken from the book of Isaiah.
2. True
3. d – A self-declared admirer of Richard Dawkins’ The Selfish Gene and Herbert Spencer’s phrase ‘survival of the fittest’, Jeff Skilling, the former CEO of Enron remains notorious for having implemented a ‘Rank and Yank’ appraisal system involving the constant monitoring of employees and the sacking and public humiliation of up to one-fifth of those with the lowest production figures every year.
4. True – the theologian D. Stephen Long, in commenting on this passage, stated that,“ ‘Socialism’ was Christian before it was made ‘scientific’ and was fundamentally distorted by Marx”
5. False – the passage is taken from Luke’s gospel.
6. False – utilitarianism is a teleological theory that focuses on the consequences of moral decision-making. If a zero tolerance approach was taken to sweatshops, the employees might then be worse off because they might have no job at all because the sweatshop may have been closed down. Such a deontological approach might therefore make matters worse. Certainly one of the major organisations that is seeking to address this issue, the Maquila Solidarity Network, favour a more nuanced process of gradual reform through encouraging employers to stop employing children in their workforce, and by supporting the creation of viable forms of alternative employment in the areas where sweatshops predominate. Utilitarians, being more sensitive to outcomes, would agree with this approach.
7. True
8. False – according to Kant, people should be treated as ‘ends in themselves’, as fellow rational beings. Note that this form of reciprocal respect and duty is not one that should be extended to animals, as Kant did not consider them to be capable of rationality.
9. False – it is the second formulation of the Categorical Imperative that applies here, namely, the requirement to treat all rational beings as ‘ends in themselves’.
10. True – Gray echoes Kant here, in the sense that we end up treating others as a ‘means to an end’ because of this.
11. True but the fact that the happiness experienced tends to be short-lived suggests that more lasting pleasures should be pursued rather than those gained from ‘retail therapy’. Plus, John Stuart Mill might have favoured focusing more on the consumption of products and services that relate to higher pleasures e.g. a ticket to a Philosophy conference rather than a Monster Truck Rally.
12. True
13. a – the financial crisis happened in 2008 not 2006. Interestingly, virtually no country was in banking crisis between the end of the Second World War and the mid-1970’s, when the financial sector was more regulated. Between the mid-1970’s and the late 1980’s, the proportion of countries who experienced a banking crisis rose to 5 to 10%, weighted by their share of world income. The proportion then shot up to around 20% in the mid-1990’s. The ratio then briefly fell to zero for a few years in the mid-2000s, but went up again to 35% following the 2008 global financial crisis. Examples include the following:
Start of 1990’s – banking crises in Sweden, Finland and Norway
1994/95 – ‘Tequila’ crisis in Mexico
1997 – crises in ‘miracle’ economies in Thailand, Indonesia, Malaysia and South Korea
1998 – Russian crisis
1999 – Brazilian crisis
2002 – Argentina
2008 – We all know about that one.
14. d- Byung-Chul Han also argues that we have willingly become prisoners in a neoliberal ‘panopticon’ (a phrase coined by Bentham). See the extension material blog entry on OCR Business Ethics for more on this.
15. False – it was Karen Silkwood.
16. True – but the suffering of animals would not be considered.
17. False – an act utilitarian would have to consider the effects on the future happiness of everyone affected by the decision, all stakeholders in other words. However, given that most of us favour ourselves and those closest to us in our moral calculations, it is possible that a potential whistle-blower may not follow either a Kantian or a utilitarian line in many instances, and might prefer to keep quiet.
EXEMPLAR ANSWER
‘Kantian ethics provides the best approach to business ethics.’ Discuss.
NOTE: THIS IS JUST MY ATTEMPT TO ANSWER THIS QUESTION. IT HAS NOT BEEN VETTED BY ANOTHER TEACHER OR AN EXAMINER. SO IF YOU ARE A STUDENT, WHILE THE CONTENT MAY PROVE HELPFUL, IT IS VERY IMPORTANT THAT YOU GET THIS ESSAY CHECKED OUT BY YOUR TEACHER, AS THEY MAY BE ABLE TO IDENTIFY ANY ERRORS OF UNDERSTANDING, OMISSIONS, OR OTHER WEAKNESSES THAT IT CONTAINS. IT ALSO TOOK 50 RATHER THAN 40 MINUTES TO WRITE. ONE PARAGRAPH IS THEREFORE ITALICISED TO INDICATE THAT ITS INCLUSION WAS OPTIONAL.
Kant’s system of moral decision-making is deontological in character (acts are right or wrong regardless of their consequences), and is one that is based on rationally derived duties. We discover these duties by, first of all, formulating a maxim (the principle that we are considering acting on) e.g. Should I make a promise that I do not intend to keep? Should I give the right change to a naive child making a purchase from my shop? Should I tell the truth to someone with murderous intentions who is asking for the whereabouts of a person they are in pursuit of?
This maxim is then subjected to various tests. It it passes them, it can be deemed expressive of what Kant calls ‘the categorical imperative’, a moral law that must be adhered to in all situations.
Firstly, the maxim is universalized. Here the intent is to see whether it retains its logical coherence. Making a false promise fails this test as the whole concept of making promises would thus be rendered meaningless. Is the maxim contaminated with selfishness? Are we failing to treat anyone affected by our actions as a fellow rational being who is therefore worthy of respect? Again, making a false promise would fail this test. This is because we are treating someone as a ‘means to an end’ rather than as an ‘end in themselves’, according to the second formulation of the categorical imperative.
Imperatives contaminated with selfish motives are always hypothetical for Kant e.g. If I, as a shopkeeper, wish the reputation of my business to be preserved, I should give the aforementioned child the correct change. This would be doing the right thing for the wrong reasons. But truth-telling passes these tests. It is logically possible, Kant thinks, for everyone to be honest on each and every occasion, and in doing so we are respecting the rational autonomy of those we are interacting with. So telling the truth is a maxim that is expressive of the categorical imperative and can thus become a law to be observed by a community of rational beings who are part of a ‘Kingdom of ends.’
Kant insists that such imperatives are exceptionless. So the truth must even be told to that would-be murderer. Adhering constantly to rational maxims throughout our lives will ensure that we will eventually reach the summum bonum (the highest good) probably in the afterlife when our virtuous actions will be rewarded (though does this introduce a teleological or consequentialist element into Kant’s system?).
When applied to the sphere of business ethics, a Kantian approach would seem to yield mixed results. For example, as evidenced by the case of the honest shopkeeper (who was actually doing the right thing even if his motives did not uphold Kant’s moral law), it would require businesses to be honest and transparent in their dealings with others. This would therefore rule out price gouging (overcharging for essential goods and services – a criticism that has been made of UK energy suppliers). For an employee who uncovers dishonest practices on the part of their employer, especially those that endanger fellow employees or customers, the imperatives concerning truth-telling and the requirement to treat others as ‘ends in themselves’ may mean that any conditions appertaining to their contract of employment (a clause requiring that an employee not disclose confidential information to outsiders) may be set aside.
Thus, a Kantian might approve of of the action taken by Karen Silkwood, a whistle-blower who exposed lax health and safety standards at the plutonium plant she was employed at in the 1970’s. Additionally, the decision of the Ford Motor Company to not correct a design flaw in the fuel tank of its Pinto model because senior management calculated that it would be cheaper to pay compensation to severely injured survivors of accidents that caused the tank to ignite, clearly violates the respect for life embedded in the second formulation of the categorical imperative.
Overall, Kantians would therefore uphold what are known as ‘stakeholder’ concerns. A stakeholder is a term used to describe anyone impacted by business activity, and would disagree with economist Milton Friedman’s view that the only obligations a company has are to its shareholders.
On the other hand, a potential whistle-blower may not be able to live up to the demands of Kantian ethics, as they might have to consider the effects of their actions on any dependants for whom they are provide financially, as well as their future employment prospects if they violated a confidentiality agreement with their employer. Breaking that contract may saddle them with a reputation for being a trouble-maker.
There is also the case of sweatshops to consider, places of employment in LEDCs (Less Economically Developed Countries) where employees work very long hours, where the working conditions can be dangerous, and in which school age children may be employed. A Kantian approach may be one of zero-tolerance: as the workers are not being treated as ‘ends in themselves’ the sweatshop should simply be closed. However, organisations like the Maquila Solidarity Network, who work to improve sweatshop employment practices, favour a more utilitarian approach. Simply closing a sweatshop would mean that those who worked in it are now unemployed and may have no alternative source of income. This may even be the case for children, who could be the sole breadwinners for their families. So, given these potentially adverse consequences, the MSN favour gradual reform.
The examples previously cited also raise the issue of whether capitalism itself, the very context for most business activity, is unethical and – as Marxists maintain – inherently exploitative. If so, Kantians would have to oppose it too. Indeed, the philosopher Byung-Chul Han has likened neoliberalism, the modern form of capitalism which demands constant economic growth and consumption (one thinks of former Prime Minister Elizabeth Truss’s mantra of ‘growth, growth, growth’), to a metastasizing cancerous tumour, one that is wreaking ecological and psychological havoc, and is fated to eventually destroy the world. Han also notes that in the appendix to his book Perpetual Peace, Kant points out that there is a tendency in the economic sphere to follow maxims that are designed to further personal advantage in business, which amounts to a denial ‘that morality exists.’
Additionally, there is considerable hard evidence, as cited by the philosopher John Gray and the statisticians Richard Wilkinson and Kate Pickett, that neoliberal economics, which advocates deregulation to promote free trade and the privatization of most state enterprises, has exacerbated economic inequality (the gap between rich and poor), and been corrosive of social cohesion, social mobility, and family life, wherever such policies have been enacted. Mental and physical health issues, like depression and obesity, as well as a lack of trust between citizens, are also prevalent in countries like the UK and USA, where neoliberal economics has been practised by successive governments since the time of Thatcher and Reagan.
However, for all its flaws, as the utilitarian philosopher Peter Singer has highlighted the fact that, with respect to the period of economic globalisation that took place between 1988 and 2008, capitalism appears to be producing better outcomes in the form of increased incomes for some (though not all) of the world’s poorest people, even though the wealth of the rich has also increased over the same period.
In conclusion, it could be therefore be said that Kantian ethics may not always provide the best approach to business ethics, as it demands too much of those seeking to apply it, as we saw in the case of whistle-blowing. In other instances , to do with sweatshops and the alleviation of poverty in poorer countries, a more pragmatic, utilitarian approach that takes potentially adverse consequences into account is to be preferred. Nevertheless, given that Kantian ethics invariably upholds stakeholder interests, it is certainly of value when it comes to moral decision-making in business. And there is evidence that, so-called ‘Firms of Endearment’, like Ikea, Honda, Costco and Timberland, that genuinely set out to act ethically and sensitively with regard to stakeholders, can perform very well financially too, as revealed by the research undertaken by the corporate philosopher Roger Steare. So perhaps there is a way to make a profit and to adhere to the high moral standards that Kant insists on.