Philosophy 360: Business Ethics Chapter 7

Evaluating Systems and Structures If some social, governmental, or economic institution contains some essential feature that is not in itself morally defensible or that on the whole produces bad consequneces, then that institution may be criticized for necessarily containing that feature. For example, feudalism isn’t feudalism without some form or another of serfdom. Since serfdom is in itself morally objectionable, feudalism is morally objectionable for necessarily containing serfdom.

Making a model: So that we may understand what we are criticizing and examining, we must create an ideal representation of an economic model and then we may take contemporary economic systems and compare and contrast their fit with the ideal model.

A Capitalist Model Capitalism can be said to essentially contain three elements: – Available accumulation of industrial capital – Private ownership of the means of production – Free market system Gov’t does not set the price of goods, set wages, or control production Competition (no artificial monopolies or monopsonies) Resources are free to move about the system so as to go toward purposes believed to generate the greatest return

Capitalism and Government Economic systems are evaluable independently of governmental systems and vice versa, but the relations between governments and economic systems are also morally evaluable. Looking at six historical relationships between capitalism and government will help us categorize and clarify aspects of contemporary relationships between governments and economic systems that we wish to criticize.

Historical Types of relationships between capitalism and government: 1.Lassez-faire: Government’s only legitimate role is to guard the basic conditions necessary for commerce and adjudicate disputes. (i.e. only police, courts, military, and only as much of those as absolutely necessary) – Two questionable assumptions: The total set of individually motivated decisions will be to the benefit of society as a whole Whenever competing enterprises act immorally, the market will act as a corrective

Historical Types of relationships between capitalism and government: 2. Internal Protectionism: The government acts to serve primarily the interest of business, even at the expense of other sectors of society. – The moral objections to such a dominant structure are obvious, but such elements are often present in contemporary capitalist systems – Part of the Marxist critique of capitalism maintains that this relationship between capitalism and government is an unavoidable consequence of capitalism.

Historical Types of relationships between capitalism and government: 3. External Protectionism: The role of government is to protect domestic industries from competition by means of tarriffs, quotas, import taxes, embargoes, cartels, etc. – The rationale is that domestic industry benefits society and preserves economic independence. – This is plausible if all of that is really true, but does ignore the effects of protectionism on those outside of society.

Historical Types of relationships between capitalism and government: 4. Umpire: The role of government is to set rules, enforce fairness, undertake some public projects (schools, roads, etc.) and take on the responsibility of caring for those who are unable to take part in economic activity. – Each of these actions requires some moral defense, usually to ensure that its goals are really achieved.

Historical Types of relationships between capitalism and government: 5. Cooperative: In this model, both business and government view the overall social good as the ultimate purpose of both business and government, so competition is allowed where beneficial, while some companies are protected when they do great social benefit.

Historical Types of relationships between capitalism and government: 6. Market socialism: The market is allowed to operate so long as it actually achieves efficiencies, otherwise, government takes control of even private industries in which the market is inefficient (e.g. public utilities), where economies of scale are important (e.g. interstate highways), or where universal standards are required (e.g. air traffic control). – “There is no reason why a government’s running an industry need be any more moral or immoral than private entrepreneurs doing so. What counts is how the running is done.”(De George 127)

A Socialist Model Contains three key features: – An industrial base – Social ownership of the means of production Refers to state or worker ownership, not universal ownership – Centralized planning Need not be total central planning. The point is to disallow competition where competition is viewed as undesirable.

Some abstract comparative virtues Capitalism Promotes individual freedom Promotes/rewards initiative Compensates risk-takers Efficient distribution of goods Socialism Promotes equality and security Prevents exploitation Mitigates gross inequalities of wealth Covers basic social needs

Justice Recall Rawls’ conditions for distributive justice. Both capitalist and socialist systems of some stripe may fit those conditions. We must make a distinction between justice of economic systems and justice in economic systems. Different formulations of justice may be acceptable but mutually inconsistent. In this case, they are prima facie principles, and we must evaluate the arguments furthered for each.