Ethics of free market

RAGHU DAYAL
The Hindu, Nov 16, 2004

MORALITY OF MARKETS: Parth J. Shah — Editor; Published by Academic Foundation in Association with Centre for Civil Society, New Delhi, 4772/23 Bharat Ram Road (23 Ansari Road), Darya Ganj, New Delhi-110002. Rs. 595. THIS BOOK deals in essence with currently popular and generic issues of the welfare state — democracy, globalisation, capitalism, business ethics, corporate social responsibility and good governance. The delineation of such a subject with multi-dimensional aspects involving as many as 23 eminent contributors, deftly categorised into four segments, although without a clear coherence nor inference, helps to bring into focus a whole gamut of concepts of vital concern to the people across the world. In 1999, the world's three richest people were worth more than the combined GDP of 34 of the poorest nations; as many as 51 of the 100 largest economies were not nation-states but corporations. As the financial capital market and business corporations are created by society, there is a view that it is their responsibility to ensure the progress of society.

Business and morality

Often businesses can appear soulless, distant, selfish and rapacious. Information with regard to malfeasance, like in Enron in recent memory, damages just about every element of liberal capitalist democracy, engendering ignominy for capitalism viewed for its greed and ruthlessness. Business leaders often feel that what is good for business is good for the country.

Brian Griffiths enlightens in his article, The Business Corporation as a Moral Community that perhaps the person who most successfully portrayed the characteristics of an amoral economy was Bernard Mandeville in The Fable of the Bees: or Private Vices, Publick Benefits, singling out "dishonesty, selfishness and devotion to vice as the emotions which lay at the root of prosperity." For Griffiths, "The business of business is business in which a moral standard has no relevance."

Social responsibility

The post-Depression phase signalled a transition from a predominantly laissez-faire economy to a mixed economy in which business found itself one of the constituencies monitored by a more active government. Tibor R. Machan explains in The Petty Tyranny of Government, "This theory that freedom rights and welfare rights must be protected by the government is the most well developed moral position in support of government regulation."

This observation may well be juxtaposed with another from Leonard E. Read in his Ignenuous I, Pancil, "Leave all creative energies uninhibited. Merely organise society to act in harmony with this lesson ... Have faith that free men and women will respond to the Invisible Hand."

As the overview by the editor sums up Milton Friedman's classic argument, "The social responsibility of business is to increase its profits," is challenged by Don Lavoie and Emily Chamlee-Wright in The Market Order and the Moral Order and Tibor Machan in his Business Ethics in a Free Society the former maintaining that mainstream economics creates a misleading image of what good management is and the latter saying that professional ethics depends mainly on constant vigilance, on sustained direction and prudence, and on wisdom, rather than on certain set rules.

Friedman himself does not appear to differ in finer nuances, "In my book Capitalism and Freedom I have said ... there is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."

Government role

Parth J. Shah aptly alludes to a remark made by Warren Buffet, "In looking for people to hire, you look for three qualities — integrity, intelligence and energy. And if they don't have the first, the other two will kill you."

In the words of Murray N. Rothbard it is curious that "people tend to regard government as a quasi-divine, selfless, Santa Claus organisation... government was built for the use of force and for necessarily demagogic appeals for votes."

Most common charges against the free market signify that it does not provide for equality and security, encourages unbridled "selfish materialism." Likewise, in Morality and Character of Development, Edward W. Younkin advocates that business people have incentives to do the right thing and thus would refrain from lying and cheating, mistreating workers and misinforming customers.

The familiar refrain of the desired level of government intervention echoes in James A. Dorn's The Rise of Government and the Decline of Morality, "The task is not to reinvent government or to give politics meaning; the task is to limit government and revitalise civil society." Again he says, "We should end the parasitic state, not because we want to harm the poor, because we want to help them help themselves."

Liberalisation

Implying a similar significance is Sharad Joshi's reference to Gandhiji's prescription in Liberalisation and Markets in Hindu Spirituality, "All that the poor need is that the world get off their backs." No doubt, the reference to some more modern concepts conforms to the current beliefs like Ian Harper citing Amartya Sen's talk of economic development as freedom and poverty as "unfreedom".

Amartya Sen himself maintains that globalisation is no curse, "The central issue of contention is the inequality in the overall balance of institutional arrangements — which produces very unequal sharing of the benefits of globalisation."

The idea of corporate social responsibility (CSR) emerged as an issue in the late 19th and early 20th Centuries. It is Alexei M. Marcoux, who believes that the stakeholder theory constitutes at least something of an advance over CSR. He quotes Robert Phillips that one of the goals of the stakeholder theory is to maintain the benefits of the free market while minimising the potential ethical problems created by capitalism.
 

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