Economics and Ethics
Humanity’s quest for a balanced society with prosperity for all has led it to engage in modern economics as a means of producing society’s requirements and benefitting the producers in a system where demand dictates supply, ideally creating equilibrium. This quest however has been short of ideal, with structures, processes and outcomes falling short of broadly consensual dictates of ethics – fairness, equality, independence, sovereignty, etc. This paper sweeps through economic theory highlighting the ethical debate that has raged since the inception of capitalism.
It does not take a stand on any of the issues highlighted. Labor Exploitation In all of economic theory, the most contentious area of ethics remains labor, with the ideal of fairness standing for inspection. Labor has always felt short-changed for the value it creates on behalf of capital, viewing capitalism as inherently skewed in favor of business owners. The theory synonymous with this school of thought is of course Marxism. Karl Marx’s theory of social conflict starts with the precept that individuals and groups within a societal setup control varying quantities of resources.
With this understanding, Marx posits a theory where the groups with more resources – thus power – use the same to exploit those with less power to their own advantage. This exploitation is implemented in two main ways according to Marx; through economic dynamics and through brute force. Economic exploitation abounds when a capitalist uses up labor and compensates it with money amounting to less than the value of the labor provided. That is how the bourgeois class makes its profits.
It can also be seen in the case of rent, where a tenant may pay rent for a lifetime yet at no point will the property become his, and can still be kicked out. Brute force on the other hand is applied by the powerful whenever their position is threatened, usually manifest in police action in protecting property rights. This is made possible through the ruling class’ political influence, as they inevitably end up assuming the highest offices, and if not, the inductees into these positions by default are bourgeois.
The above arrangement exposes important issues on fairness and greed, where labor is said to be short-changed. It also raises the issue of the deprivation of the right to agitate for equality between labor and capital, as is seen in police brutality in protecting civil rights. They are however countered by capitalists who argue that for labor to work for capital, the two parties inevitably have to arrive at a mutual consensus as to how much compensation is to be given for a set amount of labor rendered.
They extol choice as being inherent in capital-labor arrangements, and as thus, labor has no grounds upon which to agitate. Citizen’s Rights Still on labor, a new phenomenon resulting from globalized economics is emerging where jobs in developed countries are being outsourced to developing ones. As capital seeks to maximize profits, it naturally ends up in areas where labor is cheapest, if the savings on labor outweigh all other factors under consideration.
The loss of administrative jobs to mostly India and China through fiber-optic cables as well as off-shoring of manufacturing plants to Mexico, China, the Philippines, etc have raised questions on whether these phenomena are justified. Labor and progressive politicians in developed countries are up in arms asserting that there should be some measure of security for their workers against foreign competition. They decry the sudden despair industry and administrative workers fall into as a result. On its part, capital contends that its principal aim of profit-making dictates that they seek the most cost-effective means of production.
Besides, they say, by off-shoring and outsourcing, they create jobs in developing countries, thus helping their economic growth and furthering the ideal of equality among nations. This last point is however under intense scrutiny, with evidence to the effect that owing to their desperation, workers in poor countries will take any wage, usually so low as to only be sufficient for subsistence, leaving nothing for savings and investments for personal development. This condemns them to perpetual poverty. (In)-Equality and Fairness Structural Widening of Rich-Poor Gap
While the contentions with capitalism have always been existent since it came into effect, the clamor has lately reached new decibels as the gap between rich and poor nations and individuals has grown to unprecedented levels and is widening at an increasing pace. Never before in economic history has so much prosperity been witnessed; never before has so much squalor. In part, this phenomenon has been attributed to the collective effect over time of capital accumulating wealth at the expense of labor’s input, the latter being compensated less than the value of its input.
Over the past three decades however, the acceleration of this phenomenon has been attributed to neo-classical economics, the school of thought that advocates unbridled free markets, only tinged by government provision of a safe and secure environment for business. However, opponents of the free markets argue that twenty years of letting business dictate most aspects of life have proven counterproductive. Contrary to expectations, the welfare of the majority of the populace in most countries has gone down significantly. In Britain, the years after Margaret Thatcher introduced free market reign saw the steady rise of unemployment numbers.
About 10% of the population was classified as poor before Thatcher’s entry. As of 1999, a quarter of the population was in this bracket. Beyond statistics, being poor means that one cannot heat his/her house in winter or afford sufficient clothing for themselves and their families (George, 1999). Inequality has never been universally accepted as a virtue. Only very few parties would glorify a widened rift between the haves and the have-nots; yet under pure capitalism, it has not only thrived, but has been made official and incorporated into government policy.
Indeed, in Britain, taxation went down for corporations and wealthy individuals, while shooting up for the poorest. The top 1% of taxpayers benefited from 29% of all tax cuts in the 1980s. On the contrary, individuals earning half the average income found their taxes go up 7%. These measures were in an apparent bid to attract capital into the economy, while maintaining the treasury’s budget. Democracy In democracy, ideally, the principle that reigns is that of ‘one man, one vote’. This principle has been ratified as just almost universally today.
In a capitalist system however, the principle that seems prevalent is that of ‘one dollar, one vote’, where one has a say commensurate with her wealth. The result of the market is a situation where the poor is getting poorer while the rich is getting richer. This comes about because resources for production are taken up by those who can afford it – the rich, from those who need the money to survive – the poor. In the end, even the little the poor had is finished up, while the rich retains all the resources necessary to do as they please. Thus the vote goes by the dollar in the market.
This is evident in international politics where poor countries have little say on global issues; the World Bank and the IMF are controlled by the U. S and Europe respectively, as is the U. N, largely by both. At the national level, lobby groups and special interests are known to sway politics by financing politicians’ campaigns and in return, dictating the policies said politician should implement. The effect is that policies get warped to reflect the special interests’ ideologies, which often run contrary to the interests of the majority, thus creating injustice and making a mockery of democracy.
Welfare To what extent should we be responsible for the well-being of the less fortunate in society? And if we are responsible, which is the best way to carry out this responsibility? This is a leading point of ethical concern and a major bone of contention. Capitalists posit that the best way to uplift the poor is through the creation of jobs by investing in new businesses, and as these businesses grow, so does their capacity to create employment and therefore improve overall well-being of society.
Opponents however point to the facts on the ground to explain why they believe the capitalists’ theory has failed in social development – half the world’s population lives on less than $2 a day; even wealthy nations have homeless citizens, etc. To counter these disparities, they have called for welfare economics to moderate the disparities by spreading around the wealth. Such programs include food stamps for the hungry, Medicare and Medicaid for those who can’t afford health insurance and unemployment benefits for the jobless.
If there is one frontline issue that modern capitalists are squarely against, it is this issue of welfare. They have argued – arguably correctly – that the welfare state has encouraged laziness among its populace; what, for example, should a lazy individual to seek employment when he knows that regardless of whether or not they do work, he will somehow find food using stamps, get treated should they fall ill and sleep in a soup kitchen should he lose his home? While there is merit in the laziness argument put up by capitalists, it is not all inclusive.
According to welfare proponents, most people are willing to work, if only they can find the opportunity. An example is those who lose their jobs through outsourcing and as a result cannot afford healthcare; they definitely are not lazy, as they have clearly demonstrated. Such should therefore be helped up to a point where they can get new jobs or have small businesses running. Besides, everyone is born with inalienable rights to basic necessities, and it is up to society to ensure that everyone experiences her rights.
To actualize these ideals, Keynesian economics has been promoted as a more tenable model. It features big government, where the interests of labor are safeguarded by the state and government collects high amounts in taxes to enable it provide sufficiently for the welfare needs of the less fortunate in society. This, it is to be remembered, is precisely what capitalists are against, as they argue that high taxes and heavy regulation drives away investment to other countries. The Environment
Quickly rising to become the foremost issue in economics today, the environment is rapidly degrading as a result of industrial activity; as more oil and coal is burnt by factories, planes and motor vehicles, greenhouse gases build up in the atmosphere, leading to global warming. The burning of fossil fuels continues despite the fact that in developed countries, there is gross over-production of commodities, meaning that the excess gases emitted in these countries are totally uncalled for. Production however continues as countries aim at GDP growth, the predominant measure of a country’s prosperity, however flawed it may be.
A new school of thought has emerged advocating for steady state economics, where production is limited to demand, and is conducted strictly in a sustainable manner. References Bellamy J. F & McChesney R. “Monopoly: Finance, Capital and the Paradox of Accumulation”, in Monthly Review Vol 61 no. 5 October 2009 Pages 1-19. Carruthers B. & Babb S (2000). Economy/Society: Markets, Meanings and Social Structure, 2e. Pine Forge Press. Chapter 1 Chang, H. (Dec 2007). The Myth of Free Trade and the Secret History of Capitalism. Bloomsbury, 288pp. Dowd, D. The Twisted Dream: Capitalist Development in the United States Since 1776.
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