Can Economics Be Ethical?

The answer is not certain, but the future wellbeing of the world depends on it. Whatever the difficulties, economics with imperfect ethics cannot fail to be an improvement over economics without ethics. A strong argument can be made that most of the world’s inequalities stem from the latter.

The essential problem, as I see it, is that the ethical beliefs and behaviors of individuals are not necessarily reflected in the behavior of their organization, or in economics at large. The ethical behavior of individuals is indeed problematic, but organizations, particularly corporations, are by nature impersonal. In spite of what the Supreme Court thinks, they are not people. They are non-living, an-ethical constructs incapable of ethical or any other kind of human behavior.

In spite of what the Supreme Court thinks,
corporations are an-ethical non-humans.

Garment manufacturing is a good place to look at the juncture of ethics and economics. In the news recently we have read about the welfare of garment workers, both at home and abroad in Third World countries like Bangladesh, where fatal factory accidents are frequent, and pay is sub-poverty. But assuring an ethical climate there has turned out to be difficult even with the best of intentions.

Some US clothing manufacturers are attempting to make and market clothing at home in the US, but that is also difficult. Clothing from the Third World is so cheap that we usually buy new clothing rather than repair what we have. It is so cheap that most of us can afford at least a few seasonal fashion purchases. Charities like Goodwill are forced to dispose of tons of donated clothing made in the Third World on a regular basis.

The temptation of inexpensive clothing
from the Third World
is too much to resist.

There is some economy gained from lower transportation costs at these American sites, but that is not nearly enough to put retail prices in the same range as clothing from Bangladesh. Nobody in the US can afford to work for Third World pennies, but manufacturers at home are compelled by the global market to minimize wage costs, even more than usual under the capitalist imperative. Other costs that might make a difference include executive compensation. I have seen no figures, but it seems to me any US garment company hoping to compete at home cannot be giving execs the truckloads of money so common to other capitalist enterprises.

We consumers would presumably prefer to give our money to our own workers, but the temptation of inexpensive Third World clothing has been too strong to resist. And so, we share in the ethical dilemma, because even those of us with modest income gain significant wealth in clothing because of low costs in Bangladesh. But we are also supporting an industry where safety means little and wages are well below poverty level. Although few of us seem to think about that, when we do learn about it, we are concerned.

We support an industry
where safety means little
and wages are well
below poverty level.

H&M, the Stockholm-based retail clothier, has established a policy to pay a “fair wage” for the manufacture of everything they sell within a few years, although so far they have not clearly defined what that means. If they are able to do it and still maintain sales, it will signal to business that it can be done, and that buyers are willing to honor their own ethical concerns about Third World clothing even if it costs them a bit more.

One factor that might make US products more competitive is worker ownership. Worker ownership in local perishables markets is easier to establish than in manufacturing markets where the Third World competes, although it’s not so easy even then. Establishing a worker-owned manufacturing factory from scratch in the global market is more difficult, because it requires a significant investment by every worker, and their necessarily low pay sharply limits investment. In garment manufacturing, however, economy of scale is less important because there is less benefit to be had from automation. Garment factories everywhere still consist of rows of sewing machines and individuals operating them, so small manufacturers are not so severely penalized for their size, which helps potential worker-owned companies.

The joining of ethics to economics
is fraught with difficulties.

As we can see, the joining of ethics to economics is fraught with difficulties. But economics without ethics is far worse. If there is to be democracy and equality in the world, we must find ways to moderate the overwhelming an-ethical behavior that allows corporations and their owners and executives to benefit from the misery of the world’s people.

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3 CommentsLeave a comment

  1. You might find the following essay by Yves Smith (Susan Webber) interesting.

    http://www.nakedcapitalism.com/2013/10/ethics-and-complex-systems.html

    Her thesis is that we live in a world of large organizations in which (1) what’s good for the organization is different from what’s good for the individual within the organization and (2) it is impossible to foresee all the consequences of one’s actions.

    In such a situation, economic self-interest is not a sufficient guide, even for producing economic well-being. It is necessary to have an inner moral compass—which the study of economics does not give you.

    • I agree, it’s a worthwhile essay.

  2. Capitalism is amoral. Capitalists run the gamut, from comic book level villainy to moral humans.


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