Can an Economy Ever be Moral?

Another Moral Economy Column
By Christopher Lind
February 2011

If I said Big Business can never be moral, would you agree with me? Why is that? In general, people are pretty cynical about commercial relationships. The bigger the business, the more cynical people are. With size, all relationships become more impersonal. You don’t know the owner and they don’t know you, your family or your community. “Buyer beware” is the dominant motto and you better be very careful if you want to protect yourself against the predatory practices of … (shall we make a list?) … oil companies, used car salesmen, cell phone companies, banks etc.

When I ask people what can be done to make the economy more moral, they typically respond with ideas for personal reform. Banks should have Codes of Ethics so employees are forced to be honest. Oil companies should have training programs for their executives so employees don’t lie, and so on.

These are good responses as far as they go, but that isn’t far. You see, I actually think big business can be moral but all of us are caught up in social systems that are far larger and more influential than our personal relationships. Strong personal ethics are necessary for a moral economy but they are not sufficient. A moral economy also requires a social ethic. What goes into a social ethic? There are many principles but one of them would be mercy.

Bankruptcy is an example of the principle of mercy applied to modern economies. Bankruptcy is a declaration that the commercial enterprise is broken and cannot be fixed. So, the principle of mercy is applied. The remaining assets are divided among the creditors according to certain criteria and the enterprise is over. The parties are now free to restart this or another enterprise. This principle of mercy applies both to personal bankruptcy and to corporate bankruptcy.

Sometimes bankruptcy is thought to contradict the principle of responsibility. We all agree that in general, people who borrow money should pay it back, whether they are individual homeowners or big corporations. In practice though, the larger the corporation the more likely it is to be rescued by governments. This is especially so if the corporation is so interconnected to other corporations that its failure threatens the whole lot.

In the United States pressure is building to address the contradiction as virtually bankrupt companies like the insurance giant AIG, and formerly bankrupt corporations like GM, pay out million dollar executive bonuses while homeowners continue to be foreclosed, because banks refuse to renegotiate mortgages. In this case mercy is being applied to investors and responsibility forced on homeowners. Some people argue that the contradiction should be resolved by forcing the same punishment on investors as on homeowners. I take the opposite view. Mercy is a powerful principle and should be available to investors and homeowners, farmers and students alike. It is a reflection of one of the oldest and widely supported moral rules known to humanity – the Golden Rule. Do unto others, as you would have them do unto you.

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• This column is published in The Western Producer, Canada's largest agricultural newspaper