Chapter 3 (Ethics in Capitalism)

What is the evolution of capitalism?


There are increasing levels of ethics in business as we progress

1. Colonial - agricultural production

2. Industrial Revolution - factories & mass production

3. Industrial Entrepreneurs - advance in tech

4. Production - assembly lines (specialize in each step)

5. Marketing - listen & understand consumer wants

6. Relationship - customer relationships (returning customers)

What is the Canadian economic system?

• A bunch of businesses operating in a market system

• Mixed economy

What are the 8 elements needed for capitalism to function? (8)


1. Right of private property

2. Equality of opportunity

3. Competition

4. Individualism & economic freedom

5. Profits

6. Work ethic

7. Consumer sovereignty

8. Role of government

What is 1. the right of private property?

• legal right to own & use economic goods

-> this leads to better care of your property & respect for other's property

• What are some ethical concerns?

-> use of land by animals, wealth gaps, taxation to redistribute wealth, theft of intellectual property

What is individualism?

• Idea that the individual is the paramount decision maker in society (not society or the collective)

• assumes individual is inherently decent & rational

Ethical concern:

• Balance between collective & individual needs (infringing own rights to protect general public - wearing masks)

Describe Indigenous Peoples & property rights

Aboriginal Title: rights of Indigenous peoples to land/territory (granted in the Constitution Act 1982)

• Nunavut is complicated (want to be part of Canadian collective but still keep rights to use land)

What is 4. Individualism & Economic freedom?

• Economic freedoms - when business system operates with few restrictions (tax, regulation, tariffs, government intervention)

• Division of labour - a cycle of exchange of goods & services - value resources as communal goods

• Ethical implications - success by working with others - government programs recognize the public good

• Agency - right to do things that make sense to us (self-interest)

What is 3. Equality of opportunity?

Assumption that all individuals have an equal chance at opportunities

• difficult in capitalistic system, wealth unequal, female disparity, efforts to increase equity

Gender equality: persons of all genders & sexualities have equal means & opportunities

• Discrimination due to lack of understanding/perspective

• Foster equality by increasing opportunities (education, hiring, representation)

What is moving from inequity to equity?

• businesses work to achieve greater perceived fairness

What is 4. Competition?

• Normal condition in a market system where many rival sellers seek to provide good & services to many buyers

• should lower costs & prevent waste

• due to barriers to entry, some firms enter certain industries

What are 5. Profits?

• Excess of revenues over expenses (more competition, less revenues - must be efficient to make more revenue)

• Profits sometimes viewed as immoral

• Taxation of excessive profits to redistribute

3 ways to earn more profit:

1. Sell more of the item

2. Sell the item at a higher price

3. Produce the good more efficiently

What is 6. the work ethic?

• A code of values claiming that work is desirable, natural, and good

• Protestant work ethic: unemployment is temporary misfortune/deficiency

• Now have higher standards of conditions -> work-life balance

How does the work ethic vary across generations?


• Millennials & Gen Z - collaborative, smarter, quicker, diverse, higher morals

• Rising cost of living, more debt, less likely to stay with a company for 30 years

What is 7. Consumer Sovereignty?


• Consumers have power over the producer by what they decide to buy/not buy (more competitive, more power)

• Marketing understands & shapes consumer behaviour

Ethical Implications:

• consumers should exercise power, Governments protect competition, large business have more impact on consumers

Boycotts - abstaining from using/buying as a protest

• more successful with: passion, low participation cost, easy-to-understand issues, social media

What is 8. Role of Government?


Government's role in law, welfare, currency, etc.

Regulation to restrict or promote industries - influential stakeholder in business

• Laissez-faire approach -> minimal Government involvement

What is 8. Scope of Government in Society?

Government fosters economic growth:

• buy a lot of stuff, promotes businesses, loans, rescue failed businesses, owns businesses (VIA rail to compete)

• Shield industry from tariffs, quotas, chooses tax, free-trade, protects low income, environment, consumer protection

• Regulate monopolies, oligopolies

What are regulated industries, deregulation, and privatization?

Regulated industries: insurance, transportation, utilities, communications

• prevent high prices -> expensive industries to get into (barriers to entry)

Deregulation: reduction of government influence - freer more efficient marketplace

Privatization: selling off state-owned assets to private organizations

What is 8. Self-regulation?


Regulation imposed by the corporation or industry (not by government or market forces)

• faster, cheaper, more efficient, more effective than government

• Can be self-serving (lower standards), hard to administrate

Self-regulatory organizations: industry/professional groups responsible for regulating business conduct & operations

What is 8. Private (Civil) regulation


Non-profit, independent organizations that set standards for responsible business practices

• Private: no government involvement

• Civil: voluntary, community

Third-party certification: approval by an organization independent of government and business after reviewing the production of good/service

Why adopt certification? due to pressure from NGOs, shame, following competitors

What is 8. Market regulation?


Should apply when competitive markets exist

Corporate self-discipline: norms/standards are developed, used, enforced by the corporation

• Simplifies trade-off between financial health & ethical concerns

• Greenwashing: companies pretend to do the right thing

What is 8. Striking a balance?


Balance between private & public (business & civil society)

• Private sector: innovation, investment to promote growth & employment

• Government: institutions, rules, education, to promote private sector

Balance shift back & forth (government regulation, to self-regulation, to private regulation, to market regulation)

What is 8. Ethical Implications?


Government is a participant & stakeholder in business

• They monitor & participate

To solve issues & prevent monopolies:

• restrict natural resource sale, product standards, prevent business from shutting down plants, trade practices, influence approach to ethics

What are some challenges to ethics in capitalism?


• Greed

• Business failures

• Wealth disparity

• Corporate crime

• Damage to environment

• Economic downtowns, stagnant incomes vs. increasing CEO salary, reliance on market system that is rarely perfect

What is Capitalism as an ethical system? (pros, assumption)


Pros:

• produces wealth, prosperity, greater well-being than other economic systems

• creative & productive forces operate

• co-operation despite competition

• respects freedoms & rights

Assumption that moral individuals operate in the business system