10 Propositions on Ethics in Capitalism

Remarks prepared for a lunch discussion at Bloomberg's,
London, October 15, 2004 (UN/FAO World Food Day)

(See also, Ethical Capitalism..... )

1) Probity matters (see 4). But we should keep ethics out of as much discussion as possible. Remember, "ethics" equals "opinion". All ethical positions are a matter of debate. Sweat shops? Fair trade? Animal rights? Fatcat pay? All these and more are rightly debatable, and crying "Ethics!" is more a way of shutting down proper debate than getting the "right thing" done.

2) Keep the law out of as many situations as possible. Laws are usually expensive to regulate and are often poorly-designed anyway. Keep the state out as well (it will tend to vulgarise isues, in the hope of populist success).

3) Most businesses have competing self-interests: rules work best which recognise this. Rules about insider trading, for instance, preserve the strength of the market overall. Fatcat pay, though, is much less clear, and much less a proper area for rules.

4) Distinguish between issues of probity (personal and professional standards) and virtue (ethics and do-gooding). Business people have a strong obligation to uncorrupt behaviour (avoiding venality and cupidity), but should abjure do-gooding. They should remember: firms cannot be virtuous, only persons can be. Probity is de minimus and possible; "virtue" is open-ended and impossible.

5) Looking at 1) and 4), one should remember that do-gooding is hotly-disputed. One man's charitable giving is another man's creation of dependency. Rich consumers are right to consider the poverty of many of their suppliers. But there is no certainty (perhaps not even a likelihood) that over-paying their suppliers will help the poor societies in which these poor workers live.

6) When a firm signs up for a do-gooding position, it is assuming its shareholders, customers and employees all agree that the firm is doing the "right" thing. This is to assume more consensus than it has a right to expect (and much more than it has a right to enforce) .

7) It is fine for a firm to become strongly committed to this or that do-gooding, providing there are plenty of opportunities for its shareholders, employees and customers to involve themselves in the sector in a "no frills" way (ie, to abandon the firm for one which isn't making those assumptions).

8) Firms should never muddle claims of virtue and claims of self-interest (ie, the Triple Bottom Line). If an action isn't hurting, it isn't virtuous.

9) Highly-opinionated firms (Body Shop, Ben and Jerry, etc) may indeed gain market share because of their supposed "virtue", but we should not believe that self-proclaimed virtue is likely to be other than humbug. "Ethical Firms" should be renamed "Opinionated Firms".

10) Firms tend to "buy" their "ethical" positions from charming, radical NGOs staffed by people who are well to the left of society. We wouldn't trust them to run the country, or our firm, or our pension fund. So why do we think they are good gate-keepers of something as tricky as ethics? They understand business about as well as the average parish priest does.