BUSINESS ETHICS & other paradoxes © Jimmy Winfield, George Hull, Greg Fried 2014 ISBN: 978-0-620-60518-2 This book may not be available in bookshops. Please order directly from the publisher, using the contact details below. Fairest Cape Press (Pty) Ltd Cape Town, South Africa www.fairestcapepress.com e-mail: info@fairestcapepress.com alternative email: michelevw@xsinet.co.za phone: +27 (0) 83 292 3440 Cover design by Linnea Chapman Front cover art work: detail from: Eric Zener's Man on a Tightrope, 48 x 38", oil on canvas, 2009 The moral rights of the authors have been asserted. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the authors or publisher. BUSINESS ETHICS & other paradoxes by Jimmy Winfield, George Hull & Greg Fried ABOUT THE AUTHORS James ‘Jimmy’ Winfield teaches Accounting for the College of Accounting and the Graduate School of Business at the University of Cape Town (UCT) and Business Ethics for the Philosophy Department. He holds a B.Bus.Sci, a B.Com (Hons), a Postgraduate Diploma in Accounting, all from UCT, and an MA in Philosophy, Politics and Economics from the University of Oxford, where he was a Rhodes Scholar. Before following his love of teaching he worked in commerce as an accountant, auditor and management consultant, and still owns and runs a small business. His academic work on business ethics began in 2006 and includes teaching various university courses, running seminars for professionals, writing articles for journals and producing commissioned research. When he is not working he cherishes time with his wife, Laura, their children, Tommy and Sarah, family, friends, and his current pastimes of trail running, learning the acoustic guitar and making his own craft beer. George Hull studied Philosophy at the University of Cambridge (from which he holds an MA) and University College London (which awarded him a PhD). He has also been a visiting research student at the Eberhard Karls Universität, Tübingen, and the Goethe-Universität, Frankfurt am Main. Since 2013 he has been a lecturer in Philosophy at UCT, where he teaches Political Philosophy, Biomedical Ethics, Critical Philosophy of Race and Business Ethics. Before becoming a full-time philosopher, he was a theatre critic for The Spectator in London, UK. Greg Fried lectures in the Philosophy Department at UCT, and holds a doctorate in the History and Philosophy of Science from Trinity College, Cambridge. He has taught courses in the history of philosophy, philosophy of mathematics, philosophy of science, epistemology, aesthetics, political philosophy, philosophy of mind, creative non-fiction and, of course, business ethics. His research includes work in social choice theory, a mathematical theory of collective decision making. Greg and his wife Lisa Lazarus have produced two children and three books together. Their jointly-written publications are two novels which appear under their pen name Greg Lazarus—Paradise (2014) and When in Broad Daylight I Open my Eyes (2012)— and a memoir, The Book of Jacob (2009). For all the lecturers, administrators, tutors and students of Business Ethics at UCT, in gratitude for their invaluable contributions over the years. CONTENTS SECTION A: FOUNDATIONS OF BUSINESS ETHICS 1. INTRODUCTION by Jimmy Winfield 2 What is the purpose of this book? Who is this book for? Will this book make you more ethical? What is philosophy? What is critical thinking? How does learning philosophy help with critical thinking? How to use this book 3 4 5 6 7 8 9 2. BASIC TERMS AND CONCEPTS by Jimmy Winfield 11 What is the difference between ‘ethics’ and ‘morality’? What do ‘moral’, ‘immoral’ and ‘amoral’ mean? Is it easy to distinguish moral issues from amoral issues? How can we distinguish the moral usage of ethical terms from their amoral usage? How can we distinguish moral standards from amoral standards? Can we explain the notion of moral obligation without using ethical terms? What is the difference between descriptive and normative ethics? What challenges are there to the idea that there are objective moral facts? What is emotivism and why do most philosophers think that it is incorrect? What is moral relativism and why do most philosophers think that it is incorrect? What is the doctrine of divine command and why do most philosophers think that it is incorrect? Can you be ethical without thinking critically? Will you be ethical in business if you simply obey God’s advice? Will you be ethical in business if you simply obey the law? Will you be ethical in business if you simply rely on your gut? Who are you to decide right from wrong? 11 12 14 14 15 16 17 17 18 19 21 22 22 23 25 26 3. CRITICAL THINKING I: HOW TO REASON LOGICALLY by Jimmy Winfield 30 What is logical reasoning? What is the basic structure of an argument? What is a valid argument? What is a sound argument? How does one show that an argument is unsound? What are some typical examples of unsound arguments? How are moral arguments special? What does it mean for a moral standard to be consistent? What is an inductive argument? What is an argument by analogy? 30 31 31 32 34 35 41 42 44 46 4. CRITICAL THINKING II: WHY WE SHOULD INITIALLY CONFRONT MORAL BELIEFS WITH SCEPTICISM by Jimmy Winfield 49 What is a cognitive bias? What causes cognitive biases? What sorts of factors might impair our critical thinking? 50 51 52 Contents · iii How might our feelings impair our critical thinking? How might our position in time impair our critical thinking? How might our self-esteem needs impair our critical thinking? How might our personal experiences impair our critical thinking? How are we to avoid the effects of cognitive biases? 52 54 55 56 57 5. THE ETHICS OF ECONOMIC SYSTEMS by Jimmy Winfield 61 How might cognitive biases misguide our moral reasoning about economic systems? What is pure capitalism? What is the resource-allocation mechanism in a capitalist economy? What is pure socialism? What is a mixed economy? Is a mixed economy halfway between pure capitalism and pure socialism? What is the libertarian argument for capitalism? What are the counterarguments to the libertarian argument for capitalism? What is the invisible hand argument for capitalism? How is the invisible hand thought to create economic efficiency? What are the counterarguments to the invisible hand argument based on market failure? What is the counterargument to the invisible hand argument based on exploitation? What is the counterargument to the invisible hand argument based on inequality? What is distributive justice? What is the utilitarian view of distributive justice? What is the ‘equal opportunities’ view of distributive justice? What is the ‘difference principle’ view of distributive justice? What is Rawls’ ‘original position’ argument for the difference principle? How might we summarise the Rawlsian view of distributive justice? What are the implications of inequality for the invisible hand argument? Is there an inductive counterargument to the invisible hand argument? What are the arguments against socialism? Why is a mixed economy the best economic system? 61 62 63 64 66 68 69 71 73 75 76 79 80 80 81 82 83 85 86 87 88 88 89 6. IN WHOSE INTERESTS SHOULD BUSINESSES ACT? by Jimmy Winfield 94 Why can’t we simply say that businesses should act in everyone’s interests? 95 Why don’t businesses have just the same set of moral obligations as individuals? 95 What is a corporation? 96 If a corporation is equivalent to an individual in law, is it not equivalent to an individual in ethics? 97 Are businesses really the sorts of things which can have moral obligations? 97 THE NARROWEST VIEW: Is a business obliged to act in its shareholders’ interests only? 100 SHAREHOLDER PRIMACY: Should a business prioritise its shareholders’ interests? 101 Argument 1 for Shareholder Primacy: Profit-seeking businesses benefit everyone 103 Argument 2 for Shareholder Primacy: Governments, not businesses, ought to benefit society 105 Argument 3 for Shareholder Primacy: Businesses are incapable of benefiting other stakeholders 107 Argument 4 for Shareholder Primacy: The purpose of business entails Shareholder Primacy 109 Argument 5 for Shareholder Primacy: Shareholders have rights of ownership 111 THE STAKEHOLDER MODEL: Should a business balance the interests of all stakeholders? 115 Argument 1 for the Stakeholder Model: All the arguments for Shareholder Primacy fail 115 Argument 2 for the Stakeholder Model: Businesses are citizens 116 Argument 3 for the Stakeholder Model: Extraordinary power means extraordinary responsibility 116 Argument 4 for the Stakeholder Model: All stakeholders make significant contributions 118 Is it really possible to implement the Stakeholder Model? 119 What if acting in the interests of all stakeholders benefits shareholders? 120 Has the debate been decided? 121 iv · BUSINESS ETHICS & OTHER PARADOXES SECTION B: BUSINESSES AND THEIR CUSTOMERS 7. PRODUCT SAFETY AND LIABILITY by George Hull 128 Defective products Risk and rights A market in risk? The value of preventing a fatality Liability for harmful defects Caveat emptor Negligence Strict product liability Conclusion 129 130 134 139 150 151 152 153 155 8. IS ADVERTISING IMMORAL? by Greg Fried 160 General critiques of advertising Galbraith’s Dependence Effect Arrington on four potential objections Advertising produces desires in us that are not autonomous Advertising produces irrational desires in us Choices that we make as a result of advertising are not free Advertisers control us Evaluation of Arrington Autonomy Rational desire Free choice Control Levitt on the value of advertising 160 161 164 164 164 165 165 166 166 167 168 168 169 SECTION C: BUSINESSES AND THEIR EMPLOYEES 9. MEANINGFUL WORK by George Hull 174 Work, meaning, value, happiness Work Meaning Value Happiness Realising your potential Jobs fit for human beings Conclusion 174 174 175 177 180 184 191 195 10. AFFIRMATIVE ACTION by George Hull 198 Affirmative action and equal opportunities Affirmative action Equality of opportunity Proxies for disadvantage Affirmative action as redress Conclusion 199 199 200 210 212 218 Contents · v 11. EMPLOYEE RIGHTS by George Hull 221 Contractual obligations Workplace safety Workplace privacy Interests of the employer Interests of the employee Interests of customers (and other third parties) Collective bargaining Secondary strikes Disruptive and coercive strikes The “closed shop” Political affiliations of trade unions Conclusion 221 227 232 237 238 238 239 245 246 246 246 249 12. WHISTLEBLOWING by Greg Fried 253 Basic considerations raised by DeGeorge 254 DeGeorge’s considerations against whistleblowing 254 DeGeorge’s consideration in favour of whistleblowing 255 DeGeorge’s default presumption about whistleblowing 255 The kind of whistleblowing under discussion 255 Permissible whistleblowing 256 Condition 1: There is a threat of serious, considerable harm 256 Condition 2: The employee’s immediate superior has been informed—without result 257 Condition 3: Others in the company have then been informed—without result 257 Obligatory whistleblowing 257 Condition 4: The employee has clearly persuasive evidence 257 Condition 5: The employee has a reasonable belief that the whistleblowing will rectify the situation; so the success must be worth the risk 258 Merits of DeGeorge’s guidelines 258 Criticisms of DeGeorge 258 SECTION D: BUSINESSES AND SOCIETY-AT-LARGE 13. BUSINESS AND THE ENVIRONMENT by Greg Fried 266 Who (or what) has moral standing? (i) Human beings (ii) Conscious beings (iii) Organisms Must we consider future generations? DesJardins’ guidelines for companies Shaw and Barry on government regulation (1) The regulatory approach (2) The incentives approach (3) The pricing approach 266 267 268 272 273 273 274 275 275 275 14. GLOBAL BUSINESS ETHICS by George Hull 279 Globalisation Standards in less economically developed countries Double standards 280 284 284 vi · BUSINESS ETHICS & OTHER PARADOXES Workplace abuse Child labour Suppliers’ standards The duty of rescue Legitimacy Conclusion 287 287 289 291 294 299 SECTION E: BUSINESS ETHICS IN PRACTICE 15. BEHAVIOURAL ETHICS by Jimmy Winfield 304 Why should people behave ethically? Why do people behave unethically? The influence of personal incentives The influence of hunger and fatigue The influence of cognitive busy-ness The influence of emotional factors A boss’s influence The influence of colleagues The influence of one’s organisational role The influence of organisational culture How can organisations promote more ethical behaviour? How can individuals make better ethical decisions in business? 306 309 309 312 312 313 314 315 319 319 321 323 16. AN EXAMPLE OF PROFESSIONAL ETHICS: THE ETHICS OF CHARTERED ACCOUNTANTS by Jimmy Winfield 328 What is a professional? What is a Chartered Accountant? Why is it important for society that Chartered Accountants do their jobs ethically? What specific ethical challenges are faced by Chartered Accountants in public practice? What are the sources of ethical guidance for Chartered Accountants? What is the ‘conceptual framework approach’ of the CPC? What is the basic structure of the CPC? What does the CPC say about independence? What specific advice does the CPC give about ethical conflict resolution? How are the ethical obligations of Chartered Accountants enforced? CASE STUDIES 329 329 330 331 332 333 336 337 339 340 341 APPENDIX A: GUIDE TO FURTHER READING 346 APPENDIX B: MODEL ANSWERS 354 INDEX 373 Section A FOUNDATIONS OF BUSINESS ETHICS Section A FOUNDATIONS OF BUSINESS ETHICS Chapter One INTRODUCTION by Jimmy Winfield The twists and turns of your life may bring you to strange and unlikely positions. One of the stranger and less likely positions would be that of a university lecturer in Business Ethics. If the fates were to conspire against you in this tragic way, one of the unpleasant things for which you would have to prepare is that meeting new people would become eerily predictable. ‘Pleased to meet you,’ they would say, ‘What do you do?’ Your innocent, honest response ‘I teach Business Ethics at the University’ would almost invariably be greeted by a dramatic pause, and then ‘Hah! “Business Ethics”. Isn’t that a paradox?!’ A paradox is a contradiction, like the sentence ‘this is a lie’. People think of ‘business ethics’ as a contradiction because ethics is about doing the right thing, and yet they think businesses rarely do the right thing. Some people even go so far as to claim that business is necessarily unethical, as if there is something about being successful in commerce which requires businesspeople to behave wrongly. Given how influential businesses are in our lives, it would of course be very worrying if this were true. Paradoxes are powerful because they can lead to important discoveries: when they are genuine contradictions they can for example show that an argument is mistaken, or that a common assumption about the world is false. We shall be using paradoxes in this way later in this book. However, some paradoxes are only apparent contradictions, like the notion that photons have the properties of both waves and particles. Although this seems impossible, it is an established scientific fact. ‘Business ethics’ too is only an apparent contradiction: it is certainly possible to be both ethical and successful in business. Indeed, as this book will show, depending on how one thinks of ‘success’, it may even be paradoxical to believe that an unethical business person can be truly successful. So let us begin with a confession—that our subject is at the very least an apparent contradiction—but let us also take inspiration from what the Danish philosopher Søren Kierkegaard had to say about such things: ‘one must not think ill of the paradox’ he wrote, ‘for the paradox is the passion of thought, and the thinker without the paradox is like the lover without passion’.1 Chapter 1 · Introduction · 3 What is the purpose of this book? ‘Business’ has been around ever since the first caveman allowed his daughter to be taken away in exchange for a new spear, and ‘ethics’ has been around ever since the first cavegirl called her father a selfish pig. Since those days much has been said and written about the two disciplines separately, but it is only recently that much serious thought has been given specifically to ethics in business. Some people believe that our values have eroded over time. That may explain the increased attention to business ethics lately. According to this view, features of past societies kept unethical behaviour in check without businesspeople having actively to think much about whether they were doing right or wrong. For example, maybe the prevalence of people who held strong religious views (compared to our times) meant that more people had a very compelling, divine reason to resist immoral temptations in business; or maybe people in the past were less materialistic than we are today and therefore were not so motivated to shortcut across ethical boundaries in the pursuit of financial gain. Alternatively, we could explain the recent focus on business ethics in a more uplifting way: by pointing instead to the moral progress that we have made. For example, maybe the modern appreciation of human and civil rights has meant that we are now much more keenly aware of ethical shortcomings that were overlooked historically, like the abusive treatment of child labourers during the Industrial Revolution. Another, structural explanation—which might surprise you—is that in recent decades business has become less connected to public policy. For example, in the middle of the previous century, the US economy was controlled by a few enormous monopolies working closely with government and national unions. By contemporary standards, it and many other countries were a great deal more socialist. Now, globalisation, technology and politics have meant that business—though enormously influential—is no longer controlled by policymakers, with the result that business ethics has emerged as an increasingly important, separate field. Whatever the explanation, the world has discovered that there is a deep need to engage with matters of ethics in business. The institution of business now affects virtually every person, every hectare, and every animal species on the planet—at a deeper level by far than that caveman and his daughter could ever have imagined possible. Notwithstanding the difficulties of measuring such things, it is not inconceivable that business as a whole has more influence than politics, culture or religion. And no doubt some of this business activity has been harmful. Whenever enormous power and harm co-exist, we have no choice but to ask questions of ethics. There were a few thinkers—people such as Adam Smith and Karl Marx—who began ahead of their time to ask and answer such questions, but business ethics did not emerge as a wellrecognised, distinct field of study until less than fifty years ago. In that relatively short time much has been achieved, but most of the new discourse within business ethics has yet to trickle across from the cloistered halls of academia to the mainstream of business practice, where presumably it will ultimately make a bigger difference. Primary and secondary school curricula also tend to pay very little attention to matters of ethics. Even though many young people are destined one day to occupy a position of responsibility in the business world and elsewhere, they are more familiar with the marvels of calculus, Newton’s Laws and Shakespeare than with the canon of work dedicated to how they might do their work with integrity. The purpose of this book—or at least its most basic purpose—is to expose practitioners and students of business to the wealth of findings, ideas and debates within business ethics, to better equip them to think through the ethical aspects of their decision-making for themselves. 4 · BUSINESS ETHICS & OTHER PARADOXES Who is this book for? It may be easier to begin to answer this question by explaining who the book is not for. When the inhumane treatment of prisoners at Guantanamo Bay was revealed to the international public and widely condemned in 2004, President George W. Bush famously blamed only a small group of military guards, whom he described as ‘a few bad apples’.2 Many believe, like the former president, that there are some people who are simply morally rotten. These are the people who make life intolerable for the rest of us; whom no amount of reasoning or hectoring could persuade to fall into line. Perhaps this is true: certainly, the existence of tyrants like Hitler, Stalin, and Idi Amin suggest that some people are just grotesquely immoral. This book is not for anyone like that, because it will make absolutely no difference to how they behave. Of course, if you were a ‘bad apple’ you wouldn’t have picked up this book, so there would be no need to tell you that you may as well stop reading now. On the other hand, Bush’s approach suggested that no one other than these villains was responsible: not the commanders who were meant to ensure that prisoners were treated appropriately, nor the policymakers who revised policy documents on torture to authorise many of the acts broadly considered to be wrong, nor any one of the many other people who had some knowledge of the atrocities, or at least some involvement in allowing them to happen. Bush and people who think like him might have asked: ‘how could they be responsible for such terrible acts? They are good people, after all.’ Well, there is an answer to this question: it is an error to think that people are either wholly good or wholly bad, and that therefore if we are not bad, we are incapable of doing anything wrong. (You will discover later that this fallacy of reasoning is called a ‘false dichotomy’, but let’s get through the introduction first.) Of course, all people with the ability to self-reflect—to consider themselves and their actions somewhat objectively and critically—know that they have done some bad things. We have all lied, cheated or stolen at some point in some way, and in all likelihood we will all do so again—even if it is just by deceiving our parents about a small matter, or never getting around to returning a borrowed item. Of course, it is logically possible—in other words, it is not totally inconceivable—that you have never done anything wrong, and more importantly, that you are at no risk of ever doing anything wrong in the future. If so, this book is not for you. To paraphrase Jesus Christ when the Pharisees wanted to stone an adulteress, let him who is without sin be first to put down this book.3 There is another possibility: perhaps you always know right from wrong; you just don’t always do what you know to be right. This view seems to be quite widespread: ‘I don’t need to attend a course, or read a book, on ethics’, it goes, because ‘my parents taught me to tell right from wrong’ or ‘God tells me what is good’. What a cunning way to make a very arrogant claim while pretending to be humble: ‘my judgement is flawless, though someone else deserves the credit’! But could this be correct? Certainly, most people have been taught basic moral truths by their parents and/or their religion—truths about murder and kindness, and of course much more than that—but can they possibly have been prepped for every moral dilemma that they might face in business? Has God revealed to you whether you could fire an employee who tells you he is sick at home when a colleague tells you that Facebook locates him at a friend’s wedding? Did your parents equip you to decide one day how to implement affirmative action fairly in your business? Some people make the mistake of thinking that most acts are either obviously wrong or obviously right, but the truth is the opposite. In business especially, many decisions affect a vast Chapter 1 · Introduction · 5 number of people—shareholders, employees, customers, and so on—and the future effects of those decisions are almost always uncertain. In such a complex environment, just as it can be hard to tell which decision will be most profitable, it is often very difficult to tell which decision is morally right. So this book is for neither the all-knowing, the purely virtuous, nor the wholly vicious; but it is for everyone else. For people who would like to do the right thing, and are willing to admit that they do not always know how to do so. It will also be helpful if you are interested in questioning the world that you find yourself in, rather than just accepting everything matterof-factly. Will this book make you more ethical? Not in any direct sense. Reading a manual on car mechanics may be enough to make you more mechanical, but ethics does not work that way. This is partly because there is an infinity of possible ethical dilemmas and therefore the skills and knowledge required to make ethical decisions are generalised, rather than specific. This book does not—and cannot—contain advice about business ethics equivalent to: ‘if the brakes aren’t working, first check the brake fluid for a leak, and then check the brake pads for wear’. It is possible to imagine a book containing everything there is to know about a car’s mechanical system (even if it would have to be a very long manual, perhaps of several volumes); it is not possible to imagine something similar for business ethics. If you are experiencing an ethical dilemma in your place of work, and are hoping that this book will address your particular problem in specific detail, you are likely to be disappointed. Furthermore, a book alone cannot promise to make you more ethical because being ethical takes practice and time. You cannot claim to be more ethical simply because you made one or two good decisions last week; whether or not you are ethical is a question of character, and character should be judged on the evidence of much more than a few isolated acts. If you are indeed to become more ethical, an assessment to confirm this will only be possible when your memory of the content of this book has largely worn off. Lastly, a book cannot teach ethics directly because acting on one’s ethical convictions usually requires courage. The ethical option is often not the appealing option, as it usually represents some kind of cost in terms of time or money. In fact, ethical dilemmas frequently present themselves as a choice between doing what is right and doing what is in your own personal interest, like telling a small lie to a potential client in order to secure their business. It is no exaggeration to say that on a few occasions your job may even be on the line if you are to act ethically. It is a brave soul who chooses to do the right thing when not doing so appears to be much easier and more financially rewarding. Understanding this, C.S. Lewis wrote: ‘courage is not simply one of the virtues, but the form of every virtue at the testing point’.4 And the thing about courage is this: a book cannot give it to you. Neither can your mother, your colleague nor your spouse. You have to find it for yourself. In a broader sense, however, this book does aim to give its readers a credible chance of making more ethical business decisions in future. Perhaps the simplest way to describe how this might be achieved, in spite of all the reasons just given to explain why a book cannot make one more ethical in a direct sense, is that the book aims to improve readers’ ability to think for themselves about the ethical decisions they will face in the future. This is a bold objective, to be sure. In fact, changing the way that someone thinks is probably the toughest challenge for a book, or for any other instrument of learning. Most books do not have such grand aspirations: 6 · BUSINESS ETHICS & OTHER PARADOXES they aim to impart knowledge, to be sure, but not to change how their readers’ minds actually work. Books on business ethics might achieve these more modest goals by providing lists of rules and procedures, or by giving accounts of bad people who ended up behind bars and good people who made the cover of Time magazine. To find something deeper, with the capacity to influence its readers’ minds at a profound level, this book will rather mine the field most dedicated to thinking itself: philosophy. What is philosophy? The word ‘philosophy’ comes from the language of Ancient Greece, where (as far as we know) philosophy was first identified as a system of human activity. It literally means ‘love of wisdom’, although this translation may mistakenly suggest that philosophers all consider themselves wise. (In fact, one of the most famous—and perhaps wisest—of all philosophers, Socrates, denied that he was wise, claiming instead that he was ignorant, except for the fact that he knew that he knew nothing!)5 In Ancient Greek there are at least three different words—with three different meanings— all of which we translate into English as ‘love’. Philia is the kind of love which describes a deep affection or affinity, such as one’s love for one’s parents or for a work of art. Someone claiming to be a philosopher is not saying that she is wise, but rather that she is so devoted to becoming wise that she is willing to spend a large portion of her life engaged in this pursuit. What is this wisdom to which philosophers aspire? Though dictionaries should not have the last word on the full meaning of a word, they are often a useful starting point. My dictionary defines wisdom as ‘experience and knowledge judiciously applied’.6 Ideas are wise if they are sensibly and insightfully derived from our observations of how the world is, and from our understanding of why it is that way. Usually, they contain—explicitly or implicitly—some piece of advice about what we should or should not do. For example, in his memoir Long Walk to Freedom, Nelson Mandela wrote that ‘no one truly knows a nation until one has been inside its jails. A nation should not be judged by how it treats its highest citizens but its lowest ones.’7 In coming up with this piece of wisdom, Mandela combined his experience (of various South African jails) with his knowledge (that countries are often judged according to the conditions of the best-off) to generate a profound recommendation (that we rather direct our attention to the worst-off). Like many wise people, Mandela became wise through a powerful intelligence, an open mind and a willingness to reflect thoughtfully on a series of meaningful experiences. Academic philosophy is by no means the only type of philosophy, nor the only route to wisdom. However, it is a systematic, wide-ranging endeavour involving a great many people applying their minds to problems like ‘how should we judge a country?’ in a structured, tightly reasoned way. Professional philosophers contribute their ideas and arguments to peer-reviewed journals, where others have an opportunity to contest them. Only the best kinds of thinking survive this arduous testing ground. Philosophy consists of several branches, including metaphysics (which attempts to answer questions such as ‘is there a God?’, ‘what is a person?’, and ‘do we have a soul?’) and epistemology (which deals with questions about knowledge, such as ‘can we ever really know anything?’). Another branch is moral philosophy, which grapples specifically with questions about ethics. Because moral philosophy is a systematised body of thought all about matters of right and wrong, it can help us with many elements of the ethical challenges which face us. Moral Chapter 1 · Introduction · 7 philosophers have done an enormous amount of thinking about questions like ‘what should I do?’, ‘how should I be?’ and ‘what sort of society ought we to live in?’ Of course, people in business often have need of experts. If a forestry company needs to build a road, it will consult a civil engineer. A business needing to strengthen its information system will ask a team of knowledge management professionals for help, and so on. If they were only occasionally confronted with difficult ethical decisions, businesspeople should probably call on a moral philosopher: an expert in thinking through those sorts of problems. As things are, however, ethical challenges are everywhere; they are too numerous and too varied to hire an outsider to resolve each one, so instead businesspeople must develop their own ability to resolve these dilemmas. Their best chance at doing so is to learn to think like a moral philosopher. Becoming familiar with the standard debates within moral philosophy, especially the subdiscipline of business ethics, will give us access to good answers to some of the ethical questions we will encounter in our lives and careers. But many more of our future dilemmas will not be answered so straightforwardly, for specific circumstances will apply. For those unique problems, learning moral philosophy will be helpful in a subtler way: it will prepare us to think through our ethical dilemmas for ourselves. Put differently: because it is a sub-discipline within philosophy as a whole, moral philosophy enhances our critical thinking skills. What is critical thinking? ‘Critical thinking’ is a term now used frequently in education, yet like so many buzzwords its meaning is not well understood. Let’s take a few moments to get clear about what it means here, and then we will understand why a book like this one should, by necessity, develop the required skills. One of the pioneers of the term critical thinking, Edward Glaser, defined it as: (1) an attitude of being disposed to consider in a thoughtful way the problems and subjects that come within the range of one’s experience; (2) knowledge of the methods of logical enquiry and reasoning; and (3) some skills in applying those methods. Critical thinking calls for a persistent effort to examine any belief or supposed form of knowledge in the light of the evidence that supports it and the further conclusions to which it tends.8 This definition draws attention to what are perhaps the two key features of critical thinking: Critical thinking involves using logic to support one’s thinking, so it relies on reasoning and evidence, and considers the consequences of each line of thinking for our other beliefs. Critical thinkers are sceptical about ‘any beliefs or supposed form of knowledge’. They subject all ideas to persistent scrutiny, even if those ideas are quite generally accepted by other people, and even if they are intuitively appealing to the critical thinker herself. It should be fairly easy to see why critical thinking is so necessary for answering our ethical questions. After all, thinking is always going to be one of the main—and sometimes the only— effective means of making discoveries in ethics. You have probably noticed that assertions about ethical matters (like ‘kindness is a good thing’) cannot be verified in the same way that we can test the truth of claims in the ‘hard’ sciences (like ‘Mercury is the closest planet to our sun’). Ethical problems are not resolvable with a telescope mounted to a satellite or any other sophisticated technology. When we are confronted with tough moral choices, not even an 8 · BUSINESS ETHICS & OTHER PARADOXES iPhone can tell us the right thing to do. And, although a machine gun or an Act of Parliament or a piece of scripture may convince others to act in a certain way, none of these instruments can really show that it is the morally correct way, either. If the scarcity of methods for showing moral claims to be true suggests to you that we should be especially sceptical of people’s ethical statements, as well as our own intuitions about morality, you are quite correct! And yet we must try to figure out the answers to our ethical questions. Our only option is therefore to think very carefully, submitting any and all moral claims to a rigorous intellectual interrogation, and to do so remaining reflectively aware of how we are thinking about the issues. In other words, our only option is to think critically. How does learning philosophy help with critical thinking? In his book Critical Thinking: an Introduction, Alec Fisher begins by explaining why critical thinking has received so much attention in education circles of late: [I]n the past the emphasis has been on teaching content—history, physics, geography or whatever—and, though many teachers would claim to teach their students ‘how to think’, most would say that they do this indirectly or implicitly in the course of teaching content which belongs to their special subject. Increasingly, educators have come to doubt the effectiveness of teaching ‘thinking skills’ in this way, because most students simply do not pick up the thinking skills in question. The result is that many teachers have become interested in teaching these skills directly.9 Let us submit one of Fisher’s claims above—that historically education has not taught critical thinking skills directly—to some critical thinking of its own. Certainly this seems true enough of the disciplines he mentions as examples, but there is an important exception to the general claim: philosophy. In most if not all schools of philosophy, learning the discipline has always involved paying direct attention to thinking itself. For one thing, studying philosophy has usually involved taking at least one course in reasoning. Logic is often described as a branch of philosophy, but even that understates its importance: a more faithful description would be that logic is the grammar of philosophy. It has to be, as philosophy’s ambition is to give insightful and reliable (though unfortunately sometimes rather complex) answers to fundamental questions by way of the most careful and precise thinking available to us. And logic is the most precise thinking system we have because, if it is done correctly, it will not permit mistakes. Logic distinguishes precisely between beliefs that are true (you will presently discover that these are the result of sound deductive reasoning), beliefs that are probably true (the result of sound inductive reasoning), and beliefs which we have no good reason to hold. Thus, the same system of logical reasoning is required in order to do any philosophy. (The fact that in many cases logic is all that is required may explain why philosophers are famous for never needing to leave their armchairs in order to go to work!) Furthermore, the practice of philosophy involves being sceptical of the ideas we come across; that is, not taking them for granted, but rather subjecting them to critical analysis. A philosophy student learns very early on that she is expected to challenge all of the ideas that she encounters, and to be able to defend any beliefs that she wishes to claim as her own. She learns that she must be the goalkeeper of the truth, not allowing any ideas to slip through unless they have been rigorously evaluated—no matter how widely held or intuitively appealing they might be. So it’s not really possible to learn philosophy in any meaningful sense without developing Chapter 1 · Introduction · 9 one’s critical thinking skills. This is partly because thinking philosophically involves constantly practising these skills, and partly because (most variants of) philosophy education involve some direct attention to how we think. This book shall likewise embody both of these features: Chapters 3 and 4 are about critical thinking itself, and virtually every other chapter will practise critical thinking, by subjecting the moral claims of others—as well as our own moral intuitions—to logical analysis. How to use this book This book is divided into five sections. The first is ‘foundations of business ethics’, in which we establish and elucidate some key terms and concepts, attend to the critical thinking skills we require, and deal with two fundamental questions of business ethics: ‘is our economic system just?’ and ‘in whose interests should businesses act?’ It would be a good idea to start by reading through this first section from beginning to end, as many of the basic concepts and skills which they develop are required for a full understanding of later chapters. The next three sections contain chapters devoted to particular topics within business ethics, grouped according to whether they relate generally to ethical relationships with customers, employees or society-at-large. Later chapters occasionally refer to material covered in earlier chapters within these sections, so it makes good sense to read them in that order. However, if you have a particular interest in some topics, and not so much in others, you might find it most beneficial to read the chapters in the order you prefer. You will know if a chapter assumes knowledge from somewhere else in the book, because this will be explicitly stated. The final section, entitled ‘business ethics in practice’ contains two chapters, which reveal a host of surprising discoveries about how people actually make ethical decisions in the real world, and a full discussion of the ethical responsibilities of one particular kind of business professional: the Chartered Accountant. The intention of this section is to help with the transition from the sometimes abstract discussion of moral philosophy to the practical task of implementing ethical decision-making in one’s working life. At the end of the book, Appendix A contains advice for further reading, for those who would like to explore more of the literature and electronic resources relating to any particular chapter. Each chapter ends with a series of questions which invite readers to test themselves on some of the material covered by the chapter, and which might be used to stimulate further thoughts or discussion. Model answers to the two sets of questions labelled ‘content questions’ and ‘critical analysis questions’ are included as Appendix B. There are no model answers for the ‘discussion questions’. Finally, the book contains a comprehensive index, which, apart from providing the usual functions, may help the reader to connect the threads of points which reveal themselves in different places throughout the whole text.10 10 · BUSINESS ETHICS & OTHER PARADOXES CONTENT QUESTIONS (1) What is the literal meaning of the word ‘philosophy’? What does ‘moral philosophy’ mean? (2) Are all paradoxes actually contradictions? (3) What are the two key features of critical thinking? (4) Does philosophy typically teach critical thinking skills directly, indirectly or both directly and indirectly? Explain your answer. (5) When C.S. Lewis wrote ‘courage is not simply one of the virtues, but the form of every virtue at the testing point’, what did he mean? CRITICAL ANALYSIS QUESTIONS (6) Why have recent years seen increased attention paid to matters of business ethics? Offer three plausible reasons. (7) Provide three reasons that a book or a course in ethics will not on its own make you more ethical. DISCUSSION QUESTIONS (8) If ‘business ethics’ is a paradox, is it an actual or an apparent contradiction? Explain your answer. (9) ‘People always know what is right, and then choose whether to act accordingly.’ Argue against this statement, using some examples from your own life. What do you think this says about the value of a book about business ethics? CHAPTER ONE REFERENCES 1 Kierkegaard, S. 1985 (original in 1844). Philosophical Fragments/Johannes Climacus: Kierkegaard's Writings, Vol. 7, Princeton University Press, p. 37 2 Just a few bad apples? The Economist, The Economist Newspaper Limited, London, 20 January 2005 3 John 8:7, King James Bible, 2000 4 Lewis, C.S., 2001 (original 1942), The Screwtape Letters, HarperCollins, p. 161 5 Plato, 2007 (original c. 360 BC), Apology, Dodo Press, 21d 6 The Concise Oxford Dictionary, 6th edition, 1980 7 Mandela, N., 1994, Long Walk to Freedom, Little Brown and Company, p. 201 8 Glaser, E., 1941. An Experiment in the Development of Critical Thinking, Teacher’s College, Columbia University, p. 6 9 Fisher, A., 2001, Critical Thinking: an Introduction, Cambridge University Press, p. 1 10 The authors would like to thank Susan Green for suspending her life for a full week in order to lend us her prodigious and meticulous proofreading abilities. Chapter Two BASIC TERMS AND CONCEPTS by Jimmy Winfield Ethics is about right and wrong. Perhaps no field of study other than ethics is focussed on issues which matter so much to people. An accountant may have to abandon her career if a serious breach of ethics were to become public. In fact, ethics can make the difference, quite literally, between life and death: state executioners, suicide bombers, ‘honour’ killers, soldiers, doctors who provide abortions, and slaughterhouse workers all believe that ethics permits—or requires—them to bring about the end of a life. Think about a few things that have most upset you recently. More than likely most are ethical in nature: your partner or relative took you for granted, a friend was disloyal, a colleague inconsiderate, or a stranger caused some offence. It is a paradox that, despite how important ethics feels to us, we give it such scant regard in our education system. Many of us do not even have the vocabulary to facilitate a sensible conversation about ethics. What’s more, many intelligent, reasonably informed people wrongly presume that morality is purely a function of opinion, culture or the God they believe in. Similarly, many have adopted the perilous notion that we will be ethical if we simply act according to the dictates of religious leaders, the law or our own unexamined intuitions—our ‘gut feelings’. This chapter is thus intended to achieve three main tasks: (1) to elucidate and explore some of the terms used most commonly in ethical discourse; (2) to show how moral standards are independent of our feelings, culture or God; and (3) to point out the flaws in the notion that we can tell right from wrong via some shortcut method, rather than by doing the tough work of thinking for ourselves. What is the difference between ‘ethics’ and ‘morality’? For every so-called expert in ethics who explains a difference between the words ‘ethics’ and ‘morality’, there is another who tells you that in fact there is no difference. This is because the two words have multiple meanings, one of which is shared. The meaning they have in common is: principles of right and wrong behaviour or good and bad character. When we ask: ‘what is the ethical thing to do?’ we are asking the same question as ‘what is the moral thing to do?’ Both questions are equivalent to ‘what is the right thing to do?’ ‘Ethics’ has two other meanings. One is the study of principles of right and wrong behaviour 12 · BUSINESS ETHICS & OTHER PARADOXES or character, as in the title of this book, which would have been awkward, if not downright incorrect, had it been ‘Business Morality and Other Paradoxes’. The other is codes of right and wrong behaviour or character applying to a certain group, for example ‘research ethics’, ‘legal ethics’ or ‘Islamic ethics’. Read the first three sentences of this chapter again: each uses a different meaning of the word ‘ethics’. In this book we will use all three of these meanings. Until we reach the material on professional and accounting ethics, we will almost always use only the first two meanings. You should become adept at telling the difference on your own, but here’s a hint: usually the base word ‘ethics’ refers to the study of ethical principles, whereas derivative forms of the word—like ‘ethical’, ‘unethical’ and ‘non-ethical’—most often use the first meaning: they typically refer to the moral principles themselves, and not to the study of them. Because this meaning of ‘ethics’ is shared with the word ‘morality’, these forms of the word, when used in this way, are equivalent to the words ‘moral’, ‘immoral’ and ‘amoral’. What do ‘moral’, ‘immoral’ and ‘amoral’ mean? The meaning of the word ‘moral’ is a little complicated, so we shall begin instead with ‘immoral’ (or ‘unethical’) which describes an act or a characteristic that falls short of the standard established by some moral principle. For example, suppose that the moral principle of fairness establishes the following moral standard: ‘All employees who are underperforming should not be dismissed unless they have been informed of their underperformance and given reasonable time and training to help them improve’. If an employer were to fire an employee for underperformance without having previously informed her of her underperformance, then that employer has acted immorally because it has failed to meet the moral standard. The term ‘amoral’ (or ‘non-ethical’) is sometimes mistakenly assumed to have the same meaning as ‘immoral’, but in fact it means that no moral standard is applicable. Suppose that an employer is in the habit of posting a card to each of its employees in December with a picture of the business’s products on the cover, and a note inside reading ‘Thanking you for your service this year, and wishing you and your family all the best for the coming year’. This year, the business has made a loss, and in an effort to reduce costs, the employer has rather sent an email to employees with the same message. This switch to email is an amoral act, as there is no conceivable moral standard that it violates. Many acts are amoral: tying your shoelaces, buying petrol, getting up late on the weekends, and so on. ‘Moral’ (or ‘ethical’) is used in two ways. The first is to describe an act or characteristic which meets or conforms to a moral standard. For example, recall the moral standard we stated earlier relating to underperforming employees. If an employee were to continue to underperform despite being informed of her underperformance and having a reasonable amount of time and training to improve, then firing her would be a moral act because it meets the moral standard. The second use of ‘moral’ (or ‘ethical’) is to describe the exceeding of a moral standard. According to The Star newspaper, on 10 April 2013 an explosion destroyed a factory in Kempton Park in South Africa belonging to a waste disposal business.1 Six workers were trapped under the burning rubble. Despite the imminent possibility of another explosion, three of their colleagues—Paul Molekwa, Michael Meyisele and Wellington Lunga—rushed into the ruined building, pulled the burning debris off them, and carried them to safety. When asked why, Paul Molekwa replied ‘these are the people that we know and mingle with at lunchtime, even if we don’t work together’. This response is paradoxical: it is the precise reason that many of us would Chapter 2 · Basic terms and concepts · 13 not have done the same. We feel perhaps that we ought to risk our lives to save those who are very close to us—our child, sister, great friend—but a mere colleague, especially one whom we don’t even work alongside, would not generally be considered worthy of the threat to our own lives. We all agree that there is a moral standard to help to prevent harm to others, but we all would also acknowledge that this standard is subject to limitations: one is not morally required to run into burning buildings in order to save colleagues. This is of course what makes Molekwa, Meyisele and Lunga heroes: they went beyond the call of duty. In other words, they exceeded the moral standard. When we say that theirs was a moral act, we are using the second meaning of ‘moral’. A frequent sign that this is the intended meaning is the addition of an adjective like ‘very’ or ‘particularly’, as in ‘it was very ethical to give your lottery winnings to a charity’. In order to avoid confusion in this book, the words ‘moral’ and ‘ethical’ will be confined to their first meaning; we shall instead use the term ‘supererogatory’ to describe acts which surpass one’s moral duties. Supererogatory deeds are always morally impressive; an act which goes beyond the call of duty in one respect but fails in some other respect doesn’t count as supererogatory. So it is an open question whether the actions of a business can in fact ever be classed as supererogatory. Given that a business has various stakeholders (like shareholders, customers, employees, and the community affected by its operations), it may be that if ever the business is going beyond its duty to one stakeholder, it is failing in its duties to other stakeholders. If, for example, a business gives a donation to a community education group, perhaps the shareholders could rightfully claim that the money should rather have gone to them; or maybe a very large bonus to employees should rather have been used to reduce prices for customers, and so on. We shall develop this idea more in future chapters. The words we have been discussing are all related to two other notions: moral permissibility and moral obligation. What is morally permissible is what we are, morally speaking, free to do. What we are morally obliged to do is what is morally required of us. This may be understood most efficiently by viewing the following table: Amoral Non-ethical, non-moral There is no relevant moral standard Moral (meaning 1) Ethical, right (meaning 1) Meets the moral standard(s) Supererogatory Moral, ethical, right (meaning 2) Exceeds the moral standard(s) Smiling when greeting colleagues Performing and not performing these acts are both morally permissible Being honest with one’s employer Not performing these acts is not morally permissible We are neither morally obliged to perform these acts, nor morally obliged not to perform them Figure 2.1. A summary of some of the key terms in ethics. We are morally obliged to perform these acts Saving colleagues from a fire Performing and not performing these acts are both morally permissible We are neither morally obliged to perform these acts, nor morally obliged not to perform them Synonym(s) Relation to the relevant moral standard(s) Example Moral permissibility status Moral obligation status Immoral Unethical, wrong Fails to meet the moral standard(s) Stealing from one’s employer Not morally permissible We are morally obliged not to perform these acts 14 · BUSINESS ETHICS & OTHER PARADOXES Is it easy to distinguish moral issues from amoral issues? Sometimes not. Amoral issues are often misperceived as moral issues. For example, some people feel that saying ‘please’ when you ask for something is morally required, but in fact this is an amoral matter. Indeed, in isiXhosa there is no commonly used equivalent word, and no one would argue that therefore isiXhosa is an immoral language.2 Manners are standards of etiquette: they are similar in some ways to moral standards, but they are not the same as moral standards. If you refuse to say ‘please’, stand when an elder approaches, smile when greeting someone or eat with your fork in your left hand, you may be jeopardising the opportunity to be better liked, but you are not unethical. Part of the reason that manners are sometimes confused with ethical principles is that manners are culture-dependent ways of showing respect for others, and showing respect for other people is a moral issue. Yet there are of course many ways to show respect other than simply observing ‘good’ manners—if you are kind and avoid hurting other people, eating sloppily does not make you immoral—and in fact some people with meticulous manners are capable of horrific levels of disrespect: Pol Pot, the Cambodian dictator who was responsible for the massacre or deliberate starvation of a fifth of his country’s population, was said to have ‘polished manners’.3 Conversely, many acts are often misjudged as amoral by people not sensitized to their moral dimensions. For example, if the card sent out by the employer in the earlier example showed a picture of a Christmas tree and wished employees a merry Christmas, this may be offensive to employees who are not Christians. If there is good reason to be offended, for example if this is one of several ways in which the business overlooks and implicitly undermines employees with other belief systems or cultures, then sending the cards may indeed be immoral. The employer would in effect be failing to meet a moral standard that may be expressed as ‘show respect for all employees by acknowledging their belief systems and cultures without showing partiality for one belief system or culture’. In many such situations the person responsible for the message never meant to cause offence, and in fact thought that she was doing something nice. In such cases the offence may be easily forgivable, but this does not change the fact that sending the cards was part of a wrongful pattern of insensitivity to non-Christians. Those who stubbornly refuse to see these sorts of cases as anything but amoral are simply misguided. So it is not always easy to distinguish moral issues from amoral issues. Our mental equipment for telling them apart is imperfect: sometimes we fail to detect a relevant moral standard; at other times we think we see a moral standard which isn’t really there. Perhaps some people are more prone to being oversensitive to moral issues and others are on average undersensitive, but it is probably true that most of us make both kinds of error. How can we fine-tune our moral-standard-detection instrumentation? A full answer requires an investigation into the many psychological factors which influence—and sometimes obscure— our view of the world: these will be discussed in Chapter 4. But part of the answer lies in our response to the next two questions. How can we distinguish the moral usage of ethical terms from their amoral usage? We began this chapter by pointing out that ethics is about right and wrong. But the words ‘right’ and ‘wrong’ apply to amoral situations, like a student’s answers on a test. In fact, many other words used frequently in discourse about moral issues are also commonly used in amoral contexts. ‘Should’ and ‘should not’ may be used morally (‘the government should build more houses for the poor’) and amorally (‘one should not play sport immediately after eating’). Chapter 2 · Basic terms and concepts · 15 Exactly the same can be said for ‘ought’ and ‘ought not’. Similarly, ‘he is a good (or bad) person’ is a moral judgement, unlike ‘he is a good (or bad) tennis player’. How can we tell apart the cases where these sorts of terms are used in a moral sense from the cases where they are not? One way is to determine whether there is a practical purpose to be achieved.4 For example, a recipe book might say ‘you should pre-heat the oven to 180°’, ‘one ought not to use the same knife for vegetables and raw chicken’, or ‘a good way to tell if the cake is baked is to check that it does not stick to a toothpick’. In all of these cases the advice is intended to help the reader achieve the objective of cooking well. This is quite different from when your grandmother told you that you should listen to your parents, that you ought not to lie, or simply to be good. This sort of guidance is not meant to be practical: on the contrary, her only purpose was broadly to help you learn to live a moral life. Sometimes it is less clear whether advice is moral or amoral. A child sent to the principal’s office for cheating on a test might be told by his grandmother not to lie to the principal. In this case, it is not clear whether her recommendation is amoral (if her purpose is to avoid him getting into more trouble) or moral (if she simply wants him to do the right thing). It may of course be both. If you are given advice which is ambiguous in this way, it is probably worth asking whether it is meant morally. How can we distinguish moral standards from amoral standards? We have seen how manners—standards of etiquette—are sometimes misperceived as moral standards. Part of the reason for the confusion is that both types of standards are widely accepted (even if the details differ from culture to culture). As children we are taught how to hold our forks and knives at roughly the same time as we are told not to take things that belong to others. We are told that both are standards of behaviour that everyone must adhere to. It would presumably be extremely difficult for a young child to tell that one is a moral standard, and the other amoral. Adults struggle to tell the difference too, sometimes: there are grown-ups who think that how much of a woman’s body she chooses to cover with clothing is a matter of morality, not simply a practical issue of culture, occupation, fashion or climate. For a standard of behaviour to be a moral standard, it should be derived from moral principles, for example principles about avoiding harm, improving freedom, promoting equality or achieving justice. If someone else does not meet your own standards of behaviour, they are not acting immorally unless two things are true: your standard is a moral standard, and it is correct. For example, a standard of behaviour observed by many Africans is that of monogamy: each person should marry at most one other person. However, certain groups (like some Muslims and Zulus) do not adhere to this standard, and are sometimes thus criticised for being immoral. Are they? Certainly not for the simple reason that they are not monogamous. How could monogamy be a moral standard? Marriage itself is a cultural and legal notion, but not—on the face of it—a moral one. It is perfectly reasonable to suppose that polygamous societies, where both sexes may choose more than one spouse, exist (or have existed) which in comparison to monogamous cultures incorporate no more harm, greater amounts of freedom, no less equality and justice, and so on. This is not to say that no polygamous societies violate moral standards. For example polygynous societies (in which men are the only sex entitled to take more than one spouse) seem to contain less equality. Perhaps there is a moral standard which states that men and women ought to be permitted to have the same number of spouses as each other, in which case polygynous societies violate this moral standard. On the other hand, unmarried women might 16 · BUSINESS ETHICS & OTHER PARADOXES be said to have greater freedom in polygynous societies, as they are able to marry any man, even if he is already married. Perhaps this increased freedom makes up for the loss of equality, suggesting that polygynous societies are not immoral after all. We have established a few important points. First, we should not presume that a standard of behaviour (like one about marriage) is a moral standard simply because it is commonly accepted within a group. Second, moral standards are derived from moral principles about, for example, harm, freedom, equality or justice. Third, moral condemnation is only justified if it can be shown that a moral standard has not been met. To expose a polygynous society as immoral would require the identification and careful evaluation of harms, oppression, inequality, injustice or some other truly immoral phenomenon. Can we explain the notion of moral obligation without using ethical terms? Most people would agree that there is a moral standard which requires employees to arrive at work each day (unless they are unable to do so as a result of illness or other serious personal circumstances). We know already that we can express this in many ways; for example, provided that circumstances permit: Employees should go to work every day Employees ought to go to work every day Employees are morally required to go to work every day Employees are not morally permitted to miss work Employees have a moral duty to go to work every day Employees are morally obliged to go to work every day Employees have a moral obligation to go to work every day All of the above claims are roughly equivalent, but what do they really mean? Do they mean that employees have no option but to go to work? No—it is certainly physically possible for an employee to go to the mall instead. Do they mean that employees are legally required to go to work? No—for many reasons that we shall discuss later in this chapter, legal requirements are not the same as moral requirements, although in some cases they overlap: employees might well be both legally and morally obliged to go to work. Do they mean that employees will get into trouble if they do not go to work? Not necessarily—this will depend on whether they get caught, and even if they get caught, it may be that their boss does nothing about it. Do they mean that employees will benefit if they come to work? Again, not necessarily—it is quite possible that some other employee skips work and not only gets away with it but is even promoted above fellow employees with no record of absenteeism (perhaps because he is better friends with the boss). When you think about it, moral obligation really is an extraordinary concept whose meaning is extremely difficult, if not impossible, to break down into some other claims which do not use the language of ethics. In fact, it seems that the only way to explain the terms we use in ethics is by using other ethical terms: for example, we might say that the claims in the list above simply mean that it is right for employees to go to work. Imagine for a moment how hard it would be to explain to a person who was born completely blind what the colour blue looks like. How could one explain colour without using references from the realm of sight that are unintelligible to her? Morality appears to be similar: if an alien landed on Earth with no understanding of ethics, we would struggle in just the same way to make our moral claims intelligible to him.5 Chapter 2 · Basic terms and concepts · 17 The good news, however, is that we are able to talk sensibly with each other about right and wrong, should and shouldn’t, ethical obligations and prohibitions, and so on.6 This should be a relief if you have been starting to feel as though thinking about ethical facts is going to be tricky if we can’t reduce them to other, more accessible, ones. Of course we might disagree with someone’s claim that an act or person is unethical, but at least we know what it is that he is saying. Even the psychopaths portrayed in action movies are able to tell right from wrong (which is why they are so villainous for doing the latter!) So we shouldn’t be bothered by our inability to explain moral terms without reference to other moral terms, since we all understand the basic idea of morality anyway. What is the difference between descriptive and normative ethics? An important distinction to be aware of in ethical discourse is the difference between descriptive and normative claims. Descriptive claims describe a person’s or a group’s moral judgements, for example: ‘many vegetarians believe that it is wrong to eat meat’. On the other hand, normative claims prescribe moral judgements, for example: ‘it is wrong to eat meat’. Descriptive claims can generally be tested empirically (in other words, we can determine whether they are true by studying the relevant people), for example by asking a sample of vegetarians whether they believe it is morally permissible to eat meat. Normative claims cannot be tested in the same way. Although observable facts about the world may be relevant to determining the truth of normative claims (for example, to tell whether it is wrong to eat meat, it may be helpful to know whether farm animals suffer before being slaughtered), they cannot on their own establish the whole truth. If we discover that animals do suffer before becoming our meals, further observation cannot tell us whether we are morally permitted to continue to eat them. Whereas the descriptive study of moral principles is done by experts in the study of social groupings, like anthropologists and sociologists, normative ethics falls to moral philosophers: experts in logical reasoning capable of a robust investigation into the moral features of our actions and character. Furthermore, although descriptive ethics is a fascinating field, delivering valuable insights into all sorts of aspects of humanity, normative ethics has an even more important role to play, for its aim is to help each of us know what we should do and how we should be. Indeed, few things—if any—could be more important. Most of the discussion in this book will thus be normative in nature. One reason to understand the difference between descriptive and normative claims is that sometimes the two are confused. Consider the following claim: ‘in African business, it is acceptable to bribe public officials in order to secure government contracts’. Is this statement descriptive or normative? The answer is that it may be either. It is descriptive if it means that bribery is considered acceptable by businesspeople in Africa. It is normative if it means that bribery really is morally permissible in Africa. Given how vastly different these two interpretations are, it is vital in these sorts of case to use the context of the claim to determine whether it is meant descriptively or normatively. What challenges are there to the idea that there are objective moral facts? We now come to the question of whether ethics is purely a function of opinion, culture or the God we believe in. So far we have been talking as if it is a function of none of these things; as if 18 · BUSINESS ETHICS & OTHER PARADOXES there are objective moral facts. A claim is a fact if it is true, and it is an objective fact if its truth is independent of (that is, not subject to) what we or anyone else thinks about it. According to this view ‘bribery really is morally permissible in Africa’ is either true or false. If it is true, it is true in the same way that ‘the planet Earth is spherical’ is true: it just is true, and there is nothing anyone can say to make it false. Similarly, if it is false, it is false in just the same way that ‘the planet Earth is flat’ is false. Most of us speak about ethics as if there are objective moral facts, but some people feel uncomfortable about this, especially when they recognise that we cannot prove the truth of normative claims in the same way that we can prove the truth of scientific claims like ‘the planet Earth is spherical’. This leads them to believe one of a variety of alternatives. One group of thinkers has given up on the idea of there being any facts at all in normative ethics. Others do not go as far as this: they recognise that normative claims can be true or false, but they argue that they are true or false by virtue of what people believe. A third group believes that moral facts are independent of what mere people believe, but are dependent on what God believes. Most philosophers agree that adopting any one of these three views is an error. Because many people—including a good number of readers of this book—are tempted by at least one of them, we shall now consider them in more detail and show why they are thought to be flawed. There is insufficient space to describe all of the various versions of each view, so just one reasonably popular version is discussed in each of the three sections that follow. What is emotivism and why do most philosophers think that it is incorrect? A group of thinkers named ‘emotivists’ is not content simply to accept what we acknowledged earlier—that we cannot make sense of ethical discourse without resorting to other moral terms. Instead they believe that they can explain moral claims without using the language of ethics: they say that moral claims are nothing more than expressions of feelings. Often nicknamed the ‘boo-hurrah’ theory of ethics, emotivism states that when you say that lying is wrong, you are simply expressing your disapproval of lying, and when you say kindness is good you are simply expressing your positive feelings about kindness. Emotivists think morality is so totally a matter of our feelings and attitudes that we can’t, in the true sense, have beliefs about it or say anything about it at all. Thus, ‘kindness is good’ is really saying nothing more than something like, ‘hurrah for kindness!’, and ‘lying is wrong’ amounts to no more than ‘boo to lying!’ Emotivists have responded to the idea that visiting aliens might find our moral claims unintelligible by suggesting that this would be because they might not understand our feelings. Try explaining a feeling you have—your dislike for olives, perhaps—in a way that a robot, or an alien who doesn’t understand what feelings are, would truly understand. Emotivism has some attractions. It is not hard to imagine scenarios where normative moral claims like ‘lying is wrong’ seem to be mere expressions of feeling. Imagine people deciding what to say to their incompetent boss when he asks if they think he is doing a good job. Some people would decide to tell the truth because ‘lying is wrong’; others would instead decide that in this case, ‘lying is not wrong’, that ‘kindness is good’. On hearing these different responses, it is fair to say that the respondents feel differently about ethics, and, if we didn’t feel sure of the answer ourselves, we might be tempted to conclude that whether lying in this case is right or wrong comes down to what attitude you have. But should we go so far as to agree with the emotivists entirely? If emotivism is true, there is no such thing as a normative moral fact. After all, it is neither true nor false that ‘boo to lying’, which on the emotivist account is all that ‘lying is wrong’ means. So not only could we say that Chapter 2 · Basic terms and concepts · 19 it is a matter of feeling whether lying to the boss is right, but it is also a matter of feeling whether killing the boss is right. Emotivism perhaps seems like an attractive way to explain why people cannot agree about the ‘grey areas’ of ethics, but in doing so it removes all reasons for believing that anything—including racism, rape or genocide—is wrong (and also that anything is right). An emotivist whose wife sleeps with his best friend may be angry, but he could not claim that his anger is justified, for according to him they have done nothing objectively wrong. By his own theory, any protestations would amount to nothing more than ‘boo for adultery’! But could anyone really accept these emotivist claims? When we say that genocidal dictators are evil or that a wife and best friend ought to know better, surely we are doing much more than just expressing our feelings: we are making a claim about how things really should be. Of course, it would seem inconsistent to accept emotivism whenever people can’t agree on a moral issue (like abortion, for example), and to reject it for less controversial claims (such as those against genocide). Given the points made above, it is more reasonable to reject emotivism entirely, and conclude that moral facts do exist; it’s just that in the grey areas, those facts are difficult to discern. This is not dissimilar to the way we think about other subjects: economists disagree about whether increased public spending will fix underemployment in a certain recession-hit country, yet we do not doubt that there is a fact about whether it will. The reason for paying attention to the economic debate—just as for ethical debates—is to figure out who has successfully located that fact. What is moral relativism and why do most philosophers think that it is incorrect? It is not possible to be a conscious member of a multicultural community without noticing that different groups have different moral standards. In other words, different people believe different things about ethics. Moral relativists (or ‘ethical relativists’)7 do not fall into the trap of the emotivists, for they accept that moral facts exist, but they contend that what makes those facts true is people believing them to be true. So moral statements can only have truth of a rather peculiar sort: truth relative to a community. We must investigate whether this is the right kind of truth to attribute to moral claims. According to a relativist, if a community believes that abortion is wrong, then it truly is wrong for that community. Note that relativists are not saying that the best guess at the objective truth is what the majority believes; they are saying that if the majority has a certain moral belief, then this is what makes that moral belief true for them. The words ‘for them’ are important: different groups hold opposing beliefs, so to avoid making a contradiction relativists maintain that the truth of moral claims is relative to the group making the claim. ‘It is raining today’ might be true in one place and false in another, so meteorological claims are relative to location. In the same way ‘abortion is permissible’ is true for Reform Jews and false for devout Catholics: there is no contradiction—‘abortion is permissible and impermissible’—because moral claims are relative to (or ‘subject to’) the group’s beliefs. Thus, while relativists accept that moral facts exist, they do not believe that there are objective moral facts. Relativism is appealing on the face of it, especially to open-minded people. Perhaps you live in a community which would frown on cultural practices like polygyny or women choosing to cover their faces in public, but you think it would be wrong to prevent other cultures from cultivating these practices (or vice versa). If so, you are tolerant of differences between your culture and those of others, and this is generally a good thing, for tolerance of difference is a great virtue. ‘What right do I have to judge what they do?’ you might ask yourself. Relativism allows you the comfort of knowing that you do not in fact disagree with them, for your own 20 · BUSINESS ETHICS & OTHER PARADOXES moral judgements are only true for you and people like you. However, virtues can be taken too far. Courage can spill over into foolhardiness. Tolerance of the practices of other cultures is entirely appropriate when those practices are amoral (like women choosing to cover their faces) or grey areas (like polygyny, perhaps), but is it appropriate when the other group is violating a clearly discernible, moral standard? What if a neighbouring country began to exterminate the members of a minority tribe? What if the majority of this country decided that cannibalism is morally permissible? What if apartheid were re-introduced in South Africa? In these sorts of cases it is much less clear that tolerance is the right response. In fact, perhaps we would be morally obliged to intervene. Yet whether or not we would have to intervene is not the main issue here. The relativist not only insists that we should leave those groups alone; she requires even more from us: that we agree that their belief about what they are morally permitted, or even morally obliged, to do is, in a sense, correct—it is true for them (simply because they believe it to be true). Even if you would be unwilling to intervene, are you happy to accept that they would be doing nothing wrong? If a majority of colonials in 1800 believed that slavery was right, does that mean it was? If the majority of Rwandans in 1994 believed that killing Tutsis was morally permissible, was the death of over half a million people justified? Of course, the relativist allows us to say that the killing of Tutsis is wrong for us. But can we be satisfied with this strictly relativised statement? Surely there are some actions which are not just wrong for us, but wrong for everyone—just wrong. So one reason that philosophers generally disagree with relativism is similar to the reason they disagree with emotivism: if it were correct, we would not be able to say that anything is universally wrong. In the case of relativism this is because we could always conceive of a society in which a particular practice—genocide, cannibalism, apartheid—is or was considered permissible, in which case, even if it remained impermissible for us, it would nonetheless be permissible for them. A second problem for the relativist is that his strategy for establishing the facts—simply identifying what people believe—is highly irregular. We don’t consider this strategy to be effective for discovering facts in any other fields of study; for example if we were to adopt this approach in physical science, we would have to accept that the sun actually went around the Earth until the work of Copernicus and others convinced people that it did not. Even in the social sciences, where facts are harder to verify, no one thinks that the general view is necessarily true. At most, it is a best guess at the truth. Why should we fundamentally change the way we think about truth when it comes to morality?8 Third, there is a problem for the relativist when in the real world the beliefs of one group come up against the views of another. In such cases he has only two options. The first is to respond that the majority is right and that the minority should submit to them; but this just endorses tyranny, which is surely taking tolerance too far. If your sister married into a culture whose members mostly consider wife-beatings an appropriate way to ensure that she respects her husband, would you encourage her to accept such treatment because it is right, given that she is now part of that culture? The other option is to stay faithful to the relativist notion by saying that the beatings are right for the husband and wrong for you and your sister. But where can we go from there? This case reveals that relativism cannot give any practical guidance in cases where communities mingle and interact, but their values conflict. Relativism seems to assume humans come neatly divided up into self-contained communities with their own value systems. But often moral guidance is most needed when people from different groups meet and disagree. Chapter 2 · Basic terms and concepts · 21 On the relativist account, it is not possible for different groups to disagree in substance about ethics. After all, if what one group believes is right is indeed right for them, then another group cannot tell them that it is wrong. Perhaps on the face of it this seems like a view which promotes harmony and fellow feeling, but in practice in contemporary society, where richly diverse groups regularly rub up against each other, the opposite may be true. In fact, to insist that opposing moral views do not disagree, whether they belong to different cultural groups, political parties or even two people—a husband and wife—is to deny them the starting point required to search for a creative solution to the dispute, or to reach a compromise. So the third objection to relativism is that when people with different moral beliefs live side by side and encounter moral disputes, relativism must either resolve the disputes by permitting tyranny, or it cannot resolve the disputes at all. Not to give practical guidance in resolving ethical disputes is surely a great failing on its part if it aspires to be a moral theory. A final problem for moral relativism relates to the sort of relativist who doesn’t just claim that other groups are right to do what they believe to be right, but takes the next step of telling others that it is wrong to judge other groups’ beliefs to be wrong. ‘It is wrong to identify wrongness’ is deliciously self-refuting: a paradox that cannot be resolved. Of course we must be tolerant of other groups different from our own: we must refrain from judging their amoral practices; we must not pretend to understand their circumstances without first properly informing ourselves; we must be willing to listen to the arguments for their moral views; and we must be prepared to change our minds if we believe after careful consideration that their arguments have greater merit than our own. But none of this means that we should consider every group to be right about every one of its moral views. It is much more reasonable to think that some of the views out there—including some of our own—may well be incorrect. What is the doctrine of divine command and why do most philosophers think that it is incorrect? If, like most philosophers, you accept that there are moral facts, and that they are not made true simply by people believing them, then you might think that we have no choice but to concede that objective moral facts do exist. However there is a theory which accepts both of these assertions, but which still denies that moral facts are objective. This theory is often called the ‘doctrine of divine command’, and it states that moral facts are true only by virtue of being in accordance with God’s will. In other words, the views of mere people do not have anything to do with the rightness or wrongness of an act; instead this is subjectively determined by God. Of course, it is an objective fact (on this view) what God wants, so in that sense moral facts are objective. But they remain subjective in the sense that they are dependent on someone’s beliefs—God’s. It will not surprise you that atheists do not have this view, but in fact most religious people also do not really believe the doctrine of divine command. When you think about it, it makes a very radical claim. It does not simply say that there is a correspondence between God’s will and moral facts: instead it claims that God makes moral facts. The Ancient Greek philosopher Socrates asked a perceptive question that strikes at the core of this idea: ‘Is that which is holy loved by the gods because it is holy, or is it holy because it is loved by the gods?’9 (The prevailing religion in Ancient Greece was polytheistic, but the question is just as effective for a single God.) Surely, if the first option is true, if God’s preference for certain behaviour is what makes that behaviour ethical, then we have to accept that, if God’s preference were for the murder of 22 · BUSINESS ETHICS & OTHER PARADOXES innocents, then we should all go out and wring the neck of a small child. At this point, most religious people would object that God would not have such a preference, but this is to endorse Socrates’ second option: that ethical principles have their source independently of God. Archbishop Emeritus Tutu did just this when he famously announced that he ‘wouldn’t worship an anti-gay God’.10 How does one respond to the fundamentalists who maintain a belief in Socrates’ first option—that God could have made murder good and kindness bad—and who are prepared to live by such morals if sufficiently certain that God had so instructed? First, one might point out that it does not make God any less omnipotent (all-powerful) to concede that omnipotence itself is limited. Omnipotence does not allow for logical contradictions, for example, like true lies, or mathematical fallacies such as 2 + 2 = 3. It therefore seems plausible that a belief in God’s omnipotence does not require us to believe that He could make murder right. A second kind of response, at least to Christian, Jewish and Muslim believers in the doctrine of divine command, is to point out to them that scripture itself supports the opposite view. For example, in the Book of Genesis (which is accepted as holy scripture by all three of these religions), on hearing that God is preparing to destroy Sodom, Abraham asks Him: ‘Will You sweep away the righteous with the wicked? ... Far be it from You to do such a thing ... treating the righteous and wicked alike. Far be it from You! Will not the Judge of all the earth do right?’11 It seems much more reasonable to believe, as Abraham apparently did, that any correspondence between God’s will and moral facts is not the result of God manufacturing the facts, but rather His directing us to act morally and to display good character. Not only does such a view not render Him any less omnipotent, it in fact makes Him more impressive, since He is judged to be good by objective moral standards, rather than by His own self-imposed standards. Can you be ethical without thinking critically? Our rejection of emotivism, moral relativism, and the doctrine of divine command gives us good reasons to believe that there are moral facts, and that they are objective (that is, they are true regardless of what anyone thinks about them). Naturally, we must know what these moral facts are if we are to have any hope of acting ethically, but how do we learn them? Philosophers maintain that there is only one way—thinking critically. Yet thinking for ourselves is difficult, and people are lazy. Perhaps there is a shortcut to being ethical—a way to know moral facts without having to do the hard work. After all, why walk up a mountain to know the lay of the land when you could just look at someone else’s photos? For those readers who do not consider there to be an obvious answer to such a question, the remainder of this chapter is dedicated to a discussion of three frequently proposed shortcuts, beginning with one which follows from our conclusion in the previous section. Will you be ethical in business if you simply obey God’s advice? We have already acknowledged that, even if religion is not the source of ethical truths, it certainly gives us access to a great deal of moral guidance. There is scripture of course, and also advice from one’s priest, imam or rabbi or some other theological authority. You might wonder if these sources of moral guidance are sufficient for us to learn the moral facts relevant to business. Well, religions (just like parents) may give voluminous and varied advice, but they do not Chapter 2 · Basic terms and concepts · 23 typically cover the kinds of moral dilemmas that you might face in business. Scripture, being written before the advent of modern business, undoubtedly requires interpretation in order to make it relevant. Most preachers are not familiar enough with business issues to devote much of their time to thinking about them, but even those who do must be relying—like you—on interpreting scripture and possibly other signs from God. This need for God’s messages to be interpreted requires a philosophical approach. The context must be evaluated, broad principles must be made relevant to specific situations, competing moral standards must be weighed, and the entire process should be performed using logical reasoning. In other words, whether they admit it or not, when theologians and preachers are figuring out their instructions on how to be or what to do, they are thinking critically. If they are not, their pronouncements are mere opinions and worthless as a basis for important decisions. Furthermore, given the wide variety of moral views that they manage to derive—in many cases from precisely the same set of scripture—it is imperative to understand how they got to their interpretations. In other words, if you are a Christian, the fact that there are so many different moral opinions generated within the same faith, from the same Bible, should motivate you to examine the process that priests and others use to arrive at their conclusions, and decide for yourself with whom you agree. You should learn to think critically about the thinking they have done. If you do not, you are subjecting yourself to what Bob Marley called ‘mental slavery’.12 Still, perhaps you are committed to thinking for yourself, but you prefer to begin with the basic moral principles of your religion. For any individual believer this is a perfectly acceptable approach for determining how to live, and will almost certainly not lead to conflict with anything in this book, which does not contradict the basic moral principles of any established religion. Thinking critically does not preclude a religious outlook. In fact, religious people need to think for themselves just as much as anyone else. With a few exceptions, this book will not make use of religion in discussing ethics, because it is written for a multicultural readership. It would be wise even for believers to learn the same secular approach, for they too are faced—or will one day be faced—with a similar audience. One day, if not already, you will have to discuss the ethics of a business decision with business partners from different religious backgrounds to your own. In a multicultural setting it will not be helpful to say ‘let’s start by acknowledging that Jesus told us to love one another as we do ourselves’ or ‘Islam forbids the charging of interest’. Will you be ethical in business if you simply obey the law? Here perhaps is another way to be ethical without having to think critically: just don’t do anything illegal. This view appears to be particularly widespread in business, where corporate lawyers often seem to have the sole authority to say what a business is permitted to do. Certainly, there is a relationship between ethics and the law, for some laws (legal standards) aim to enforce moral standards, like the laws against murder and theft. Can we therefore just use the law as a proxy for ethics? Unfortunately we cannot, for the reasons that follow. To begin with, let us dispel the view of a small minority of people who appear to think that immoral actions are wrong because they are against the law. According to such people, the reason we would act ethically if we just act legally is that the law is in fact the source of ethics. However, many legal standards aim to enforce amoral standards, like the laws that we should drive on one side of the road and have a passport if we wish to leave the country. Such laws are 24 · BUSINESS ETHICS & OTHER PARADOXES only there to solve coordination problems and for other practical purposes, and their existence is sufficient to show that the law is not the source of ethics. If being unlawful is what makes an act wrong, then arriving at international departures without your passport would be immoral. Indeed, people with this view reverse the true direction of causality: there are laws against murder and theft because these acts are immoral, not the other way around. Of course we can recognise that laws are designed to uphold both moral and amoral standards, and still expect that acting lawfully would ensure that we act ethically. Sure, we would be meeting some amoral standards, but by definition there’s nothing wrong with that (in fact doing so makes a lot of sense, at least with respect to everyone driving on a certain side of the road and carrying passports to fly internationally). And the big advantage is that we would also be meeting the legal standards relating to ethical issues, saving us the effort of determining the moral standards for ourselves. This strategy will work if three things are true: (1) that no legal standards violate any moral standards (otherwise we could act unethically by following the law); (2) that all moral standards are upheld by legal standards (otherwise we could fail to act ethically despite following the law); and (3) that legal standards are relatively easy to discern (otherwise they would not serve us well as a shortcut to avoid thinking for ourselves about ethics). There are problems with each of these three claims, as we shall now discuss. We have good reason to doubt Claim 1 because we know that laws can be immoral. Over the years, laws have facilitated slavery, apartheid and genocide, and they have brutally punished people for amoral matters like their religion or sexual orientation. Even today, open a newspaper and you will find a plethora of allegations about the law being wrong. The media is outraged by politicians legally suppressing freedom of the press, by large food corporations greedily patenting seeds which should belong to all of us, and by fishermen cruelly murdering dolphins in the process of catching tuna. Criticising the ethics of the law is not just a media obsession: trade unions complain that the laws are unfairly biased against workers, while big business claims that labour regulation is unfairly restrictive for employers. Perhaps you have more faith in our contemporary legal system than in the people who criticise the law. If so, you could maintain that, while unethical laws have existed in the past, there is no clear evidence that our current laws are immoral. In that case, consider how laws are made. In most countries, statutory laws at least are the result of a majority vote by members of parliament (MPs). Yet politicians have an incentive to vote in their own interests (for example, by voting in the interests of large corporations who donate generously to their re-election campaigns), rather than in the interests of the people whom they represent. In fact, even if MPs did vote according to the interests of the people they represent, it is not clear that this would result in laws which correctly uphold moral standards. After all, some acts might be immoral despite being in the interests of the majority; for example a law which requires police officers to shoot illegal immigrants on sight may suit many citizens, whose jobs would be more secure; but it would not be right. Furthermore, when significant numbers of MPs disagree about a proposed law, the bill is altered through a process of political compromise, resulting in a law which few or none of the lawmakers think is best but which most of them can live with. Although it is conceivable that sometimes a consensus will lead to a legal standard which faithfully matches a moral standard, at least some of the time we should expect that the compromise in fact leads to a poor match. All in all, the process by which laws are made is highly unlikely to result in a high-fidelity correlation between laws and the ethical standards that they are meant to uphold. Chapter 2 · Basic terms and concepts · 25 Claim 2 is equally problematic. There are clearly moral issues which fall outside of the law, which is generally much more proscriptive (that is, it mainly outlaws bad behaviour like theft) than prescriptive (that is, it seldom encourages good behaviour like being charitable). Even then, it mostly avoids proscribing bad behaviour in one’s private relationships, for example being sexually faithful to a romantic partner, defending a friend from unfounded accusations, and taking care of one’s parents when they get older. These ‘blind spots’ in the law are probably for the best: it is a rare person who thinks the government should be allowed to regulate his personal relationships or how he (or his business) chooses to be kind and generous. Regardless, in these sorts of cases we have to determine the moral facts for ourselves. Finally, though many people presume that Claim 3 is true, they are making a mistake by thinking of law too simplistically. Of course some acts like murder or theft are straightforwardly illegal, but the legal status of many other acts is often very difficult—if not impossible—to know. Consider whether the number of wheelchair ramps in a building is legal. The law does not specify precisely how many wheelchair ramps a building should have, because the appropriate number will depend on the building’s design and other details like access routes. The law will have to be interpreted, and that means we cannot be sure of the legality of the issue until a complex process is complete: someone would have to sue the owner for not having enough ramps, the owner would have to opt not to settle the case out of court, the defence must not come up with some technical way to get the owner off the hook, and so on. Whatever the judge decides is not even necessarily a final legal determination as her decision may be overturned on appeal. Even without an appeal, the legal process would take years. Of course, it is unlikely that it would ever come to this, because the owner would need to estimate not only the chances of winning the case, but also, if it can be won, the costs of winning it. It will surely be cheaper, even if the current number of wheelchair ramps is legal, just to install one or two more. A vast number of issues, especially in business law, are like this. The law is not easily discernible. If you disagree, ask yourself why those corporate lawyers need to be consulted so often or be paid quite so much! And if we cannot know easily whether something is legal, then— notwithstanding the other problems already mentioned—the law will not serve us well as a guide as to what is ethical. Will you be ethical in business if you simply rely on your gut? Some people are comfortable determining moral facts for themselves but do not see the need for a rigorous process of thinking critically to achieve this. In their opinion the job can be done just fine purely by intuition, which has been defined as ‘immediate understanding, knowledge or awareness, derived neither from perception nor reasoning’.13 To intuit that we should not lie is instantly to realise that we should not, without taking the time to think about it (or think about it much). Many people refer to this visceral approach to ethics as ‘just following your gut’. There can be no doubt that intuition is extremely helpful to us: for every time that you could say ‘I really don’t know why I did (or thought) that, but I am so glad I did’, you have your intuition to thank. But does this mean that you should always use your gut as a shortcut method for obtaining moral truths? The simple answer is no, and the simple reason is that there have been too many times when you could say ‘I really don’t know why I did (or thought) that, and I now regret it’. Sure, many intuitions turn out to be right, but there is still too large a number that are wrong. This is because intuition is unduly influenced by factors that often should have nothing to do with one’s judgements and decision-making. These factors are the subject of Chapter 4, but here is a brief, incomplete list: our current beliefs, our feelings, our point in time, 26 · BUSINESS ETHICS & OTHER PARADOXES our self-esteem needs and our personal experiences. Furthermore, it is a mistake to think that intuition always gives us clear, coherent messages. Suppose you have a colleague who is also your good friend, who tells you that he has convinced a customer to purchase a product when he knows that a cheaper product would have served her more effectively. Perhaps you are hairdressers and he has sold her an expensive hair treatment that is wrong for her hair type. Or you are bankers and he has sold her a costly investment product which does not match her risk profile. You and your colleague disagree about just how bad a product he has sold her: while he says it is ‘not ideal’, you think it is in fact harmful. What does your gut tell you to do? If you are like most people, you will in fact experience at least two gut responses in these sorts of cases: one to be loyal to your friend and not say anything; another to avoid harm to the customer, perhaps by somehow warning her or by letting your boss know. In many of these cases, neither intuition seems to be stronger than the other, and one can end up feeling immobilised by the conflicting impulses. The fact that gut responses can be contradictory can be explained in the same way as the fact that intuition is sometimes unduly influenced by irrelevant factors: the intuitive approach by definition does not give us access to the reasons for acting one way or another. Truly, we should not allow ourselves to decide something as important as our ethical conduct by reliance on a mere feeling, any more than we should unthinkingly follow the rules set by religious leaders or lawmakers. Our choices are morally good or bad for reasons, to which each of us has access if we just learn some basic skills and are willing to make the effort to use them to think for ourselves. This is not to deny that there is an important role for our moral intuitions. Indeed, many philosophers think moral intuitions are an important starting point for moral theorising. So don’t be surprised if, in the chapters to come, there are some appeals to your intuition, for example that some consequence of a moral view under discussion is ‘just wrong’. The important thing is to think critically about your moral intuitions, both considering what psychological factors may be distorting them, and also rationally developing the moral principles which lie behind them. Without intuitions the study of ethics could hardly get started. But intuitions are just that—a starting point. Not the end of the story. Our general approach in this book’s quest to access objective moral facts will be to begin with the mass of other’s moral claims and our own intuitions, and then try to smooth out and systematise them, treating some as core, some as less central, others as revisable, and still others as needing to be rejected. We will also often check that the views that emerge from this process fit with our best understanding of relevant fields like empirical psychology, political science, economics, and so on. In short, we will reason through our tangled mess of moral judgements while respecting what we do know about people and societies, to find the best possible approach to ethics.14 Who are you to decide right from wrong? If you accept the claims in this chapter then you accept that we should all be prepared to think for ourselves to determine as best we can the objective facts about what we should do and how we should be. You also accept that the relativists are mistaken in thinking that the moral views of groups different to our own are always ‘right for them’. Instead, once we have teased out their moral views from the set of all their views, if any of these contradicts our own moral standards, then either we or they must be mistaken. Indeed, if the reasons supporting our ethics are superior to the reasons for holding their views, then they are wrong, whether ‘they’ are our Chapter 2 · Basic terms and concepts · 27 preachers, our laws, or an entire foreign culture. Although this is the proper conclusion to draw from our discussion so far, it strikes many as too bold. How arrogant to claim that you are correct and others—often many others—are incorrect! After all, who are you to decide right from wrong? But is it really arrogant to believe that you are correct when others are incorrect? Bear in mind that this happened at school whenever you answered a test question correctly and other classmates did not. Of course, this did not mean that it was appropriate to flaunt the fact that they were wrong while you were right, in the same way that having a correct moral view does not necessarily imply that you should tell everyone with a different view that they are wrong. We are just considering whether it is acceptable to believe that you are right and others are wrong. (Though in the case of morality, depending on the circumstances, it may be important to do something about others’ wrong beliefs). Perhaps some people are reticent because there is no easy way to demonstrate that their moral beliefs are superior to other people’s, whereas on a test the teacher’s tick-mark was all the proof that was needed. This is certainly a reason to be cautious about claiming to know the truth before doing the hard work necessary to verify your view, but it does not change the fact that it is eminently possible for you to be right and others wrong about matters of ethics. What can you do to verify your view? You should ensure that all of the following are true: you have made yourself aware of all relevant issues you have considered the full range of ethical positions you have not merely accepted the opinions of others as true you have not allowed your view to be corrupted by the sorts of factors that we shall discuss in Chapter 4, like your own self-esteem needs you have good reasons supporting your view, amounting to a sound argument you have considered the reasons for opposing positions, and have rejected them as they do not amount to sound arguments There is a good answer to the question ‘who are you to decide right from wrong?’ It is this: ‘I am a person who has done all of the things on the above list—I am, in other words, a person who can think critically, for myself’. Chapters 3 and 4 will help you learn how to be in a position to make this claim truthfully. 28 · BUSINESS ETHICS & OTHER PARADOXES CONTENT QUESTIONS (1) Describe what it means for an act to be ‘immoral’ in terms of moral obligation and moral permissibility. (2) Some actions are immoral, and some actions are amoral. What is the difference between the two? (3) ‘Lying is morally permissible in business’. Explain what this statement means if it is a descriptive claim. Explain what it means if it is a normative claim. (4) Will you consistently be ethical in business if you simply rely on your intuition? Briefly explain your answer. (5) Give an example of an action which most people would agree is supererogatory. CRITICAL ANALYSIS QUESTIONS (6) What three conditions would have to be met for a person to be ethical simply by obeying the law? Give one good reason to doubt the presence of each condition. (7) What is moral relativism (also known as ethical relativism)? Give at least one reason that moral relativism may appear attractive, at least initially, to an openminded person. Identify and explain at least two reasons that we should reject moral relativism. DISCUSSION QUESTIONS (8) Suppose that you were visited by an alien who does not understand what it means that some acts are right and others wrong. He can see that some acts cause harm, or treat people differently, for example, but he cannot perceive the ‘extra fact’: the moral judgement about them. How would you attempt to explain to him what moral judgements are, and where they come from? (9) If the Doctrine of Divine Command—the notion that God decides right from wrong—is mistaken, how are we to understand the relationship between religion and morality? Consider opposing moral beliefs from two different religions, and explain how a follower of one religion might have a productive debate about the issue with a follower of the other. Chapter 2 · Basic terms and concepts · 29 CHAPTER TWO NOTES AND REFERENCES 1 Molosankwe, B. 2013. ‘Worker Risk Lives to Save Men From Inferno’. The Star. 11 April. Accessible online at www.iol.co.za (accessed 3 June 2013) 2 Of course, there are more or less polite ways to ask for something in isiXhosa. The point here is the word ‘please’ itself, which so many English-speakers believe is crucial in a polite question, has no directly-translated equivalent in isiXhosa. 3 ‘Pol Pot’. 1998. The Telegraph, obituaries section, 17 April, available online at: www.telegraph.co.uk (accessed on 3 June 2013) 4 Admittedly, one famous philosophical conception of ethics—consequentialism—sees morality ultimately as a way to serve a practical purpose: to bring about the best consequences. If, for example, a government official were proposing a new policy because it would make more people better off, this would certainly be a moral argument. The point here is that in everyday talk of ethics, we can typically distinguish the ethical from the unethical usages of ‘ought’, ‘should’, ‘good’ and so on by asking whether ‘that is the right thing to do / way to be’ would ordinarily suffice to explain why the term has been used. 5 For a lovely, illustrated example of such a failed attempt, see the section describing Stephen Law’s trip around Oxford in Flib and Flob’s flying saucer, in Law, S. 2002. The Philosophy Files. Orion Children’s Books. p. 140. 6 One way to explain this, ascribed to the philosopher G.E. Moore, is that we all have a ‘moral sense’, somewhat like our other five senses. However, this is only one explanation, and one certainly should not imagine that ethics is entirely a ‘sense thing’, as opposed to something to which one can apply reason. In fact, it may be that reason itself is a better explanation for morality than the mysterious notion of a moral sense. 7 There are a few different kinds of views described as moral relativism. The view discussed in this section is more precisely described as ‘meta-ethical moral relativism’. 8 Some amoral standards are relative. For example, it is correct to say that holding your fork in your left hand is good manners in some cultures, that holding it in your right hand is good manners in other cultures, and that not using a fork at all is good manners in yet many more cultures. This is partly why we took some trouble to distinguish moral and amoral claims earlier in the chapter: confusing them can seduce a person into the mistake of moral relativism. 9 This is from Plato’s dialogue Euthyphro. The translation is courtesy of Fowler, H. (translator), 1996 (original in 380 BCE), Plato in Twelve Volumes, Vol. 1, Harvard University Press, 10a 10 ‘I Wouldn’t Worship an Anti-Gay God - Tutu’. 2007. Cape Times. 19 November. p. 1 Accessible online at www.iol.co.za (accessed 3 June 2013) 11 Genesis 18: 23—25. I am grateful to Andres Luco for pointing out this passage to me. 12 In Redemption Song, Marley sings: ‘Emancipate yourselves from mental slavery / None but ourselves can free our minds’. Although the song is primarily a call for black consciousness, the quote is apt for all failures to think critically. 13 Oxford Dictionary of Psychology, Edited by Andrew M. Colman, 3rd edition, Oxford University Press 14 Thanks to my two co-authors for helping me to refine this description of our approach. Readers interested in learning more about it, and its justification, may like to research the notion of reflective equilibrium, first named and made popular by the philosopher John Rawls in his seminal work, A Theory of Justice. See Rawls, J., 1999. ‘A Theory of Justice’, revised edition. Harvard University Press. Chapter Three CRITICAL THINKING I: HOW TO REASON LOGICALLY by Jimmy Winfield So far a strong case has been made for thinking critically to figure out the answers to one’s ethical dilemmas. All of the activities in the list at the end of the previous chapter are necessary to achieve critical thinking, but they can be summarised using the two key features of critical thinking that we identified in Chapter 1: to give ourselves the best chance of arriving at correct moral beliefs, we must reason logically, and we must maintain a healthy scepticism about the moral beliefs that we encounter, whether received from others or our own intuitions. This chapter and the next spend some time developing these two skills directly. This chapter provides guidance about how to employ logical reasoning, and in Chapter 4 we shall learn to be on our guard against the tricks our minds can play to get us to accept beliefs which are not supported by good logic. Some aspects of these two chapters may seem somewhat technical, but that is intended, for they are essentially about the mechanics of thinking. They provide, in a real sense, the tools required to think critically. What is logical reasoning? You may remember from high school grammar that English sentences generally use one of three different moods: declarative (or indicative), interrogative or imperative. The interrogative mood is used to ask questions, and the imperative mood gives instructions; neither shall concern us here. Declarative sentences make a statement: they claim that something is the case, for example: ‘I will reply later’, ‘grass is green’, ‘I like peanut butter’, ‘Jacob Zuma was abducted by aliens’, ‘you should not have lied’, ‘capitalism is immoral’ and so on. In philosophy, we often talk of such sentences as ‘statements’ or ‘claims’, and when the claim is a general claim about some important topic with broad applicability, we often call it a ‘position’ or a ‘view’. For example, ‘capitalism is immoral’ is a position. Generally, a declarative sentence is either true or false: ‘I will reply’ is true if I will reply, and false if I will not. Sometimes the truth of a claim is obvious; for example everyone knows that grass is green. Even when the truth is not obvious, sometimes we are not particularly motivated to test whether the claim is true—why should we doubt someone’s preference for peanut butter? Chapter 3 · Critical thinking I: how to reason logically · 31 At other times it is impossible to verify the claim anyway: there is no sure way to tell if I will reply later (or do anything else in the future)—except to wait and see. But at other times we are able and keen to establish whether a statement is true or false—we may well want to know if JZ really was abducted, if your lie was in fact justified, or if capitalism is truly immoral. The term ‘reasoning’ describes the process involved when we give reasons which defend a claim we have made, or unpack the further logical consequences of claims we have made. The reasons we give in support of a claim amount to an ‘argument’, but not the sort which involves aggressiveness. Shouting at a person is one way to attempt to convince him, but it is not usually effective. A much more promising method is to provide a logical argument. Good logical reasoning consists of good arguments, and good arguments provide good reasons for accepting the claims they support. What is the basic structure of an argument? Arguments are presented in many forms, but to be taken seriously they should all conform to the same basic structure, even if only implicitly. The claim whose truth we seek to test is the conclusion of the argument, and the reasons given for believing the conclusion are called the premises. Suppose that your friend told you that the reason she knows Jacob Zuma was abducted by aliens is that her boyfriend’s mom knows Jacob Zuma and he told her about the abduction, which she then related to your friend. Because this is a claim supported by a reason, it is an argument, although it is not yet fully developed. To evaluate arguments properly, it often helps to go through them carefully, one step at a time. An effective way to do this is to identify separately each component (this is called ‘formalising the argument’). We do this below, using the letter ‘C’ to indicate the conclusion, and the letter ‘P’ for each premise. You will soon see that there is almost always more than one premise, so we shall use subnotation to number each of them. So your friend’s incomplete argument currently boils down to the following: P1: My boyfriend’s mom said that JZ told her he was abducted by aliens Therefore: C: JZ was abducted by aliens What is a valid argument? The above argument is incomplete because it is not valid. It is vital to note that the word ‘valid’ is often used in everyday talk as if it means ‘sound’, but in logic it is a big mistake to confuse these two terms because they mean very different things: in fact, many unsound arguments are perfectly valid. An argument is valid if it is impossible for the premises to be true and the conclusion to be false. Other common ways to say this are: the premises ‘entail’ the conclusion, and the conclusion ‘follows’ from the premises. If you want to establish whether an argument is valid, ask yourself: ‘if the premises were true, could the conclusion be false?’ If your answer is ‘yes’ then the argument is invalid; if ‘no’, then it is valid (even if the premises are in fact false). For example, if it were true that your friend was told by her boyfriend’s mom that JZ told her he was abducted by aliens, is it possible that JZ was in fact not abducted? Of course it is, for there are at least five possible scenarios—logical possibilities—which would enable this to happen: (1) the boyfriend’s mom might have lied about her conversation with JZ (2) she might have misheard JZ 32 · BUSINESS ETHICS & OTHER PARADOXES (3) she might have misremembered her conversation with JZ (4) JZ may have lied about being abducted; or (5) JZ might have wrongly perceived the events which he considers to be an alien abduction. In any of these scenarios, the sole premise of the argument as presented above would be true, and yet the conclusion would be false. Therefore the argument is invalid. We can make many invalid arguments valid by inserting a premise (or premises) which make it impossible for the premises to be true and the conclusion false. We call this inserting a ‘missing’, ‘hidden’, or ‘suppressed’ premise. This is necessary with many arguments that you hear or read, for people do not always explicitly state each premise of their argument. Often this is for good reason: perhaps the missing premise is obviously true, or maybe it is just their style not to spell everything out in infinitesimal detail. Sometimes, though, a premise is hidden for more cunning reasons: perhaps if it is explicitly stated, it will show how the argument can be defeated for other reasons. When inserting a premise, be sure that it is sufficient to make the argument valid. For example, do you think the following argument is valid? P1: My boyfriend’s mom said that JZ told her he was abducted by aliens P2: What my boyfriend’s mom says, is true Therefore: C: JZ was abducted by aliens This is not valid because, on scenario 4 or 5 identified above, the premises would be true but the conclusion still false: in either case, the boyfriend’s mom is not wrong about what she heard from JZ (rendering P2 true) but JZ himself is mistaken (so the conclusion is false). To make the alien abduction argument valid we need to add another missing premise about the interaction between JZ and the boyfriend’s mom: P1: My boyfriend’s mom said that JZ told her he was abducted by aliens P2: What my boyfriend’s mom says, is true P3: What JZ tells my boyfriend’s mom is true Therefore: C: JZ was abducted by aliens This is a valid argument. There is just no possible way that the premises can be true and the conclusion false. As we have already noted, however, whether the argument is sound is another matter. What is a sound argument? An argument is sound if it is valid and the premises are true. Sound arguments are required for us to accept a claim, because we can only be sure that a claim is true if it is supported by a sound argument. You should be able to see why: validity means that if the premises were true, the conclusion would be true; so if the premises are indeed true, the conclusion must in fact be true. Do you think that the argument above is sound? Perhaps we know the friend who presents the argument to us well enough to accept that P1 is true, but there is little reason to accept the truth of P2, and even less reason to think that P3 is true. After all, we don’t know the boyfriend’s Chapter 3 · Critical thinking I: how to reason logically · 33 mother, and we have never met JZ. Anyway, most people are regularly mistaken and do sometimes lie, and there is little evidence to believe that anyone has ever been abducted by aliens. It therefore is much more plausible to believe that either P2 or P3 is false. Most likely, either JZ or the boyfriend’s mom was making a joke that was misinterpreted as serious. So we have no good reason to believe that the friend’s argument is sound. Below you will see some examples of sound arguments on the left of the page. The basic logical form of each example is indicated to the right of each argument using the letters Q, R and S to represent statements. These are not the only ways to construct sound arguments, but they are some of the commonest. All arguments which conform to these patterns are valid, but like all valid arguments they are only sound if the premises are also true, as in the examples on the left.1 P1: If you are reading this, you are literate P2: You are reading this Therefore: C: You are literate P1: If Q then R P2: Q Therefore: C: R P1: If you are in Dushanbe, you are in Tajikistan P2: You are not in Tajikistan Therefore: C: You are not in Dushanbe P1: If Q then R P2: Not R Therefore: C: Not Q P1: If you are in Empangeni, you are in South Africa P2: If you are in South Africa, you are in Africa Therefore: C: If you are in Empangeni, you are in Africa P1: If Q then R P2: If R then S Therefore: C: If Q then S P1: Dushanbe is the capital of either Tajikistan or Turkmenistan P2: Dushanbe is not the capital of Turkmenistan Therefore: C: Dushanbe is the capital of Tajikistan P1: Either Q or R P2: Not R Therefore: C: Q P1: Suppose that it is acceptable for me to litter P2: If it is acceptable for me to litter, it is acceptable for everyone to litter P3: If it is acceptable for everyone to litter, it is acceptable to live in filth P4: It is not acceptable to live in filth Therefore: C: It is not acceptable for me to litter P1: Suppose Q P2: If Q then R P3: If R then S P4: Not S Therefore: C: Not Q Often these basic forms are combined to make a more complex argument. Take our alien abduction argument, which has been formalised at the top of the next page so that you can see that it consists of two sub-arguments: the conclusion of the first sub-argument (which uses the third form presented above) is the third premise, and this combines with the fourth premise to reach the final conclusion (using the first form presented above). 34 · BUSINESS ETHICS & OTHER PARADOXES P1: If my boyfriend’s mom says that JZ told her something happened, then he did tell her P2: If JZ tells my boyfriend’s mom that something happened, then it did happen Therefore: P3: If my boyfriend’s mom says that JZ told her something happened, then it did happen. P4: My boyfriend’s mom said that JZ told her he was abducted by aliens Therefore: C: JZ was abducted by aliens Of course, one does not have to formalise an argument so that it conforms to one or more of the basic patterns in this way. Frankly, our previous formulation of the alien abduction argument was perfectly acceptable for us to show that it was likely to be unsound; whereas the above formulation is unnecessarily complicated. However, it is helpful to know the basic patterns because sometimes these can inspire your thinking. Certainly, if you can show that your position is supported by an argument that conforms to one of the basic patterns, and that your premises are true, you have proved beyond any doubt that your argument is sound. How does one show that an argument is unsound? Thinking for yourself does not involve ensuring only that your views are supported by sound arguments; it is also about considering opposing views and showing that they are not. To do this you must provide a counterargument, which, if successful, is said to ‘refute’ your opponent’s argument. Because a sound argument is valid and has true premises, a counterargument needs to show either that the original argument is invalid or that one or more of the premises is false. Consider the following argument which does something called ‘affirming the consequent’, which we shall discuss again a little later: Example of the fallacy of affirming the consequent: P1: If you are in Dushanbe, then you are in Tajikistan P2: You are in Tajikistan Therefore: C: You are in Dushanbe P1: If Q then R P2: R Therefore: C: Q Presumably you are not in Dushanbe, the capital of the country Tajikistan, so this argument must be unsound, as we know that the conclusion is false. But simply denying the conclusion is not a refutation of the argument; for that, we must show how it is unsound. This argument can be refuted in both of the possible ways we identified. Firstly, a premise (P2) is false: presumably you are not currently in some other part of Tajikistan either. Second, the form of the argument (symbolised on the right) is invalid. For example, if you were in Isfara, a city in the north of Tajikistan, the premises would be correct but the conclusion false, which means that the argument is invalid. Note that here the counterargument relies on an example—the possibility of being in Isfara—to prove the argument unsound, and this example is therefore called a counterexample. Often, counterexamples are very effective ways to show either that an argument is not valid or that a premise is false. They are sometimes hypothetical like this one (after all, you are not in Isfara), or real (for example, if there was evidence that your friend’s boyfriend’s mother had lied in the past about something JZ had told her, then this would be an effective counterexample Chapter 3 · Critical thinking I: how to reason logically · 35 against the previous argument, for it would mean that P1 is false). Some people, when first encountering the rules of logic, think that hypothetical counterexamples are ineffective because they are made up, but this is a mistake: as long as the imagined scenario is possible, then it can refute the argument, just as the mere possibility of your being in Isfara shows the argument above to be invalid. To prove an argument unsound, all we need to show is that one premise is false or that the argument is invalid. When there is more than one way to refute an argument, as with the argument above, we technically only need to show one of the errors. However, it is common to point out all of them, as doing so is a more convincing refutation. If your opponent disagrees with you about one of your counterarguments, perhaps she can nevertheless be persuaded about the others. What are some typical examples of unsound arguments? One might think that refuting an argument is so easy that no one would ever bother to make unsound arguments. Not at all: unsound arguments are made all the time, and refuting them can be quite challenging until one has had enough practice. However, many unsound arguments conform to a few basic patterns of unsound (or ‘fallacious’) reasoning which are themselves so widespread that they are called ‘fallacies’ and have been given their own special names. In this section, we discuss some of the commonest fallacies. As indicated, the argument formalised above commits a fallacy called ‘affirming the consequent’. In a conditional statement like ‘if Q then R’, the first part, ‘if Q’, is called ‘the antecedent’ and the second part, ‘then R’, is called ‘the consequent’. If we know that ‘if Q then R’ is true, and ‘Q’ is also true (thus affirming the antecedent), this logically implies that ‘R’ must be true. However, if we know that ‘if Q then R’ is true, and ‘R’ is also true (thus affirming the consequent), we cannot logically conclude that ‘Q’ must be true. We showed this above by acknowledging that you may well be in Isfara. Precisely the same mistake occurs when someone accuses you of being materialistic when he hears that you want to make lots of money, on the grounds that materialistic people want to make lots of money. ‘Equivocation’ is another classic fallacy used to hide an invalid argument. An argument equivocates if it uses the same word but with different meanings as if the word has the same meaning in each instance. A famous example can be formalised like this: An example of the fallacy of equivocation: P1: A high school education is better than nothing P2: Nothing is better than a PhD Therefore: C: A high school education is better than a PhD The argument is fallacious because it slides between two meanings of the word ‘nothing’. In P1, ‘nothing’ really means ‘not having any post-primary school education’, whereas in P2, ‘nothing’ means ‘no other educational qualification’. Given these different usages, it is quite possible for the premises to be true and the conclusion false, so this argument, like all arguments which equivocate, is invalid. In truth, there is obviously something wrong with the above argument, because its conclusion is clearly out of line with its premises. But equivocation is sometimes far more difficult to spot, like the following well-known argument against gay marriage: 36 · BUSINESS ETHICS & OTHER PARADOXES Another example of the fallacy of equivocation: P1: Allowing gay marriage erodes traditional family values P2: Traditional family values are vital for a moral society Therefore: C: Allowing gay marriage erodes what is vital for a moral society This argument equivocates because the meaning of ‘traditional family values’ differs between P1 and P2. In the first premise, it refers to the principles of arrangement within a traditional family—a man, a woman and their children, if they have any—whereas in the second premise, the phrase refers to positive moral qualities like love, loyalty, respect, trust, fidelity, and so on. If gay marriage involves two men or two women (and their children if they have any) demonstrating qualities like love and respect—certainly the argument gives no reason to think that it does not—then the premises would be true and the conclusion false. This argument is therefore just as invalid as the PhD argument above it. A person making a straw man argument misrepresents an opponent’s view, or the argument for his view, as weaker than it in fact is, and consequently asks us to accept her view. Consider the following arguments which might be employed by some atheists to deny the existence of God: An example of the straw man fallacy (one which misrepresents the opponent’s view): P1: Religious people say that God exists because they see Him in the beauty of the natural world P2: But any old men with grey beards walking around in nature are not God Therefore: C: God does not exist An example of the straw man fallacy (one which misrepresents the argument for an opponent’s view): P1: Religious people say that God exists because scripture says He does P2: But it is possible that scripture is mistaken, so it is unreliable as a proof of God’s existence Therefore: C: God does not exist When religious people say they can see proof of God’s existence in nature, they do not mean that they have seen God himself traversing pretty landscapes. Defeating a misrepresented version of the opposing view fails entirely to deal with the opponent’s actual view, and is therefore a logical nonstarter. Similarly, while it is true that invoking the truth of scripture is a bad argument for the existence of God, the second argument above is likewise a bad argument for the non-existence of God, because showing a weak argument for the opposing view to be unsound hardly shows that the opposing view is wrong. A scarecrow cannot fight back, so knocking him over is hardly evidence of your fighting abilities. Straw man arguments are invalid for two separate reasons. First, to convince anyone that your opponents’ view is flawed, you need to acknowledge their actual view, and show that their Chapter 3 · Critical thinking I: how to reason logically · 37 best arguments for it are unsound. In fact, the most powerful refutation is the one which has been the most generous to the opponents, both in selecting their most promising arguments, and also in employing interpretative charity in presenting them. ‘Interpretative charity’ requires that if there is any ambiguity we do not choose the weaker interpretation of the argument, that we fill in any missing premises, and that overall we attempt to present the best possible version of the argument. The second reason that straw man arguments are invalid is that even a convincing demonstration that all of your opponents’ arguments are unsound would not prove that your view is correct. After all, your opponents could be correct but not yet have discovered a sound argument for their view, or maybe there just is not sufficient evidence to draw a conclusion one way or the other. Although showing your opponents’ best arguments to be unsound will strengthen your case, you will only prove your case with a sound argument for your view. To say that we do not know something is not the same as saying that we do know its opposite. And so straw man arguments often go hand in hand with a variety of argument that commits another, broader fallacy: appeal to ignorance. This describes any kind of justification for believing one view on the grounds that there is a lack of certainty about the opposite view. Atheists who argue for their view purely because there is no proof of God’s existence make this error, just as religious people who argue that God exists because there is no conclusive proof that He does not. This fallacy is sometimes used to justify a conservative approach in business: ‘better the devil you know than the devil you don’t’ implies that it is preferable to stick with a familiar yet difficult situation rather than to try something new with uncertain consequences. Truthfully, provided one can make a reasonable guess at the likely results of some alternative options, the conservative approach is only logically justified if the risk-return payoff of the best alternative is lower than that of the status quo. Here are three more fallacies which masquerade as valid arguments: an appeal to authority argues for its conclusion on the grounds that some deeply respected person or group believes or believed the conclusion; an ad populum argument urges us to believe something because the majority of people believe it; and an ad hominem argument steers us away from a certain view by pointing out that some deeply disrespected person or group has or had the same view. Examples of each fallacy are: An example of the fallacy of appeal to authority: P1: The Pope has decreed that wearing a condom is wrong Therefore: C: Wearing a condom is wrong An example of the ad populum fallacy: P1: The majority of South Africans believe that individual income tax rates are too high Therefore: C: Individual income tax rates are too high An example of the ad hominem fallacy: P1: Hitler was a vegetarian Therefore: C: Vegetarianism is wrong 38 · BUSINESS ETHICS & OTHER PARADOXES One might insert other premises into these arguments, such as ‘the Pope is the head of the Roman Catholic Church’ or ‘Hitler was evil’, but no true premise can make these sorts of arguments valid because ultimately they rely on a move from what people believe to a conclusion about what is true. As our earlier discussion of moral relativism revealed, the beliefs of others should never be regarded as absolutely conclusive evidence of the truth. Our heroes can, even en masse, be wrong about some things, and villains can be right about some things. (However, if you still think that what others think in an uncertain world may sometimes point to a probable truth, you are not wrong: hold that thought until the section below on inductive arguments.) We shall consider one last fallacy which relies on an invalid argument: the hasty generalisation, which draws a sweeping conclusion on the basis of too-little evidence. Consider the following: An example of the hasty generalisation fallacy: P1: I saw three accidents this week all caused by women drivers Therefore: C: Women are bad drivers This fallacy is responsible for most stereotypes. The flaw is that the conclusion is about all people of a certain sex (or race, age, religion and so on) whereas the only valid conclusion is about some members of the group to which they belong. In other words, the correct conclusion in the first example is the rather dull claim ‘some women are bad drivers’. A proper understanding of logic makes the ridiculousness of stereotypes obvious: all one needs is a single counterexample—in this case, one woman who drives well—to prove the assertion false. If the person proclaiming the stereotype were to persist ‘aah, yes, well, she is just an exception’, it is appropriate to respond ‘no, she’s not “just” an exception, she is a counterexample which invalidates your bigoted claim’. (Think of the common expression ‘the exception that proves the rule’, which is appropriate enough if ‘proves’ is to be interpreted in the old-fashioned sense of ‘tests’: if a rule holds, even in exceptional situations, this provides more evidence in favour of the rule. However, in everyday talk ‘the exception that proves the rule’ is often just a nonsense way to force a hasty generalisation on us: exceptions do not literally prove broad claims are true; in fact, they do precisely the opposite.) Of course, if one has amassed a statistically significant quantity of data, despite the existence of exceptions, this may be enough to justify a probabilistic claim (like ‘men tend to drive faster than women’). More on this in the later section on inductive reasoning. Hasty generalisations are not only used to attempt to justify stereotypes, as this example shows: Another example of the hasty generalisation fallacy: P1: I do not have spare money to give to the poor Therefore: C: I cannot help the poor This rather self-serving argument could only really establish the weaker conclusion ‘I cannot help the poor by giving them my spare money’. After all, even if you cannot afford to give Chapter 3 · Critical thinking I: how to reason logically · 39 money, you could help the poor by donating old clothes or your time. As it appears above, the argument is invalid because the conclusion is again too general. These sorts of contrived examples are common: consider a student who claims that she is performing well because she got an A on a maths quiz last January, or a bigot who claims that he is not a racist since he gets on well with his domestic worker who belongs to the race that he otherwise detests. As is always the case with hasty generalisations, one or even a few examples do not usually constitute enough evidence to support a sweeping conclusion. Having dealt with several fallacies which involve invalid arguments, we now turn our attention to two fallacies whose fatal flaw is that they contain a false premise. The first is called the false dichotomy (or false dilemma), which describes a premise that erroneously identifies only two possible options—‘dichotomy’ means ‘divided into two parts’—as in the following examples. Examples of false dichotomies: P1: Corporations should be managed either for the shareholders or for society-at-large P2: If they are managed for society-at-large, corporations will go out of business Therefore: C: Corporations should be managed for the shareholders P1: Either France cooperates fully with the USA or it is on the side of the terrorists P2: France is not cooperating fully with the USA Therefore: C: France is on the side of the terrorists P1: Children have either strict parents or loving parents P2: My parents were strict Therefore: C: My parents were not loving parents Unlike all the fallacies we have discussed so far, there is nothing wrong with the logical form of these arguments: they are valid. Yet none is sound, because in each case P1 is false. In the first example, there is a host of other possibilities: corporations could be managed for customers, employees, a single shareholder, or any combination of different groups. In the second, there is one other possibility: that France does not cooperate fully with the USA and is not on the side of the terrorists. In the third example, being strict and being loving are not mutually exclusive alternatives, as parents can be both strict and loving. (In fact, experts generally insist that truly loving their children requires parents to be strict at times.) In every example, the existence of just one more alternative is enough to render P1 false. Naturally, a dichotomy is not always false: a coin toss gives either heads or tails; this book is either informative or uninformative; an argument can either be proved sound or it cannot. Nonetheless, we should be particularly cautious of simplistically ‘black-and-white’ claims like ‘you’re either with us or against us’, ‘she’s either part of the problem or part of the solution’, ‘people are either good or bad’, and so on: far too often, they are false dichotomies. We could also speak of false trichotomies, which make out as if there are only three possibilities when in truth there are more. In fact, any argument which presents us with an incomplete set of options as if it is a complete set contains the same flaw. 40 · BUSINESS ETHICS & OTHER PARADOXES The second fallacy involving a false premise is known as a ‘slippery slope’ argument. Consider these: Examples of slippery slope arguments: P1: If marijuana were legalised, then other substances currently banned should be legalised too P2: Before long, deadly drugs like heroin will have to be legalised P3: Deadly drugs like heroin should never be legalised Therefore: C: Marijuana should not be legalised P1: If we raise the minimum wage this year, then we will have to raise it year after year P2: Ultimately, the minimum wage will be too high for any employer—or the economy— to afford Therefore: C: The economy cannot afford for us to raise the minimum wage In both arguments, a relatively small event is predicted to have dire consequences, as if by dislodging a rock at the top of a hill, one starts a slide down a ‘slippery slope’ that ends with an avalanche destroying a village far below. It is important to note that not all slippery slope arguments are unsound—after all, a rolling stone can cause an avalanche—but they are only sound if each premise is true. In the two arguments above, there is no good reason to believe that the initial event will in fact lead to the event predicted in P2: it is possible, as the Netherlands has shown, to legalise ‘soft’ drugs like marijuana and not ‘hard’ drugs like heroin; and a raise in line with inflation should never itself render employers unable to afford wages, as those employers charge their customers prices which are themselves subject to inflation. Whenever you are confronted with a slippery slope argument, check it carefully to see if each step in the chain reaction is necessarily implied by the step before it. If not, then it is fallacious. Finally, we come to a favourite fallacy of lazy politicians, perhaps because it often fools a lot of people without their having to do any real work. It is called ‘begging the question’, but beware of its misleading name: it may be helpful to remember that a better name would have been ‘assuming the answer’.2 An argument which begs the question is often also described as employing ‘circular reasoning’ because it bases its conclusion on a premise which is a rephrasing of that same conclusion. Consider the claim ‘abortion is wrong because it is murder’. We could formalise this argument, taking care to state the missing premise (P2), as follows: Examples of begging the question / circular reasoning: P1: Abortion is murder P2: Murder is wrong Therefore: C: Abortion is wrong This does have a valid form, but it is fallacious because we have no better grounds for accepting the truth of P1 than we do for accepting the truth of the conclusion: in fact, they express precisely Chapter 3 · Critical thinking I: how to reason logically · 41 the same idea. Murder is the wrongful ending of a life, as opposed to killing for some a welljustified reason (like self-defence), so the question of whether abortion is wrong is really just the same as the question of whether abortion is murder. An argument which seeks logically to convince us that abortion is wrong needs to show why we should regard abortion as wrong, not simply tell us twice that it is. Similarly, if an employer claims that it cannot pay above the minimum wage because it cannot afford the additional staff costs, it is not making an argument: rather, it is saying in two ways that it is unable to pay more. For such a claim to amount to an argument, the employer would have to explain why it cannot afford to pay more. How are moral arguments special? We mean something quite specific by the term ‘moral arguments’: arguments whose conclusion is a normative moral judgement like ‘abortion is murder, ‘you should not have told the client that we offer a two-year guarantee’ or ‘that company does the right thing’. Moral arguments must obey the same rules as any other arguments: in other words, they must be valid and their premises must be true. What is unusual about moral arguments is not only that the conclusion is a normative claim: it is also the case that at least one premise must likewise be a normative claim. This is because one cannot argue validly from a series of purely descriptive premises to a normative conclusion. Put differently, one needs to establish a moral standard in order to be able to judge something as moral or immoral. See if you can spot the normative premise (that is, the moral standard) in each of the examples below: Examples of moral arguments: P1: Abortion is the ending of an innocent human life P2: Ending an innocent human life is murder Therefore: C: Abortion is murder P1: One should never lie P2: Telling the client that we offer a two-year guarantee was a lie Therefore: C: You should not have told the client that we offer a two-year guarantee P1: That company is fair, honest and sensitive to the needs of the communities in which it operates Therefore: C: That company does the right thing The moral standard in the first argument is P2; in the second, it is P1; and in the third it is a missing premise which could be stated as follows: ‘P2: It is the right thing for a company to be fair, honest and sensitive to the needs of the communities in which it operates’. The normative premises in moral arguments are frequently hidden in this way, because they are considered by the speaker to be obvious from the context. It is always important to identify them, though, because while it may be obvious what moral standard the speaker is using in his argument, this is different from the moral standard being obviously true. As we shall see in a moment, the truth of the moral standard is often the most vulnerable part of a moral argument. 42 · BUSINESS ETHICS & OTHER PARADOXES Of course, moral arguments can go wrong in all the same ways as the other arguments we have discussed. For example, many would challenge the validity of the first argument above on the basis that it equivocates: in P1 ‘innocent human life’, because it refers to a foetus, means ‘a human life form incapable of telling the difference between right and wrong’, whereas in P2 the same expression refers to a ‘person not guilty of wrongful acts’. (If you disagree, and think that it has the second meaning in both premises, then consider whether the argument begs the question.) Since sound arguments, in addition to being valid, must have true premises, the normative premise—that is, the moral standard—in a moral argument must be true. However, we know that moral standards are not easily verifiable, and that the best way to determine moral standards is through reasoning. This presents us with an interesting situation, as the following example should make clear. Imagine that your colleague lied to his client about his company offering a two-year guarantee, when in fact the company offers no guarantee at all. You tell him he acted wrongly, and he asks why, so you present him with the second argument above. But then he asks how you know that P1 is true. Now, because this is a moral standard that cannot be proven empirically, you must provide him with logical reasons for accepting P1. In other words, you need an argument to explain why one should never lie. Perhaps you offer the following: P1: Lying causes harm because when people act on misinformation they make harmful decisions P2: It is always wrong to cause harm to others Therefore: C: One should never lie This argument relies on a more basic moral standard, P2. (It is more ‘basic’ because it covers far more kinds of actions than lying.) Of course, now you have made another argument for him to challenge. One of the ways in which he might do this is to ask how you know that P2 is true. Then another argument—with its own, even more basic, moral standard—is needed, and he will predictably just ask why that argument’s moral standard is true. Perhaps this is not a hopeless task: many philosophers believe that there are in fact some fundamental moral standards (or moral principles) that can be used to ground all of our moral standards, some of which we shall discuss later in this book. However, it is certainly a long-winded way of approaching the simple question of why your colleague should not have lied, which will very quickly appear to move off the main point (for example, a discussion about the truth of P2 above is unlikely to be much about lying). Usually, it is better to stay focussed on the moral standard in the original argument. But then how can we test the truth of that moral standard—‘one should never lie’—without providing arguments for it? Manuel Velasquez suggests that we can determine whether it is consistent, and if so then we have very good reasons for accepting it as true.3 What does it mean for a moral standard to be consistent? When Velasquez says a moral standard must be consistent, he does not just mean it must be internally consistent—that is, not contain a paradox. That would be too easy a requirement to meet. Velasquez explains that for a moral standard to be consistent it should: (1) not conflict with any other moral standards (2) be applicable to all similar acts, by any other person, in all similar circumstances Chapter 3 · Critical thinking I: how to reason logically · 43 So how could your colleague attempt to show that ‘one should never lie’ is inconsistent? First, he could try to think of another moral standard which is in conflict with it. In fact, one candidate is (ironically) the moral standard we suggested above to justify the prohibition against lying: ‘it is always wrong to cause harm to others’. What if telling the truth might actually cause some harm: wouldn’t this imply that one has a moral obligation to lie? Suppose that your grandmother asks you if you like a pair of socks that she bought you for your birthday. Suppose that she is a highly sensitive soul who took a great deal of time to find these particular socks, and that she will therefore be very upset if you tell her the truth, which is that you wouldn’t be caught dead wearing them. Also, she does not usually buy socks as presents, and so you can be fairly certain that whatever your answer, she is unlikely to give you similar gifts in future and you are thus unlikely to suffer the effects of receiving more hideous presents. In this case the moral standard to avoid causing harm seems to be in conflict with the moral standard against lying: by satisfying one, you will transgress the other. Because of Velasquez’s first condition for consistency, ‘one should never lie’ is thus inconsistent, and the argument given earlier to show that your colleague’s lie was wrong is unsound. However, there may be a way to save the argument by modifying the moral standard to circumvent the conflict. After all, lying to a client about guarantees does not seem to be like lying to your granny to avoid hurting her feelings. In fact, the lie may well lead to harm, as the client may be persuaded by the promise of a guarantee to purchase a product that in fact causes her to suffer a loss when the product malfunctions. The following argument is better than the previous one because the moral standard does not appear to conflict with any other moral standards: P1: One should not lie unless there is a good reason to think that the lie avoids harming others P2: Telling clients that we offer two-year guarantees is a lie that is unlikely to avoid harming others Therefore: C: You should not have told the client that we offer a two-year guarantee Of course, your colleague could try to show that P1 above, while meeting Velasquez’s first condition for consistency, fails to meet the second condition. However, it is very hard to see how he would get such an accusation to stick. On the contrary, if he were to suggest that there is some other moral standard which permits him to lie to clients, it is far more likely that you could successfully accuse his argument of this sort of inconsistency. For example, suppose that he constructs an argument as follows: P1: It is morally permissible to lie to clients if the company will benefit through increased sales P2: Telling clients that we offer two-year guarantees is a lie that will increase sales Therefore: C: My lie to the client about a two-year guarantee was morally permissible Would anyone be willing to apply the moral standard above, P1, to all similar acts, by any other person, in all similar circumstances? Surely not, for we would then consider it morally permissible to be told lies by businesses all the time. Even your colleague would presumably not 44 · BUSINESS ETHICS & OTHER PARADOXES be willing to accept the notion that all the companies from which he purchases goods or services are permitted to trick him into buying from them. If he is unwilling to allow for the moral standard to be applied to others, then he cannot rationally maintain that the moral standard should apply to him and his company. In summary, moral arguments are sound if—and only if—they are valid, their descriptive premises are true, and their normative premises are consistent in both of the ways indicated by Velasquez. What is an inductive argument? So far we have considered only deductive arguments. Good deductive arguments have true conclusions if their premises are true, because good deductive arguments are valid. On the other hand, even if the premises of a good inductive argument are true, its conclusion is merely probably true. In other words, inductive arguments—even good ones—are not valid. Since soundness requires validity, inductive arguments are never sound. You might immediately wonder why anyone would want to make an argument that is not sound, in other words to prove only that her claims are probable. The answer is that she cannot do any better. If one had a good deductive argument to support one’s position, one would far rather use it than an inductive argument. But sometimes a good deductive argument is unavailable. Consider the following arguments, and ask yourself whether there are deductive arguments that would support these sorts of conclusions—in other words, whether it is possible to prove with absolute certainty that they are true: An example of an inductive argument which relies on an appeal to authority: P1: Any meteorologist will tell you that if there is cloud on Lion’s Head, it will rain within 12 hours P2: I have just seen cloud on Lion’s Head Therefore: C: It will rain within 12 hours An example of an inductive argument which relies on an appeal to evidence: P1: Jimbob’s wife was stabbed to death on Saturday morning and buried in his garden P2: Jimbob claims that he cannot remember where he was on Saturday morning P3: Jimbob is eligible to receive R20 million in life insurance on his wife’s death P4: Jimbob’s fingerprints are on the murder weapon, preserved in his wife’s blood P5: On Saturday afternoon, a neighbour saw Jimbob burying a lifeless body in a hole in his garden Therefore: C: Jimbob murdered his wife An example of an inductive argument which relies on a statistical inference: P1: Of two hundred students surveyed, 80% believed that tuition fees are too high Therefore: C: Most of the University’s 15 000 students believe that tuition fees are too high Chapter 3 · Critical thinking I: how to reason logically · 45 An example of an inductive argument which relies on a causal inference: P1: Whenever I have a really bad cold, I drink a special herbal tea P2: After drinking the herbal tea, I have always recovered within three days Therefore: C: The special herbal tea cures my cold For three out of four of the conclusions above, it is impossible to prove beyond a shadow of a doubt that the conclusions are true, so inductive arguments are all we have to go on. With respect to weather predictions, we will presumably always have to rely on appeals to authority.4 The meteorologists themselves will have to rely on appeals to evidence, like the second argument does. And we all have to rely on causal inferences all the time (setting my alarm clock will cause me to wake up, brushing my teeth will prevent them rotting, turning the steering wheel will make my car turn, and so on). The exception is the third argument, because if we had the resources to keep asking students about tuition fees until 7 501 students said they were too high, we could prove the conclusion deductively. Yet statistical inferences are often necessary in a world with limited resources. Though no inductive argument is deductively valid or deductively sound, some are better than others. We thus talk about them as either ‘strong’ or ‘weak’. The premises of a strong inductive argument point to the conclusion in such a way as to make the conclusion very probably true. In fact, assuming their premises are true, the above four arguments appear in order of strength. The first is very strong because if it is true that every meteorologist agrees about a meteorological phenomenon, then it is extremely unlikely that they are wrong. Meanwhile the second argument is strong, because the evidence against Jimbob appears compelling. On the other hand, the third argument is only somewhat strong, because a response by 80% of the sample suggests that more than 50% of the population will respond the same way, but the sample is relatively small. Finally, the fourth argument is weak, because there are probably better candidates to explain the cold going away, like the natural life cycle of cold germs. Given that we sometimes must rely on inductive arguments, we should be willing to accept them, but we should always be aware that the truth of their premises does not make them watertight in the same way as deductive arguments, and we should thus always evaluate for ourselves how strongly the premises really point to the conclusion. With respect to the above four arguments, we should be progressively less comfortable relying on each of their conclusions, to the point that we reject the last one out of hand. Incidentally, incorrect causal inferences like the herbal tea argument are amazingly frequent: a plethora of psychological research reveals a striking human tendency to ascribe causes without good reason. Like all common logical errors, this fallacy has a name—‘post hoc ergo propter hoc’—which is Latin for ‘after this, therefore because of this’. It is pervasive in many fields, but none more so than statistics, where it is often tempting to ascribe causality when all that has been shown is a correlation. For example, when people are told that crime increases when more air conditioners are used, they often begin to think about how exposure to air conditioning perhaps makes people more aggressive, and therefore causes them to turn criminal, when in fact the better explanation is far simpler: crime increases in warmer weather when people are outside and in closer proximity to one another. That’s also when people turn on their air conditioners. You might think at this point that, whenever we talk about the strength or the weakness of 46 · BUSINESS ETHICS & OTHER PARADOXES an argument or about the probability that its conclusion is true, it is an inductive argument. However, this is not the case. In fact, we might decide the conclusion of a deductive argument is ‘probably’ true or ‘probably’ false, and therefore consider it to be strong or weak. This is not because we are unsure about the validity of the argument, for if an argument cannot be shown to be valid, it is worthless as a deductive argument. Rather, it is because we are unsure about the truth of one or more premises. Recall the (valid, deductive) argument about JZ’s alleged alien abduction near the beginning of this chapter: we did not quite prove that the argument was unsound, because we did not show beyond doubt that the premises were false (it is possible that JZ told the boyfriend’s mother the truth, and that she told your friend the truth). However, we did find good reasons to suspect that at least one premise was probably false, and we therefore showed that the argument was probably unsound. Although this result does not amount to a knockout punch against the opposing view, it shows that the argument is weak. Similarly, sometimes one cannot prove the deductive argument supporting one’s own view to be sound, but one can show that it is strong—it is valid and the premises are at least probably true. In the real world, where we often have to put up with a great deal of uncertainty, this is often the best we can do: show our opponents’ arguments to be weak, and ours to be strong. Sometimes this is because we are dealing with inductive arguments; sometimes it is because we cannot be sure about the truth of the premises of deductive arguments. What is an argument by analogy? Consider the following argument: An example of an argument by analogy: P1: A child’s relationship with his parent is like a dog’s relationship with its owner P2: A dog owner is morally permitted to beat her dog in order to improve its behaviour Therefore: C: A parent is morally permitted to beat her child in order to improve his behaviour An argument by analogy relies (unsurprisingly) on an analogy—a statement that two things are similar—to conclude that if x is true of one of these things, then x must be true of the other thing. In this case, P1 contains the analogy (children are analogous to dogs), P2 makes a statement about one of the analogous items (dogs), and the conclusion makes the equivalent claim about the other item (children). All arguments by analogy have this sort of form, though of course the premises may appear in the other order. Arguments by analogy are very common in moral reasoning, partly because of the requirement we identified earlier that moral standards must be consistent. What a moral argument by analogy seeks to point out is that if we don’t accept the conclusion, then we are guilty of having inconsistent moral standards since we do accept the equivalent claim in similar cases. For instance, the above argument implies that it would be inconsistent to consider it permissible to beat a dog and not a child. Although arguments by analogy are not deductively valid, they can be strong, but only if two conditions are true (in other words, to show that an argument by analogy is weak, you should show that either of these conditions does not apply): (1) the analogy is accurate in all respects relevant to the argument; and (2) the premise which contains the statement about the analogous item is uncontroversially true. Chapter 3 · Critical thinking I: how to reason logically · 47 With respect to the argument above, one could challenge the accuracy of the analogy in P1 by pointing out relevant differences between children and dogs, for example the fact that children can understand language better than dogs (this is relevant because it introduces an alternative way to improve a child’s behaviour); or that children are physically capable of, and inclined towards, copying their parents behaviour (this is relevant because it implies that there is a negative consequence of beating a child that doesn’t exist for a dog: a tendency for him to hit other children in future); and so on. An analogy which is shown to be inaccurate in this way is sometimes called a ‘false analogy’. One could also dispute condition 2, for example by denying P2 on the grounds that animals have a right not to be beaten. Given that this is not the conventional view, however, one would need to provide a good argument to support this counterclaim in order for it to be convincing. Absent such an argument, the existence of relevant differences is nonetheless sufficient to cast enough doubt on P1 to evaluate the above argument as fairly weak anyway. See what you think of the argument by analogy at the beginning of the next chapter, which contains the remaining tools required for you to learn to think for yourself. CONTENT QUESTIONS (1) ‘Men are humans. All humans occupy space. Therefore men occupy space.’ Is this an inductive or a deductive argument? (2) What conditions must an argument meet to be sound? (3) Consider the following argument: ‘All spider monkeys are elephants. No elephants are animals. Therefore no spider monkeys are animals.’ Is this argument valid or invalid? Explain why. (4) Explain what it is for an argument to ‘equivocate’. Why is such an argument fallacious? (5) ‘That politician says that we ought to nationalise the mines, but he is an idiot. Therefore, we obviously should not nationalise the mines.’ What fallacy does this argument commit? Why is it a fallacy? CRITICAL ANALYSIS QUESTIONS (6) What is a false dichotomy (also known as a ‘false dilemma’)? Explain why a false dichotomy is a fallacy of reasoning. Give an example of a false dichotomy in business ethics, and explain why it is a false dichotomy. (7) How are moral arguments different from other kinds of arguments? Given your answer, identify and explain in some detail any additional conditions for the soundness of moral arguments, with specific reference to the work of Manuel Velasquez. Continued on the next page 48 · BUSINESS ETHICS & OTHER PARADOXES Continued from the previous page DISCUSSION QUESTIONS (8) Consider a moral belief that you once had which you have since abandoned (e.g. perhaps you once had a racist view which you now realise was mistaken). Try to remember how you justified this belief in the past. Write down this justification and do your best to formalise it into its premises and conclusion. Analyse this argument, pointing out why it is unsound, and identifying any relevant fallacy of reasoning. (9) ‘Some people think that the only legitimate way to justify a belief is to provide a rational argument in support of it, but that is not the only way. One might instead use one’s instincts, intuition, faith or feelings to access difficult truths.’ Respond to this statement, giving a nuanced account of the role of rational argumentation in establishing the truth of our beliefs. CHAPTER THREE NOTES AND REFERENCES 1 Students of formal logic are taught that each valid argument form has a name. The names of the forms presented here are, respectively: modus ponens, modus tollens, hypothetical syllogism, disjunctive syllogism, and reductio ad absurdum. 2 Apparently this misnomer results from a mistranslation of the original Latin name for the fallacy, petitio principii. Using one meaning of petitio the phrase means ‘assuming the starting point’, which is a much better description of this fallacy than the conventional translation, which uses a different meaning of petitio: ‘begging’. (From There are Two Errors in the Title of This Book: A Sourcebook of Philosophical Puzzles, Paradoxes and Problems by Robert M. Martin, Broadview Press, 2002). 3 Velasquez, Manuel, 2002, Business Ethics: Concepts and Cases, Prentice Hall, p. 36 4 Note that appeals to authority are always invalid as deductive arguments, as discussed earlier, but they can amount to strong inductive arguments. However, such arguments are only strong if the claim used as justification is in fact held by a genuine authority whose expertise is relevant to the claim made. Similarly, the ad populem fallacy discussed earlier in the chapter is not always fallacious if used in an inductive argument, provided that the claim is one about which a majority opinion could reasonably be expected to be correct. Chapter Four CRITICAL THINKING II: WHY WE SHOULD INITIALLY CONFRONT MORAL BELIEFS WITH SCEPTICISM by Jimmy Winfield We have now completed the first of the two chapters dedicated to teaching critical thinking directly. Imagine for a moment that instead of learning this intellectual skill, you are reading a guide on how to skydive solo. Up until this point we would have covered some basic principles: the mechanics of flight, the structure and functions of the equipment, the correct technique, common errors made by novices, and so on. Of course, at some point you will have to learn by doing—you must actually jump out of a plane—but at least one more section of theory would be helpful: by now you know what errors are frequently made, but you do not yet know what it is that may cause you to make them. For example, it would be helpful to learn that it is your adrenalin which might cause you to pull the ripcord too early, and that the speed of your descent is why you will probably misjudge how close the ground is, and so on. When you earlier read about the errors you might well have thought ‘oh, I wouldn’t make those mistakes’; but if you understand why that mistake is predictable for you and other newcomers to the sport, you may better appreciate that you will tend to do the same, and be more alert to them and to the importance of avoiding them in practice. At this point in a guide to critical thinking, having already covered the most common errors of logic, we should consider how they might arise. This chapter thus explores the reasons for breakdowns in rational thinking that have been shown to exist by researchers in psychology. Their almost overwhelming power accounts for the second important feature of critical thinking that we identified in Chapter 1: scepticism about the beliefs we encounter. In short, to avoid the pitfalls of moral reasoning we must understand why we are tempted to believe so many of the moral claims that we come across, without any rational grounds for doing so. To see how we are all prone to overlooking the second feature of critical thinking, and thereby getting the first feature wrong too, it will be helpful if you do the mental equivalent of reading the theory and actually skydiving at the same time, by making a genuine attempt at the exercises that are presented here. 50 · BUSINESS ETHICS & OTHER PARADOXES What is a cognitive bias? Let’s put this into practice right away; try the exercise below now: Exercise 1. Determine as quickly as you can whether the following argument is sound: P1: All women are people P2: Some people are unethical Therefore: C: Some women are unethical Recall that soundness requires the premises to be true and the argument to be valid. Validity requires that, if the premises are true, the conclusion must be true. When you are happy with your answer to Exercise 1, do the following exercise: Exercise 2. Determine as quickly as you can whether the following argument is sound: P1: All women are people P2: Some people are male Therefore: C: Some women are male If you are like most people, and especially if you followed the instruction to produce an answer relatively quickly, you will have thought that the argument in Exercise 1 is sound, and that the argument in Exercise 2 is not. If you were paying close attention, your answer to Exercise 2 may have unsettled you, when you noticed quite correctly that it has exactly the same logical form as the argument in Exercise 1. In fact, this argument form is not valid—as Exercise 2 points out very effectively—because in both of the above arguments what is true of ‘some people’ may only be true of some (or all) of the people who are not women. For all arguments structured like this, it is logically possible for the premises to be true yet the conclusion false, so here both arguments are invalid, and therefore unsound. You may resist the idea that the argument in Exercise 1 is unsound on the grounds that the conclusion is true, or because the premises and the conclusion are all true. Well, if arguments are valid and sound because their premises and conclusions are true then the argument in Exercise 3 is valid and sound: Exercise 3. Determine, as quickly as you can, whether the following argument is sound: P1: All women are people P2: Some people are male Therefore: C: Grass is green This is of course nonsense, and an unsound argument. The whole point of arguments is to give reasons to accept the conclusion, not just to mouth off a series of facts. The truth of the conclusion does not determine the validity and soundness of the argument (actually, in logic the converse is true). Yet the important thing to see here is that the truth of the conclusion can often determine psychologically what we think of an argument. Of course, no one is persuaded that the argument in Exercise 3 is sound because the premises aren’t even vaguely relevant to the conclusion, but Chapter 4 · Critical thinking II: confronting moral beliefs with scepticism · 51 Exercise 1 is different: there is a definite relationship of association between the premises and the conclusion, and this, together with their belief in the truth of the conclusion, tricks most people into thinking that the argument is valid. This is an example of what is called a ‘confirmation bias’, which causes us to favour— without good logical reasons—views and arguments which confirm what we already believe. This bias is why most pro-lifers think that even weak arguments against abortion are sound, and why most pro-choicers agree with bad arguments for abortion. It is extremely powerful and, if you are interested in your beliefs being true, dangerous. It causes us to ignore evidence against our views and instead unconsciously to sift out only the evidence which supports our positions; and it is a major impediment to our ever changing our minds, even when we are wrong. To become wiser, we must resist it. The confirmation bias is just one of many cognitive biases that psychologists have discovered, all of which trick us into committing any number of logical fallacies, like those mentioned earlier in Chapter 3. The word ‘cognitive’ implies that these are mistakes of thinking—as opposed to feeling—so ‘cognitive biases’ are errors of perception, judgement or decision-making. The word ‘bias’ implies that the errors are made as a result of some reasonably consistent tendency; for example, an addition error is not likely to be the result of a cognitive bias unless, say, you always tend to get too large a total when adding a list of numbers. What causes cognitive biases? Most psychologists agree that we have two systems of thinking: one fast, used to make quick judgements and decisions; and one slow, for making judgements and decisions that require more mental processing.1 The first of these systems is often called intuition, which we came across in Chapter 2. Intuition is of course extremely helpful—many of our decisions need to be made quickly and without a great deal of cognitive effort: if we had to think seriously about how to get out of bed, the best route to take to the bathroom, the correct order of our morning ablutions, and so on, we would never get anything done! As we have also noted previously, intuition in some cases can serve you better than your other, slower thinking system, like when you spontaneously swerve your car in order to avoid a pedestrian. Nonetheless, intuition makes mistakes, such as initially misjudging a person based on his appearance. In particular, your intuition sometimes overrides your other thinking system—the capacity for more methodical and logical processing—in ways that cause you to be wrong. Consider the following exercise, the original version of which was developed by the psychologist Shane Frederick:2 Exercise 4. Determine, as quickly as you can, the answer to the following question: A child’s cricket bat and ball together cost R110. The bat costs R100 more than the ball. How much does the ball cost? Many people, when they come across a question like this in a book like this, anticipate that it will be tricky and they therefore slow down and force themselves to ignore their intuition. If you did this, you would probably have come up with the correct answer, which is R5. If instead you just went with the response provided by your intuition, you almost certainly would have incorrectly answered ‘R10’. (If you don’t see why that is the wrong answer, just add R10 for the ball to R110 for the bat.) Even those who successfully resisted intuition would likely admit that, had they not been actively looking for a catch, they would have been fooled. 52 · BUSINESS ETHICS & OTHER PARADOXES It seems that our slower, logical thinking system kicks into action only when the intuitive thinking system tells it to—when the quicker system realises that it cannot handle the matter on its own—like when you need to prepare a presentation for your boss, or need to multiply 27 by 33. If the intuitive system does not identify a need to call in backup, you will just go with your snap judgment. This is precisely what happens when the answer ‘R10’ is given to Exercise 4, and when the answer ‘yes, it is sound’ is given to Exercise 1. Cognitive biases unconsciously allow intuition to override our capacity for logical reasoning, and make us ‘jump’ to a conclusion, or believe a claim which we do not have good reasons to accept. In such cases, we are not thinking critically; in fact, we are lazily avoiding the required kind of thinking altogether. What sorts of factors might impair our critical thinking? To date, psychologists have identified a scarily large number of cognitive biases, though some are sub-types of others, and many are inter-related in other ways. They often have intriguing names like ‘the curse of knowledge’, ‘the Texas sharpshooter fallacy’ and the ‘Semmelweis reflex’; a short internet search will explain these and a hundred others. Any of them could conceivably cause us to support an unsound moral argument; some of the most pernicious are discussed briefly in this section. We have already seen how the confirmation bias allows our current beliefs to influence us to accept an unsound argument just because they correspond with its conclusion. In general, this is the way that cognitive biases can pervert our moral thinking: by allowing something— like a related belief we have—to be the determining factor in our judgements when really that factor should be mostly or wholly irrelevant to those judgements. In the sections below, we shall discuss four other kinds of such factors: our feelings; our position in time; our self-esteem needs; and our personal experiences. How might our feelings impair our critical thinking? We shall begin this discussion with the following exercise: Exercise 5. Determine, as quickly as you can, whether the acts described below are morally permissible: A) Julie and Mark are a brother and sister who decide one night on vacation that it would be interesting and fun to make love. Both use contraception, just to be sure. They enjoy the experience, but decide not to repeat it, and to keep it as a special secret, which strengthens their sibling bond. B) Vijay eats the body of his dead father. If you think either of the above acts is immoral then you probably fell prey to the affect heuristic, which causes us to form judgements which correspond with our feelings—our likes and our dislikes—rather than with reason.3 ‘Affect’ refers to our emotions, and a ‘heuristic’ in this sense is an unconscious rule of thumb, so this bias causes us to react to a question like ‘is x good?’ with a different question—‘how do I feel about x?’ Our intuition uses the latter question to serve as a helpful rule of thumb to give us the answer to the first question, for example when we instinctively avoid eating food that smells revolting, or when a person’s poor personal hygiene causes us to distrust them. The scenarios in Exercise 5 are both designed to activate what has been called your ‘yuck Chapter 4 · Critical thinking II: confronting moral beliefs with scepticism · 53 factor’, which is a strongly negative emotional response that, via the affect heuristic, tends to cause a belief that the stimulus is immoral. Indeed, most people presented with Scenario A in studies have considered it immoral,4 just as the historian Herodotus wrote of the moral indignation that Ancient Greeks experienced on learning of an Indian tribe called the Callatians who routinely did precisely what is described in Scenario B.5 Like all heuristics, however, which are designed to help us make a decision quickly based on limited evidence, they can be wrong. Bad-smelling food is sometimes edible and badsmelling people may be entirely trustworthy.6 Similarly, once you reason logically about it, you may decide there is no good reason to condemn Mark and Julie, for they caused no harm— psychological or otherwise—nor did they risk a baby with the defects that are more likely in cases of incest. (Having said that, many philosophers have argued that even consensual, adult, non-procreative incest is morally wrong—but not simply because it makes us feel queasy.)7 With regard to Scenario B, the Callatians were doing what any of today’s cultures is expected to do: honour their dead through ritual. Our rituals happen to be burial or burning—what defensible grounds do we have to argue that eating our dead relatives would be wrong? Walter Sinnot-Armstrong and colleagues have explained the many ways that negative moral judgements may be generated by negative feelings: ‘All the affect heuristic says is, roughly: if thinking about the act (whatever the act may be) makes you feel bad in a certain way, then judge that it is morally wrong… If you consider doing the act yourself, you might feel compunction in advance or anticipate guilt and/or shame afterwards. If you imagine someone else doing the act to you, then you might feel anger or indignation. If you imagine someone else doing the act to a third party, then you might feel outrage at the act or the agent... And different kinds of negative affect might accompany judgments in different areas of morality: anger in moral judgments about harm, contempt in the moral judgments about hierarchy, and disgust in moral judgments about impurity.’8 So the yuck factor is just one of countless ways in which the affect heuristic can distort our moral judgements. For example, the heuristic can also be blamed for the election of likeable but unethical leaders, because instead of trying to answer ‘would he be a good president?’, people subconsciously substitute this important question with a much easier one: ‘do I like him?’ Another way occurs when we are confronted by a dilemma between acting in our selfinterest and doing what is right. Indeed, this is precisely how most ethical dilemmas appear to us: on one hand we should keep a promise, tell the truth, remain loyal, avoid harming someone, and so on; on the other hand, we stand to benefit—financially or otherwise—if we do the opposite. We can predict that when we weigh the options, the self-interested choice will be given undue credit thanks to the affect heuristic. This explains neatly why unethical acts like using the employer’s resources for private purposes, not owning up to a mistake, and taking credit for someone else’s good work all happen so frequently in some working environments that such behaviour is accepted as normal. Psychologists have shown how the affect heuristic may lead to poor judgements in business ethics, even when self-interest is not involved, using an ingenious experiment in which a group of subjects was taught about the benefits of a new technology, and others were taught about its low risks. By revealing no arguments against the technology, researchers made it seem very likable. When later asked, the group informed about low risks rated the benefits as large and the group informed about large benefits rated the risks as low, even though each group was not told about the other dimension of assessment.9 As the benefits and risks of technology are likely to have moral implications, it is easy to see how businesspeople who behave the same way might 54 · BUSINESS ETHICS & OTHER PARADOXES make bad decisions not only in terms of what is good for business, but also in terms of what is morally right. How might our position in time impair our critical thinking? To see how one’s position in time is a factor which can corrupt one’s reasoning, try the following exercise: Exercise 6. Quickly answer the following questions: A) Imagine yourself living 50 000 years ago in a caveman scenario, regularly needing to move very heavy objects like buffalo carcasses or dugout canoes from one place to another. If it wasn’t already invented, don’t you think you would have invented the wheel to help you? B) When George Tenet, the director of the CIA at the time, discovered just two months before the ‘September 11th’ attacks that al-Queda may be planning a major terrorist act against the United States, should he have reported this information straight to the President? C) Have you ever asked someone who told you about a mistake that he made: ‘What were you thinking?’ as if it should have been obvious that it was a mistake, and then realised—based on his answer—that it was actually perfectly reasonable for him to act as he did at the time? If you answered ‘yes’ to any of these questions, you did so as a victim of hindsight bias, which makes it difficult for us to see the world from the perspective of a bygone time. Our current reference point is specific to a particular position in time, and this distorts our perspective on the past. Most if not all of us suppose that coming up with the wheel would have been a relatively straightforward exercise, but this is only because the wheel is now so commonplace that we take it for granted. The truth is that experts consider the invention so difficult that they think it happened only once, in one place, and then spread to other peoples. In fact, the first wheels appeared relatively recently—well less than 10 000 years ago—long after our ancestors had learned to cast metal alloys and make harps, for example.10 Similarly, although many people criticised George Tenet for reporting his concerns about a terrorist attack to the National Security Adviser and not to the President himself, this is only because they know what happened two months later. Ironically, the same hindsight bias might lead people to be critical of security agencies for wasting the president’s time with information about suspected terrorist attacks that never happened.11 So the hindsight bias makes us prone to judge an act as morally blameworthy if it turns out to have harmful or unjust consequences, even when at the time the act was performed it was reasonable not to foresee these consequences. Naturally this can wreak havoc with our reasoning in business ethics: a decision to fire newly hired employees because of a sudden, genuinely unknowable reversal of a company’s prospects would not in all circumstances be morally repugnant, despite what our intuition (and the unions) might say. The hindsight bias also works in the other direction, causing us to give undue credit to acts which were unjustifiably risky at the time but which happened to have a favourable outcome. Thus, a CEO betting everything on a mere hunch which turns out coincidentally to be correct does not deserve the praise that the business press is likely to bestow on her. The hindsight bias is so powerful that it even changes what an individual remembers about Chapter 4 · Critical thinking II: confronting moral beliefs with scepticism · 55 how he or she used to think. Studies have asked people to predict the likelihood of certain news events (a successful outcome of the President’s upcoming trip aboard, for example), and then again, after the fact, asked them to recall what they had predicted. They significantly exaggerate the likelihoods they assigned to events which actually happened and understate the likelihoods they assigned to events which did not.12 How might our self-esteem needs impair our critical thinking? Perhaps in cases where people are self-reporting their previous judgements, it is not just their position in time that is subconsciously skewing their observations of the past, for we also know that people deceive themselves in order to give a more favourable impression of themselves. To see how your self-esteem needs can have an undue influence on your thinking, do the following exercise: Exercise 7. Quickly answer the following questions, as honestly as possible: A) Think of a school subject in which you used to obtain good marks. Do you think your performance was due more to good teaching or to your natural ability in that subject? B) Think of a school subject in which you used to obtain lower marks. Do you think your performance was due more to bad teaching or to your relatively weak ability in that subject? C) Why do you think schoolmates did worse than you in the subject you considered in Question A? D) Why do you think schoolmates did better than you in the subject you considered in Question B? If you answered that your strong performances were the result of your abilities, and your weaker performances were the result of bad teaching, it is of course logically possible that you were correct. More likely, however, you displayed a textbook case of the self-serving bias, which causes us to attribute our successes to internal factors like being clever, socially sensitive or ethical, and our failures to external factors such as someone else not doing their job properly. This is definitely the more likely explanation if your answer in C was that your classmates were less able, and in D that your classmates benefited from an external factor like having better teachers in junior school or having a parent who could help them with the subject. Such inconsistency in your responses would reveal the bias: it seems extremely improbable that the correct account of other people’s performance would work the opposite way to yours—that their successes are the result of external factors and their failures the result of internal factors. This bias means that you are more likely to judge something you have done as ethical even though you might judge it as unethical if someone else did it. For example, if your work requires you to check calculations carefully, and on a given day you fail to do this, you will probably explain it away as unavoidable, say because your boss put you under unfair time pressure; whereas if you were to hear of someone else who skipped a similar check, you would more likely fault him for laziness or incompetence. The presence of this sort of double standard in business has been well established by studies, for example it has been found that injuries in the workplace are usually blamed by management and co-workers on the injured employee, but by the employee on unsafe working conditions.13 56 · BUSINESS ETHICS & OTHER PARADOXES How might our personal experiences impair our critical thinking? The last factor (to be discussed here at least) which has a strong—and often biased—effect on our judgements is our record of personal experiences. Exercise 8. Quickly answer the following questions: A) Which city is the capital of New York State: New York City, Albany or Buffalo? B) Would you be willing to work with Alan, a person who is intelligent, hard-working, impulsive, critical, stubborn and envious? C) Which kind of high school is better: co-educational or single-sex? D) Think of someone you met recently with whom you had a fairly brief but good conversation. Would you recommend the person for a job? E) Would you be willing to work with Ben, a person who is envious, stubborn, critical, impulsive, hard-working and intelligent? By now you know to look out for the trick in these exercises, so it is unlikely that your intuition will be fooled by all of them. However, for them to be effective as demonstrations of cognitive biases, you just need to be aware of an intuitively tempting answer. In life, most of us are not always on guard against the quirks of our intuition, and so we would be more likely to fall for them in a less artificial context. The correct answer to Question A is Albany. However most non-Americans—and even some Americans, no doubt—would give one of the other answers because they are more familiar. (In fact, ‘Buffalo’ may be an especially tempting answer for South Africans because they know of a similar-sounding city—Buffalo City.) This is the result of the familiarity heuristic, which causes us to substitute the question ‘what am I more familiar with?’ for more difficult questions like ‘what is the capital city?’ or ‘which course of action is the right one?’ Thus we can predict that people will allow the experiences they are familiar with to guide them when confronted with ethical decisions. For example, habit and convention will often deprive our intuition even of the notion that what we are doing might be wrong. Somebody who regularly drives after too much alcohol will more likely do so without thinking about the harm that he might cause. A boss who has always treated her employees abusively will never pause to consider doing otherwise. A person whose colleagues regard homosexuality as unacceptable is more likely to treat a new gay recruit disrespectfully without a pang from his conscience, and so on. An example of the familiarity heuristic which is often considered a cognitive bias in its own right is system justification: we are prone to thinking that the system with which we are familiar is essentially good, even when it is not, or at least when a good deal of serious thinking is required to tell whether it is. This is why you are more likely to have chosen as your answer to Question C the model of high school that you experienced (to be sure, ask your friends who went to a different model for their view). It also explains why people who work in investment banks believe the big bonuses—often more than their annual salary—are appropriate while most others find them offensively large. Another cognitive bias which describes one more way in which the accident of our personal experiences distorts our reality is called the halo effect, which has been defined as ‘the tendency to like (or dislike) everything about a person—including things you have not observed’.14 The name is apt, for the effect claims that if you like someone when you first meet them, you are likely to think of them as being somewhat angelic—wearing a halo—even despite some evidence Chapter 4 · Critical thinking II: confronting moral beliefs with scepticism · 57 to the contrary. The converse is true of people who give you a poor first impression. If you answered ‘yes’ to Question D above, it was as a result of the halo effect—having an enjoyable social encounter with someone really ought to be insignificant in assessing their appropriateness for a job. Likewise, if you were more willing to work with Alan (presented in Question B) than with Ben (presented in Question E), the halo effect misguided you by weighting the earlier descriptions as more important than the later ones—the descriptions are in fact identical except with respect to order.15 The implications for our moral evaluations of other people and institutions should be clear. The case of Alan and Ben also shows how the experience of being given information in a certain way—how it is ‘framed’—can play mischief with our reasoning. This is called the framing effect, and the classic example comes from a study by the psychologist Amos Tversky, who asked two groups of physicians to recommend whether surgery was the correct treatment for a patient with lung cancer.16 The groups were given exactly the same information except for the framing of the short-term outcome of surgery: one group was told that ‘the one-month survival rate is 90%’; the others were informed that ‘there is 10% mortality in the first month’. Despite the fact that the meanings of these two claims are identical, 84% of physicians in the first group recommended surgery, while only 50% of the second group did! Given that experts in their field can be so susceptible to the way in which information is presented, when considering moral arguments we ought to be very wary of framing effects, ensuring that we understand each component of the argument for what it really means, and that we do not get misled by mere presentation. How are we to avoid the effects of cognitive biases? We have by no means discussed all of the cognitive biases which can spoil our moral reasoning. People have evolved to follow simple rules of behaviour, and the need to make decisions quickly and on limited evidence is no less true today than it was for our ancestors on the savannah. Think of a way that people tend to shortcut their reasoning capacity, and you will likely name a heuristic which works well for us much of the time but sometimes leads to horrible misjudgements. (For example, you might easily come up with Kevin Laland’s ‘do-what-themajority-does’ heuristic or Shelly Chaiken’s ‘I-agree-with-people-I-like’ heuristic.)17, 18 How are we to respond to this devastating indictment of our mental faculties? Well, one mistaken response would be to think that you are immune. In fact, there’s a name even for that cognitive bias—bias blind spot—the failure by an individual to acknowledge that biases affect him or her. The evidence for the ubiquity of biases is too strong to reject. In many studies every single participant demonstrates them. However, the good news is that not everyone demonstrates them to the same degree. Better educated people seem to be less prone to some biases, for example.19 Also, many of the studies which reveal significant biases are designed to put people off guard. Studies which encourage their subjects to think carefully show a much lower incidence of bias.20 The fact that different people, and different conditions, exhibit a greater or lesser degree of bias should give us hope that one can reduce—even if not entirely eliminate—one’s exposure. More on this in Chapter 15. To know that cognitive biases exist, to recognise their enormous influence, to be able to identify at least some of them, and to know the basic mechanism by which they arise, are key weapons in combating them. Such knowledge will help us develop specific actions in particular contexts to avoid certain cognitive biases: for example, Daniel Kahneman recommends that 58 · BUSINESS ETHICS & OTHER PARADOXES educators should mark students’ essays in an examination separately, and without knowing the marks they gave each student for her other essays, so that the halo effect does not cause them to give subsequent essays a mark like the first. Similarly, he suggests that before discussing an important decision, business executives should each write down their initial views, and start the meeting by reading what they have written, to reduce the tendency for those who speak early to have a disproportionate influence on the decision.21 There is also a general approach which will strengthen our defence in the battle against cognitive biases and their onslaught on our reasoning processes. When a decision is important—as all ethical decisions are—we must remember that forming a conclusion is the responsibility of our slow, deliberate thinking system. This system should not entirely refuse entry to contributions from the high-speed intuitive thinking system, but these contributions should be rigorously tested. Philosophers often, as we shall do in this book, acknowledge that a certain idea has intuitive appeal, and that others are counterintuitive, but this is just a starting point, and no idea should be accepted or rejected until it has been subjected to a thorough evaluation using the methods of logical reasoning. In other words, when confronted with an ethical dilemma, one ought to respond as alert readers respond to the exercises in this chapter: to be on one’s guard, to anticipate tricks, and to retain a healthy scepticism about one’s ability to have instant access to objective moral truths. Chapter 4 · Critical thinking II: confronting moral beliefs with scepticism · 59 CONTENT QUESTIONS (1) What are cognitive biases? (2) Briefly describe the theory (attributable to Daniel Kahneman) which explains how cognitive biases occur by identifying two systems of thinking. (3) What is the confirmation bias? How might it affect the way we interpret data? (4) How might the hindsight bias lead us to make incorrect moral judgements? (5) What is a ‘double standard’? Explain how many double standards are the result of our need for self-esteem. CRITICAL ANALYSIS QUESTIONS (6) What is a heuristic? What purpose do heuristics serve? How can they lead us astray? Give an example of a heuristic identified by researchers in psychology, explaining how it can be both helpful and problematic. (7) Describe three different ways in which an individual’s history of personal experiences can significantly distort her judgement on ethical matters. DISCUSSION QUESTIONS (8) It is common to hear people say ‘I like to believe that x’, e.g. ‘I like to believe that things work out all right in the end’. What is wrong with this, as a way to justify the belief x? Why do you think it is nonetheless an accepted way to tell someone what you think? (9) Now that you have learned about cognitive biases, identify some ways in which your own moral decision-making might be impaired by them. Produce a list of at least five habits you can develop to reduce the likelihood that you will fall into the traps laid by cognitive biases. Justify each item on your list. 60 · BUSINESS ETHICS & OTHER PARADOXES CHAPTER FOUR NOTES AND REFERENCES 1 This idea, and many others introduced in this section, are excellently explained by the psychologist and Nobel prize-winner Daniel Kahneman in ‘Thinking, Fast and Slow’, Allen Lane, 2011 2 Frederick, S. 2005. ‘Cognitive Reflection and Decision Making’ by, Journal of Economic Perspectives, 19, pp. 25-42 3 Slovic, P., Finucane, M., Peters, E., MacGregor, D. 2002. ‘The Affect Heuristic’ in Heuristics and Biases: the Psychology of Intuitive Judgment, eds. Gilovich, T., Griffin, D., Kahneman, D., Cambridge University Press 4 Haidt, J. 2001. ‘The Emotional Dog and its Rational Tail: a Social Intuitionist Approach to Moral Judgment’, Psychological Review, 108, pp. 814-834 5 Cited in James Rachels’ excellent book ‘The Elements of Moral Philosophy’, 2007, McGraw Hill. 6 Moral intuitions based on the affect heuristic are the focus here, but they are certainly not alone in sometimes being mistaken, as the food example is meant to show. Consider a more intriguing example for sports fans: the 2011 film Moneyball and the non-fiction book by the same name are vivid accounts of how the affect heuristic once led to suboptimal recruitment in major league baseball, with scouts and coaches deciding a player’s potential partly by their body type and looks. The hero of the story, Billy Beane, manages to compete successfully with teams with triple the payroll by ignoring his feelings and rather using the best players in statistical terms. (Lewis, M. ‘Moneyball: the Art of Winning an Unfair Game’, 2003. W.W. Norton and Company) 7 See, for example: Neu, J., 1976. ‘What is wrong with incest?’, Inquiry: An Interdisciplinary Journal of Philosophy, vol. 19, pp. 27-39; Fischer, R., 2012. ‘Why Incest Is Usually Wrong’, Philosophy in the Contemporary World, vol. 19, pp. 17-31 8 Sinnott-Armstrong, W., Young, L., and Kushman, F. 2010. ‘Moral Intuitions’ in The Moral Psychology Handbook, ed. Doris, J., Oxford University Press, p. 260 9 Finucane, M., Alkahami, A., Slovic P., Johnson, S. 2000. ‘The affect heuristic in judgements of risks and benefits. Journal of Behavioral Decision Making, 13, pp. 1-17 10 Beware of bigots who suggest that one culture is backward because it never invented the wheel—it is overwhelmingly likely that the bigot’s cultural forefathers also only copied it from someone else! For more on this, see: www.scientificamerican.com/article.cfm?id=why-it-took-so-long-to-inv/ 11 This example comes from Kahneman, D., ‘Thinking, Fast and Slow’, p. 204 12 Fischhoff, B. and Beyth, R. 1975. ‘‘I knew It Would Happen’: Remembered Probabilities of OnceFuture Things.’ Organisational Behaviour and Human Performance, 13, pp. 1-16 13 Gyekye, S. and Salmien, S. 2006. ‘The Self-Defence Attribution Hypothesis in the Work Environment: Co-Workers’ Perspectives’. Safety Science, 44 (2), pp. 157-168 14 Kahneman, D., ‘Thinking, Fast and Slow’, p. 82 15 Questions B and E are adapted from a famous 1946 study—which showed clear evidence of a bias—by Solomon Asch: ‘Forming Impressions of Personality’, Journal of Abnormal and Social Psychology, 41, pp. 258-290 16 McNeil, B., Pauker, S., Sox, H., Tversky, A. 1982. ‘On the Elicitation of Preferences for Alternative Therapies’, New England Journal of Medicine, 306, pp. 1259-1262 17 See Laland, K. 2001. ‘Imitation, Social Learning, and Preparedness as Mechanisms of Bounded Rationality’ in Bounded Rationality: The Adaptive Toolbox, ed. G. Gigerenzer and R. Selten. Cambridge: MIT Press 18 See Chaiken, S. 1980. ‘Heuristic versus Systematic Information Processing and the Use of Source Versus Message Cues in Persuasion.’ Journal of Personality and Social Psychology, 39, 752-766. 19 See for example Frederick, S. 2005. ‘Cognitive Reflection and Decision Making’, Journal of Economic Perspectives, 19, pp. 25-42 20 See for example Schwartz, N., Strack, F., Hilton, D., Naderer, G. 1991. ‘Base Rates, Representativeness, and the Logic of Conversation: the Contextual Relevance of “Irrelevant” Information’, Social Cognition, 9, pp. 67-84 21 Kahneman, D., ‘Thinking, Fast and Slow’, pp. 83-85 Chapter Five THE ETHICS OF ECONOMIC SYSTEMS by Jimmy Winfield To continue the analogy which opened the previous chapter, we are now ready to try the business ethics equivalent of skydiving. We have completed as much theory as we need to be able to use the basic equipment, and to avoid the common sorts of mistakes. All we need is a topic: some moral issue within business to which it would be worthwhile applying our freshly honed ability to think for ourselves. Of course, there are many candidates, many of which we will cover in this book, but it makes sense to start with one of the ‘biggest’ questions: one which influences all further questions in business ethics. We can make moral judgements about at least three different kinds of things: people’s actions, their character, and the systems in which they operate. We do these respectively when we say ‘he should not have lied’, ‘she is kind’ and ‘their culture is sexist’. What better place to start our investigation of business ethics than with the question of whether our economic system itself is moral? After all, the economic system for businesses is like the air for flying birds: it both enables and constrains their activity. When something so foundational is manmade, we ought to ask whether it is morally justified: in other words, is the economic system which enables and constrains the businesses around us a good one? How might cognitive biases misguide our moral reasoning about economic systems? An economic system governs how a society’s resources are allocated between people, and so the question of its morality is immensely important. Yet you may never have wondered about this question. Some of us do not question the fundamental characteristics of the world around us. If you haven’t wondered why the sky is blue, perhaps you also haven’t wondered about whether capitalism or socialism is better. However, an enquiring mind and a willingness to challenge even the most commonly accepted ideas are key ingredients in critical thinking. If these questions feel too big or too out-of-the-box, remember that if you aspire to be a leader in your chosen field, you will be required to think big and out-of-the-box. Probably the best ways to prepare for your role then is to practise these ways of thinking now. Perhaps you have never questioned the current economic system because it just seems so obvious that our system is morally acceptable. If so, you have fallen prey to the cognitive bias 62 · BUSINESS ETHICS & OTHER PARADOXES covered in the previous chapter called system justification. A good deal of serious thinking is required to judge an economic system; an intuitive response favouring one system simply because it is the one you know, is hopelessly inadequate. On the other hand, perhaps you have thought briefly about these issues, and you have a strong view that our system should be more capitalist. Or perhaps your preference would be for a more socialist economy. Again, you may be the victim of a cognitive bias: the affect heuristic would predictably cause people from a wealthy background to be against socialist features of an economy. For example, the elite do not like progressive taxation—the tax system which taxes larger incomes at a higher rate—and, in the way that Chapter 4 described, this dislike often translates into a moral objection to it. Similarly, the same bias might be at work in causing someone from less privileged circumstances to be in favour of more socialist reforms, like nationalising the mines. Of course, almost no one admits that his moral beliefs are a function of what would benefit him. People typically instead hide the fact that their position is a self-interested one by offering arguments that may sound convincing for a moment, though they should not fool anyone for long. The wealthy capitalist who claims that poor people are just lazy and deserve a tiny portion of the resources ignores the overwhelming evidence that many poor people are not lazy. Such rationalisations are insulting and ignorant, because the rich generally have no idea what it is like to be poverty-stricken. Similarly, the impoverished socialist who claims that we are all equal and therefore should be allocated an equal share of resources overlooks the reasonably obvious point that being equal in moral worth doesn’t necessarily imply that people should earn the same amount, especially if unequal pay would result in them both earning more than that amount. We shall avoid such errors in this chapter by keeping an open mind about the morality of economic systems without allowing our intuition to misguide us, misled as it is by irrelevant factors like our feelings and personal experiences. In order to ensure that we do this properly, we shall use the system we developed in Chapter 3 for presenting and evaluating arguments. First, however, we should establish what economic system we have, and where it falls on the contemporary spectrum of economic systems. It will be best to start by considering the two extreme ends of that spectrum: pure capitalism and pure socialism. What is pure capitalism? Imagine that deep in the jungles of the Congo, a tribe of indigenous people lives far from the reach of the governments nominally responsible for that region of the political map. Imagine too that the tribe has not developed its own system of government, and so there are no laws constraining the behaviour of each individual. The only rule, observed by everyone, is: ‘what’s yours is yours, and what’s mine is mine’. There are no taxes, no public projects, and no organised way in which the society takes care of people unable or unwilling to take care of themselves. This is the quintessential case of each man for himself—and each woman for herself—and it would produce the closest thing we could imagine to pure capitalism. What would be the key elements of such an economy? First, individuals would be permitted to acquire as many things as they are able, including things with which one makes other things (say, a machine for making bows and arrows, or an entire factory). Capitalism involves the notion of private property, including the ability of an individual to acquire the means of production, which economists call ‘capital’, hence the name. Second, people are allowed to trade whatever they like, including drugs, slaves and guarantees from bigger members of the tribe that they will—or will not—beat up smaller individuals. Moreover, they may choose to band together Chapter 5 · The ethics of economic systems · 63 into groups with whomever they choose, and could seek to enrich themselves in whatever way they like, setting up production processes without any regard for harmful consequences (like destructive fires) and selling at whatever price others are willing to pay. Purely capitalist economies consist of entirely free markets, in which individuals and companies seek their own gain by selling goods and services to each other without any restrictions whatsoever. Third, individuals take personal responsibility for their well-being: in a purely capitalist economy, no authority would collect and spend money on public works or social welfare. Presumably you can see why pure capitalism does not exist in practice. The weaker and less shrewd would before long be forced to sell themselves into slavery, the environment would be devastated, and for all but the wealthiest individuals, life would be nasty, brutish and short.1 In the long- or even medium-term, virtually no one would benefit; this purest form of capitalism would be hell. As we shall soon see, there are two common arguments for pure capitalism, both of which require a modification to this purest form. Because one argument is concerned mainly with individual freedom and the other with human welfare, it would be antithetical to allow slavery or physical abuse of others. Thus the private ownership rights would be restricted to exclude a right to own other people, and physical harm to others would also have to be outlawed. At this stage, it would perhaps be wise to make one more change to the model sketched above. It is pretty unrealistic to imagine that people will voluntarily agree to respect each other’s private property rights. Given the temptation to steal someone else’s property, the only reliable way to protect the ‘what’s yours is yours’ principle would be to have some minimalist form of government, a police force, and a justice system—to outlaw, prevent and punish theft and to adjudicate trickier cases of ownership like questions of precisely who owns the resources acquired by a group of people. These state functions would presumably also be charged with preventing slavery and harm to others. They would of course require funding, which could be raised by imposing a small tax. So what does this less harsh version of pure capitalism—the version that we henceforth mean by the term—look like? People would be free to: possess anything except other people; sell anything they possess except goods or services which harm others; buy any such goods or services for a mutually agreed price; and to amass, if they are capable, any quantity of wealth. People would pay a small tax, just enough to fund an authority to decide ownership disputes and to protect individuals from slavery, harm, theft and the destruction of property. All economic activity would be determined by the market—the exchange of goods and services between willing individuals and groups of individuals—and this market would be free of restrictions except those necessary to avoid harm to people or their property. Just as in the starker version, individuals who do not accumulate resources would not receive any help except perhaps voluntary contributions from other individuals. What is the resource-allocation mechanism in a capitalist economy? You may remember learning at some point that economics is the study of the allocation of scarce resources. Thus, an economic system is a system which allocates those scarce resources between people. Given this description, it may seem odd to call capitalism an economic system because no discernible allocating appears to be going on. This is in fact what most advocates of capitalism point to as its greatest strength: no person or group of people is required to make difficult economic decisions about what and how resources get consumed, what and how goods and services are produced from those resources, and how those goods and services should be 64 · BUSINESS ETHICS & OTHER PARADOXES distributed between people. The key to understanding capitalism—and, admirers would say, its fundamental beauty—lies in how all of these critical economic decisions are autonomic, like the system that ensures the proper functioning of your cardiac, respiratory, circulatory and other bodily functions. Allocations happen not through a deliberate, conscious process, but rather through the ceaselessly efficient, almost magical, activity of the market. Legend has it that in or around 1680 the French finance minister met with a group of merchants, and asked them how the government could assist them. One might have expected that they would ask for the subsidisation of capital intensive ventures, or infrastructural development of their supply routes, but instead they famously replied ‘laissez-nous faire!’— ‘leave us alone!’ It seems that they—like all true capitalists—trusted the market mechanism to serve them far better than their political leaders. Apart from playing the minimalist roles we identified above, all they wanted government to do was to keep away. On this reckoning, a market free from government intervention—that is, a ‘free market’—or ‘laissez-faire economics’ is all that is needed for a flourishing economy. We shall expand and refine this idea below in our discussion of the invisible hand argument for pure capitalism. What is pure socialism? Socialism is at the other end of the spectrum of economic systems because in its purest form it involves no private property, no market, and collective—rather than personal—responsibility for each individual’s welfare. The table below indicates how the two economic systems are diametrically opposed with respect to each of these elements. Pure capitalism Resources are owned by individuals and groups of individuals, because people have the right to own private property, including the means of production. How are these Production and consumption of resources allocated? resources is determined by a free market, i.e. by the unrestricted exchange of goods and services between profit-seeking individuals and groups of individuals. Who takes People are collectively responsible Government and taxes are strictly for responsibility for for each other’s welfare. A the purposes of protecting the above people’s welfare? centralised authority directs all elements. Individuals must take spending for the purpose of personal responsibility for their own benefiting the people. welfare. Figure 5.1. A comparison of the key elements of purely socialist and purely capitalist economic systems. Who owns resources? Pure socialism There are no private property rights. Instead individuals own everything collectively with everyone else, especially the means of production.2 A ‘command economy’ exists, in which all production and consumption is planned centrally. There is no market for goods and services. Here, we are using the term ‘socialism’ broadly. There are many different ways to try to achieve the features identified in the middle column above. Socialism, even in its purest form, does not necessarily imply any one political system. In theory at least, a socialist society may be ruled by a single benevolent dictator who is wise enough to know what is best for everyone (the so-called ‘philosopher king’ of Plato’s Republic), or tens of thousands of workers’ groups might feed recommendations upwards to a single decision-making body, or even an anarchic society composed of voluntary associations might conceivably have a purely socialist economy. In most Chapter 5 · The ethics of economic systems · 65 extant forms of socialism, though, key decisions are made by a government, which is thus the term we shall use here to describe the decision-making authority. Just as the political structures differ between socialist economies, so too do the forms of collective ownership: a population may be divided into smaller communities which collectively own the resources available to it, or the entire nation might share all of a country’s resources. Many reasonably well-informed readers, if asked to think of a socialist society, will conjure up oppressive images from the formerly communist USSR. In that system, human rights were suppressed, poverty prevailed and corruption was widespread. It is important to acknowledge, though, that communism is just one version of socialism, and that in fact the USSR never achieved anything much like true communism. A much more generous characterisation of pure socialism would be the utopia described by the British artist William Morris thus: a ‘society in which there should be neither rich nor poor, neither master nor master’s man, neither idle nor overworked, neither brain-sick brain workers, nor heart-sick hand workers, in a word, in which all men would be living in equality of condition, and would manage their affairs unwastefully, and with the full consciousness that harm to one would mean harm to all’.3 Socialism is a newer idea than capitalism, and in fact emerged in direct opposition to it.4 Common to all socialists is the belief that the overwhelming majority of people in a capitalist society—the workers, or ‘proletariat’—suffer at the expense of the wealthy capitalists, or ‘bourgeoisie’. Furthermore, socialists believe that the proletariat, and perhaps even—though they themselves would not admit it—the bourgeoisie, would be much better off in a socialist system on all sorts of levels, including with respect to their autonomy, their quality of life, the physical and mental quality of work, their access to creative outlets, and their sense of community. How such lofty ideals might be achieved depends on the form of socialism, but here is one example from the most famous of all socialist writings, The Communist Manifesto, in which Karl Marx and Friedrich Engels outlined the following steps required to achieve a socialist revolution: (1) Abolition of property in land and application of all rents of land to public purposes. (2) A heavy progressive or graduated income tax. (3) Abolition of all rights of inheritance. (4) Confiscation of the property of all emigrants and rebels. (5) Centralisation of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly (6) Centralisation of the means of communication and transport in the hands of the State. (7) Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally in accordance with a common plan. (8) Equal liability of all to labour. Establishment of industrial armies, especially for agriculture. (9) Combination of agriculture with manufacturing industries; gradual abolition of the distinction between town and country, by a more equal distribution of the population over the country. (10)Free education for all children in public schools ... Combination of education with industrial production.5 66 · BUSINESS ETHICS & OTHER PARADOXES What is a mixed economy? The Cold War and the many books and films it inspired for Western audiences in the twentieth century has left in the popular imagination an enduring false dichotomy about economic systems: that they are either capitalist or socialist. In truth, there are no purely capitalist or socialist economies. Many would regard the USA and Hong Kong as capitalist, but both have many socialist features, including social welfare systems, minimum wage laws and government subsidisation of private enterprise.6 If it were possible to say which country today is ‘most’ socialist, North Korea would be a strong candidate, though even that country’s economy includes a capitalistic—though underground—market for goods like rice, refrigerators and radios.7 Furthermore, though we could draw a line with pure socialism on one side—the left, of course!—and pure capitalism on the right, and know that the USA and Hong Kong would be far to the right of North Korea, we would have trouble plotting precisely where the USA lies relative to Hong Kong, or North Korea relative to Cuba, because with respect to one feature, an economy may be more capitalist than a similar economy, but with respect to another feature, it may be more socialist. Similarly, though we know that South Africa, for example,8 belongs somewhere between the USA and North Korea, it is not clear quite where it would belong relative to countries like Denmark or Germany, which are also not extreme cases. It is thus oversimple to call some economies ‘capitalist’ and others ‘socialist’. In truth, all contemporary countries have ‘mixed economies’, which combine elements of both models. Technically, we shouldn’t call any country ‘socialist’ or ‘capitalist’, reserving those terms instead only for certain policies and so on. However, if we are prepared to acknowledge that they are oversimplifications, perhaps we should nonetheless accept the conventional descriptions of countries such as the USA as capitalist and countries such as Cuba as socialist, since their mixed economies veer towards one end of the spectrum by comparison with others. In the case of countries like South Africa, however, which are not outliers, it is difficult to justify using any term other than ‘mixed economies’ to describe their systems. Why is this? Look again at Figure 5.1. In categorising any economy, we might begin by examining property rights. There is no doubting that South African individuals—and the companies comprised of them—are entitled to own property, including the means of production. In fact, in the 2013/14 Global Competitiveness Report (GRC), South Africa was ranked 20th out of 148 countries with respect to the protection of property rights.9 Two issues with respect to property rights are perhaps the reason that the country is not ranked even higher: nationalisation of mines and land redistribution to those who were dispossessed of land under the apartheid regime.10 To be sure, if government were to expropriate mines or land for little or no compensation, this would amount to something of a socialist revolution, for it would dramatically undermine the capitalist respect for property rights. However, neither of these moves seems likely: the government announced in early 2013 that the nationalisation of mines is off its agenda,11 and although land reform remains a priority, a recent policy document makes it clear that expropriation—forced sales—will be used only as a ‘last resort’, and for ‘due compensation’.12 The second element to consider in determining the nature of an economy is the resourceallocation mechanism. Certainly, South African prices mostly appear to be determined by the interaction of consumers and producers, as in a laissez-fare market economy. When you go to a South African supermarket, you know the government hasn’t instructed the manager to set a certain price, and that instead he has set his price at something close to what customers will be Chapter 5 · The ethics of economic systems · 67 willing to pay in order to deplete his stock. Nonetheless, the prices of two basic goods—petrol and electricity—are set by government and these influence the price of just about everything else. There are also two kinds of basic services for which the price is determined by government: the price of low-skilled labour is set via minimum wage legislation, and the price of borrowings is set (less directly) by government’s stipulation of the repurchase rate, or ‘repo rate’, which heavily influences the interest rates charged by private banks. Moreover, the government is involved in the markets for most goods and services by regulating them. For example, the Financial Services Board regulates activity in financial markets, the National Regulator of Compulsory Specifications (NRCS) regulates the quality of goods produced by manufacturers, and a myriad of government agencies—mostly within the Department of Labour—regulate labour markets. Although some degree of market regulation exists even in the most capitalist systems, South Africa’s markets—especially the labour market—do seem to be more tightly regulated than those. In fact in the capitalist-oriented GRC mentioned above, the country was ranked 116th out of 148 with respect to how burdensome government regulation is for doing business, and ‘restrictive labour regulations’ was ranked second highest in a list of sixteen candidates for most problematic features of doing business (below ‘inadequately educated workforce’, but well above ‘corruption’ and ‘crime and theft’).13 This is perhaps the most significant impact made by the two junior partners in the ruling tripartite alliance—the Congress of South African Trade Unions (COSATU) and the Communist Party. Furthermore, government also influences resource-allocation by taking on the role of market participant. It has made significant investments in capital, owning a considerable number of large ‘parastatals’ like South African Airways, the electricity provider Eskom, the railways and ports corporation Transnet, the arms manufacturer Denel, the mining business Alexkor and the forestry company SAFCOL. Indeed, there is an entire government department dedicated to managing these state-owned companies (SOCs): the Department of Public Works. In a more capitalist country like the USA the share of national output of SOCs is only 1%.14 Although an equivalent South African figure is not available, we can be sure that the government’s role as market player is much more significant, especially given that the SOCs are in key infrastructure sectors which significantly influence other sectors. It is important to note, however, that neither central control of the prices of some basic goods, nor the tight regulation of some markets, nor the existence of SOCs, necessarily inhibits the success of people pursuing private gains. In fact, some individuals have become enormously wealthy, largely because profit-seeking companies have thrived in South Africa. The JSE is by far the largest stock exchange in Africa: measured by market capitalisation—over a trillion US dollars at the end of 201315—the wealth invested in South Africa’s listed companies is more than ten times the closest African country, and is ranked 17th in the world.16 South Africa’s companies earn profits equal to more than 51% of the national income, much more than the rhetorical bastion of capitalism, the USA, where profits comprise only 43% of national income.17 Although corporate earnings vary from year to year, there can be no disputing that South African markets do allow very large gains to be made by some of the participants. Finally, the third criterion to determine where a country falls on the economic spectrum is the degree to which people are taken care of collectively—the extent of public spending on social welfare. Now some kinds of services are expected of governments even in the most capitalist of countries, like the provision of a defence force, police services, infrastructure like roads, bridges and water systems, and many other bureaucratic services such as those provided by the 68 · BUSINESS ETHICS & OTHER PARADOXES Department of Home Affairs. Of course, the South African government does more than this: it provides public education, free health services and housing for the poor. It even provides a public broadcaster, the SABC. But even these items do not push South Africa very far to the left, for they exist in some form in virtually every country—the USA and Hong Kong included. However, the scale of government services is different from the more capitalist countries. For example, the South African government employs more than 23% of all formal sector workers,18 which is a great deal more than the so-called capitalist countries (in the USA,19 less than 15% of workers work for the public sector, and in Hong Kong,20 less than 5%). Furthermore, to determine how far left a country should be placed on the economic spectrum, we can look at government spending on what is sometimes called the ‘social safety net’—payments to those too poor to help themselves. The number of such payments is high: in 2013, roughly 16.1 million South Africans received social assistance grants, totalling payments of R113 billion.21 More than half of households are beneficiaries. By contrast, only about 15% of families in Hong Kong receive similar financial assistance (though the Hong Kong government also helps to provide low-cost housing to 30% of the population).22 Interestingly, on this measure the size of South Africa’s social safety net is not significantly different from the USA, where nearly half of households receive government assistance of some sort.23 A difference between South Africa may well be the extent of dependence on these benefits. For 22% of South African households,24 these grants are the main source of income, whereas in the USA this figure is unlikely to be so high, given that unemployment and poverty are much smaller problems there.25 In summary, South Africa has a mixed economy. Its most capitalist features are a strong respect for private property rights and a high incidence of profitable corporate activity. Furthermore, with just a few noticeable exceptions (petrol, electricity, unskilled labour and borrowings), prices are determined via market forces. On the other hand, the government insists on regulating rather tightly many markets—especially the labour market. Much of this regulation is socialist in nature, as are the comparatively high rate of public sector employment and relatively large social safety net. Is a mixed economy halfway between pure capitalism and pure socialism? If you ask for a mix of chocolate and vanilla ice cream, you expect to receive roughly the same amount of each flavour. Is a mixed economy what you get when you blend equal parts of pure capitalism and pure socialism? No. Most mixed economies are significantly closer to the pure capitalist end of the spectrum. After all, in pure socialism, nobody owns anything privately, government has total control over production and prices, companies do not exist, and everyone is effectively employed by the state. None of these is even close to ‘half true’ for most mixed economies, including South Africa. On the other hand, South Africans do experience some features of pure capitalism, including the right to own private property, to form companies, to seek profit and to accumulate capital. This idea can be illustrated crudely as follows: Mixed economies (e.g. Denmark, Germany & South Africa) Purely socialist Socialist (e.g. Cuba & North Korea) Capitalist (e.g. USA & Hong Kong) Purely capitalist Figure 5.2. A crude representation of the economic spectrum, indicating how most mixed economies are closer to pure capitalism than to pure socialism Chapter 5 · The ethics of economic systems · 69 Now that we understand what is meant by the terms capitalism and socialism, and we understand how to characterise a mixed economy, we are ready to attempt an answer to the primary question of this chapter: is our economic system morally justified? One might expect that the best way to answer this question is by arguing directly for each of the features of a mixed economy, but this would be time-consuming and repetitive. What we shall do instead is consider the two best-known moral arguments for the system at the end of the economic spectrum closest to us—pure capitalism—and determine in this way how we might be justified in moving away from that extreme. Interestingly, each of these arguments is centred on one of the three main elements of the capitalist system: the libertarian argument argues for pure capitalism on the grounds that it protects private property rights; the invisible hand argument relies on showing that a marketbased resource allocation has good consequences. What is the libertarian argument for capitalism? One of the best known arguments for capitalism is based on the notion that people have a moral right to private property. Here, ‘property’ does not refer only to land: it refers to a wide variety of resources; in fact, to all ownable things. This libertarian argument can be formalised as follows: The libertarian argument for capitalism: P1: People have a right to private property which it is immoral for the economic system to violate. P2: Capitalism is the only economic system which we know of that protects private property rights. Therefore: C: All economic systems that we know of, other than capitalism, are immoral. Note the negative nature of the conclusion. This is not so much an argument for capitalism as it is an argument against all other systems. What if some other element of capitalism makes that system immoral? Then, combined with the conclusion of the libertarian argument of capitalism, this would rather depressingly imply that no economic system is morally justifiable! But a libertarian need not fear, for if she is right in claiming that private property rights should be protected at all costs (P1), then it is easy to see that the other two key elements of capitalism would follow directly from this. The government would not be justified either in interfering with the voluntary exchanges in a market system nor in using one individual’s resources to ensure the welfare of another, as both would involve the forcible removal of property. Thus, a libertarian need only show that private property rights are sacrosanct in order to justify capitalism. Let us use some of the skills we developed in Chapter 3 to determine what we should think of the libertarian argument. Certainly, it is valid: if the premises are true, then the conclusion would have to be true. Also, P2 is credible. We already know that socialists insist that all (or, in weaker versions, some) property should be owned collectively. In fact, all other feasible economic systems involve either collective ownership of resources (like the communitarian systems previously common in Africa) or the systematic withholding of property from most people (like the feudal systems which dominated Europe before the rise of capitalism, when 70 · BUSINESS ETHICS & OTHER PARADOXES peasants were forced to rent land from aristocratic landlords who received it as a gift from the monarch). Even mixed economies do not protect private property rights as well as capitalism. After all, people’s earnings are part of their property and a portion of those earnings (in some countries, more than half) is forcibly appropriated by the government in the form of taxation. The most vulnerable part of the argument appears to be P1. Are there not obvious scenarios in which it is morally permissible to violate a person’s right to private property? For example, if the taxed earnings of wealthy people are used to build a country’s infrastructure, or to help starving or homeless people, would this not be a good thing, thus justifying the violation of property rights? Libertarians would answer both of these questions in the negative; insisting that it is always wrong to take away someone’s property. In the words of American philosopher and politician John Hospers, libertarianism is ‘a philosophy of personal liberty—the freedom of each person to live according to his own choices, provided he does not attempt to coerce others and thus prevent them from living according to their choices’.26 The philosophy gets its name, of course, from this devotion to the concept of personal liberty, which at least on the face of it seems attractive: why shouldn’t you be free to do what you like as long as in doing so you do not restrict someone else from doing what she likes? Note that the constraint (in italics above) is vitally important. Personal liberty implies both a right—to do as we please, and an obligation—not to stop others from doing as they please. If it were not for this constraint, libertarianism would contain an irresolvable paradox, requiring us to maintain simultaneously that I am free to bash you over the head (if that’s something I would like to do) and that you are free not to be bashed on the head (presuming that this is what you would prefer). It is not hard to see how the rights and obligations inherent in personal liberty would further imply that one should be free to do what one likes with one’s property, and that one should not be allowed to interfere with someone else’s property. We are free to acquire property through means like purchasing it in a voluntary exchange or receiving it as a gift or inheritance; but no one may acquire property from someone who does not want to part with it, for example through theft, fraud or expropriation. ‘How dare the government take our property by taxing us and using it for any purpose other than the protection of property?’ say most libertarians, ‘no one should prevent us from living according to our choices, and so no one is entitled to take our property against our will!’ We can summarise and formalise this thinking—the argument to support P1 in the libertarian argument above—as follows: The libertarian argument for private property rights: P1: People have a right to personal liberty: to pursue their own interests provided they do not infringe upon the rights of others to do the same. P2: The right to personal liberty implies a right to private property: a right to acquire goods and services through voluntary exchanges and gifts, and a right not to have these goods and services forcibly taken by others. P3: It is immoral for the economic system to violate this right to private property. Therefore: C: People have a right to private property which it is immoral for the economic system to violate. Chapter 5 · The ethics of economic systems · 71 What are the counterarguments to the libertarian argument for capitalism? The most effective counterarguments to the libertarian argument for capitalism are criticisms of the libertarian argument for private property rights immediately above. We shall discuss two types of counterargument: one which attempts to show P2 to be false, and another which attacks P3. We begin with P2. Many critics of libertarianism accept that personal liberty implies that if original acquisitions were fair (or ‘just’), then property legitimately acquired should not be forcibly removed, but they question the presumption that people were ever entitled to property in the first place (philosophers call this disputed claim ‘justice in original acquisition’). They argue that, contrary to the idea that personal liberty entails private property rights (as P2 claims), the right to personal liberty in fact invalidates the very notion of private property. This is because the act of making property private prevents others from achieving their ends. For example, when Europeans arrived in the Cape of Good Hope, they demarcated and laid claim to great tracts of land. They thus prevented access by the nomadic people who had long used the land communally without applying this Western notion of private ownership. The initial act of declaring property private thus appears to breach the principle that the libertarians hold so dear: we should not restrict people’s liberty. To show that private property rights should be respected today, libertarians must show why original acquisition is just: how individuals would ever be justified to take something into private ownership when it was not previously owned by anyone. The best-known defence of justice in original acquisition is referred to as the ‘labour-mixing argument’ and is found in the writings of the influential English philosopher John Locke (1632 - 1704): Though the earth, and all inferior creatures, be common to all men, every man has a property in his own person. This nobody has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his. Whatsoever then he removes out of the state that nature has provided, and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property. It being by him removed from the common state nature placed it in, it hath by this labour something annexed to it, that excludes the common right of other men.27 Locke believed that when resources are in the common state—in other words, not privately owned—and an individual mixes her labour with one of those resources, she joins something she owns (her labour) to something unowned, and the resulting thing is therefore hers. For example, suppose that water in a fountain is owned in common. When she uses a pitcher to remove the water, the water becomes hers. Private property is established in similar ways when land is farmed, animals are corralled, and so on. Locke’s argument thus relies on an intuitively attractive principle which could be formulated as follows: owned by X + unowned = owned by X However, Locke’s critics point to two problems with this argument. First, it is not possible for the principle above to be universally true. As the philosopher Robert Nozick pointed out (rather generously, given that he was a libertarian himself), if someone pours a cup of tomato juice into the sea, so that the molecules spread evenly throughout the water, he does not come to own the sea; instead, he has merely wasted his tomato juice. Second, Locke’s argument assumes that resources like water, land and animals are unowned 72 · BUSINESS ETHICS & OTHER PARADOXES until they are collected, farmed or corralled. But why should we accept this Western view of ownership? Nozick has argued in favour of libertarianism on the grounds that private property rights respect the distinctiveness of individuals,28 but why should we not also respect the interconnectedness of communities? We could rather embrace a communal view of ownership, which sees uncollected water, unfarmed land and uncorralled animals to be owned by everyone. Then, the labour-mixing argument would only work if the following principle were true: owned by X + owned by all of humanity = owned by X But such a principle lacks plausibility. If we assume that the resulting object is owned, then X is not (as for the previous principle) the only candidate. The other candidate is all of humanity. And why should ownership by X—one person or group of persons—outweigh ownership by everyone? It seems more likely that the claims of X would be dwarfed by those of all humanity.29 It is possible that you may be feeling a little lost at this point, so let’s recap the criticism of P2. The libertarian argument for pure capitalism relies on the claim that we have a right to private property which it is immoral to violate. This right is derived from a principle of personal liberty which states that we are free to do as we please provided we do not prevent others from doing as they please. Yet the example of European settlement in the Cape demonstrates that the very act of attaching private ownership to things which were previously unowned (or owned in some general way by all people) prevents others from doing as they please and thus violates the principle of personal liberty. Thus believers in personal liberty must accept that the notion of private property is itself sometimes unjust, and so we cannot claim that we have an inviolable right to it. The problem is not specific to land in the Cape in the 17th and 18th centuries; it applies equally to river water collected in a pitcher, to wild animals corralled by a farmer, to minerals in the ground, and to the immense number of other natural resources which have been claimed by people in every part of the world throughout the ages. ‘Original acquisition’ is not only something which happened in the past, and the question of what right we have to resources originally acquired may be closer to home than you think. When someone pumps up borehole water from an aquifer deep beneath his land and uses it to irrigate his lawn, should we accept the idea that it is entirely his to use at will? Why would it be wrong to say that the water in an underground aquifer is everyone’s, and that if he wishes to use it, he should pay them some compensation in the form of a tax? All of this means that we cannot accept P2 of the libertarian argument for private property rights, since it is not the case that a right to personal liberty always implies a right to private property. Instead we must allow that even in a society like ours which does observe the notion of private property, there will be limits on what can legitimately be taken into private ownership, and private owners may sometimes incur special obligations. Critics of libertarianism also argue that P3 is false. They claim that, even if it were true that people have a right to personal liberty (P1), and that this implies that they have a right to private property (P2), it is not necessarily immoral for the economic system to violate the latter right. This may seem like a contradiction, for saying that you have a right to X is equivalent to saying that others have a duty to let you have X. Indeed, rights are simply entitlements which impose duties on others. When libertarians say that people have a right to private property, they necessarily mean that the economic system has a duty to keep people’s property private. Rights and duties are opposite sides of the same coin, so critics cannot accept that one has a right Chapter 5 · The ethics of economic systems · 73 without also accepting a corresponding duty on others. However, sometimes one right can override (or ‘trump’) another. The right you have to walk into your bank is trumped by the right the police have to prevent your entry if they suspect that an armed robbery is in progress. In fact, the notion of one right trumping another is at the heart of libertarianism: if what makes you happy would restrict someone else’s happiness, your right to pursue happiness is trumped by their right to do the same. When we see that one right can trump another, we have to accept that the right of homeless people to have shelter, or the right of hungry people to be fed, might trump the property rights of wealthier people. When rights are trumped in this way, the duty associated with the ‘trumped’ right is not enforceable: if the right to life, shelter or a decent meal trumps the right to private property then it is false to claim that an economic system is immoral for violating the latter right. Libertarians have responded to this criticism by attempting to give the right to private property special ‘untrumpable’ status. In many cases they use the term ‘natural’ to describe the right to private property, which is to say that this right existed even before society, and is therefore not subject to restrictions created by societal institutions. Thus, the institution of government is not able to tax the wealthy in order to feed the poor because property rights are natural and therefore always trump the socially-created right of the poor to a decent meal. Yet this sort of response is unconvincing, for at least three reasons: (1) it is not clear that we should accept property rights as originating in a natural (pre-societal) state, because, as we have already shown, the arguments for justice in original acquisition are contentious; (2) many sorts of property are in fact social in origin, like brands, other intellectual property, and the right to get back the money you deposited at a bank; and (3) even ownership rights over more ordinary kinds of property appear to be subject to social forces, given that the bundle of rights conveyed by ownership differs between societies. Think of differences between countries with respect to homeowner’s rights: whether they could open a shop or add a second storey, how close to the perimeter they can build, and how loudly they can play their music. In summary, the libertarian argument for private property rests on two premises that have not been proved convincingly. Although die-hard libertarians do of course respond to their many critics, it is not at all clear that these responses truly demonstrate why a private property system is morally required, nor why private property rights, if they are legitimate, should be revered to the exclusion of all other rights. Unless better defences of their position can be found, the libertarians’ argument for capitalism will thus remain weak. What is the invisible hand argument for capitalism? The libertarian argument is based on a right—the right to private property. Because of the reciprocal relationship we noted above between rights and duties, arguments based on rights are equally based on duties. Philosophers use the term ‘deontological’ to describe such arguments (in Ancient Greek, deon means ‘duty’). Thus, the libertarian argument is a deontological argument. Generally speaking, there are two main ways in which philosophers try to decide what is morally best: ‘deontological’ and ‘consequentialist’. Did you notice how the libertarian argument said nothing about the consequences of a capitalist system? This is because a libertarian bases her worldview on the deontological idea that respecting rights is more important than arranging for good consequences. For her, there is nothing morally wrong with an economic system which permits some to starve while others gorge themselves on caviar, 74 · BUSINESS ETHICS & OTHER PARADOXES provided that property rights are respected. This is because either these outcomes don’t bother her at all, or they bother her less than a violation of anyone’s property rights.30 Many people consider the consequences of a system (and other things which can be judged morally, like acts or decisions) to be much more important than libertarians do, to the point that they argue for or against the morality of a system purely on the basis of its outcomes. In other words, they use consequentialist arguments. The most famous such argument for pure capitalism is often called the ‘invisible hand argument’, because it was first expressed in 1776 by the moral philosopher Adam Smith in his famous book The Wealth of Nations, using the metaphor of an unseen hand guiding a free market to arrange the best outcome for everyone. He wrote that an individual in a capitalist system is: led by an invisible hand to promote an end that was no part of his intention ... By pursuing his own interest he frequently promotes that of society more effectually than when he really intends to promote it.31 Why did Smith and his countless followers believe that capitalism would result in the best consequences, or in his words, ‘promote the interests of society most effectually’? Smith considered the two most important goals of an economic system to be: (1) incurring the lowest possible cost in producing goods from the available resources (this is called productive efficiency) and (2) creating the maximum possible satisfaction (also called utility) in allocating these goods to people (this is called allocative efficiency). A system which is both productively efficient and allocatively efficient is called economically efficient, and Smith claimed, as do many today, that this ought to be the ultimate goal for any economic system. Smith further claimed that pure capitalism achieves unparalleled economic efficiency, and it therefore has the best consequences for society. We can thus summarise, and formalise, the entire invisible hand argument as follows: The invisible hand argument for capitalism: P1: Capitalism is more economically efficient than any other economic system P2: The most economically efficient system creates the best outcome for society P3: The system that creates the best outcome is morally best Therefore: C: Capitalism is the morally best economic system There are many criticisms of the invisible hand argument, which it will be instructive to separate into two groups. One group claims that market failures in capitalist economies render P1 false because free markets are not in fact optimally efficient. The other group argues that, even if one of the outcomes of capitalism is economic efficiency, there are other consequences and/or features of capitalist economies which are so bad that capitalism cannot be the morally best economic system. In other words, this second group claims that P2 and/or P3 are false— efficiency alone should not determine what economic system is morally best. We shall start with the first group of criticisms, but we must first understand why it is that proponents of the above argument claim that capitalism is so efficient. In other words, how exactly does the invisible hand work? Chapter 5 · The ethics of economic systems · 75 How is the invisible hand thought to create economic efficiency? The classical account of free markets claims that they have an almost-magical ability to achieve economic efficiency, primarily because of the voluntary nature of exchange and the existence of competition amongst producers. The theory is simple but elegant. Consumers want to pay the lowest possible price for the goods they seek. Producers want to receive the highest possible payment for the goods they provide. Producers will not get paid for unwanted goods, so they will not produce them. In producing the goods that people desire, of course producers in a capitalist economy would like to maximise their profits by charging high prices—and they may do this initially, in the ‘first generation’ of the market—but other producers will soon enter a free market. These competitors will bid down the price to the bare minimum that consumers are willing to pay and that producers are willing to accept. Producers who are wasteful with resources in the production process will not be able to compete at this price—known as the ‘equilibrium price’—and so they will drop out of the market, leaving only efficient producers. Thus, productive efficiency is achieved. Efficient producers will make a profit in an accounting sense, but this will be only as much as other efficient producers are willing to accept as a return on their investment: they cannot afford to charge more than what economists call a ‘normal’ profit. Since the prices are as low as possible, more consumers can afford the goods, and each of these consumers derives maximum satisfaction (or utility) by paying the least cost to acquire them. Moreover, when consumer preferences change, the decrease or increase in demand creates a surplus or shortage of the good, which puts downward or upward pressure on the price, thus causing producers to leave or enter the market, in turn adjusting the volumes produced to the maximum possible given the cost of production and that level of demand. Thus, allocative efficiency is also achieved. Many argue that such levels of economic efficiency would be impossible in a command economy. For one thing, central decision-makers remote from consumers will squander resources by producing unwanted goods. A more general point made by the economists Mises and Hayek is that an efficient economy requires access to massive amounts of information and an ability to make a vast number of production and distribution decisions. A central planning authority could never hope to meet this need consciously, whereas the free market does so effortlessly by allowing the millions or billions of conscious interactions between market participants to process autonomously the information and to determine automatically a production and distribution plan.32 What makes the good consequences of free markets ‘almost magical’ is the counterintuitive idea that the best possible result for everyone is achieved by allowing everyone to act according to their self-interest. Everyone gains by the unrestricted interaction of consumers seeking to increase their own levels of satisfaction and producers looking to maximise their own profits. This is why Adam Smith wrote that it is as if an invisible hand optimally allocates resources throughout society. In another of his famous passages, he expressed the idea thus: It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity, but to their self-love.33 This feature of the invisible hand argument makes it clear why it argues not only for free markets, but also for the other two key elements of pure capitalism. To harness people’s selfinterest, a market must involve people giving up something they have (like a small amount of 76 · BUSINESS ETHICS & OTHER PARADOXES money) for something they wish to have more (like a soft drink). Also, for producers efficiently to minimise the costs of production, they have to behave as consumers in the markets for the means of production, looking to pay the minimum possible price for them. Thus, the invisible hand argument requires the existence of a system of private ownership, including the right to own capital. Similarly, as the above quote makes clear, the market mechanism relies on selfinterest, so people ought to be responsible for their own welfare. What are the counterarguments to the invisible hand argument based on market failure? The classical account of free market dynamics in the previous section is well known to anyone who has taken even a semester of Economics, but it is not an accurate description of free markets in the real world. To be sure, most introductions to economics will take time to point out that the model involves several assumptions, but people often forget about them or overlook how unrealistic they are. As this is not an economics textbook, we shall avoid going into unnecessary detail, but what follows is a brief description of the major flaws in the idea that free markets result in economic efficiency in the real world. First, we saw above the vital role played by competition, which restricts profits to a ‘normal’ level, keeps prices down and ensures that resources are not wasted. But there are good theoretical reasons and strong empirical evidence to suggest that competition is often far from perfect. To be sure, competition was far more prevalent when Smith was writing, when markets were supplied by a great number of small producers, but nowadays, most markets are dominated by one or a few giant players. Think Microsoft and Apple; Standard Bank, ABSA, Nedbank and FNB; Truworths and TFG (The Foschini Group); Pick n Pay, Woolworths, Shoprite and Spar; SAB Miller and, well, SABMiller. Some rabid defenders of capitalism may try to claim that the presence of a few dominant producers is the result of ‘unfree’ markets, in other words that government interference in the market establishes and protects these de facto monopolists and oligopolists. It may be true that in some industries (like electricity production), the government actively restricts the number of players, yet the truth is that in most industries the government tries to limit or reduce monopoly power, by preventing some proposed mergers of corporate giants, and by trying to weed out price collusion Price collusion by a few big players of course threatens efficient market outcomes: by agreeing to keep prices higher than equilibrium, they make abnormal profits but less than the equilibrium volume is available, at a higher cost to the consumer. One might imagine that in theory this would be impossible, for new entrants could simply enter the market and produce at a lower price, but these large firms have economies of scale which mean that they can produce at a lower cost than start-up enterprises. They also have the benefit of decades of successful marketing and established brand recognition. Thus, it is harder for new entrants to break into the market than the classical account lets on. Also, when a new entrant tries to enter a market, the established producer in the region can engage in a practice known as price-gouging in which they drop their prices below the level that the new entrant requires in order to break even. If need be, a large company can sell a few product lines at below cost for many months, while the new entrant quickly runs out of capital. The ability of one or a few firms to dominate an industry and manipulate prices is not just a theory: in the last several years, price collusion between the dominant producers has been identified and exposed in a multiplicity of diverse markets around the world. In just the last few years in South Africa, prices for bread, oil, bicycles and construction have all been manipulated Chapter 5 · The ethics of economic systems · 77 by powerful companies. The latter example demonstrates that price-fixing can happen even in a market with more than a few large producers: in 2013, eighteen South African construction companies admitted to fixing prices in the building frenzy which preceded the 2010 World Cup.34 We also noted above that self-interest is integral to the invisible hand argument. In order for economic agents to act in their self-interest, we must assume not only that they are selfinterested, but also that they have the rational capacity to determine how to achieve their selfinterest. Yet real people are not so simple. First, we regularly experience people being unselfish—we all have stories of the generosity and kindness of others. Second, if Chapter 4 contained just one lesson, it is that humans are far from rational. When one has been exposed to just some of the ways in which people fall prey to cognitive biases and illusions, it is laughable to think that consumers will reliably collect and process the available information, accurately judge the utility to be gained from a product, and correctly assess the value of the product against the price. How many people do you know who have overpaid for a product, perhaps because they overestimate its true value, are seduced by deceptive marketing, or are simply too lazy to shop around? This problem of irrational economic behaviour does not just affect ‘dumb’ consumers: the most business-savvy executives are also prone to error. Consider for example how top bankers at the British bank HSBC and the Spanish bank Santander lost billions invested with Bernie Madoff, the ‘hedge fund’ fraudster who at age 75 is now serving a jail sentence of 150 years in US federal prison. In fact, even a perfectly rational, self-interested consumer cannot be expected to make the correct purchasing decisions if she does not have access to all of the relevant information about a product. In some cases, she will be fully informed, for example when buying her usual lunch at her regular spot. Before ordering, she will know the benefits to be derived from the product, and also how much she will pay. But in many other cases, it is impossible to know either the value or the cost of the product. Take for example a car: no one knows how long it will last, how much they will appreciate its optional features, how much they will pay over the years for its maintenance, or what uncertain future events may impact on its value (e.g. for example having a third child). If information is imperfect in this way, how can we expect the interaction of supply and demand to result in a price which correctly reflects the optimal price for the goods? Many economists have pointed out that it is also the case that information is asymmetric. For example, car producers often have much better information about the value and costs associated with a car, but they have a strong incentive to hide information which reflects badly on the product, and emphasise its strengths. This may further distort the efficient functioning of the market. Another assumption built into the classical account of free markets is that producers pay all the costs of production and consumers receive all the benefits. Thus, producers charge a price which reflects the true costs to society of the resources employed, and consumers are willing to pay for all the utility to be gained from consumption. Yet there are so many examples of how this assumption is false that economists have a name for the costs not paid by producers and the benefits not felt by consumers: externalities. In free markets, car makers do not pay the environmental costs of carbon emissions; chemical producers do not pay the medical costs caused by their toxic waste; and textile factories do not pay the social costs caused by the psychological effects of mechanisation on their workers. In fact, all producers—so far as they can achieve rationality—will intentionally seek to externalise these and all other possible costs, resulting in production of more than the socially optimal volumes. These are thus called 78 · BUSINESS ETHICS & OTHER PARADOXES external costs. Conversely, less than the socially optimal volumes of goods with external benefits are produced. For example, a patient who pays for a vaccination will pay for the benefit to himself, but not for the public benefit of lower disease incidence; companies which commission research will not factor into the price the value which the findings bring to others; buyers of paper are generally unwilling to be charged for the environmental benefits provided by forests acting as a carbon sink; and someone who rides the bus will not compensate the bus company for reducing carbon emissions. Speaking of buses, the classical account of free markets ignores the free-rider problem, which demonstrates that public goods—goods like pavements, lighthouses and police which by their nature cannot benefit the transacting parties more than others—will never be produced in a free market. Why would you pay for a pavement to be built when everyone else gets to use it too? And why should your neighbour? And his neighbour? Unless a way could be found to charge people for their use (in the way that national roads can be tolled), these sorts of goods just will not be produced, and yet a society with no pavements, lighthouses or police would not be using the available resources to maximum advantage. Public goods have the potential to benefit everyone; common resources can do likewise. Garrett Hardin in the Tragedy of the Commons showed how self-interested behaviour will ultimately deplete common resources despite the fact that this is in no one’s long-term selfinterest.35 He used the example of common grazing land which will predictably and quickly become overgrazed as a result of each of the many cowherds self-interestedly choosing to allow his cows to graze just slightly more than his fair share. A capitalist might cleverly point out that the solution for grazing land would be to privatise it, allowing the owner to rent out parcels and carefully monitor the extent of grazing. But even the ultimate free market system cannot privatise some common resources, like the air we breathe and the fish in the sea. It should come as no surprise, then, that both of these happen to be prime examples of tragically depleted common resources. A final example of market failure is the possibility of underemployment of resources in a free market system. There is a contentious debate within economics about whether the aggregate demand for goods and services in a free market economy could be less than the aggregate supply (i.e. the amount of goods and services that the economy is theoretically capable of producing with all resources fully employed). On one side of the issue are Smith and other free market economists who subscribe to Say’s Law, which states that demand will always expand to match supply, so underemployment of resources is not possible in a free market. On the other side are the Keynesians and post-Keynesians who subscribe to Keynes’ Law, which states that in practice demand may well fall short of supply in a capitalist market, leaving open a real possibility of underemployment. In such cases, say the latter group, only government intervention (especially in the form of public spending) will ensure that aggregate demand increases to match the level of aggregate supply. Because the debate is unresolved even between experts, we shall not explore this issue further; it is safe to say that there are many economists who believe that this issue amounts to a damning criticism of the supposed efficiency of pure capitalism. This section has presented some of the most convincing descriptions of market failure— ways in which free markets are not efficient. They amount to compelling critiques in most cases because we see them in practice, and because we can also understand relatively easily how— contrary to the classical account of free markets—they can arise. They are thus powerful enough to cast serious doubt over P1 in the invisible hand argument for pure capitalism. Chapter 5 · The ethics of economic systems · 79 What is the counterargument to the invisible hand argument based on exploitation? Chris Hani, perhaps South Africa’s most famous socialist, once said: Socialism is not about big concepts and heavy theory. Socialism is about decent shelter for those who are homeless. It is about water for those who have no safe drinking water. It is about health care, it is about a life of dignity for the old… It is about a decent education for all our people. Socialism is about rolling back the tyranny of the market.36 In the previous section, we encountered cases of market failure which point to a significant flaw in the argument for pure capitalism, yet none of these cases are likely to cause anyone to describe the market as ‘tyrannical’. Being inefficient might mean you are no good at your job, but it shouldn’t bring people to see you as evil. More than likely, when Hani spoke the above words he was not thinking of the criticisms that we have introduced so far; instead he was thinking of something worse. He may well have been considering the three phenomena to which critics typically point when they argue that pure capitalism, even if it is efficient, is immoral. These are: alienation, exploitation and inequality. The first two of these criticisms were famously made by Karl Marx, both of which attack P2 of the invisible hand argument. Even if capitalism brings about efficient outcomes, thought Marx, these outcomes are not best because they contain other, bad features. Alienation we will cover in Chapter 9 on meaningful work, as it fits neatly into our discussion there. In this chapter, we will discuss another of Marx’s criticisms: that the outcomes of capitalism are bad because they include exploitation of the proletariat. This argument is based on the labour theory of value, versions of which were also advocated by classical economists such as Adam Smith and David Ricardo. Marx’s version of the labour theory of value says that the financial value of any good is determined by the labour time required for its production. More precisely, the prices of goods will tend to settle at an amount that is a function of the ‘socially necessary’ labour time: the time needed when producers have at their disposal the normal machinery for their society, and when workers are not abnormally unskilled or lazy). If this is true, the only possible way that a capitalist could make a profit would be by not paying workers the full value of their labour. All profit under capitalism, according to Marx, come from the ‘surplus value’ created by workers’ labouring beyond what they had been paid for. After all, consumers will not be prepared to pay more than the value of the goods they seek, and so the producer in order to make a profit must ensure that he pays less than full value for his inputs. The only input whose cost he can influence is labour, because workers have to sell their labour in order to survive, whereas material inputs can in most cases rather be sold by the supplier to someone else willing to pay full value. All employers in a capitalist economy have a profit-motive, and therefore (argued Marx) all employers will exploit their workers. Thus, in seeking to attain efficiency by minimising their costs—which according to P2 of the invisible hand argument for capitalism would be the best outcome—employers in fact create an injustice: systemic undercompensation of workers (Marx called this ‘wage slavery’). Thus, P2 is false, for economic efficiency is not the only determinant of what counts as a good outcome, and in fact in this case the drive for efficiency produces a bad, albeit efficient, outcome! Advocates of pure capitalism do have some defences against the above allegation of exploitation. Most fundamentally, the labour theory of value assumed by Smith, Ricardo and Marx is now rejected by most economists. Economists nowadays tend to explain financial value 80 · BUSINESS ETHICS & OTHER PARADOXES as determined, not by socially necessary labour time, but by supply of, and demand for, the good in question. If this is true, Marx’s claim that profit is only possible if workers are exploited becomes more dubious. There are some more points we should make. Firstly, profit can be seen not as the surplus value created by dispossessed workers, but rather as fair compensation to the employer for the ingenuity, knowledge, creativity, initiative, invention and risk-taking that he showed in starting and maintaining his business. Second, the class divisions are not as clear as in Marx’s day: many modern workers actually own the means of production through pension funds, and surely they cannot be exploiting themselves? Third, the general circumstances of workers have improved a great deal since then, thanks to a number of mechanisms which protect workers, including the ability to bargain collectively with employers via a union with large enough membership to counteract the influence that employers previously had over the cost of labour. However, these responses are not the end of the story: socialists can respond in turn, for example by pointing to differences between the amounts earned by employers and their employees in capitalist systems. These disparities are often too large to be easily explained away as compensation for qualities like the ingenuity of the employer (in America, CEOs have been paid as much as 530 times more than the average employee).37 Also, critics of capitalism might counter that the improved circumstances of workers are due not to free markets but to government intervention deliberately aimed at supporting their unions and protecting them in other ways. Even if we reject the labour theory of value, it may be possible to use something like Marx’s concept of exploitation to make a reasonably strong case that pure capitalism is unjust. However, it is unlikely to be as compelling as the counterargument introduced next, based on inequality. What is the counterargument to the invisible hand argument based on inequality? Many readers of this book are from countries which contain a giant disparity between the wealthy elite and the poor masses. In such places, inequality is, and should be, the subject of much serious discussion. Not only is inequality important, but the ethics of inequality is a complex issue. We shall therefore break our treatment of inequality into a series of subsections.38 What is distributive justice? We know by simple observation that resources in capitalist economies are distributed unequally between people. In fact, the inequality inherent in capitalism was a large part of what inspired the early socialists to propose the overthrow of capitalism. Even if capitalism leads to efficient outcomes, they thought, these outcomes are not morally acceptable because they are unjust. In other words, capitalism involves so much inequality that it does not exhibit what philosophers call ‘distributive justice’. Distributive justice refers to the fairness of a certain distribution of resources. Pretty much everyone has a view of distributive justice, even if they haven’t thought about it in those terms. For example, some believe that the only fair way to distribute resources is for everyone to get a roughly equal share. Such a view is often called ‘egalitarian’, after the French word for equality, though not all egalitarians believe in such strict equality of outcomes. (For example, a different kind of egalitarian believes instead in equality of opportunity, to which we shall return later.) An alternative view of distributive justice is the Marxist dictum: ‘from each according to his ability, to each according to his needs’, which endorses inequality provided that it is based on differences in people’s needs.39 Chapter 5 · The ethics of economic systems · 81 On the other hand, many defenders of capitalism embrace a contribution-based view of distributive justice: inequalities are justified to the extent that they are in proportion to a person’s contribution to the economy. The prices of various washing machines differ because consumers of washing machines are willing to pay more for those that work better and harder, and so if the same goes for the price of labour, the resulting inequalities are fair, according to this view. Other people believe that the distribution which results from economic exchange is not in fact what matters, but rather they think that the fairness of the system should be assessed by determining whether the exchanges themselves are just. The libertarian view of distributive justice works in this way: as long as goods are acquired, voluntarily transferred and exchanged in way that respects private property rights, then whatever the resulting distribution, it is just. Clearly, there are many different views of distributive justice. We do not have the space here to evaluate each one in detail, so instead we will focus on just two of the most influential and compelling: the utilitarian view of distributive justice, and the Rawlsian view. What is the utilitarian view of distributive justice? We have already acknowledged that the invisible hand argument is a consequentialist one, in that it—contrary to the deontological approach of the libertarians—claims that we can assess the moral goodness of a system by looking at the outcomes of that system. So consequentialist views of distributive justice take actual distributions into account. But how do we decide which consequences are morally best? By what standard can we compare one set of consequences (say, an unequal but efficient system) with another (a more equal but less efficient system)? Most famously described by the English philosopher John Stuart Mill in the nineteenth century, utilitarianism proposes a compelling answer: the best consequences are those which contain the most happiness. This answer is so appealing that utilitarianism is still the most prominent consequentialist doctrine today. After all, isn’t happiness what ultimately matters to everyone? (Actually, the answer to this question is not as obvious as one might think; we shall return to it in Chapter 9 on meaningful work.) The utilitarian ‘greatest happiness principle’ tells us how to determine whether a system exhibits distributive justice: if it results in more happiness (sometime called ‘satisfaction’ or ‘utility’) than any other system, then it is just, even if the resource distribution is unequal. Why might we expect that an unequal distribution might be a happier one overall? Well, especially in a capitalist system, many of the features that lead to inequality are also the features which create economic efficiency. After all, we should surely agree with Smith’s notion that it is self-interest which fuels the exchanges that result in the immense productivity associated with capitalism, but self-interest is only a motivator if there are genuine opportunities to achieve selfinterested outcomes. It is the potential to make more money than someone else who is less talented or hard-working that causes people to use their talents industriously. Thus, even if these inequality-causing features of capitalism leave some of us poor, they do achieve economic efficiency for society as a whole. Recall that efficiency implies minimal social costs and maximal social benefits, and so with greater efficiency we can expect greater overall happiness in general. It thus seems that a utilitarian—again, in general—would consider a more capitalist system to exhibit more distributive justice (provided there is some way to control for the market failures which reduce efficiency). However, there is a limit to this general rule: even a utilitarian may at some point have to stop endorsing more capitalist reforms. That is the point at which increased efficiency no longer translates into increased happiness. The law of diminishing 82 · BUSINESS ETHICS & OTHER PARADOXES marginal utility40 suggests that this point does exist in reality: it is the point when a gain in efficiency delivers less happiness to the rich than the happiness it takes away from the poor. This would happen when, for example, the increase in net social benefits is distributed in such a way that the rich experience so small a relative increase in net benefits, compared with so large a relative decrease in net benefits for the poor, that less happiness is created overall. What is the ‘equal opportunities’ view of distributive justice? Perhaps, however, utilitarianism tolerates too much inequality even before it reaches this limit. Even if capitalism never gets to the point where increasing inequality reduces overall happiness, many people nevertheless feel deeply uncomfortable with the inequality inherent in the system. How might we explain this discomfort? Well, let’s start by thinking about what makes racist or other discriminatory laws unjust. Intuitively, we find it totally unfair that the accident of whether you’re born black or white or Jewish or Christian should determine whether you have the chance to live a successful life. So different races and different religions should be treated equally. But similarly, wouldn’t it be unfair for the accident of whether you are born into a rich or a poor family to influence your degree of success in life? If it was something you’d chosen or deserved, that would be different, but again we are talking about something ‘arbitrary’ from a moral point of view—something unchosen and undeserved. We have a strong intuition that factors which, from a moral point of view, are complete accidents, should not determine our outcomes in life. So in order to determine whether capitalism is unfair, we may wish to pay attention to what sorts of factors create inequalities in capitalist society. Here are some: The rich can generate earnings not only from their time, but also simply from their accumulated wealth, in the form of interest, rent, dividends, trading in shares, and so on. The poor, on the other hand, can make money from their time only. This means that all things being equal, there is an ever-widening gap between the earnings of the rich and the poor. What is more, having only one source of income means that if it is lost, one’s earnings drop to zero. Inheritance, which is a function of the strong property rights in capitalism, means that individuals begin from very different starting points. As it insists that people are responsible for their own welfare, capitalism incorporates a relatively small social safety net, if any, to uplift the poor. Without access to capital, decent education or connections, the poor become trapped in a cycle of poverty, from which only a few exceptional individuals escape. The above factors are not the only ways to explain how capitalism contains inequalities, but they do partly account for inequality, and they do seem to be arbitrary from a moral point of view. This line of thinking was famously put forward by the American philosopher and political theorist, John Rawls, in his ground-breaking 1971 book A Theory of Justice.41 Rawls proposed that, if there is to be inequality in society, there should be no arbitrariness in who gets to occupy the advantaged positions. In other words, there should be equality of opportunity. Equal opportunities do not mean that everyone should have an equal likelihood of obtaining positions of power or wealth, because some people are better candidates for such roles. However, we would all agree, thought Rawls, that there should be no systemic way in which access to advantaged positions is denied or restricted to certain people or groups of people based on arbitrary factors. Chapter 5 · The ethics of economic systems · 83 Rawls expressed this idea as follows: ‘Social and economic inequalities are to … be attached to positions and offices open to all under conditions of fair equality of opportunity’.42 In other words, both rich and poor should face the same set of opportunities and constraints in getting themselves into a position to apply for a higher-paying job, whereupon the better candidate should be selected. For example, this would presumably involve free, high-quality public education, as well as the absence of hiring practices which favour candidates from more privileged backgrounds. (We shall discuss equality of opportunity in more detail in Chapter 10 on affirmative action.) What is the ‘difference principle’ view of distributive justice? Having established the importance of equality of opportunity as a principle of justice, Rawls then took his reasoning a step further. He observed that there are other factors which drive inequality in a capitalist system—factors that we did not mention in the list above. For example, talented, hard-working people are generally able to earn a larger share of resources. Now, many people—especially those with a contribution-based view of distributive justice—think that the inequality which results from these sorts of factors is perfectly acceptable. However, Rawls pointed out that, just as much as it is ‘morally arbitrary’ whether you’re born white or black, or rich or poor, it is also seems morally arbitrary whether we’re born talented or untalented, industrious or lazy. By observing the natural differences between people, it is clear that one’s talents are largely the result of factors beyond one’s control, and there is even some scientific evidence to support the idea that the same is true of so-called ‘laziness’: consider how a severely depressed person, suffering from an extreme neurochemical imbalance, is physically unable to get out of bed in the mornings. Maybe you consider aptitude for hard work to be more a matter of choice, but even then is our propensity to make that choice not the result of our upbringing, and is it therefore not a coincidence whether we’re born into a family that instils a work ethic into us? So factors like talents and industriousness are arguably on a par with factors like race, class, sex and wealth: they are morally arbitrary. This means that a system which gives people equality of opportunity, and then allows the most talented and industrious to take greater advantage of these equal opportunities, is still unfair. Perhaps then we must insist on strict equality of outcomes. However, we now come to the troubling question about how society should achieve equality of outcomes. We seem to have two equally unappealing options. One option is to level down, say by lobotomising clever people and disfiguring beautiful people, and so on. This is clearly not acceptable. The other option is to assign all jobs and positions in society randomly, so that at least everybody has an equal chance of getting a well-paid job or a powerful political office. But that would lead to incompetent people in important jobs, which would have a disastrous impact on economic efficiency and ultimately social welfare. It makes no sense to insist on equality of outcomes if doing so causes (almost) everybody to lose. Rawls proposed a way through this dilemma: we can and should allow talented and industrious people to reap the rewards of their talent and hard work, but only to the extent that doing so increases the welfare of the least well off in society. If, for example, appointing a talented person to a position of great wealth or power would make the least well off people in society better off than they would have been had he not been appointed, then the inequality is permissible, even if the advantaged person benefits by more than the disadvantaged. Rawls called this principle of justice ‘the difference principle’. He expressed it as follows: ‘Social and 84 · BUSINESS ETHICS & OTHER PARADOXES economic inequalities are to … be to the greatest expected benefit of the least advantaged members of society’.43 To contrast the utilitarian and ‘difference principle’ view of justice, it may be helpful to suppose for simplicity’s sake that an economy consists of just two people: rich Rutendo and poor Philani. Suppose further that we could actually measure units of happiness. As bizarre as this idea sounds, economists often use it in their models, calling the units of happiness ‘utils’. If there were a way to restructure the economy such that Rutendo gets 15 additional utils while 10 utils are taken away from Philani, a utilitarian would regard the restructure as not simply morally permissible, but in fact morally obligatory. Yet a Ralwsian would reject this idea, and instead only endorse a restructure which, while giving Rutendo, say 15 utils, also added at least one util to Philani. As Rawls himself observed, the difference principle represents a ‘modification’ to the utilitarian principle, because it ‘excludes … the justification of inequalities on the grounds that the disadvantages of those in one position are outweighed by the greater advantages of those in another position’.44 You may wonder how inequalities might benefit the worst off. Suppose that in Rutendo and Philani’s little two-person economy, one could choose either to be a crop farmer or a warrior. If the wages for both positions are equal, it is likely that both would choose to be farmers, as the life of a warrior is offputtingly dangerous. However, the crops are frequently raided by wild animals and people from neighbouring villages. If the position of warrior were to pay better than that of farmer, it is not hard to imagine that Rutendo, who is strong and brave, might agree to do that job. As a warrior, she would protect the crops, and both Rutendo and Philani would benefit, for there would be more food to eat. Even though—in fact because— Philani’s earnings are below Rutendo’s, he is better off. This is a simple example, but it demonstrates that it is not unreasonable to think that even in modern economies inequalities can, up to a point, benefit the worst off. Even if you are convinced by this point, you might be dissatisfied with our use of the concept of a util. How could a theory of justice be implemented in real life, if the stuff it is meant to distribute is an abstract academic construct? We need something more concrete. But deciding what the currency of distributive justice should be is no easy matter, given that different people have different goals in life and, correspondingly, value different things. Again, Rawls can help us out. He said that a theory of justice should be a theory of how “social primary goods” should be distributed. The basic idea is that, whatever your goal in life, these are things you will need. Here is how Rawls himself described them: … things that every rational man is presumed to want. These goods normally have a use whatever a person’s rational plan of life … For simplicity, assume that the chief primary goods at the disposition of society are rights, liberties, and opportunities, and income and wealth … [T]he primary good of self-respect [also] has a central place … These are the social primary goods. Other primary goods such as health and vigour, intelligence and imagination, are natural goods; although their possession is influenced by the basic structure, they are not so directly under its control.45 Rawls thought rights, liberties and opportunities should be distributed equally, but the remaining primary goods—including income, wealth and self-respect—should be distributed according to the difference principle. Chapter 5 · The ethics of economic systems · 85 What is Rawls’ ‘original position’ argument for the difference principle? Rawls admitted that, while the thinking described above amounts to an argument that might convince many people of the difference principle, it mostly just appeals to our intuitions about justice. But he also believed that he could provide a methodologically more watertight argument for it. This is the ‘original position’ argument, and it is quite ingenious. Rawls noted the point which we made at the beginning of this chapter: that cognitive biases cause people unconsciously to prefer systems which favour them. If you are well-off, for example, you may well side with the utilitarians in judging that an economy with 5 additional utils is the better economy, despite the fact that Philani is worse off. If you are from a poorer background, you probably would favour the system where Philani has 10 more utils, even if that means Rutendo has to go without the extra 15. Yet, as we have already remarked, our assessment of what is fair is only justified if we have good, objective reasons for it. Now, normally in life, when we know that our subjective interests are distorting our judgement, it is a good idea to find an impartial third party to give us a truly objective appraisal. However, with regard to the distribution of society’s resources, nobody is impartial, because everyone has a particular set of interests which might bias him towards certain principles of distribution. So what can we do instead? Rawls suggested a solution which most of us are used to adopting when no objective third parties are available to us: when everyone wants a large piece of cake, but there is no independent party to cut it equally, we let one of the hungriest people cut the cake, and let everyone else choose. In other words, we trust that self-interested ignorance will model impartiality. Ignorance (not knowing which slice we will get) and selfinterest (the cutter’s eagerness for the largest possible slice) will mean that the cake is cut evenly and the outcome is effectively impartial. Thus, Rawls realised that to work out the details of a just society we need to get people to be ignorant of what would bias them on that question. To do this, he contrived a thought experiment which he called ‘the original position’, in which we are to imagine that a group of people come together, before society is formed, to decide on the rules by which that society should operate. Of course, each of those people can be expected to opt for the set of rules which maximises his self-interest, but, rather than being constrained by this idea, Rawls harnessed it. (In fact, he reasoned, society should serve the selfinterest of the individuals of which it is made, but it should also do this in way that is fair.) So he introduced a cunning twist: the people in the original position are to be behind a ‘veil of ignorance’: they are not to know their sex, their race, their abilities, their level of intelligence or wealth, or even if they have a disability of some sort. From behind a veil of ignorance, because no one knows whether his circumstances might be like those of Rutendo or Philani, everyone can be expected to reason in the same way about how to maximise his self-interest. In fact, if they are all rational, they should come up with the same set of rules. This means, in fact, that each of us should also be able to come up with them, on our own. And these rules, chosen out of self-interest, but not influenced by the accident of one’s own circumstances, are the rules which would govern a truly just society. Try to put yourself behind the veil of ignorance in the original position. What governing principles do you think you would come up with? Rawls supposed that, because these principles would determine our and our families’ fate for our entire lives, we would be conservative. Some of us may by nature be more risk-averse than others, but a truly rational consideration of matters with such enormous influence over our existence would cause each person to reject the utilitarian standard that might force him to accept a life of poverty if that creates the greater overall happiness. 86 · BUSINESS ETHICS & OTHER PARADOXES Instead, we would initially be deeply suspicious of any amount of inequality. However, when we consider the sorts of points that have been made in this chapter about how allowing inequality can promote efficiency by incentivising productivity, we would see that some degree of inequality may in fact benefit everyone. Rawls believed that each person in the original position would adopt what he called the ‘maximin’ rule, which is a contraction of ‘maximise the minimum’. This is a rule for making choices under conditions of uncertainty. In particular, it is a principle for choosing between options each of which has a number of possible outcomes for us as individuals, but where we do not know the probability of the various possible outcomes of each option. Imagine that at the end of each day’s work your boss offers you either your usual day’s wages or a gamble, in which you have a 50% chance of winning four times your normal wage and a 50% chance of getting nothing at all. The rational thing to do in this situation would be to take the gamble. If you do it repeatedly over a period of weeks, your earnings will even out at twice what they would be if you stuck with the day’s wages each time. But there are three significant differences between this choice and Rawls’s choice in the original position. First, the choice in the original position is a once-off choice, not a repeated one. Second, in the original position you don’t know the probability of the various options—of what position you will end up occupying in society. Third, the choice in the original position is immensely, life-changingly significant, determining whether you will be able to realise your aspirations in life. So adapt the example given just now, and imagine your boss offers you the same two outcomes—a day’s wages or a gamble in which you might get four times a day’s wages or you might get nothing—except this time you don’t know the probabilities attached to the uncertain scenario, and it is a once-off choice about your entire life (i.e. if you choose the riskier option and lose, you become a slave labourer for him). Rawls’ point is that in this second scenario you should stick with a day’s wages—the option with the best worst-possible outcome—because it would be an insanely irrational course of action to risk becoming a slave just because there was an unknown likelihood of getting more. Thus, behind the veil of ignorance we would each rationally and self-interestedly choose to play safe. And this means that in the hypothetical original position we would, when asked to decide what principles of justice ought to regulate the basic institutions of society, endorse the difference principle. How might we summarise the Rawlsian view of distributive justice? Thus far we have dealt with the strands of Rawls’ view of distributive justice separately, but at this point, let us bring them together. Rawls identified two principles of justice: [T]he first requires equality in the assignment of basic rights and duties, while the second holds that social and economic inequalities, for example inequalities of wealth and authority, are just only if they result in compensating benefits for everyone, and in particular for the least advantaged members of society.46 Note that a just distribution requires both equality of opportunity and the difference principle to be observed: the kind of restructure which gives Rutendo the warrior 15 extra utils and Philani the farmer only one would not be endorsed by a Rawlsian unless both Rutendo and Philani have equal opportunities to attain the position of warrior. And, as mentioned earlier, they should both have equal liberties—such as freedom of movement—and equal rights—such Chapter 5 · The ethics of economic systems · 87 as the right to vote. Not everyone agrees with Rawls’ view on distributive justice, but his contribution has been very influential, not only because it is intuitively appealing, but also because it is supported by a methodology for justifying it. If you agree with his deductions about the organising principles that we would come up with if we were in the original position behind a veil of ignorance, then you have a very good reason to consider them correct. Similarly, in order to reject Rawls’ views, you should identify for yourself ways in which his argument is flawed, rather than simply endorsing other principles—consciously or subconsciously—simply because they better suit your own circumstances. What are the implications of inequality for the invisible hand argument? Several pages ago, we introduced the notion of inequality in capitalist systems as a challenge to the invisible hand argument. How does inequality undermine the case for capitalism based on its producing the best consequences for society? Firstly, it may be that the consequences of capitalism are efficient but that they are nevertheless not the best consequences. The law of diminishing marginal utility implies that, if the wealth gap in pure capitalism is large enough, we could in fact obtain greater happiness by reducing it, even despite a decrease in efficiency. In that case, utilitarians would have to admit that the invisible hand argument fails because P2 is false. If we prefer the Rawlsian principles of justice, it is even more likely that we would conclude that P2 is false, on observing that the poorest people in the more capitalist nations like the USA and Hong Kong are significantly worse off than the poor in less capitalist nations like the Scandinavian and other European countries. Embracing Rawls also casts serious doubts over P3 of the invisible hand argument, because it challenges the consequentialist notion that we can judge a system based solely on its consequences: we ought to consider not only what the outcomes are, but also how the unequal outcomes arise. Specifically, capitalist economies do not seem to contain equality of opportunity. Some people might protest by pointing out that the poor in capitalist societies can overcome their poor backgrounds and become wealthy, but to suggest that this means everyone has equal opportunity is a hasty generalisation, for such rags to riches stories are rare. Any reasonable person would agree that in such economies, wealthy people have access to a great deal more opportunities. In countries without a social safety net, especially a good public education programme, wealthy people tend to stay wealthy, and the poor by and large stay poor. Of course, Rawlsians are not the only people who argue that capitalism, despite mostly good consequences, is nonetheless unfair. Many Marxists would be concerned if inequalities are not in proportion to needs, as they are surely not in a capitalist system. Even people with a contribution-based view would not endorse the purer forms of capitalism, when presented with ‘trust-fund kids’ living a life of debauchery and self-indulgence. It is even possible to regard some instances of inequality as further evidence against P1 of the invisible hand argument, because in a free market the wealthy will create inefficiencies in their efforts to maintain or increase their advantaged position. Consider the following passage by the Nobel Prize winning economist Joseph Stiglitz in his recent book The Price of Inequality. Using the example of the financial crisis of 2008-09, he writes: Adam Smith, the father of modern economics, argued that the private pursuit of self-interest would lead, as if by an invisible hand, to the well-being of all. In the aftermath of the financial 88 · BUSINESS ETHICS & OTHER PARADOXES crisis, no one today would argue that the bankers’ pursuit of their self-interest has led to the well-being of all. At most, it led to the bankers’ well-being, with the rest of society bearing the cost … Deregulation in the 1980s led to scores of financial crises in the succeeding decades, of which America’s crisis in 2008-09 was only the worst. But those government failures were no accident: the financial sector used its political muscle to make sure that the market failures were not corrected, and that the sector’s private rewards remained well in excess of their social contributions—one of the factors contributing to the bloated financial sector and to the high levels of inequality at the top.47 Is there an inductive counterargument to the invisible hand argument? There is a final, pragmatic point to be made against the purer forms of capitalism. Smith lived and wrote in the eighteenth century. In the approximately 240 years since The Wealth of Nations was published, innumerable economies have experimented with a wide variety of forms of capitalism. We have had ample opportunity to prove that society flourishes when markets are deregulated so that outcomes are determined entirely by the simple interaction of self-interested producers and consumers. If Smith had been right, it would be obvious to all but the most dogmatic nonconformists that the single-minded pursuit of profits produces, as if by magic, a win-win outcome. This has not been our experience. It would be wonderful if the real world did in fact work as Smith predicted: if each of us acting in our own self-interest in fact improved life for everyone else, but this is a naïve pipe dream. What are the arguments against socialism? We have now considered the two commonest arguments for capitalism, and we have seen that they are both in fact weak. Libertarians cannot show convincingly that we have an inviolable right to private property which entails that pure capitalism is the only moral economic system. Proponents of the invisible hand argument have failed to prove that pure capitalism is most efficient, nor even that, if it were most efficient, it would produce better consequences than any other economic system. However, how do we know that the purer versions of capitalism are worse than any other economic system? Are there not serious problems inherent in purely socialist economies too, despite the fact that they promise fairer outcomes? It is tempting to think so when one observes the record of societies which have attempted socialist experiments only to revert (or convert) to a mixed economy. Just as critics of capitalism might use an inductive argument against it by appealing to the evidence of many failed experiments, there is a similar argument available to critics of socialism. For example, the former USSR, former Communist bloc and Angola have all abandoned socialism, embracing a mostly capitalist model. Other so-called ‘communist states’ like China, Laos and Vietnam are now in fact only socialist in name, having instituted extensive market reforms which are widely seen as the reason for their recent growth. The two economies which remain largely socialist—North Korea and Cuba—are hardly economic success stories, nor do their people live well by comparison with other countries. Of course, this argument is inductive, based on an appeal to evidence. Recall from Chapter 3 that such arguments do not provide a conclusion of which we can be certain in the way of deductive arguments. However, like the inductive argument against capitalism, it is a relatively strong one given the large number of failed experiments. There are also deductive arguments which posit reasons that purely socialist countries can be expected to fail, including: (1) Mises and Hayek’s point introduced earlier about the inability of a central decision-maker to handle Chapter 5 · The ethics of economic systems · 89 the complexity of economic decision-making; (2) a predictable focus on production volumes rather than quality in meeting targets set by a central authority; and perhaps most significantly (3) the lack of incentives to be a productive member of a socialist economy. We have observed that people are not entirely self-interested, but they certainly are more self-interested than they are altruistic, and so how could we expect people to work hard when they know they will be supported by the state regardless? Socialism is first and foremost an attempt to bring about economic justice, as a direct response to the injustices (like alienation, exploitation and inequality) observed in capitalist economies. We do not have space here to consider whether socialist economies can in fact eliminate or sufficiently reduce these injustices. However, we have said enough to conclude, with reference to both the empirical evidence and also the theoretical arguments outlined above, that the inefficiencies inherent in a socialist system are deeply problematic. Why is a mixed economy the best economic system? At this point you may be feeling at a loss. If capitalism and socialism are both so flawed, perhaps we should give up on the idea of a morally justifiable system altogether. Yet that we cannot do: an economic system has such a material influence on all of our lives that we must surely identify and implement the best one, even if it is imperfect. Recall that pure capitalism and pure socialism are not the only two economic systems available to us (in fact, as we have observed, neither exists in reality). A mixed economy represents an opportunity to harness market forces (as pure capitalism seeks to do) and do so in such a way that we minimise other injustices (as socialism seeks to do). Certainly, there is a strong inductive argument to suggest that mixed economies do in fact incorporate the best elements of the two extreme systems: the most successful economies today—those which are efficient and at the same time contain less exploitation and inequality than their more capitalist neighbours—are mixed economies. How does a mixed economy minimise inefficiencies? Look back at the instances of market failure that we encountered a few sections back. Each of these can to some extent be alleviated by introducing a ‘socialist’ feature: regulation—government involvement in the market. Take again the example of South Africa, where the Competition Commission obstructs the formation of monopolies and oligopolies, and punishes price-fixing; the National Credit Act protects people from irrationally taking on more credit than is really in their interests; the National Regulator of Compulsory Specifications (NRCS)—the old SABS—and the Financial Services Board both reduce the likelihood that people are fooled by asymmetric information which would otherwise induce them to buy defective or overpriced products and services; pollution laws prevent firms from externalising the environmental costs; fishing licenses & quotas reduce the depletion of common resources. All mixed economies contain these and other regulations designed to improve the efficiency of the market by reducing or eliminating market failures. Besides regulation, government spending on infrastructure—another ‘socialist’ intervention— provides us with public goods and can arguably alleviate the potential problem of underemployment of resources. How does a mixed economy reduce exploitation and inequality? Again, regulation is part of the answer. Minimum wage legislation and laws protecting the rights of unions shield workers from the grossest cases of exploitation and inequality, and also usually seek to promote equality of opportunity. The system of progressive taxation takes from the wealthy in larger proportions in order to even out some of the inequality, perhaps to the point that Rawls’ 90 · BUSINESS ETHICS & OTHER PARADOXES difference principle can be satisfied. Likewise, social welfare systems help those who suffer most from inequality. And regulation should of course be able to combat the effects of the wealthy manipulating markets to maintain their privileged position, as identified by Joe Stiglitz. Thus mixed economies like those found throughout Africa promote private enterprise and mostly allow the exchange of goods and services to be determined primarily by the interactions of producers and consumers. At the same time, the government regulates these markets to achieve two dramatically different kinds of outcomes. One form of regulation is intended to make markets more efficient; the other to ensure a more just distribution of resources than an efficient market would produce. We shall henceforth call this style of mixed economy ‘regulated capitalism’ in order to recognise that it is closer to pure capitalism than to pure socialism, and also that the key feature which moves it away from the extreme of pure capitalism is regulation. While the two forms of regulation may appear to have contradictory goals, their ultimate purpose is the same: to achieve the best outcome for the people in that economy. Without broadly efficient markets, there would be a lack of incentives for innovative and industrious activity, resources would be wasted or overused, and costs would not be minimised. Almost everybody would lose. On the other hand, without regulation to correct for injustices in (albeit efficient) free market resource allocation, the impoverished and the powerless would be exploited, and inequality would worsen. When we allow for diminishing marginal utility, it is reasonable to expect that the poor would lose more than the wealthy would gain. As it turns out, the clearest thinkers about the ethics of economic systems agree with the Cambridge economist Ha-Joon Chang when he paraphrased Winston Churchill thus: ‘[regulated] capitalism is the worst economic system, apart from all the others’.48 It is generally agreed (by everyone who is not blinded by ideological faith) that a mixed economy can incorporate more of the positive than the negative characteristics from both capitalism and socialism, and therefore it amounts to an imperfect system vastly superior to those two alternatives. None of this is to say that the debate ends there: in fact this is just the starting-point for the more difficult questions about how precisely governments should regulate markets, and when and how they should intervene. Our ablest economists disagree strongly about a broad array of such issues. Should governments bail out banks in a financial crisis? Should they spend more to boost employment during a recession? Should trade unions have more or less power than they currently have? Is the minimum wage high enough, or too high? These and many more are vital questions about the moral responsibilities of the state and the public sector, which no doubt some of the readers of this book will one day be required by their jobs to decide. But we should all think about them, for in a democracy the responsibilities of the public sector are ultimately the responsibilities of all citizens. Moreover, it makes sense for the people who run and work for businesses to think for themselves about what regulations are justified, and what regulations simply hold businesses back. It is important that readers do not leave this chapter thinking that, if the right public policy is found, regulated capitalism has the same magical qualities that Adam Smith proposed for pure capitalism. This chapter has given reasons to believe that the consequences of regulated capitalism are better than those of pure capitalism (and pure socialism). Yet self-interested interactions of consumers and producers, even in a regulated market, will not necessarily lead to the highest possible levels of social welfare. There may well be additional features of an economy, say responsibilities to be borne by the market participants themselves, which could result in even better outcomes. We shall return to this idea in the next chapter, in which we Chapter 5 · The ethics of economic systems · 91 move from the broad question of the ethics of our economic system to the narrower question of the ethics of the businesses within it. CONTENT QUESTIONS (1) Describe two features of an economy that would make it more capitalist than socialist. (2) Give a brief account of economic efficiency, and explain why in general economic efficiency is a morally praiseworthy feature of an economic system. (3) Is utilitarianism a deontological or a consequentialist moral theory? Explain why. (4) At what point would a utilitarian see economic inequality as unjust? (5) Briefly describe Rawls’ thought experiment of being behind a ‘veil of ignorance’ in the ‘original position’. Why might this thought experiment be expected to deliver impartial principles of justice? CRITICAL ANALYSIS QUESTIONS (6) ‘People have a right to personal property. Only capitalism protects this right. Therefore only capitalism avoids immorally violating people’s rights.’ To what school of thought does this argument belong? Describe at least two challenges to this argument. (7) Explain how the presence of monopolistic and oligopolistic behaviour in unregulated markets represents a challenge to Adam Smith’s “invisible hand” argument for capitalism. Using examples, explain how regulation to prevent or reduce such behaviour improves an economic system. DISCUSSION QUESTIONS (8) ‘Some forms of government regulation of a mixed economy are intended to ensure that markets operate efficiently. Other forms of regulation are intended to alter the outcomes of efficient markets. Since the intentions behind these two forms of regulation are contradictory, it cannot be true that both forms of regulation are justified.’ Evaluate this statement, explaining whether you agree with each part of it, and why. (9) ‘The current extent of inequality in this country is immoral.’ Discuss this statement. Use one view of distributive justice to support the statement. Use another view of distributive justice to argue against the claim. Indicate which view you most agree with, and why. Your answer should include a short, factual account of the extent of inequality in the country. 92 · BUSINESS ETHICS & OTHER PARADOXES CHAPTER FIVE NOTES AND REFERENCES 1 These three words were used by the English philosopher Thomas Hobbes in his 1652 book Leviathan to describe a life without mutually beneficial principles of organisation. Although Hobbes was imagining a world without even private property, it is not hard to imagine that even with this one principle of organisation, life would still be pretty bad. 2 Several less-than-pure socialist models allow individuals to own personal items such as cars and houses , but few if any models which could truly be called socialist would allow capital to be owned by individuals. 3 Morris, W. 1894, ‘How I Became A Socialist’, Twentieth Century Press Ltd, 16 June, p. 1 4 It should however be noted that many people consider a lot of pre-colonial African societies to have had an essentially socialist communal organisation, though it was not called ‘socialism’ per se. One can thus see the practice of socialism as quite old. See, for example, Kgalema Motlanthe’s essay in Turok (ed), 2010, The Historical Roots of the ANC, Jacana Media. 5 Marx, K and Engels, F. 2009. ‘The Communist Manifesto’. Echo Library, p. 28-29. The original version was published in 1848. 6 For an account of recently-arisen socialist features of the Hong Kong economy, see ‘End of an Experiment’, The Economist, 15 July 2010 7 See ‘Jin-Sung, J., 2013, ‘The Market Shall Set North Korea Free’, International Herald Tribune, 27 April 8 In this section, I have chosen to use South Africa as an example of a mixed economy, partly because many of the readers of this book are expected to be South African. Readers from other countries may wish to look up the equivalent data for their own countries. 9 Schwab, K. (ed.) 2013, The Global Competitiveness Report 2013/14, World Economic Forum, p. 347 10 Of course, land redistribution might be seen to respect, rather than violate, property rights. However, it is a relatively safe bet that the authors of the pro-business Global Competitiveness Report would consider the possibility of land reform as a threat to the private property rights as they are currently distributed. 11 Tolsi, N., Bauer, N., Pillay V. 2012. ‘Nationalisation of Mines Dead and Buried’. Mail & Guardian,20 December 12 African National Congress, 2012, ‘Land Reform Policy Discussion Document’, June, p. 15 13 Schwab, K. op. cit. 14 Chang, H-J. 2010. 23 Things They Don’t Tell You About Capitalism. Allen Lane, p. 205. 15 This statistic was found on the JSE’s website at https://www.jse.co.za/about/history-companyoverview (accessed 27 May 2014) 16 The information about ranking was obtained using 2012 data available from the World Bank at www.data.worldbank.org. (accessed 26 May 2013). Search for ‘market capitalisation of listed companies (current US%)’ 17 The data for South Africa was from 2008; for the USA it was from 2005. These statistics come from Rudin, J. 2012. ‘If Only Workers Were Not Also People’, Mail & Guardian online, 27 January, accessed online on 26 May 2013 at: http://mg.co.xa/article/ 2012-01-27-if-only-workers-were-not-also-people 18 The precise figure in March 2011 was 23.6%, obtained from the South African Reserve Bank Quarterly Bulletin, 2011, 259, March, p. 15, available online at www.resbank.co.za 19 This information is for 2011, from OECD, 2011. Government at a Glance 2011, OECD Publishing, Part V, Section 21. 20 In 2008, Hong Kong’s public sector employed about 4% of the work force, according to Scott, I. 2010. ‘The Public Sector in Hong Kong’. Hong Kong University Press. p. 1 21 Kahn, T. 2013. ‘Social Grants Increase But “No Substitute for Jobs”’. Business Day. 28 February. Accessed online on 26 May 2013 at: www.bdlive.co.za/national/2013/02/28/social-grants-increase-butno-substitute-for-jobs 22 Wong, L. 2008. ‘Hong Kong’s Welfare Model Reconsidered—What Model? What Traits? And What Functions?’ EASP 5th Conference: Welfare Reform in East Asia, 3-4 November. Accessed online on 27 May 2013 at: www.welfareasia.org/5thconference/session-1/stream-4 23 US Census Bureau, 2010, ‘Census Bureau Reports Nearly Half of U.S. Residents Live in Households Chapter 5 · The ethics of economic systems · 93 Receiving Government Benefits’, 15 April, available online at: www.census.gov/newsroom/releases/ archives/employment_occupations/cb10-53.html (accessed 27 May 2013) 24 Kahn, T. op. cit. 25 Data is not easily available on the proportion of American households whose major source of income comes from welfare payments. 26 Hospers, J. 1971. Libertarianism. Nash. p. 5 27 Locke, J. 1980. (Original in 1690). Second Treatise of Government. Hackett Publishing Company. V. 27. p. 19. Italics in original. 28 Nozick, R. 1974. Anarchy, State and Utopia. Basic Books. 29 I am grateful to Greg Fried for sharing with me this way to formulate the criticism. 30 In fact these outcomes might bother her a great deal: she might be disgusted at the greed and thoughtlessness of the caviar-eaters. But she might think that, though it is disgraceful for them not to assist the poor, the poor do not have a right to their assistance. Many libertarians would concede that it is often morally wrong to do what you have a right to do. 31 Smith, A. 1985. (Original in 1776). The Wealth of Nations. Modern Library. p. 223 32 Hayek, F. ‘The Price System as a Mechanism for Using Knowledge’ and Moses, L. ‘Economic Calculation in Socialism. Both in Bornstein, M. (ed.) 1965. Comparative Economic Systems: Models and Cases, Homewood. pp. 39-50 & 79-85 33 Smith, A. 1985. op. cit. p. 5 34 Cohen, M. & Bhuckory, K. 2013. ‘South African Biggest Construction Companies Admit to Collusion’, Bloomberg, 7 May. Accessed online on 3 June 2013 at: www.bloomberg.com 35 Hardin, G. 1968. ‘The Tragedy of the Commons’. Science. 162, 3859. 36 From a speech by Chris Hani, exact origin unknown. Find this quote along with others at the website of the Chris Hani Institute: www.chi.org.za 37 Michaels, A. 2004. ‘Off The Leash: What Will Bring Executive Pay Under Control?’ Financial Times. August 24. p. 11 38 I am very grateful to George Hull for making many excellent suggestions about how to present this discussion of inequality. 39 Marx, K., 2008. (Original in 1875). ‘Critique of the Gotha Programme’, Wildside Press LLC, p. 27 40 The law of diminishing marginal utility should be familiar to readers who have done a semester of Economics. In short, it states that as we acquire more of a good, we experience a smaller increase in utility (or happiness) with each subsequent acquisition. Consider for example how much more impactful a small amount of money is for a poor person than the same amount of money is for a wealthy person. 41 Rawls, J., 2009. ‘A Theory of Justice’, revised edition. Harvard University Press. 42 Rawls, J., 1993. ‘Political Liberalism’. Columbia University Press. p. 6 43 Ibid. 44 Rawls, J., 1958. ‘Justice as Fairness’, Philosophical Review, 67, April. p. 168 45 Rawls, J., 2009. ‘A Theory of Justice’ revised edition, p. 54 46 Ibid., p. 13 47 Stiglitz, J. E., 2012. ‘The Price of Inequality’, Allen Lane, pp. 33 & 34 48 Chang, H-J. op. cit. p. 253. Churchill famously said that ‘democracy is the worst system of government, apart from all the others’. Chapter Six IN WHOSE INTERESTS SHOULD BUSINESSES ACT? by Jimmy Winfield Where I live there is a large retail chain which prides itself on its customer service. ‘The customer is king’ is the unofficial company motto, and it is meant entirely without irony. A friend who works at the head office has told me that he thinks this all goes a bit too far. For example, their no-questions-asked returns policy means that that they spend a fortune accepting returned, spoiled goods which were fine when they left the store. He is convinced that this unbridled dedication to the customer goes well beyond just creating brand loyalty: it in fact reduces profits, and harms the shareholders. I have another friend who, along with her family, owns a medium-sized publishing business. She tells me that she considers the staff to be an extension of her blood-family, and she treats them as such. I have no doubt that in years when business has been tough, as some have certainly been, the family pays its employees generously, even if that means a pittance as dividends for her and her family. Some people think that such commitment to serve the interests of customers or employees is inappropriate. ‘The business of business is business’ they say, by which they mean that a company ought never to sacrifice profits in the service of some social goal, for its responsibility is to maximise shareholder wealth. Who is right? Whose interests should a business serve? There are several candidates, who are referred to generally as the business’s stakeholders. This term is typically used to describe anyone whose existence is necessary for the business’s survival, and may include owners, shareholders, employees, customers, suppliers, lenders, other creditors, the community, and even society-at-large.1 Naturally, each stakeholder group has a different set of interests when interacting with the business. Can we say that a business has a moral duty to act in these interests? Do the interests of some stakeholders outweigh those of others? If there is a conflict between the interests of two stakeholder groups (say, the employees want higher pay but shareholders want larger dividends), should the business prioritise the interests of a particular group? In practice, the debate is about how a business should weigh the interests of its shareholders Chapter 6 · In whose interests should businesses act? · 95 against the interests of all of its other stakeholders.2 Each position in this debate does not simply assert which stakeholders it is morally permissible to serve. Instead, it attempts to state whom a business must serve. For example, what we shall call the ‘Narrowest View’ tells us that a business ought to act in its shareholders’ interests only. If this view is correct, then a business is committing an immoral act by taking into account the interests of other stakeholders in a way that conflicts with the interests of shareholders. The question at the heart of this chapter is fundamental for any person who makes or hopes to make influential decisions in commerce. One thing that will become clear is that—whatever you might think now—the answer is neither straightforward nor self-evident. The arguments for each of the positions require careful consideration and evaluation, and that is what this chapter aims to provide. Why can’t we simply say that businesses should act in everyone’s interests? An economic system determines how all the resources accessible by a society are to be distributed amongst the members of that society. Since the economic system is by definition for the entire society, it is important that it is good for that society. If there is a feasible economic system that would satisfy the interests of everyone in society better than the current one, we have a moral imperative to switch to the more beneficial system. The same reasoning does not apply to individuals. Individuals are not by definition there to serve society. Though an admirable few do dedicate their lives to the service of others, this is agreed to be supererogatory. We generally do not consider it wrong that most of us largely pursue our own interests, and devote a relatively small fraction of our time to helping others. Even when we do assist other people, we consider it appropriate that we first act in the interests of those who are closest to us, like our family and friends, before considering other members of society. Generally, even if we are aware that an individual could take an alternative path through life which would generate greater benefits for society-at-large than her current path does, we think there may nonetheless be good reasons for that individual to continue on her current path. No one is obliged to sell her worldly possessions and volunteer to hand out food parcels to starving orphans for the rest of her life, even if doing so would make the world a better place. What about businesses? Must they by definition act in the interests of society at large? The answer is no. As participants in an economy, they are in the context of this question more like individuals than like economic systems. Just as with individuals, to say that a business should benefit society, it is not enough simply to show that it can benefit society. (A philosopher might say that ‘the ability to do x is a necessary condition but not a sufficient condition to be morally required to do x’.) It may be true that businesses are obliged to benefit society, but not by definition. Why don’t businesses have just the same set of moral obligations as individuals? If businesses are economic participants just like individuals, perhaps they have just the same set of moral obligations as individuals. Maybe, for example, they are entitled simply to look after themselves, without harming anyone except to avoid greater harm to themselves or others. But this response oversimplifies. The fact is that businesses and individuals are very different kinds of things, and as such, different questions about their moral obligations arise. For one thing, businesses do not possess the characteristics of life and consciousness, and this alone makes them profoundly different from real people. For another, businesses have 96 · BUSINESS ETHICS & OTHER PARADOXES characteristics which individuals do not: for example, businesses are made up of multiple people, each with his own relationship to the business. We cannot tell what obligations a business has to its various stakeholders by asking the analogous question about an individual, because he does not have an equivalent set of stakeholders. Of course, the business world is full of analogies between businesses and individuals: you might be told in your place of work that the board of directors is the brain of the company, and the employees its heart; or that the shareholders are its parents and the other subsidiaries within the group are its sisters; and so on. But these are more like poetic metaphors, with some value for motivating employees, perhaps, but insufficient for strong arguments by analogy to apply. Businesses and individuals are as different from each other as a single buffalo cow is different from a stampede. What would it mean to say that businesses should ‘look after themselves’? What is the ‘self’ of a business? The likely reason that people are tempted to think of a business (wrongly) as morally analogous to an individual is that most businesses are legally analogous to individuals. That is, most businesses are corporations. What is a corporation? A corporation is a business which has been ‘incorporated’, or registered as a legal person all of its own. Given how different businesses and individuals are, this is a bizarre idea, and needs some explanation. The law uses the term ‘natural persons’ to describe real flesh-and-blood people, and it also recognises a separate, artificial category of legal person, a ‘juristic person’, of which a corporation is one example. Juristic persons do not have all of the same legal rights and responsibilities as natural persons (they cannot marry, and since they cannot drive they do not have to obey speed limits, for example), but many laws apply equally to both types of legal person. A corporation can thus own assets, borrow money, sue other legal persons (or be sued by them) and it can be punished by the law. Juristic persons are even mentioned, for example, in the South African Bill of Rights, which states that ‘a juristic person is entitled to the rights in the Bill of Rights to the extent required by the nature of the rights and the nature of that juristic person’.3 The Bill also insists that juristic and natural persons alike should respect the rights of other legal persons.4 If an unincorporated business is owned by only one individual, she is commonly known as a sole trader or sole proprietor; if such a business is owned by multiple people, they are known as partners, and the business as a partnership. In such a business, the business’s assets are legally owned by the sole trader or the partners, and the business’s debts are legally owed by these natural persons too. When a business incorporates, the legal ownership of the assets and the legal obligation for the debts transfer to the new corporation. The sole trader or partner effectively sells her direct stake in the business for an indirect stake: a certain number of shares in the new corporation. She becomes a shareholder, and her shares entitle her to various contractual rights, depending on the company and the country in which it operates. Not all companies are businesses. For example, South Africa’s Companies Act of 2008 established five kinds of companies—public companies, private companies, personal liability companies, state-owned companies and non-profit companies.5 Businesses by definition aim to make a profit, so non-profit (and some state-owned companies) are not businesses. In this book, we are thus mostly concerned with profit-seeking companies and unincorporated businesses. The terms ‘shares’ and ‘shareholders’ are only used by companies; unincorporated Chapter 6 · In whose interests should businesses act? · 97 businesses do not have shareholders. However, in order to be concise, we shall use the term ‘shareholders’ generally in this chapter. For unincorporated businesses, except where a distinction is necessary, simply read ‘shareholder’ as equivalent to ‘sole trader’ or ‘partner’. If a corporation is equivalent to an individual in law, is it not equivalent to an individual in ethics? No, the corporations we are considering are still businesses, so everything we have already said about the differences between individuals and businesses still applies. Artificially labelling corporations as ‘persons’ in law may have many benefits for the legal system, but it does not change the fact that they are just too different in nature from individuals for us to derive the moral obligations of corporations by extrapolation from those of individuals. Furthermore, consider two businesses conducting the same activities, where one is registered as a company, and the other is not. The arbitrary difference that one of them has sent off some documentation and paid a fee to the company registration authority cannot make one business morally responsible for the actions carried out by its employees, and the other not. In fact, there is some reason to think that it doesn’t even make sense to talk of businesses as having moral obligations. Are businesses really the sorts of things which can have moral obligations? This is a fundamental question because if the answer is ‘no’, there is clearly no sense in proceeding to identify in whose interests a business is morally obliged to act. The way in which philosophers phrase the question is: ‘is a business a moral agent?’ ‘Moral agent’ is the term for a participant in morality, in the same way that a participant in an economy is called an ‘economic agent’. So a moral agent is an entity that has moral rights and obligations, such as most adult humans. Animals, young children and severely mentally disabled people are not moral agents, as they have no moral obligations (though they certainly have moral rights). If a ferocious lion kills a defenceless zebra foal, we cannot sensibly say that it acted immorally, even if we find the violence sad or regrettable. When we say that lions are not moral agents, what we mean is that they just don’t have the characteristics required for us usefully to apply moral judgements to them. We could ask what characteristics distinguish a moral agent from a lion in this case, and the answer would presumably include the power to choose to become a vegetarian or at least to slaughter prey humanely. We could also broaden the question, and ask what is the full set of characteristics which distinguish moral agents in general. This is harder to answer, which is why the issue of businesses’ moral agency is open for debate. The philosopher Manuel Velasquez is concerned that if we identify the business as a moral agent, individuals within the business might wrongly escape blame for wrongful acts performed in its name. He writes: [We] must not let the fiction of ‘the corporation’ obscure [the fact] that human individuals underlie the corporate organisation. Consequently, these human individuals are the primary carriers of moral duties and moral responsibilities... Corporate policies, corporate culture, corporate norms and corporate design can and do have enormous influence ... [y]et these corporate artifacts do not make the employee’s choices for him or her and so they are not responsible for his or her actions.6 98 · BUSINESS ETHICS & OTHER PARADOXES Come to think of it, what precisely do we mean by ‘the business itself’ anyway? If the business is incorporated, then we might mean the legal entity, like when we talk about BP owning an oil refinery (ownership is a legal concept and so presumably ‘BP the owner’ refers to the legal entity called BP). But what kind of entity are we talking about when we say that BP has spilled oil into the Mexican Gulf or has decided to expand its research in renewable energies? Artificial legal entities do not occupy physical space and so could not spill something physical, and they are not conscious so they cannot make decisions; we must thus mean something else. Perhaps the truth is that most of the time all we mean by ‘the business’ is the collection of people employed by the business. If this is true, then Velasquez is right to talk about the ‘fiction’ of a corporation: when we talk about the activities of a business which matter morally—its actions and decisions—we are in fact just talking about the actions and decisions of those moral agents (real people) who act on behalf of the legal entity. Other philosophers like Peter French have attempted to show that in a morally relevant sense a business consists of something different from the people that work for it, and something more substantial than just an inanimate arrangement of policies, culture, norms and design. In fact, they argue that the ‘business itself’ has the characteristics of a moral agent.7 Their arguments are complex, partly as a result of what was noted above: the precise characteristics of a moral agent are not commonly agreed. It is certainly not as simple as saying that since a corporation is a legal person it is a moral agent, as we observed in the previous section. Let us pause briefly and see if we can answer the question yet. Is a business a moral agent? We have established that, because what is meant by ‘a business’ is unclear, we can interpret the question in two ways: (1) if we see the business as essentially a collection of individuals acting on behalf of a ‘fictional’ juristic person, the question boils down to the following: ‘do the individuals making decisions and performing actions on behalf of a business have moral obligations with respect to those decisions and actions?’; or (2) if the business is essentially something quite different from the collection of individuals who act on its behalf, then the question is: ‘does the business itself, quite apart from the individuals it employs, have moral obligations?’ The answer to the first version of the question is a resounding ‘yes’, by virtue of the fact that individuals cannot escape their moral obligations simply by acting on behalf of someone or something else. To determine the answer to the second version of the question would require us not only to refine what ‘the business itself’ means, but also then to examine the complex arguments of French and others. If we were to do so, we may decide that the answer is ‘yes, a business is a moral agent’ or ‘no, it is not’. However, the reason that it is important to determine whether businesses are moral agents is not what you might think. One may suppose that if we were to decide that businesses are not moral agents, then we could not claim that any business acts are wrong, in the same way that we cannot claim that lions wrongly kill zebras. Perhaps, you might think, if businesses do not have moral agency, then their actions are amoral. Yet this makes no sense at all: imagine if a gang of vicious thugs were to start a business called He Can’t Cheat If He’s Dead (Pty) Ltd, selling their murderous services to paranoid, jealous wives. When they make a killing (if you’ll forgive the pun), would we be prepared to accept that their actions are not wrong because they are performed by a business? Of course not; it is quite clear that if the business is not itself morally responsible for its actions, then the individuals within the business are. So it is appropriate to consider decisions made and actions performed in the name of a business as morally praiseworthy or blameworthy. Whether we say that the moral obligations Chapter 6 · In whose interests should businesses act? · 99 belong to the business itself or to the individuals within it is a matter of some debate, but we know that either way moral obligations apply to the decisions and actions of a business. This thinking is summarised in the chart below: The decisions and actions of ‘the business itself’, some inanimate entity essentially different from the individuals working for it YES, because the individuals are Possibly YES, Possibly NO, each moral agents, and on this depending on depending on the Does the business have interpretation the business is no the outcome of outcome of moral agency? more than the sum of the complex complex individuals. arguments. arguments. YES, because the Do moral obligations YES, because individuals do not YES, because the business is no pertain to the decisions the business escape their moral more than a collection of moral and actions of a itself is a moral obligations by agents. business? agent. acting on the business’s behalf. Figure 6.1. The argument to show that moral obligations do pertain to the decisions and actions of a business. Possible interpretations of ‘decisions and actions of a business’ Essentially the decisions and actions of individuals working for the business We can now be confident that a business is the sort of entity that can be said to have moral obligations, even if we have dodged the question of whether ‘the business’ refers to an inanimate moral agent or just the set of individuals who make decisions and perform actions in the name of the business. However, it is worth quickly noting that if we want to identify precisely whom we should hold responsible for ethical or unethical business acts in order to praise or punish the responsible party, we do need to know whether the business itself is a candidate. If a pharmaceuticals company were recklessly to cause harm to people by selling an untested drug, should the company be fined, or should the directors or other employees be incarcerated? The question of who is responsible not only determines who should be punished or rewarded, but also influences the range of available punishments and rewards, as one cannot send a company to jail or give it a promotion. We are now ready to consider three different kinds of answers to the central question of this chapter: ‘in whose interests is a business morally obliged to act?’ They are represented in the figure below, and will be discussed in detail in the sections which follow. NARROWEST VIEW Only shareholders’ interests count. SHAREHOLDER PRIMACY Shareholders’ interests have primacy (they are most important), but a business has other obligations too. THE STAKEHOLDER MODEL A business should identify and balance the interests of all stakeholders. No single stakeholder group is more important than any other. Figure 6.2. A representation of the three main views of how businesses ought to treat the interests of stakeholders, indicating increasing breadth. 100 · BUSINESS ETHICS & OTHER PARADOXES THE NARROWEST VIEW: Is a business obliged to act in its shareholders’ interests only? Some people claim that a business has one and only one moral obligation, which is to make the owners wealthy. This may be expressed in several ways, including ‘to increase shareholder value’, ‘to maximise profits’, and so on.8 We shall call this the Narrowest View of businesses’ moral obligations, to distinguish it from other views as depicted in the diagram above. This is the ‘narrowest’ of the views because it implies the fewest moral obligations, and the least number of actions that would be considered immoral. According to the Narrowest View, for example, activities like the use of sweatshops, dumping hazardous waste, and deceiving suppliers are not immoral—in fact they are morally required of businesses—provided they enrich the owner. The Narrowest View has the major benefit of keeping things simple for corporate executives, by allowing them to focus exclusively on one thing: the so-called ‘bottom-line’. In the competitive business environment, often described as a ‘dog-eat-dog world’, business leaders sometimes claim that success is only possible through the single-minded, if not ruthless, pursuit of profitability. Not having to take into account what might be seen as the distractions of employees’ welfare, damage to the environment, and abuse of the suppliers dependent on one’s patronage, would certainly make the job of running a large business a whole lot easier. Some might counter that in fact establishing shareholders’ interests is not as simple as maximising their wealth. For example, a company’s employees are often shareholders by virtue of investments they have through their pension fund, or through an employee share incentive scheme. Although they are shareholders, they may have a greater interest in the company’s spending money on improving the safety or comfort of working conditions than they do in that money going to shareholders as dividends. Also, so-called ‘green’ investors are so concerned about how the company makes money that they are willing to sacrifice earnings if it means that the company will avoid making harmful products or damaging the environment. In both of these examples, what shareholders want is not a straightforward maximisation of their return on investment. This suggests that the Narrowest View would not always be as easy to implement in practice as one might think. It appears that to act truly in shareholders’ interests would sometimes require a nuanced evaluation of what is in fact best for shareholders, without presuming the answer to be maximum profits. An even subtler analysis would be required when some shareholders are employees, for example, and others are not: a method for weighing different shareholders’ interests would be necessary. One way to tidy up this little muddle is to recognise that each of the terms for stakeholders (like ‘shareholder’) describes roles, not people. As one individual is capable of several roles, he may belong to more than one type of stakeholder group, which is how a person who owns shares in the company that employs him can be described as both an employee and a shareholder. To the extent that the business’s operations affect the environment in which he and his family live, he also belongs to the ‘community’ stakeholder group. In each of these roles, he may have different interests: as a member of the community he has an interest in a clean environment; as an employee he has an interest in a safe working environment and good pay; and as a shareholder he has an interest in the business earning high profits. After all, the shareholder role is essentially a financial one; why should the interests of a shareholder (strictly in that capacity) be any more than financial? So perhaps we can say that shareholders (strictly in their role as shareholders) do have a straightforward interest in maximum profits, and therefore the Narrowest View is simpler than Chapter 6 · In whose interests should businesses act? · 101 other views to enact in practice. However the ease with which an activity can be undertaken is not itself an acceptable moral justification for the activity. Whether it is easy or hard to implement should not determine the correct answer to the question about the moral obligations of business. For example, the moral standard which requires us to avoid harm always overrides the amoral standard which prefers easy-to-follow instructions. What is the problem with the Narrowest View? In the end, the Narrowest View has the same flaw as the idea that if businesses themselves are not moral agents then their actions are amoral. Simply by operating as a business one does not immunise one’s activities from moral judgement, nor does one qualify to be judged using only one moral standard. It is just not morally permissible for a manufacturing concern to whip its workers, even if this makes them work harder. A wholesaler cannot threaten to kill the CEO of its biggest supplier in order to cut costs. A retailer should not poison its groceries in order make more sales at its pharmacy. In the same way that a person is no less morally responsible for his actions simply because he performs them from behind the corporate veil, he is no less responsible simply because the actions are performed in the name of maximising shareholder wealth. To claim that a business’s only moral obligation is to make profit is to say that profitability alone determines whether the business has behaved ethically, and on reflection this is clearly false: one needs to consider how the business generates its money, not simply how much is generated. Perhaps some people would respond: ‘sure, but we wouldn’t do anything immoral in seeking to maximise profits’. The problem with this kind of response is that it begs the question. Remember, the purpose of this chapter is to determine what kinds of moral obligations businesses have, or to put it another way, to determine what the difference is between a moral business and an immoral one. To claim that a business’s moral obligation is to make profit while at the same time refraining from being immoral is to fail entirely to answer the question, and instead just tells us something we already know. The response should give clear guidance as to what makes for ethical business behaviour, and instead it amounts to no more than the redundant claim that an ethical business is not an unethical business. It is actually quite common to hear businesspeople speak as if they subscribe to the Narrowest View when in fact they do not. Perhaps you have heard a business executive talk about the obligation to shareholders as if there is none other, despite her clearly knowing that she also has an obligation to refrain from killing her annoying customers, for example? Indeed, perhaps the most influential contribution to the topic of this chapter was an article by Milton Friedman which on the face of it appeared to be making a claim in favour of the Narrowest View, but in substance did not. Appearing in the New York Times Magazine in 1970, it was called ‘The Social Responsibility of Business is to Increase its Profits’, which certainly sounds like a clear assertion of the Narrowest View. In fact, Friedman was quick to point out in the article that there are obviously limitations on the means that a business can use to pursue shareholder wealth. This makes him, despite the rhetorical hyperbole in the title of his article, a spokesman for what we shall call the ‘Shareholder Primacy’ response to the question of whose interests a business is morally obliged to serve. SHAREHOLDER PRIMACY: Should a business prioritise its shareholders’ interests? Advocates of Shareholder Primacy9 acknowledge the fatal flaw of the Narrowest View—of course 102 · BUSINESS ETHICS & OTHER PARADOXES there are things businesses should not do in the pursuit of profits—and so it downgrades the business’s responsibility to act in shareholders’ interests from the only moral obligation to the primary moral obligation. According to this view, shareholders are not the sole stakeholder group that must be considered—the effects of the business’s activities on other stakeholders should also be considered—but shareholders are still the most important group. Any version of Shareholder Primacy must provide us with an account of the (albeit secondary) moral obligations which relate to the interests of stakeholders other than shareholders. One popular version of Shareholder Primacy claims that, while prioritising shareholders’ interests, businesses ought also to act legally in dealing with all other stakeholders. Thus, according to this version the moral obligations of business are to maximise profit and to act legally. We might say that on this version acting legally is a ‘moral minimum’ which a business must satisfy in interacting with other stakeholders, after which it can and must focus simply on earning profit for the shareholders.10 However, there are several other prevalent versions of Shareholder Primacy, each with its own account of the moral minimum. Three classic versions of Shareholder Primacy are described in Figure 6.3 below. Milton Friedman Elaine Sternberg Theodore Levitt ‘[T]here is one and only one ‘[B]eing ethical in His/her ‘In the end, business has social responsibility of business consists assertion of only two responsibilities business—to use its resources of maximising Shareholder … to seek material gain’ and engage in activities designed long-term owner Primacy ... to increase its profits … value … … so long as it stays within the [...and] ‘to obey the … subject only to His/her account rules of the game, which is to say, elementary canons of distributive justice of the moral engages in open and free everyday face-to-face and ordinary minimum competition without deception civility (honesty, good decency’12 or fraud’11 faith, and so on)’13 Figure 6.3. Quotations from key advocates of Shareholder Primacy, showing separately their basic assertions of Shareholder Primacy and their particular conceptions of the moral minimum. Although the assertions of Shareholder Primacy in Figure 6.3 use different words, they amount to the same basic claim. This is what makes them all versions of Shareholder Primacy. They are different because the moral minima distinguish them: not only do the accounts of the moral minima in Figure 6.3 use different words; they describe different conceptions. Correspondingly, any Shareholder Primacy view should be supported by two kinds of arguments: those in favour of Shareholder Primacy, and those in favour of the particular moral minimum that it espouses. We shall focus our attention for the moment on the arguments for Shareholder Primacy, as this is the point of departure with the most promising alternative model of businesses’ moral obligations: the Stakeholder Model. Before we do so, it is worth acknowledging three points concerning the various arguments for the moral minima: (1) Often, the arguments for a specific moral minimum emerge from the particular argument for Shareholder Primacy. For example, Milton Friedman argued for Shareholder Primacy on the grounds that the success of free markets depends on businesses acting primarily in the interests of shareholders. His moral minimum thus limited the obligation to act in shareholders’ interests in such a way that this justification has the best chance of being true: that is, one requires businesses to engage ‘in open and free competition without deception or fraud’. Similarly, Elaine Sternberg believed that Shareholder Primacy flows directly from Chapter 6 · In whose interests should businesses act? · 103 the very definition of business activity, so she justified her moral minimum as follows: ‘the principles of business ethics are those enjoining the basic values without which business as an activity would be impossible’.14 For Sternberg these are ‘distributive justice’, which for her means ‘that organisational rewards should be proportional to contributions made to organisational ends’,15 and ‘ordinary decency’ which ‘consists of fairness and honesty and refraining from coercion and physical violence, typically within the confines of the law’.16 (2) Our initial example of a moral minimum—that a business should act legally in making as much profit as possible—is not well-supported. As previous discussions have clearly shown, it is a mistake to think of legal obligations as determining moral obligations. The fact that some businesses are themselves legal persons does not change this: after all, people are also legal persons, but they have moral obligations separate from their legal obligations, too. (3) It should not be a source of concern that this chapter will not further explore arguments for the various moral minima. Many of the remaining chapters in this book deal in some detail with the moral obligations of businesses in various contexts. They do not presume that Shareholder Primacy is correct, but they can certainly be read as if it is. In that case, the arguments presented in those chapters can be seen as arguments for or against particular moral minima. We now proceed to examine the arguments for the assertion common to all views within Shareholder Primacy: that the shareholders’ interests are of primary importance. As there are several such arguments, they have been numbered here for ease of reference. The numbers do not have any significance of their own, nor do they correlate with a numbering system developed by any other writer. Argument 1 for Shareholder Primacy: Profit-seeking businesses benefit everyone Lloyd Blankfein, the CEO of Goldman Sachs, once claimed that the investment bank does ‘God’s work’ in earning its famously enormous profits.17 He presumably meant that aiming to serve shareholders above anyone else is a veiled way of benefiting everyone. Recall Adam Smith’s famous conception of the invisible hand: resources are allocated best for all of us when market participants seek their own gain. Admittedly, Smith’s point was about individuals, but perhaps we might also claim that the interests of society are similarly advanced when businesses favour the interests of shareholders. After all, the effects of profit-oriented businesses acting as producers and consumers in a market would presumably be much the same as the effects of selfinterested individuals doing the same. However, there is a serious challenge to this argument: we know from Chapter 5 that the invisible hand argument is weak. In the real world, self-interested behaviour by market participants leads to monopolistic and oligopolistic pricing, externalities, exploitation of natural and human resources, deep social inequalities, and so on. In response to this challenge, an advocate of Shareholder Primacy might counter that, although the invisible hand does not operate as Smith predicted in an entirely free market, perhaps a modified form of it applies under our conditions of regulated capitalism. Certainly, we concluded Chapter 5 with the idea that society is better off when markets are regulated and outcomes are corrected by government. But is government intervention all that is required to fix Smith’s idea? In other words, in the context of a regulated capitalist economy, is it true that social welfare will be maximised if 104 · BUSINESS ETHICS & OTHER PARADOXES market participants, including businesses, simply act to maximise their financial gain? Do they not consciously have to bear some of the responsibility for ensuring that outcomes are for the best? There are some good reasons to be dubious. One is that for intervention to bring about optimal outcomes on its own, the government must be able to do its job well. At this point, you will be forgiven a cynical snort or two, but let’s leave aside concerns about the quality of political leadership. There are theoretical reasons to doubt government’s ability to regulate markets. Such reasons include the following: Because they are outsiders, regulators’ information is often imperfect: they do not know as much as insiders As a result of (perhaps unfortunate) differences in how people are attracted to the private and public sectors, insiders are often cleverer than the regulators Since regulators may never discover an instance of market manipulation, and if they do, can only punish retroactively, profit-maximising businesses face a risk-return profile which may well suggest that the payoff for breaching the regulations is worth the possible costs of punishment Large businesses have great political and economic power which they use to influence government to swing regulations in their favour at the expense of other sectors of society These theoretical reasons are supported by observation of the real world. If regulators had been able to do their jobs properly, we would presumably have avoided accounting scandals at Enron, Worldcom, Fidentia, and so on. BP would have been prevented from causing the deaths of eleven platform workers and the largest ever oil spill in US coastal waters, when the Deepwater Horizon drilling rig exploded in April 2010. The oil company certainly would not have been due to receive just a few weeks later the US Government's Safety Award for Excellence for ‘outstanding safety and pollution prevention performance’.18 There are countless other published instances of businesses acting to maximise profits causing grave social losses in regulated capitalist economies; how many more as yet undiscovered instances might there be? A second serious challenge to the notion that government intervention on its own creates the conditions required for maximal social welfare comes from thinkers like Amartya Sen19, Robert Frank20, and Oliver Williams21. They argue convincingly that trust between market participants is essential for markets to function efficiently, and point out that trust is not created by the presence of a regulator nor by a general acceptance that those participants will each work in their own self-interest. Rather, trust is created by a genuine commitment to act in each other’s interests. The Nobel-prize-winning welfare economist Sen wrote that this is particularly true of developing countries: To see capitalism as nothing more than a system based on a conglomeration of greedy behaviour is to underestimate vastly the ethics of capitalism… The development and use of trust … can be a very important ingredient of market success… the merits of selfless work and devotion to enterprise … are important… Developing countries have to pay attention to … the making and sustaining of trust, avoiding the temptations of pervasive corruption, and making assurance a workable substitute for punitive legal enforcement.22 The idea behind the invisible hand argument—my acting in my own interests actually serves everyone else’s interests—has always been a counterintuitive idea. Although we have resolved not simply to accept our intuitions, it is hard to see why we should believe the opposite. Given the above arguments, isn’t it more reasonable to think that, if a business wishes to serve the Chapter 6 · In whose interests should businesses act? · 105 interests of employees, customers or the community, the best way would be the obvious way— to consider and actively promote them—rather than always to prefer the interests of shareholders? Social welfare is a shaky foundation on which to build an argument for Shareholder Primacy, yet as we observed at the beginning of this chapter, it is far from clear that businesses, as mere market participants, ought to benefit everyone. The above discussion therefore does not imply that Shareholder Primacy itself is mistaken. Instead, it merely indicates that Argument 1 is weak. It is perfectly possible, however, that another argument can be found to convince us. Argument 2 for Shareholder Primacy: Governments, not businesses, ought to benefit society There is another argument which relies on the context of regulated capitalism, but it does not try to claim that Shareholder Primacy serves the greater good. Instead, this argument suggests something quite different: that it is properly the role of government, not business, to determine and implement socially beneficial policies. So, goes this kind of argument, businesses should not try to act as social benefactors. There are two varieties of Argument 2, which we shall call ‘2A’ and ‘2B’. Argument 2A is based on legitimacy. We have already encountered Milton Friedman, the most famous proponent of Shareholder Primacy, who made several arguments for his position, including 2A. Friedman wrote that, when an executive spends the business’s money for social purposes instead of retaining it for shareholders: He becomes in effect a public employee, a civil servant, even though he remains in name an employee of a private enterprise. On grounds of political principle, it is intolerable that such civil servants ... should be selected as they are now. If they are to be civil servants, then they must be elected through a political process. ... [P]olitical machinery must be set up ... to determine through a political process the objectives to be served.23 This is a strange argument coming from someone who described himself as a libertarian (albeit apparently ‘with a small “L”’), as libertarians are typically against even governments providing social benefits. It is strange for another reason: why should the existence of a legitimate public benefactor—government—preclude others from making contributions to society? We do not think that the fact that some people are qualified teachers means that you can’t help your cousin to understand some difficult material from her management accounting class. No one would insist that you should first go through the same process that qualified teachers have undergone. All that is necessary is that you are in fact likely to help her, despite your not being a teacher by profession. Similarly, the fact that a democratically-elected government has been tasked with improving society’s welfare does not imply that the rest of us are not permitted to make a difference too. All that matters is whether we can make a difference (which is a question that we will deal with shortly, in our discussion of Argument 3A for Shareholder Primacy). Of course, it would be wrong for you forcibly to remove your cousin’s lecturer from class tomorrow in order to teach the class yourself, but this is not analogous to businesses’ paying attention to society’s welfare. There is far more opportunity for business and government to work together on social projects for the fear that business might get in the way of government to be justified. Some might respond to this counterargument by pointing out that requiring businesses to take responsibility for society’s welfare makes business the scapegoat for government failures: 106 · BUSINESS ETHICS & OTHER PARADOXES we are letting off the hook the people whose job it really is to take care of our general wellbeing.24 Yet the analogy with your cousin is helpful once again: if her lecturer is doing a bad job of teaching her, this certainly calls for criticism of his teaching, but it does not mean that you should not help her. If anything, there is even more reason to think that you should. Theodore Levitt presented the argument that we shall call Argument 2B, which is about the consequences of acting in the interests of stakeholders other than shareholders: he claimed that expecting businesses to take responsibility for welfare generally is not so much illegitimate as downright dangerous. This is because corporate values are ‘tightly materialistic’, and will transform society in terrible ways. According to this view, a democratically-elected government has a better chance of representing the will, and therefore the values, of the people. In fact, in 1958 Levitt was concerned that businesses had already got their claws into too much of our lives: [T]he modern business is reshaping not simply the economic but also the institutional, social, cultural and political topography of society. And there’s the rub. For while the business also transforms itself in the process, at bottom its outlook will always remain tightly materialistic. What we have, then, is the frightening spectacle of a powerful economic functional group whose future and perception are shaped in a tight, materialistic context of money and things but which imposes its narrow ideas about a broad spectrum of unrelated noneconomic subjects on the mass of man and society.25 Levitt wrote this passage a long time ago. From our perspective more than six decades later, at least two kinds of response come to mind. First, if this argument ever had any sway, its days are now long past, as the societal transformation that Levitt feared is now virtually complete. Society’s values are, generally-speaking, materialistic, and African society is no exception. For example, Thabo Mbeki said in 2006 that our ‘fundamental objective’ should be ‘to defeat the tendency in our society towards the deification of personal wealth as the distinguishing feature of the new citizen of the new South Africa’.26 Whether or not you agree that materialism is a bad thing, you certainly cannot disagree that it is rampant at virtually every level of society. So we wouldn’t avoid the purveyance of materialism by stopping businesses intervening with social problems; we would just lose important benefits instead. The second kind of response to Argument 2B is that it is not clear how requiring businesses to take active responsibility for the welfare of stakeholders other than shareholders would have steepened our descent into materialism (or today, prevent us ascending out of it, as Mbeki would have us do). Levitt seems to believe that it is self-evident that the business’s ‘outlook will always remain tightly materialistic’, but isn’t this precisely what those who argue for a broader approach than Shareholder Primacy are trying to change? How would a business’s donating to an orphanage, voluntarily contributing towards its employees’ medical aid premiums, or minimising its pollution well below legally permissible levels cause society to be more materialistic? We might ask ourselves how we have got to our current state from Levitt’s day (when it was still possible to worry that society might become ‘narrowly materialistic’). No doubt people’s infinite capacity for consumption is partly at fault, but it is also true that some of the blame should be directed at businesses’ unrestrained willingness to take advantage of our weakness for acquisition. It is obvious that one way that businesses have done this is through marketing. It is not at all obvious that another way is through acting in the interests of stakeholders other than shareholders. If this is something that Levitt believes, he needs to make the argument explicit. Chapter 6 · In whose interests should businesses act? · 107 Argument 3 for Shareholder Primacy: Businesses are incapable of benefiting other stakeholders Near the beginning of this chapter, we agreed that being able to do x is a necessary condition for being morally obliged to do x. Some defenders of Shareholder Primacy argue that the reason that businesses should not be required to pay more than a small amount of attention to the interests of stakeholders other than shareholders is that they just cannot do any more than that. This argument also comes in two varieties: Argument 3A is about a lack of the necessary skills and experience; Argument 3B is about financial infeasibility. If either of these is sound, it would constitute a very good reason to believe in Shareholder Primacy, as one cannot require a business to do something that it cannot do. Milton Friedman articulated Argument 3A in the following passage about a business manager: He is told that he must contribute to fighting inflation. How is he to know what action of his will contribute to that end? He is presumably an expert in running his company—in producing a product or selling it or financing it. But nothing about his selection makes him an expert on inflation. Will his holding down the price of his product reduce inflationary pressure? Or, by leaving more spending power in the hands of his customers, simply divert it elsewhere? Or, by forcing him to produce less because of the lower price, will it simply contribute to shortages?27 Friedman is right that the average business manager has little clue about how to curb inflation (even the economists do not seem to get it right!) How can anyone be expected to risk corporate resources without any likelihood of success? The manager of a chain of restaurants might equally claim that he does not know how to fix the HIV/Aids pandemic, and the CEO of a pharmaceuticals company that she is not able to make any real difference to world hunger. However, these responses commit the hasty generalisation fallacy. Yes, of course there are many social ideals that are not attainable by any particular business, but that does not mean that the business cannot contribute expertise to the achievement of some other socially beneficial outcome. After all, CEOs of pharmaceutical companies are probably better placed than anyone else to contribute to the fight against HIV/Aids, and presumably the restaurant chain manager could help fight hunger in the local communities by making leftover food available to them. Elsewhere in his famous essay ‘The Social Responsibility of Business is to Increase its Profits’, Friedman uses other examples of so-called ‘socially responsible’ activities which he in fact considers irresponsible, like incurring ‘expenditures on reducing pollution beyond the amount that is in the best interests of the [shareholders]’.28 It is telling that he does not use this example to support his version of Argument 3A. Doing so would have made the flaw obvious, as no one running a business which pollutes could claim that he would not know how to reduce the pollution; at the very least, he knows he could pay someone else with the requisite skills and knowledge. A Friedmanite might counter that none of this expertise is a guarantee of success: the pharmaceuticals firm’s research might end up not making any inroads into the HIV/Aids crisis; the restaurant chain’s leftover food might inadvertently be used to feed gangsters; the polluter could reduce one form of pollution but in so doing create a worse problem for global warming. This counterargument does not amount to much, however, given that a business manager almost always operates in a context of uncertainty: she is constantly required to make judgement calls in the pursuit of profits, and no one suggests that she therefore has no obligation to try to make profits for shareholders. Most of the time, she does the best she can with the information 108 · BUSINESS ETHICS & OTHER PARADOXES available, and there is no reason to doubt that there will be opportunities to serve other stakeholders to which she can apply a similar degree of expertise, skills and judgement as she does to making profit for shareholders. Friedman is focussed mainly on defeating the claim that businesses should be contributing to society generally. It is worth observing that Argument 3A does not fare any better when applied to other, more clearly defined stakeholders, like employees, customers and suppliers. One doesn’t need any expertise to have a reasonably good idea of how to act in the interests of these stakeholders: it is in the interests of employees that they be paid more, work in safe and comfortable conditions, and be given more time off work; customers would benefit from similar or better quality for lower prices; and suppliers will prosper if they are paid on time, and be given opportunities to sell more goods and services to their clients. This is the point at which a subscriber to Argument 3B would prick up his ears. ‘What!?’ he would say, ‘you can’t seriously expect businesses to pay their employees more, improve the quality of goods and services, use up resources acting in the interests of suppliers and even society-at-large, and at the same time cut their prices. This is a sure recipe for bankruptcy! Businesses just cannot afford to act in the interests of anyone but the shareholders.’ The problem with this is that it is a straw man argument, because it attacks a misrepresentation of the opposing position in order to imply the superiority of one’s own position. The opposing position to Shareholder Primacy does not claim that a business should spend every last cent on its stakeholders to the point that it is driven to bankruptcy, as that would obviously be contrary to everyone’s interests. Many stakeholders (especially employees) are dependent on the business continuing to exist, and so it would not be acting in their interests to pay them so much that the business could not afford to pay its debts. The only sensible alternative to Shareholder Primacy is the notion that the business should consider the interests of all stakeholders, and should balance these interests in deciding how to act. This in no way requires a business to spend all of its resources on all of its stakeholders: rather, it requires that no single stakeholder is consistently given priority at the expense of others. Others have formulated Argument 3B without invoking a straw man, but rather by appealing to elementary economic principles. This idea was summarised by Norman Bowie as follows: If company X spends more of its money solving social problems than company Y, company Y gains a competitive advantage. Even if company Y wants to contribute to solving social problems, it will try to get company X to contribute even more. Company X has thought this all through; as a result it can't contribute (or contribute as much as it would like). The conclusion is that all competitive companies believe they can't focus on solving social problems even if they want to.29 The challenge to this argument is that it assumes markets always to be at the equilibrium point; that producers are earning only what economists call ‘normal’ profits, a reasonable return for shareholders on their investment. Yet the truth is that markets are rarely, if ever, at the equilibrium point. Even free market economists consider this point to be achievable only in the long run, and yet life is lived second by second, in the short run. A moment five years in the future may feel now like the long run, but it will be the short run in five years’ time. Then, some producers will be earning super-profits, just as super-profits are being earned now. More than likely, in the short run (in other words, all the time) one of Company X or Company Y will have an advantage which will mean that in fact it can afford to spend more on social problems. Chapter 6 · In whose interests should businesses act? · 109 In fact, it may be that both companies can afford to do so. For example, for its 2013 financial year, the South African retailer TFG (The Foschini Group) reported profits of R1.94 billion.30 TFG’s closest listed competitor, Truworths International, reported profits of R2.4 billion for the same year.31 Of course, one might say that these are giant companies, so these large numbers may in fact be the minimum profits required for survival. It is not clear how to work out what would be a minimum acceptable level of profits, below which the business becomes financially infeasible. However, one generally accepted measure of business performance is called ‘return on equity’, which compares profits for the year with the average accounting value of the business. The returns on equity for these two companies in 2013 were 26.4% and 39.5% respectively.32 These returns are entirely attributable to shareholders. These two companies are not atypical: the average return on equity for retailers listed on the South African stock exchange, the JSE, was 26.1% in 2013.33 In fact, Truworths’ 2013 results were considered disappointing by stock market analysts.34 For those who distrust accounting figures, another measure of business performance, specifically relating to listed companies, is return on investment, which expresses the return to shareholders (composed of the cash dividends and the non-cash increase in the share price) as a percentage of the price of the share. According to Professor Brian Kantor, Chief Economist and Strategist at Investec Bank, return on investment over the 10 years between 1 January 2003 and 31 December 2012 averaged 18.4% per annum for all companies listed on the JSE. This was during a period that included the global financial crisis of 2008-09, and an average annual inflation rate of 5.5%.35 Surely no one could seriously argue that corporations like these could not afford to spend some of their profits on stakeholders other than shareholders. There may be good reasons that these businesses should not be spending some of their profits on satisfying the interests of stakeholders other than shareholders, but it is just not true that they cannot do so. Argument 4 for Shareholder Primacy: The purpose of business entails Shareholder Primacy One of the most audacious arguments for Shareholder Primacy has been formulated by the philosopher and businessperson Elaine Sternberg, who embraces the popular cliché we mentioned at the beginning of the chapter to support her theory—‘the business of business is business’—implying that businesses are by definition profit-seeking enterprises, and therefore they are acting wrongly if they seek something other than profit. The profit motive is indisputably part of a business’s goals: in fact, this is precisely what distinguishes a business from other institutions like clubs, societies, charities and governments. However, it is worth paying close attention to the manner in which Sternberg moves from this fact to the conclusion that any acts which fail to seek this goal are morally wrong: Purposes are essential for evaluating goodness... [W]hat counts as a good car depends crucially on whether the objective is inexpensive motoring or setting speed records. Just as a good object is identified by reference to the object’s purpose, what counts as the proper conduct of an activity depends on the activity’s purpose... What counts as morally right action also depends on objectives. Cutting someone’s throat is normally wrong, but it can be the right thing to do— ethically as well as medically—in the course of a lifesaving tracheotomy... What constitutes ethical conduct in business depends critically on business’s defining purpose... Choosing the wrong end, and misunderstanding the end in question, and pursuing the right end in the wrong way are all examples of teleopathy.36 110 · BUSINESS ETHICS & OTHER PARADOXES The term ‘teleopathy’ is a portmanteau, a hybrid word composed of the Ancient Greek words for ‘purpose’ and ‘disease’. Her book Just Business contains just one other brief mention of teleopathy before it states many pages later that: [B]usiness managers who use business funds for non-business purposes are guilty ... of the logical offence of teleopathy: in diverting funds from strictly business purposes, they are pursuing the wrong ends.37 Sternberg evidently intends the first paragraph quoted above to be a proof that the defining purpose of business entails a moral obligation to direct all business activities towards the business goal of what she describes as ‘maximising long-term shareholder value’,38 but is it such a proof? The paragraph may be seen to contain two separate arguments: Argument 4A (which mentions a car’s purpose) is predicated on the claim that ‘purposes are essential for evaluating goodness’; Argument 4B (which mentions a tracheotomy’s purpose) relies on the idea that ‘what counts as morally right action ... depends on objectives’. However, neither of these arguments supports the conclusion that a failure to act in accordance with the business purpose is morally wrong. Argument 4A commits the fallacy of equivocation, which should be clear from the following formalisation: Argument 4A for Shareholder Primacy: P1: ‘Purposes are essential for evaluating goodness’ (because ‘what counts as a good car depends … on whether the objective is inexpensive motoring or setting speed records’) P2: The purpose of business is to ‘maximise long-term shareholder value’ Therefore: C: Good businesses always pursue their purpose of maximising long-term shareholder value In P1, the term ‘goodness’ means ‘suitability’. Yet in the conclusion the word ‘good’ is used in a wholly different, moral sense.39 In fact, the argument does not contain a moral standard; the only valid conclusion to draw from P1 and P2 (which are both true, of course) is the stunningly obvious, amoral assertion that businesses are suitable for the purpose of maximising long-term shareholder value if they maximise long-term shareholder value! Argument 4A, insofar as it intends to lead us towards a moral conclusion, is invalid, and therefore unsound. Argument 4B does at least contain a moral standard, but it fails for different reasons. Here is an attempt to formalise it: Argument 4B for Shareholder Primacy: P1: ‘What counts as morally right action ... depends on objectives’ (because ‘cutting someone’s throat is normally wrong, but it can be the right thing to do—ethically as well as medically—in the course of a life-saving tracheotomy’) P2: The purpose of business is to ‘maximise long-term shareholder value’ Therefore: C: Good businesses always pursue their purpose of maximising long-term shareholder value Chapter 6 · In whose interests should businesses act? · 111 Of course, P1 is intuitively appealing: generally we feel that an action is morally preferable if the intention (or objective) behind it is to do good, and vice-versa. Yet, as it is formalised above, Argument 4B is not valid. For the premises to entail the conclusion, we would need to add a third premise: that the intention behind maximising long-term shareholder value is to do good. But Sternberg herself explicitly states that she does not believe such a claim, perhaps because she understands the objections to Argument 1 for Shareholder Primacy. She explicitly states that the goal of profit-maximisation is amoral.40 But P1 does not claim that actions are morally right if their objectives are morally neutral, and for good reason. If you plan to watch a nature programme on television tonight but instead you fall asleep early and do not watch it, your failure to achieve your objective is morally neutral, just like the objective itself. In fact, failure to achieve an amoral objective could even by morally preferable: if instead you do not watch the TV programme because you go with friends to hand out blankets at a homeless shelter, your failure to achieve your objective to watch TV is for the better. So it seems that the premise required to make Argument 4B valid is not available to us. Perhaps there is another way to save Sternberg’s argument.41 Her book Just Business begins many of its chapters with quotes from the Ancient Greek philosopher Aristotle. Her term ‘teleopathy’ is derived in part from a word fundamental to Aristotle’s writings on ethics: telos. Although her book never explicitly claims as much, Sternberg presumably believes that Aristotle’s ethics support her ideas about business. Perhaps this is because Aristotle believed that a person’s character could be judged as morally virtuous if and only if she achieves her purpose (or telos) as a person, in the same way that the best use of a knife is for its unique purpose of cutting. (You will encounter this idea again, in relation to individuals in the workplace, in Chapter 9.) There are reasons to suspect that we cannot simply extend Aristotle’s thinking about people to businesses, in order to show that a business is only ethical to the extent that it fulfils its defining goal of profit-making. For one thing, it is not clear that the only good way to use manmade items (like knives and businesses) is for their intended purpose. Although a knife may by definition be designed for cutting, it might also be well used for tapping against a champagne glass to silence a dinner party. If this is true, there is no reason to think a business is not ‘good’ when used to save lives rather than earn profits. A final point challenges the idea of applying Aristotelian ideas about telos to businesses, and also undermines P2 of both Argument 4A and Argument 4B. Why should we accept that the only purpose of business is to maximise shareholder wealth? Yes, profit-making is what uniquely differentiates businesses from other organisations, but we could just as well identify a different, broader business purpose, for example to ‘serve customers, take care of its employees, use society’s resources sustainably, and increase long-term shareholder wealth’. In fact, each of the items in this list is often claimed by business leaders as a function of business. It is not at all clear why, just because one of the items in this list is unique to businesses, we should elevate it above the others which are shared with other organisations. The distinctive purpose of a double bed is to accommodate two sleeping people, but this does not mean that the purpose it shares with single beds—to provide a good night’s sleep—should be ignored. Argument 5 for Shareholder Primacy: Shareholders have rights of ownership Suppose that one day you have earned enough money to be able to purchase three rental properties in your home town. Suppose too that you hire a rental agent to find tenants, manage the properties and collect the rental fees on your behalf. Now suppose that at the end of a year, 112 · BUSINESS ETHICS & OTHER PARADOXES the agent reports to you that he has collected rental fees from only two of the properties because he decided that it was ‘socially responsible’ to let some homeless people live for free in the third property. How would you feel? Most of us would feel profoundly aggrieved. Not only might you have a legal claim against the rental agent, but you also have a moral claim against him. You entrusted your property to him to manage in your interests, and instead he unilaterally decided to use your resources for some social project of his own. If he wants to help homeless people, he is free to donate his own money to a charity like the Haven Night Shelter Welfare Organisation, and if you want to, you will do so too, but how dare he make the decision on your behalf! Many advocates of Shareholder Primacy believe that corporate acts to benefit stakeholders other than shareholders at the expense of the latter are precisely like this. Friedman wrote: In a free-enterprise, private-property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society… What does it mean to say that the corporate executive has a ‘social responsibility’ in his capacity as businessman? If this statement is not pure rhetoric, it must mean that he is to act in some way that is not in the interest of his employers. For example, that he is to refrain from increasing the price of the product in order to contribute to the social objective of preventing inflation, even though a price increase would be in the best interests of the business… In [this case], the corporate executive would be spending someone else's money for a general social interest. Insofar as his actions in accord with his ‘social responsibility’ reduce returns to stockholders, he is spending their money… [I]f he does this, he is in effect imposing taxes, on the one hand, and deciding how the tax proceeds shall be spent, on the other.42 Elaine Sternberg took this point one step further when she wrote the following: As a political economist, Professor Friedman naturally castigates use of the firm’s resources as … unauthorised ‘taxation’. Far from being too harsh, that categorisation is in fact too polite. Using business resources for non-business purposes is tantamount to theft: an unjustified appropriation of the owners’ property. Managers who employ business funds for anything other than the legitimate business objective are simply embezzling: in using other people’s money for their own purposes, they are depriving owners of their property as surely as if they had dipped their hands into the till.43 Whether using someone else’s property to achieve one’s own social ideals is illegitimate taxation or theft depends on how significant one considers the intention behind doing so. Certainly many people would not go so far as Sternberg, for they would see using another person’s property with the intention to benefit others as fundamentally different from doing so for one’s own personal financial gain. Be that as it may, this is an intuitively powerful argument for Shareholder Primacy, as it is clear that it is wrong to use someone else’s property, entrusted to you, for purposes other than achieving their interests. Some may protest that simply owning something does not mean that it can or should be used to achieve anything at all to further the interests of the owner. Indeed, property rights are typically limited: a gun owner cannot do whatever she likes with her gun; and the moral obligation to respect their neighbours prevents people who own the houses they live in from turning them into nightclubs. However, this point just confirms the idea that there is a moral minimum to be observed when acting in the interests of owners of businesses. Sure, Chapter 6 · In whose interests should businesses act? · 113 corporate resources should not be used for acts like murder or bribery, but this does not imply that corporate resources should be used for uplifting society. A counterargument to Argument 5 is very unlikely to succeed by insisting that it is morally permissible to use someone else’s property to achieve one’s own noble goals. Rather, a successful counterargument must show that in fact the shareholders’ relationship with the business is fundamentally different to the relationship that owners normally have with their property, and therefore that the general rule does not apply in the context of a business. Do shareholders in fact own companies? The answer to this question is not as straightforward as one might think, even though it is commonly believed that the answer is an uncontroversial yes.44 Ownership is an essentially legal concept, and so it may be instructive to consider how the law answers this question. The Companies Act 2008 does not explicitly refer to shareholders as owners of companies.45 South African common law in fact contains cases which draw a clear distinction between owning shares and owning the company. Cassim et al cite the case of State v De Jager (1965), in which: …the accused, who was a director and a shareholder of a public company, was charged with theft for abstracting the company’s funds for his own purposes and not for the benefit of the company. His defence was that the crime of theft consists of depriving an owner of his ownership without his consent… This, the court stated, offended the principles of company law underpinning the concept of limited liability, namely that the company is a separate legal person and owns the funds of the company; the directors manage the affairs of the company in a fiduciary capacity to it, and the shareholders’ general right of participation in the assets of the company is deferred until winding-up, subject to the claims of creditors.46 The above passage makes it clear that when the law identifies the directors’ fiduciary duty to act in the best interests of the company, this does not simply mean a fiduciary duty to act in the interests of the shareholders, as some mistakenly assume. (A duty is ‘fiduciary’ if it relies on good faith and trust.) This same sentiment is further developed in the South African King Code of Governance of 2009, known commonly as ‘King III’, which states that ‘[t]he best interests of the company should be interpreted within the parameters of the company as a sustainable enterprise and the company as a responsible corporate citizen. This approach gives effect to the notion of redefining success in terms of lasting positive effects for all stakeholders.’47 The fact is that there is overwhelming legal support for the notion that shareholders do not in fact own the company. After all, in law a company is a person, which, ever since the abolition of slavery, just cannot be owned by another person. As we have observed, when a sole trader incorporates her business, she gives up ownership of the business’s assets in exchange for ownership of its shares. Owning these shares entitles her to a bundle of rights, which usually includes the right to vote in general meetings and to receive a dividend whenever one is declared by the board of directors and on liquidation. Owning this bundle of rights, however, is not the same as legally owning the company itself. Might we still claim that the law is being overly technical when it falls shy of describing this bundle of rights as equivalent to owning the company? Is the economic substance of a shareholder-company relationship one of de facto ownership? This is the view taken by many economists who apply the language and concepts of ‘agency theory’ to business, describing shareholders as ‘principals’ and corporate executives as ‘agents’. Agents do have a moral obligation, like the rental agent in the example at the beginning of this section, to act in the interests of the principal, and so agency theory underlies the frequent claims in the business 114 · BUSINESS ETHICS & OTHER PARADOXES world that the business’s money is the shareholders’ money. An argument to support this view would need to overcome the challenge implied by limited liability, which is a special feature of owning shares: shareholders cannot lose any more than they initially contribute. This makes their relationship to the company quite different from our ordinary conception of ownership. To return to the example of your three rental properties, if one were to collapse onto another person’s house, you would be held personally liable for their damages, but, had you incorporated a company to own the properties, you would be protected by limited liability. Thus owning shares is not like owning the assets directly. Furthermore, if you have less to lose as a result of incorporating, is it not fair to think that you should have less to gain? Even if this challenge can be met, it would still be necessary to show how owning shares gives shareholders special rights akin to the substantial rights of ownership of the company. A common response by advocates of Shareholder Primacy is that shareholders make an important contribution—in the form of capital—to the business. This, so the argument goes, entitles them to expect the company to be run primarily in their interests. However, this is far from convincing, for several reasons. First, other stakeholder groups have contributed to the business too: employees contribute years of dedicated labour, customers often contribute loyal patronage, suppliers contribute their goods and services, society-at-large contributes its human and natural resources, and lenders even contribute funding, much like the shareholders.48 One might object that these stakeholders already get reimbursed for these contributions, but recall that no one is arguing that shareholders deserve no compensation for their contribution. Opponents of Shareholder Primacy will accept that shareholders should receive a just reward for their contributions; they simply insist that shareholders line up alongside other stakeholders when the size of their reward is determined. Second, given the contributions made by other stakeholders, the size of the rewards typically given to those shareholders who have in fact contributed to the business seems to be unreasonably large. The cumulative amount contributed by shareholders to a company is reported (approximately) in a line-item on the business’s balance sheet usually called ‘share capital’ and/or ‘share premium’.49 To return to our earlier example of TFG and Truworths, in TFG’s 2013 balance sheet, this amount was R502 million, so the profits of R1.94 billion earned for shareholders in just one year were about four times greater than the total contribution made by shareholders to the business in its 75-year history as a public company!50 In Truworths’ case, the 2013 profits of R2.4 billion were more than eight times the cumulative shareholders’ contributions of R293 million!51 Third, many shareholders, especially shareholders of listed companies, have in fact made no contributions to the companies at all; they have simply purchased their shares from previous shareholders. Not only this, but their relationship with the company is often a fleeting one, especially in the case of traders (as opposed to ‘value investors’), who can often buy a share one day only to sell it the next. By comparison, the typical employee works eight hours a day, often for decades, for the business, and natural resources are potentially permanently depleted by a business’s activities. The existence of these much closer, more dependent, longer-term associations with the business casts a long shadow of doubt over the idea that shareholders have the exclusive, intimate kind of relationship with a business that the word ‘ownership’ usually implies. Chapter 6 · In whose interests should businesses act? · 115 THE STAKEHOLDER MODEL: Should a business balance the interests of all stakeholders? The only alternative to Shareholder Primacy that is generally considered worthy of consideration is usually referred to as the ‘Stakeholder Model’.52 There are now many proponents of this model, but two of the earliest were Edward Freeman and William Evan, who wrote that ‘the very purpose of the firm is ... to serve as a vehicle for co-ordinating stakeholder interests’.53 They proposed two fundamental principles. The Principle of Corporate Legitimacy states that ‘[t]he business should be managed for the benefit of its stakeholders: its customers, suppliers, [shareholders], employees, and local communities. The rights of these groups must be ensured, and, further, the groups must participate, in some sense, in decisions that substantially affect their welfare’.54 The Stakeholder Fiduciary Principle states that ‘[m]anagement bears a fiduciary relationship to stakeholders and to the business as an abstract entity. It must act in the interests of the stakeholders as their agent, and it must act in the interests of the business to ensure the survival of the firm, safeguarding the long-term stakes of each group’.55 Appearing as it did in the heady days of ruthless corporate profiteering depicted so vividly in Tom Wolfe’s novel The Bonfire of the Vanities and the movie Wall Street, the Stakeholder Model took some time to achieve mainstream support. Now, however, it is more conventional, though it still vies with views that espouse Shareholder Primacy. In Africa, the debate is far from decided, though King III has roundly endorsed a version of the Stakeholder Model, which it refers to as the ‘Stakeholder Inclusive Model’: [I]n the ‘stakeholder inclusive’ model, the legitimate interests and expectations of stakeholders are considered... The integration and trade-offs between various stakeholders are then made on a case-by-case basis, to serve the best interests of the company. The shareholder, on the premise of this approach, does not have a predetermined place of precedence over other stakeholders. However, the interests of the shareholder or any other stakeholder may be afforded precedence based on what is believed to serve the best interests of the company at that point.56 Many approaches have been taken to justify the Stakeholder Model, of which several are discussed below. Argument 1 for the Stakeholder Model: All the arguments for Shareholder Primacy fail Evan and Freeman’s main argument for their theory was the following: We bring to bear our arguments for the incoherence of [Shareholder Primacy] as justification for [the Principle of Corporate Legitimacy]. If in fact there is no good reason for [Shareholder Primacy], and if in fact there are harms, benefits and rights of stakeholders involved in running the modern business, then we know of no other starting point for a theory of the business.57 This is a fair point: if the arguments for Shareholder Primacy all fail, if shareholders’ interests should not routinely be given top priority, then the obvious alternative is to treat all stakeholders equitably. Of course (as the previous quotation from King III points out) in any particular situation shareholders may be preferred to other stakeholders, but in other situations another stakeholder may get preference. Evan and Freeman have been criticised for oversimplifying the case against Shareholder 116 · BUSINESS ETHICS & OTHER PARADOXES Primacy.58 Indeed, their argument focussed mainly on firms’ tendency to seek monopoly power and to externalise costs, which really only criticises one of the arguments for Shareholder Primacy (identified here as Argument 1). Nonetheless, it may be that all of the other arguments in favour of Shareholder Primacy are also flawed. We leave it for the reader to make up his/her own mind, and move on to arguments that amount to more than a simple rejection of the opposing position. Argument 2 for the Stakeholder Model: Businesses are citizens Norman Bowie summarised this argument for the Stakeholder Model thus: ‘businesses are citizens morally similar to individual citizens; as a result, they have a similar obligation to help solve social problems’.59 Indeed, it is common these days to hear businesses referred to as ‘citizens’. Mervyn King (after whom South Africa’s reports on corporate governance are named) is so committed to this notion that he has written a book entitled ‘The Corporate Citizen’.60 However, there are two serious challenges to this argument. The first is that it is not clear that businesses are akin to citizens. Of course, businesses aren’t citizens legally-speaking, as that term is preserved for individuals. (Citizens can vote and apply for passports, for example, which are not privileges available to businesses.) Moreover, businesses seem by their nature ill-suited to be described as ‘citizens’, as the term has a strong association with belonging to a physical place—land demarcated as a country—and businesses aren’t the sorts of physical entities that exist in one place. Given the fairly narrow meaning of the term, it is not at all clear why businesses should be considered analogous to citizens. The second challenge is that the duties of a citizen are relatively weak, so it is hard to understand how they might be used to argue in favour of strong moral obligations for businesses. The term ‘citizen’ in law rarely confers any more duties than people already have by virtue of being legal persons. Although the term ‘civic duty’ is intended to relate to citizens, there is no commonly agreed list of civic duties which would be helpful in arguing for the Stakeholder Model. (Many would argue that one civic duty is the duty to vote, but of course that option is unavailable to businesses anyway.) The truth is that, as we have already observed, most of us do not think that individuals are morally obliged to go out of their way to contribute to society generally, and instead would consider such actions as supererogatory. As a result, any argument which essentially claims that we should treat businesses as we treat individuals is likely to be counterproductive for the purposes of providing support to the Stakeholder Model. What we therefore in fact require is an argument which points to significant differences between a business and individuals, such that out of these differences arises a corporate moral obligation to go beyond what is expected of regular folk. Argument 3 for the Stakeholder Model: Extraordinary power means extraordinary responsibility An argument for the Stakeholder Model which recognises businesses as essentially different from ordinary people originated in the work of Keith Davis as follows: One basic proposition is that social responsibility arises from social power. Modern business has immense social power ... If business has the power, then a just relationship demands that business also bears responsibility for its actions... Social responsibility arises from concern about the consequences of business’s acts as they affect the interests of others. Business decisions do have social consequences. Social responsibility implies that a business decision Chapter 6 · In whose interests should businesses act? · 117 maker in the process of serving his own business interests is obliged to take actions that also protect and enhance society’s interests.61 It is certainly true that business is an immensely powerful force in contemporary society. In an economy of regulated capitalism, though government plays a vital role as regulator and limited roles as both producer and consumer, economic activity is driven mostly by businesses. Recall that an economy determines the allocation of scarce resources to people with infinite wants. This means that economics is not just one of many separate features of our lives: to a large extent it determines the basic quality of our human experience. Economics has led to a quarter of South Africa’s workforce being unemployed,62 239 million people in Africa being hungry on any given day,63 and 1.2 billion people around the world living on less than a dollar a day.64 Economics is a major part of the explanation for how Sub-Saharan Africa reports some of the world’s highest HIV/Aids infection rates, and almost the entire explanation for how our atmosphere is now contaminated to an unprecedented degree with the consequences of burning fossil fuels. This is not to suggest that business is responsible for all of these crises; but it is fair to say that business is a crucial component of the economic system which has contributed significantly to them, and which has considerable power to lessen them. But to talk about ‘business’ in this general way is not to talk about each and every business entity. The Stakeholder Model claims that ‘a business’ should serve stakeholder interests. Acknowledging that ‘business’ is a powerful force, what can we say about individual businesses? Well, there are certainly many giant companies with an almost incomprehensible reach into our lives. According to Fortune Magazine, Wal-Mart, the world’s largest employer, extended its employee base in 2011—partly by acquiring the local retailer Massmart—to a staggering 2.1 million people!65 In that year, it, together with the next nine largest global companies (by revenue) earned revenues of over US$2.1 trillion. By comparison, South Africa’s entire GDP was estimated by the IMF to be US$408 billion, less than Wal-Mart’s revenues alone.66 Unilever, which produces household consumables and food brands like Omo, Surf, Dove, Lifebuoy, Flora, Knorr, and Lipton, estimates that every day ‘two billion people use Unilever products to look good, feel good and get more out of life’.67 You are almost certainly one of them. Whichever way one looks at it, big businesses have enormous influence, and this does seem to differentiate them from ordinary people in a way which entails that they have broader moral obligations, for the reason outlined below. Recall our response to Argument 3 for Shareholder Primacy: businesses certainly can benefit stakeholders other than shareholders. Yet we have also observed that being able to do x is a necessary, but not a sufficient, condition to be obliged to do x. What other conditions would make x a moral obligation? It may be helpful to consider a case in which we do believe that a person must help someone else. Let us consider the example of a doctor on a plane when a fellow passenger gets sick. When would we say that she must help him? First, the problem should be a medical one: one with which the doctor has a special capacity to help. The stranger’s lost passport could be found by anyone. Second, the problem must be severe. A stubbed toe is not sufficient to warrant disturbing the doctor. So we have added two conditions to the mere ability to help: that the doctor is the only one, or one of very few, who has this ability; and that the situation is serious. These two conditions appear to be sufficient. In other words, we cannot imagine a scenario in which all three of these conditions are true but the doctor is still morally permitted to say ‘leave me alone, my in-flight movie is just getting to the best part’. 118 · BUSINESS ETHICS & OTHER PARADOXES By analogy, these conditions seem also to apply to businesses. Royal Dutch Shell and ExxonMobil together earned profits of over US$50 billion in 2011.68 They are both energy companies, two of the biggest players in an industry that is extracting and burning fossil fuels at a faster rate than the world has ever seen. Like the doctor, they are uniquely positioned to make a difference to the consequences of this resource consumption. Like the patient, the world desperately needs them to. So in this sort of case, it appears that sufficient conditions do exist for us to be able to say that the businesses are morally obliged to find ways to benefit stakeholders other than shareholders. Similar claims might be made about pharmaceutical companies, food producers, and any business which employs large numbers of low-skilled people in a context of national unemployment (given the seriousness of those people’s dependency on their jobs). The world faces many grave troubles, and in Africa we certainly have our fair share. So this argument appears to work well for large, powerful corporations, with special access to expertise or other resources which can help with important issues. We shall return to this discussion in Chapter 14 in a section entitled ‘The duty of rescue’. A challenge for Stakeholder Model theorists, however, is how to extend the argument to smaller businesses, where it is not so clear that they are ideally positioned to help in some way with a critical issue affecting other stakeholders. Given that their powers are more ordinary, can we hold them to extraordinary moral standards? Perhaps there is a way to argue that simply by a business employing a single person, the abovementioned ‘sufficient conditions’ apply to it such that it has an obligation to identify and balance the interests of that employee with shareholders’ interests. Similarly, by using just a tiny fraction of a community’s natural or social resources, perhaps it ought to help alleviate crises that affect that community to the extent that it can. Or maybe in fact this argument only has strength when claiming that businesses above a certain size should observe the Stakeholder Model. Argument 4 for the Stakeholder Model: All stakeholders make significant contributions Recall our discussion of Argument 5 for Shareholder Primacy, in which we responded to the claim that as a result of the shareholders’ contributions of capital, the business has a fiduciary duty to act in their interests. We responded by pointing out that all stakeholders make contributions to the business, and so, while making a contribution may imply a reciprocal obligation, shareholders are not unique in being owed this obligation. If all stakeholders make substantial contributions to a business, then the business ought to have a fiduciary duty to all of them. In other words, our counterargument against Argument 5 for Shareholder Primacy is not only that; it is also a positive argument for the Stakeholder Model. Norman Bowie acknowledges this argument, pointing out how society-at-large makes a contribution to business, and how this implies that business has a corresponding ‘duty out of gratitude’ to society: [D]efenders of a duty to help solve social problems argue that society provides tremendous resources to businesses. The local community provides public education that trains workers, a legal system complete with police and courts to enforce corporate contracts, and a huge infrastructure of highways, sewage and garbage disposal, and public health facilities. Corporate taxes are not sufficient payment for the businesses’ share of these resources, therefore businesses have a duty out of gratitude to help solve social problems.69 Keith Davis makes a similar argument employing the notion of trusteeship: Chapter 6 · In whose interests should businesses act? · 119 Society has entrusted to business large amounts of society’s resources, and business is expected to manage these resources as a wise trustee for society. In addition to the role of economic entrepreneurship, business now has a new social role of trusteeship. As trustee for society’s resources, it serves the interests of all claimants on the organisation.70 This line of reasoning corresponds with the so-called ‘categorical imperative’ set down by one of the most influential moral philosophers of all time, Immanuel Kant: ‘act in such a way that you treat humanity, whether in your own person or in the person of any other, never merely as a means to an end, but always at the same time as an end’.71 Kant believed that it is essential at all times to show respect for people’s dignity, and claimed that using people purely for one’s own purposes was a violation of this basic moral rule (or imperative). Kant would therefore presumably have abhorred the notion inherent in Shareholder Primacy that, once the moral minimum has been met, the employees, customers, and other stakeholders in a business are simply tools for the business to use in the pursuit of profits for shareholders. By contrast, the Stakeholder Model ensures that stakeholders other than shareholders are not ‘just used’, to use a contemporary expression of Kant’s idea. A challenge to these kinds of arguments is that they must show why it is that, as Bowie claimed ‘taxes are not sufficient payment for the businesses’ share of ... resources’, or why an employee’s remuneration or a customer’s enjoyment of the product or service, is not sufficient compensation. Perhaps this is not as difficult as it might sound, once we recognise what it is that the Stakeholder Model requires: that we give up the idea that all of the additional value created by the business after its contractual commitments have been paid off is attributable to the shareholders only. Precisely how a business would determine how rather to divide up this value amongst the stakeholders would depend on the circumstances, primarily on the impact of each stakeholder’s true contribution, and is probably always going to be imperfectly achieved. Nevertheless, the principle remains intact: this additional value should not be kept aside for only one stakeholder group since all stakeholders have contributed to its creation. Is it really possible to implement the Stakeholder Model? This question has been used as an argument against the Stakeholder Model, for, if the answer is ‘no’, then this on its own would amount to a knock-out blow against the Stakeholder Model. Note that it is not sufficient simply to point out that the Stakeholder Model is more difficult to apply in practice than Shareholder Primacy, for the fact that one option is more difficult than another is not an excuse for refusing to take the more difficult option if it is morally required. After all, it would generally be easier to steal a piece of fruit rather than pay for it, or to cheat on exams rather than study for them, yet no one really thinks that this makes such behaviour acceptable. It is certainly true that the Stakeholder Model is more difficult: it involves not only a higher level of alertness to the interests of all stakeholders, but also the permanent challenge of having to estimate the strength of these interests precisely enough that one can choose between them. In any given situation, management must decide whether to act in the interests of one stakeholder group or another, or to exercise some balance between satisfying each group’s interests. Furthermore, a constant eye must be kept on the medium- and long-term, not only because interests change over time, but also because the business’s survival into the future is less certain if more corporate resources are to be spent on servicing the needs of a variety of stakeholders. This may well be daunting, not least because it would be impossible always to get right, in much the same way that being a responsible parent of several children would be 120 · BUSINESS ETHICS & OTHER PARADOXES daunting. Again, of course, this is no excuse for being irresponsible. Is it worse than simply daunting? Is it so difficult that it amounts to a practical impossibility? Norman Barry was concerned that this is perhaps the case, claiming that the Stakeholder Model is exposed to a procedural obstacle known as the ‘Arrow Problem’, named after economist Kenneth Arrow. Put very briefly, Barry’s argument is that the Stakeholder Model requires collective choices to be made by democratic procedure, and, as a result of the Arrow problem, this will lead to irrational choices for businesses. Barry believes that ‘in the political or business context, for a result to occur it must be imposed by a dictator’72 and that the reason that business has been so successful historically is that the ‘traditional business ... is a dictatorship by virtue of the property rights of its shareholders’.73 This is an interesting argument, but it appears to have a fatal flaw: there are many examples of positive results occurring in political contexts which are not governed by dictators (take your pick from the democratic countries where you would prefer to live, rather than in a totalitarian state like North Korea). Why should this not also be possible in a business context? In fact, Barry himself admits that a solution might be found to the Arrow problem,74 and that ‘stakeholderism has historically been a feature of business in successful economies like Germany’s, where trade union representatives sit on the supervisory boards of companies (although owners have the ultimate decision-making power), and also perhaps in Japan’.75 It may well be that Evan and Freeman, whose work Barry was criticising, did not themselves present a workable way to implement the Stakeholder Model in practice. However, since their initial suggestion, more than 20 years of research (and, in South Africa, three King Reports) have revealed new ways to make the governance for the sake of stakeholders practically possible. Perhaps all the details are yet to be worked out precisely, but equally, no convincing arguments have emerged to prove that the Stakeholder Model cannot possibly be implemented. What if acting in the interests of all stakeholders benefits shareholders? Businesses which act in the interests of stakeholders other than shareholders are often more profitable in the long run. Keeping your customers happy by for example providing excellent after-sales care, paying your employees better than they could earn elsewhere, and finding ways to cut electricity consumption, are all ways to retain customers and staff and to increase revenues and/or cut costs over time. In these and many other cases, by benefiting other stakeholders, shareholders benefit. It may be tempting to use this fact to forge some kind of consensus between Shareholder Primacy and the Stakeholder Model. An eternal optimist may say ‘you see, there’s really no difference between benefiting shareholders and benefiting everyone else, because when you do the second, you get the first’. However, it is important to bear in mind why these two models are opposing views: they fundamentally differ about the end (or final goal) of business activity. The former claims that the end is primarily to benefit shareholders; the latter claims that the end is to benefit all stakeholders without giving any one group priority over the others. Norman Bowie developed this point thus: For simplicity's sake let us say there is some relation between providing meaningful work for employees, quality products for customers, and corporate profits. What is the nature of that relationship? Do you achieve meaningful work for employees and quality products for customers by aiming at profits (by making profits your goal), or do you aim at providing Chapter 6 · In whose interests should businesses act? · 121 meaningful work for employees and quality products for customers (make them your goal) and achieve profits as a result? A [believer in Shareholder Primacy] is committed to making profits the goal... But for a genuine stakeholder [model] theorist, the needs and rights of the various stakeholders take priority. Management acts in response to those needs; profits are often the happy result.76 The word ‘often’ in the last sentence is important. It would be extremely naïve to extrapolate from the existence of many cases where shareholders’ interests are aligned with the interests of the other stakeholders, to the generalisation that they always are. If businesses routinely consider that they have a duty to consider all stakeholders’ interests as equal, they will sometimes benefit an employee, customer, or the society-at-large at the expense of shareholders. Sometimes, if one is ultimately aiming to act in their interests, so much money might be spent on providing customers with after-sales care, paying employees well, and finding ways to preserve natural resources, that the shareholders will not earn as much profit, even in the long run. (Note, for reasons that we have identified earlier, this does not mean that acting in the interests of all stakeholders means consistently acting against the interests of shareholders.) It is thus important to recognise that the positive correlation between actions to benefit shareholders and actions to benefit other stakeholders does not show either of the following: (1) that ultimately both models can happily be reconciled, or (2) that Shareholder Primacy and the Stakeholder Model will in practice always yield the same results. It also does not constitute an argument for one position or the other. What it does lead to, if one accepts Shareholder Primacy, is a particular version of Shareholder Primacy in which the moral minimum in practice is a higher standard than in most if not all other variants: in order to serve the interests of shareholders maximally, the business must act in the interests of stakeholders other than shareholders more frequently and to a greater extent than envisaged by traditional Shareholder Primacy theorists like Friedman, Sternberg and Levitt. This view is known as the ‘Enlightened Shareholder View’ or ‘Enlightened Shareholder Value View’. Academics at the Harvard Business School and elsewhere have used a similar reformulation of the concept of socially responsible corporate activities as a way to enhance shareholder value (dubbing their makeover ‘Strategic CSR’).77 Certainly, this is still firmly a view within Shareholder Primacy, as it regards acting in the interests of stakeholders other than shareholders only as a means to maximise returns to shareholders. In a world where customers, employees, society-at-large and even some investors are becoming increasingly concerned about business’s impact on stakeholders other than shareholders, this view deserves the serious attention of anyone who is not a subscriber to the Stakeholder Model and therefore already alert to the importance of acting in the interests of all stakeholders. Has the debate been decided? Certainly, one option—called here the Narrowest View—has been eliminated. The numbers of people arguing for versions of either Shareholder Primacy or the Stakeholder Model suggest that the debate between those two alternatives is alive and well, with no side able to declare an outright victory. This analysis has attempted to show the main arguments for each of these views, and to present the most telling challenges to these arguments. The reader may feel that on balance the arguments tip in favour of the Stakeholder Model, as the last two arguments presented appear 122 · BUSINESS ETHICS & OTHER PARADOXES able to survive the challenges, at least for certain kinds of business. However, if the Stakeholder Model is correct, then the theoretical work remains unfinished, as the methods by which it can be implemented still require some attention. Perhaps, in truth, we should be open to a nuanced answer to the question of whose interests a business should serve. Perhaps the broad obligations implied by the Stakeholder Model apply only to large, powerful businesses rather than to smaller, owner-managed businesses. Perhaps it is only certain kinds of stakeholders (employees, for example, but not suppliers) who have contributed enough resources for their interests to stack up against the interests of shareholders. Perhaps it is only in certain ways that other stakeholders’ interests need to be satisfied (for example, those which develop trust). Perhaps, given the uncertainty inherent in economic activity and the difficulty of weighing different stakeholders’ interests, businesses should always err somewhat on the side of profits. Whatever the final answer, our further considerations of business ethics will be enriched by this knowledge: when confronted with ethical dilemmas in commerce, to respond simply that ‘the business of business is business’ is both hard-headed and unhelpful. The next three sections—eight chapters—of this book grapple with particular aspects of businesses’ relationships with their stakeholders. None of the ensuing discussion presupposes an answer to the general question of whose interests a business should serve, but hopefully this chapter has better prepared the reader for what is to come. If nothing else, it has shown that a thorough consideration of the interests of all stakeholders relevant to a decision is essential, if not because this is the only legitimate response, then because it will critically affect the success or failure of business as a profit-seeking enterprise. CONTENT QUESTIONS (1) ‘Corporations are simply legal structures, and not moral agents. Therefore corporate executives, when acting on behalf of corporations, cannot be said to have moral duties.’ Identify and explain a critical weakness of this argument. (2) What ‘moral minimum’ to be observed by otherwise profit-maximising corporations was identified by Milton Friedman in his 1970 article The Social Responsibility of Business is to Increase Its Profits? Why does this suggest that the title of the article is misleading? (3) Elaine Sternberg appears to argue that a business is good only insofar as it achieves its objective of increasing long-term owner value, in the same way that a car is only good insofar as it achieves the objective for which it is driven. Explain what equivocation is, and how this argument can be seen to equivocate. (4) ‘Shareholders are the owners of a company, and, as with anything else they own, they have the right to expect the business to be run strictly in their interests’. Briefly explain one serious challenge to this argument. Chapter 6 · In whose interests should businesses act? · 123 (5) Explain how the Stakeholder Model of businesses’ moral obligations is aligned with Immanuel Kant’s views about respect for human dignity. CRITICAL ANALYSIS QUESTIONS (6) ‘The Enlightened Shareholder View (or Model) of businesses’ moral obligations recommends that businesses often act in the interests of stakeholders other than shareholders. So does the Stakeholder Model.’ Therefore, these two models are essentially the same.” What do you think of this argument? Your answer should include a brief account of each model. (7) ‘Businesses’ extraordinary social power means that they have extraordinary social responsibilities’. Explain how this is an argument for the Stakeholder Model of businesses’ moral obligations. Do you think it successfully justifies the Stakeholder Model for large and small businesses alike? DISCUSSION QUESTIONS (8) What, in your opinion, are the three strongest arguments for the view that businesses have a primary moral obligation to shareholders? Clearly explain each argument. Present counterarguments to each argument. Explain whether each argument survives the counterarguments. (9) You are Senior Ethics Officer of a large multinational corporation. In the last financial year the corporation made a huge profit, and the Board of Directors is debating whether to spend 1% of this profit building 13 new schools in a Less Economically Developed Country from which the corporation extracts minerals. The families standing to benefit from these schools have hardly any connection with the corporation, not being employed by it and hardly being affected by its mineral extraction procedures. The Board is split between two positions: (i) from a moral point of view, the corporation should invest in the schools to fulfil its responsibility to society, (ii) the corporation is obliged not to invest in the schools, as this would violate its fiduciary obligation to its shareholders. Draft a memo briefly outlining two arguments in favour of position (i) and two arguments in favour of position (ii). In the memo you should indicate how you think the corporation should proceed and why. 124 · BUSINESS ETHICS & OTHER PARADOXES CHAPTER SIX NOTES AND REFERENCES 1 Freeman, Edward, 1984, ‘Strategic Management: A Stakeholder Approach’, Pitman This debate—the subject of this chapter—is sometimes referred to in the academic literature as the ‘corporate social responsibility—or CSR—debate’) 3 Constitution of the Republic of South Africa, 1996, ‘Chapter 2 - Bill of Rights’, Section 8.4, available online at: http://www.info.gov.za/documents/constitution/1996/96cons2.htm 4 Ibid, Section 8.2 5 Companies Act, South Africa, 2008 (Act No. 71 of 2008), available online at: http://www.acts.co.za/companies_act_2008/index.htm 6 Velasquez, Manuel, 2002, ‘Business Ethics: Concepts and Cases’, Prentice Hall, p. 18 7 See, for example, French, Peter, 1979, ‘The Business as a Moral Person’, American Philosophical Quarterly 16, July, pp. 207-215 8 Note that the accounting term ‘profit’ refers to the hypothetical residual after all a business’s expenses have been subtracted from its income. The accumulated profits are generally considered to be attributable ultimately to the shareholders; the amount of profit in a particular period is typically used to determine the amount of dividends to be paid to shareholders. As salaries, wages, donations to the community, environmental rehabilitation costs, payments to suppliers, and so on are all treated as expenses, an injunction to maximise profit implies that the business’s contributions to stakeholders like employees, the community and suppliers should be minimised in order to benefit shareholders to the largest extent possible. 9 Shareholder Primacy is often also called the Shareholder Model or Theory and the Stockholder Model or Theory. 10 The term ‘moral minimum’ was first used in the context of CSR by the philosopher Norman Bowie in his articulation of a ‘neoclassical’ view of CSR (Bowie, 1991). Bowie’s moral minimum was, simply put, to cause no harm. 11 Friedman, M. 2002. Capitalism and Freedom. p. 133 12 Sternberg, Elaine, 2000, Just Business: Business Ethics in Action, Oxford University Press, p. 7 13 Levitt, Theodore, 1958, The Dangers of Corporate Social Responsibility, Harvard Business Review 36 (September-October), p. 49 14 Sternberg, Elaine, 2000, Just Business: Business Ethics in Action, Oxford University Press, p. 79 15 Ibid, p. 80 16 Ibid, p. 82 17 Arlidge, John, 2009, ‘I'm doing “God's work”. Meet Mr Goldman Sachs.’ Times of London, 8 November 18 Lean, Geoffrey, 2010, ‘BP's Gulf of Mexico oil spill: the crude facts of an oil disaster’, The London Telegraph, 4 May 19 Sen, Amartya, 1999, ‘Development as Freedom’, Oxford University Press 20 Frank, Robert, 1988, ‘Passions within Reason: The Strategic Role of the Emotions’, Norton 21 Williams, Oliver, 2004, ‘Shaping a High-Trust Society: the Crucial Role of Codes of Conduct’, Business Ethics Quarterly 14, 2, April, pp. 337-343 22 Sen, Amartya, 1999, ‘Development as Freedom’, Oxford University Press 23 Friedman, Milton, 1970, ‘The Social Responsibility of Business is to Increase Its Profits, New York Times Magazine, 13 September 24 For a pithy instance of this sort of argument, and a good example of critical thinking in favour of Shareholder Primacy generally, see Rousseau, Jacques, 2010, ‘Potholes or Profits—the Modern Dilemma of Corporate Social Responsibility’, The Daily Maverick, 19 May, available online at: http://dailymaverick.co.za/opinionista/2010-05-19-potholes-or-profits-the-modern-dilemma-ofcorporate-social-responsibility 25 Levitt, Theodore, 1958, ‘The Dangers of Corporate Social Responsibility’, Harvard Business Review 36 (September-October), pp. 44 26 Mbeki, Thabo, 2006, ‘4th Nelson Mandela memorial lecture’, University of Witwatersrand, 29 July, available online at: 2 Chapter 6 · In whose interests should businesses act? · 125 http://www.nelsonmandela.org/uploads/files/PresidenMbekisLecture4thAnnualLecture.pdf Friedman, Milton, 1970, ‘The Social Responsibility of Business is to Increase its Profits, New York Times Magazine, 13 September 28 Ibid 29 Bowie, Norman, 1991, ‘New directions in corporate social responsibility - moral pluralism and reciprocity’, Business Horizons, July-August 30 TFG (The Foschini Group), ‘2013 Annual Financial Statements’, p. 13, available online at: http://www.tfglimited.co.za/docs/3056/tfg_afs2013.pdf 31 Truworths International Limited Annual Financial Statements 2013, p. 9, accessible online at: https://www.truworths.co.za/assets/investor/2013/Truworths_2013_AFS.pdf 32 These returns on equity were calculated as R1,926.6 ÷ [(R7,749.3 + R6,864.2) ÷ 2] and R2,408 ÷ [(R6,219 + R5,981) ÷ 2] respectively. 33 This information was supplied by McGregor BFA, for their ‘general retailers’ sector. 34 Moorad, Z., 2013, ‘Truworths slumps as earnings guidance falls short’, Business Day, 22 July, accessible online at: http://www.bdlive.co.za/business/retail/2013/07/22/truworths-slumps-asearnings-guidance-falls-short 35 Kantor, B., 2013, ‘Equity markets: Drawing the investment lessons of the past year and the past decade’, accessible online at: http://www.investec.co.za/research-and-insights/newsletters/monthlyview-newsletter/january-2013-articles/equity-markets.html 36 Sternberg, Elaine, 2000, Just Business: Business Ethics in Action, Oxford University Press, p. 4 37 Ibid, p. 42 38 Ibid, p. 15 39 It is possible that Sternberg did not intend for the sentences described here as ‘Argument 4A’ to amount in themselves to an argument for shareholder primacy, but if she did not, it is hard to see why they were included in the quoted passage at all. What purpose did an application of an amoral sense of the term ‘good’ have in her single elucidation of teleopathy, if not to convince us of the soundness of the elucidation? 40 Op. cit., p. 58 41 I am grateful to George Hull for bringing this point to my attention. 42 Friedman, Milton, 1970, ‘The Social Responsibility of Business is to Increase its Profits, New York Times Magazine, 13 September 43 Sternberg, Elaine, 2000, Just Business: Business Ethics in Action, Oxford University Press, p. 41 [italics in original] 44 To see how popular this belief is, try Googling ‘shareholders are the owners of the company’: observe how many hits this phrase obtains, and in what well-regarded publications it appears. Accountants and accounting students, in particular, will be familiar with regular references in the International Financial Reporting Standards to the shareholders of companies as the owners of those entities. 45 Companies Act, South Africa, 2008 (Act No. 71 of 2008), available online at: http://www.acts.co.za/companies_act_2008/index.htm 46 Cassim, Farouk; Cassim, Maleka; Cassim, Rehana; Jooste, Richard; Shev, Joanne; Yeats, Jacqueline, 2011, ‘Contemporary Company Law’, Juta, p. 35 47 IoD (Institute of Directors), 2009, ‘King Code of Governance for South Africa 2009’, p. 12, available online at: http://www.library.up.ac.za/law/docs/King_Code_2009.pdf [italics added] 48 Readers interested in finance may be interested in the following point by Lynn Stout, in which she shows how options theory gives further reason to believe that the economic substance of a shareholder’s relationship to a corporation is not one of outright ownership: ‘Options theory teaches us that once a firm has issued debt (as almost all firms do), it makes just as much sense to say that the debtholders ‘own’ the right to the corporation’s cash flow but have sold a call option to the shareholder, as it does to say that the shareholder ‘owns’ the right to the corporation’s cash flow but has bought a put option from the debtholders. Put differently, options theory demonstrates that bondholders and equity holders each share contingent control and bear residual risk in firms.’ (Lynn A. Stout, Bad and Not-So-Bad Arguments for Shareholder Primacy, Southern California Law Review, 2002, Vol 75, p. 1189) 49 Although shares are being bought and sold all the time, for a constantly moving price, the sellers are 27 126 · BUSINESS ETHICS & OTHER PARADOXES shareholders who have decided that they no longer want to own the share. Shareholders receive the money when shares are bought and sold in the daily transactions on the securities exchange. It is only when shareholders are issued shares by the company that the company in fact gets any money from shareholders. 50 TFG (The Foschini Group), op.cit., pp. 12 & 13 51 Truworths International Limited Annual Financial Statements 2013, op.cit., pp. 8 & 9 52 The Stakeholder Model is also known as the ‘Entity Model’ and ‘Stakeholder Theory’. 53 Evan, William & Freeman, Edward, 1988, ‘A Stakeholder Theory of the Modern Business: Kantian Capitalism’, in Tom L. Beauchamp & Norman Bowie, ed., ‘Ethical Theory and Business’, 3rd edition, Prentice Hall, p. 103 54 Ibid, p. 103 55 Ibid 56 Institute of Directors, 2009, ‘King Code of Governance for South Africa 2009’, p. 12, available online at: http://www.library.up.ac.za/law/docs/King_Code_2009.pdf [italics added] 57 Evan, William & Freeman, Edward, 1988, ‘A Stakeholder Theory of the Modern Business: Kantian Capitalism’, in Tom L. Beauchamp & Norman Bowie, ed., ‘Ethical Theory and Business’, 3rd edition, Prentice Hall, p. 103 58 See for example Langtry, Bruce, 1994, ‘Stakeholders and the Moral Responsibilities of Business’, Business Ethics Quarterly 4, 4, p. 435) 59 Bowie, Norman, 1991, ‘New directions in corporate social responsibility - moral pluralism and reciprocity’, Business Horizons, July-August 60 King, Mervyn, ‘The Corporate Citizen’ 61 Davis, Keith, 1975, ‘Five Propositions for Social Responsibility’, Business Horizons 18, 3, p.20 [italics in original] 62 Stats SA (Statistics South Africa), 2012, ‘Latest key indicators’, available online at: http://www.statssa.gov.za/keyindicators/keyindicators.asp (accessed 26 June 2012) 63 Worldhunger.org, 2012, ‘2012 World Hunger and Poverty Facts and Statistics’, Accessible online at: http://www.worldhunger.org/articles/Learn/world%20hunger%20facts%202002.htm 64 WHO (World Health Organisation), 2012, ‘Health and Development’, Available online at: http://www.who.int/hdp/poverty/en/ (accessed 26 June 2012) 65 Fortune, 2012, ‘Our Global 500’, Accessible online at: http://money.cnn.com/magazines/fortune/global500/2011/full_list/ (accessed 26 June 2012) 66 IMF (International Monetary Fund), 2012, ‘World Economic Outlook Database’, April, Available online at: http://www.imf.org/external/pubs/ft/weo/2012/01/weodata/download.aspx 67 Unilever, 2012, ‘Introduction to Unilever’ (website), Available online at: http://www.unilever.com/aboutus/introductiontounilever/ (accessed 26 June 2012) 68 Fortune, 2012, ‘Our Global 500’, Accessible online at: http://money.cnn.com/magazines/fortune/global500/2011/full_list/ (accessed 26 June 2012) 69 Bowie, Norman, 1991, ‘New directions in corporate social responsibility - moral pluralism and reciprocity’, Business Horizons, July-August 70 Davis, Keith, 1975, ‘Five Propositions for Social Responsibility’, Business Horizons 18, 3, p.20 71 Some readers may have come across different formulations of the categorical imperative. This is the second formulation, from Kant, Immanuel, 1785, ‘Grounding for the Metaphysics of Morals’, translated by James W. Ellington, 1993, 3rd ed., Hackett, p. 30 72 Barry, Norman, 2002, ‘The Stakeholder Concept of Corporate Control is Illogical and Impractical’, The Independent Review, v.VI, 4, Spring , p. 547 73 Ibid, p.548 74 Ibid, p.550 75 Ibid, p.542 76 Bowie, Norman, 1991, ‘New directions in corporate social responsibility - moral pluralism and reciprocity’, Business Horizons, July-August 77 See, for example, http://blogs.hbr.org/2012/06/a-brief-history-of-doing-well Section A FOUNDATIONS OF BUSINESS ETHICS Section B BUSINESSES AND THEIR CUSTOMERS Chapter Seven PRODUCT SAFETY AND LIABILITY by George Hull We have all, at one time or another, bought a product which turned out to be defective. Normally, defective products cause no more than slight annoyance—in the best cases, just the inconvenience of going back to the shop to collect a free replacement. But sometimes the defect in a product can cause harm. A poorly assembled bicycle, for instance, can cause serious injury, if it collapses while a rider is cycling at speed. Likewise, faulty wiring in electrical appliances can cause fires which destroy homes and possessions. If the defect in a product you have bought causes you harm, you may well have two connected thoughts about the business which manufactured it: in the first place, “It should have prevented this from happening,” and, in the second place, “It should compensate me for the harm I’ve suffered.” These thoughts are connected, because the first thought supplies a justification for the second. As we will discuss in more detail in Chapter 10, compensation—in the sense of this term which designates a form of redress—is generally owed by one party to another party, only if the harm the second party has suffered arises from a wrong done to it by the first. If it is true that the manufacturer should have prevented the product defect which caused you harm, then it did wrong in not preventing it, and is, consequently, to blame for the harm which you have suffered due to the defect. This would constitute good grounds for demanding compensation from the business which manufactured the defective product. Furthermore, both thoughts could easily lead you to favour some variety of regulation of the market. After all, manufacturing businesses which do the right thing and pay compensation to consumers to whom it is owed should not lose out to unscrupulous businesses which do not. If the government passes legislation requiring manufacturers to provide compensation for product-related injuries, businesses will not be able to gain a competitive advantage through withholding the compensation injured consumers are entitled to. And, if there is a minimum safety standard which every manufacturer of a certain type of product ought to meet, then the government could take positive steps to protect consumers from the risk of harm by enforcing that minimum safety standard as law. This chapter asks whether government regulation covering product safety and liability is justified, and, if so, what its content should be. In the course of addressing these questions, it Chapter 7 · Product safety and liability · 129 will attempt to determine in what circumstances the two thoughts above, concerning a manufacturer of defective products which cause harm, would be correct. Defective products It will be helpful to begin by clarifying the scope of this chapter. This chapter is concerned with cases in which a product is defective and, owing to its defect, causes harm to the purchaser of the product or others around them. Our task is to investigate whether it is justifiable for government to regulate the market in order to reduce the risk of this kind of incident occurring, and in order to ensure manufacturers pay compensation to purchasers when incidents of this kind do occur. It is quite plausible to think that manufacturers should refrain from putting defective products on the market, even when those defective products are in no way dangerous. Equally, one might well think that manufacturers, and perhaps also retailers, have obligations to consumers who have purchased faulty products—an obligation to refund or replace, at least— which are entirely independent of whether the product has caused harm. But this chapter’s principal concern is the special case of products which are not just defective but, owing to their defective nature, also dangerous. What is a defective product? Roughly, the following: Preliminary definition A defective product is a product which doesn’t function in the way it is meant to, when it is used for the purposes it was designed for Among the infinite uses to which you could put your laptop computer is as a cricket bat. But it would be wrong to call your laptop defective because a cricket ball doesn’t rebound off it at speed, no matter how perfectly-timed your stroke. And it would be unreasonable for you to accuse its manufacturer of making a defective product when, once you have used it as a cricket bat for some time, you find you can no longer use word-processing software or access your email on your laptop. This is because laptops are not designed to be used as cricket bats, so they can’t be expected to function in the way cricket bats are meant to—and, indeed, they can’t be expected to function in the way laptops are meant to, once they have been used as cricket bats. The above definition of defectiveness is generally adequate—though it must not be understood too narrowly. For example, almost everyone would agree that a chair is defective if, when you turn it upside down to stack it with other chairs, it immediately falls apart. Though, strictly speaking, the purpose of a chair is to be sat on, turning them upside down for storage purposes is a perfectly reasonable way to treat chairs, and one which the manufacturer could easily foresee. To capture this point, we can expand our definition of defectiveness in the following way: Revised definition A defective product is a product which doesn’t function in the way it is meant to, when it is used for the purposes it was designed for, or used in other reasonable and foreseeable ways Products can cause harm whether they are defective or not. Even when utterly nondefective, products such as drills, chainsaws, hammers and scissors can cause serious injury if 130 · BUSINESS ETHICS & OTHER PARADOXES used carelessly, or for purposes other than those they were designed for (such as torture or murder). Another class of non-defective products, which includes alcohol, hard drugs, assault rifles and fatty foods, do not even have to be used carelessly, or for purposes other than those they were designed for, to cause harm. The fact that such products cause harm even when nondefective and used correctly could well be a good reason for us, as private individuals, to stay away from them. It might also be a good reason for governments to place special restrictions on their sale and use—or even to ban them. But—though we will briefly touch on the topic of nondefective but dangerous products at the end of this chapter—our primary focus here is on products which cause harm because they are defective. It is worth noting that a defective product can cause harm, without it being true that it causes harm because it is a defective product. This distinction might seem the height of academic pedantry. But it actually becomes quite significant when one is trying to assess a manufacturer’s level of responsibility for harm. For instance, I might purchase an electric lawn mower, and recklessly use it to cut my children’s hair. The same lawn mower might— unbeknownst to me—have a defect meaning that, if used for long periods, it was likely to catch fire, potentially causing harm to people and property. Let us say I only used the lawn mower for short periods of time, so the defect never manifested itself. Nonetheless—let us also say—the lawn mower, in my reckless hands, caused a great deal of bodily injury to my children. Surely in this case we must agree that the harm to my children was my fault, and no one else’s, despite the fact that the lawn mower I was using was defective. The reason for this is that, in this case, the harm caused through use of a defective product did not come about because of the product’s defect. Rather, it came about because of something else entirely: my reckless behaviour. Finally, the term “product” is to be understood in a broad sense in this chapter. It should be understood as encompassing not just objects, such as toasters, cars and beds, which one can purchase and take home, but also services which one can purchase, such as a night’s stay at a hotel, a package holiday or an aeroplane flight. Services like these can also be defective in a way which can cause harm: a hotel might catch fire while you were staying there, for instance, or the aircraft which was meant to take you to Buenos Aires might crash-land in the Atlantic Ocean. The conclusions we come to in this chapter about product safety and liability will apply to cases like these—where a service is faulty in a way which is likely to cause harm—as well. In the next three sections of this chapter, we will concentrate on product safety. We will come to the issue of product liability only after that. Risk and rights Do consumers have a right not to be exposed to defective products which risk causing them harm? The most restrictive view about product safety implies that they do. It says that it is never morally permissible for a business to put a product on sale, if there is any chance at all that the product might be defective in a way which could cause harm. This view might seem so extreme as to be hardly worth considering. However, it can be reached via a chain of reasoning starting from moral assumptions which appear plausible enough. There is a moral principle—call it the “anti-harm” principle—which most people would agree with: Chapter 7 · Product safety and liability · 131 “Anti-harm” principle Except in very special circumstances, one should not cause harm to another person For example, you should not go up to a stranger in the street and shoot her with a pistol. And, equally, if you are in charge of a business which manufactures televisions, you should not rig one of your televisions up as a bomb which will explode when the purchaser of the television presses its on/off switch. In certain very unusual circumstances, actions such as these may be morally permissible—when a person’s life is in danger and they are defending themselves, for instance, or (more controversially) when a much greater harm to a very large number of people can be averted by causing some harm to one person. But these sorts of circumstances hardly ever arise in the—usually pretty anonymous—relationship between a manufacturing business and the purchasers of its products. So far, so good. The next step in the chain of reasoning we’re considering says that the following principle—which we can call a “linking” principle—ought to inform our moral thinking: “Linking” principle If it is morally impermissible to harm a person in a certain way, then it is also morally impermissible to carry out an action whereby one risks harming a person in that way This “linking” principle has a lot of intuitive appeal. If doing something (e.g. shooting a person) is morally impermissible, then one ought to avoid doing it. But if, by one’s action, one risks doing that very impermissible thing (e.g. shooting a person), then—it seems plausible to say— one is not comprehensively avoiding doing it. A chance remains that one will end up doing the very thing which is morally impermissible. So there is, as it were, still room for one to do a more thorough job of avoiding it: specifically, by refraining from actions whereby one risks doing the morally impermissible thing (e.g. shooting a person). Let us now test the “linking” principle against a concrete case. Imagine that you go up to a stranger in the street and, rather than trying to shoot her outright, you play Russian roulette on her. (Russian roulette is a game originating in the Russian army, in which a player places a single round in a pistol, spins the cylinder, points the pistol either at themselves or at another player, and pulls the trigger, thus imposing a risk of harm—often death—which is higher or lower, depending how many chambers there are in the pistol’s cylinder.)1 Playing Russian roulette on a stranger in the street is pretty clearly morally wrong. And surely the reason playing Russian roulette on a stranger in the street is wrong is that it would be morally wrong to shoot that stranger. This case appears to confirm the “linking” principle, according to which, if it is morally impermissible to harm somebody in a certain way (here, by shooting them), then it is also morally impermissible to carry out an action whereby one risks harming them in that way (here, carrying out an action whereby you risk shooting them). Another way of putting the “linking” principle is to say that, if one has a right not to be harmed by other people in a certain way, then one also has a right not to be put at risk of being harmed by other people in that way. Have we now established the most restrictive view about product safety, namely, that it is never morally permissible for a manufacturer to put a product on sale, if there is any chance at all that the product might be defective in a way which could cause harm? This conclusion does seem to follow, if we accept the “linking” principle. For example, it 132 · BUSINESS ETHICS & OTHER PARADOXES is—at least in normal circumstances—morally impermissible to harm a person by causing a fire to start in their living room. According to the “linking” principle, if it is morally impermissible to harm a person by causing a fire to start in their living room, then it is morally impermissible to do anything whereby one risks harming that person by causing a fire to start in their living room. But from this it follows that, if a manufacturer cannot utterly rule out the possibility that an electrical product it sells has a wiring fault which could cause a fire, then, by selling that product, it is doing something morally impermissible. Similar arguments, exploiting the “linking” principle, will rule out selling products with different sorts of risk attached to them. However, there are several ways in which you might try to resist this conclusion. Here we will consider four of them. Firstly, you might object that it is not the harmfulness of actions, or the risk of harm bound up with them, which makes some actions morally wrong. Rather, you might contend, it is the intent with which they are carried out. Rigging a television up as a bomb which will explode when the purchaser presses its on/off switch is an action conceived and executed with malicious intent. This, you might argue, is what makes it morally wrong. Selling a product which has a vanishingly small chance of catching fire is, in contrast, not an action carried out with malicious intent. That is what makes it morally permissible. This objection is not ultimately convincing, though. Imagine that you work for a television manufacturer, and you know that your boss has rigged up one of the televisions as a bomb, with malicious intent to cause harm—though you were not involved, and have no malicious intent, yourself. Still, it would be morally wrong for you to sell that television to a customer, knowing what you do. This shows that knowledge of an action’s likely harmful consequences can be enough to make it morally wrong, regardless of whether the agent has malicious intent. By the same token, your knowledge that the product you are selling risks catching fire could make that action morally wrong, even if you have no malicious intent. (Note that the above reasoning does not entail that an action automatically becomes morally permissible, when an agent is ignorant of its likely consequences. This is because sometimes it is morally wrong not to inform oneself of the likely consequences of an action— especially when one could easily do so.) Secondly, you might feel that speaking of individual actions—selling a particular electrical appliance, playing one game of Russian roulette—being risky, or having a chance of causing harm, is inaccurate and misleading. When you sell a particular product to a customer, it is either the case that that product is defective and is going to cause harm to the customer, or it is not. If it is not (i.e. if the product is not defective and is not going to cause harm to the customer), then—you might feel—you have done nothing wrong. If it is (i.e. if the product is defective and is going to cause harm to the customer), then—you might grant—your action is morally wrong, since it is wrong to cause harm to people. But the latter type of case will normally only arise very rarely; and everyone makes mistakes. The main point, you might insist, is that in the former type of case—the vast majority of cases—you are not morally at fault. This objection rightly alerts us to the fact that there is something philosophically suspect about the very idea of a risk. In a similar vein, the philosopher Stephen Perry has argued that there is no such thing as a particular individual’s risk of getting a specific disease—lung cancer, for instance.2 True, we can calculate from statistical data the relative frequency of lung cancer in different reference classes to which you belong—e.g. smoker, heavy smoker, smoker under the age of 25, black smoker, black female, female heavy smoker under the age of 25, and the list goes on. But each of these reference classes will exhibit a different relative frequency of the Chapter 7 · Product safety and liability · 133 disease—e.g., 0.5% for black smokers, 2.5% for heavy smokers, 0.1% for smokers under the age of 25, and so on.3 It would be arbitrary to plump for one of the indefinitely many reference classes to which you belong, and count its relative frequency of the disease as your risk of getting lung cancer. The only non-arbitrary reference class we could choose would be the one which is maximally specific to you. Since, however, this reference class includes only one member— you—the relative frequency of the disease in this case will be either 100 per cent or 0 per cent, depending on whether you are in fact going to get lung cancer. But, if you already knew whether you were going to get the disease, you wouldn’t be interested in finding out your risk of getting lung cancer! However, this objection has an implication which is surely unacceptable: that, if you play Russian roulette on a stranger in the street and your pistol does not fire a round, then you have done nothing wrong. You might reply that you have still done something morally wrong in this case: you have needlessly caused a stranger severe fright. That is a perfectly fair point. So let us grant that and reformulate our complaint by saying it is not plausible to say that this—causing a stranger severe fright—is all you have done wrong. Compare the case where you play Russian roulette on a stranger and your pistol does not fire with a different case, in which you aim an unloaded pistol at the stranger and pull the trigger. The degree of fright you cause the stranger is the same in both cases. But it is clear that you have done something much worse if there is a bullet in one of the pistol’s chambers, and you don’t know whether it will fire or not. We need to see this second objection in the proper perspective. It may very well be that, when all is said and done, concepts like risk, chance and probability tell us more about the limitations on our knowledge in real-life choice situations than about the ultimate structure of reality. But, given that the role of ethics is to guide our decision-making in concrete life situations, it must make use of the best approximations to knowledge available to us in those situations. Since we can’t dispense with concepts like risk, chance and probability when taking decisions, the ethical principles which are meant to guide those decisions cannot dispense with them either. In real-life choice situations, we have little difficulty picking out the relevant reference class when calculating risks consumers are exposed to. Thirdly, you might be convinced that we should reject the “linking” principle (above), on the basis that its implications are absurdly restrictive, outlawing most actions whose moral permissibility we take for granted in daily life. Every time we drive a car, ride a bicycle, or even go out jogging, we risk injuring someone by accidentally crashing into them. Even without venturing outside our front door, we impose risks on our fellow humans. The American philosopher Judith Jarvis Thomson illustrates this point forcefully with an everyday example: I want some coffee now, and must turn my stove on if I am to have some. If I turn my stove on, I impose a risk of death on my neighbour—it is a gas stove, and my turning it on may cause gas to leak into his apartment, or it may cause an explosion, etc. Feeling a surge of moral anxiety, I ask your advice. You say: Absurd. That’s a fine stove, in mint condition, and the risk is utterly trivial.4 Thomson is surely right that we would respond to her “moral anxiety” in this way—even though we know that gas leaks and explosions do happen. The reply she attributes to us brings out a peculiarity of the “linking” principle: it completely ignores the question of how great the risk of harm is which an action imposes. So you might be convinced that the “linking” principle wrongly takes the mere existence of risk to 134 · BUSINESS ETHICS & OTHER PARADOXES be morally problematic, when the morally relevant issue is how great that risk is. Indeed, most people would probably agree that the magnitude of a risk is a crucial factor to bear in mind when assessing which risky actions are morally acceptable and which are not. We will explore in more detail how magnitude of risk can be factored in to moral decision-making in the next section but one of this chapter (‘The value of preventing a fatality’). But, before that, we must consider a further objection to the “linking” principle. Fourthly, it may have occurred to you, when the “anti-harm” principle was formulated above, that commercial transactions between a willing buyer and a willing seller are among the types of “very special circumstances” which make it not wrong to cause somebody harm. For example, if a person’s natural teeth are perfectly healthy, many people would consider that it constitutes harm for a second person to remove all of the first person’s teeth—i.e. that the second person’s action makes the first person worse off overall. However, if the first person was a customer at a dentist’s surgery, who had specifically requested that their dentist—the second person—extract all of their perfectly healthy teeth, then, arguably, though remaining harmful, the second person’s action of extracting the first person’s teeth is not morally wrong. The essence of this idea is that voluntary transactions between a buyer and a seller involve a form of agreement, or consent. The seller consents to provide a particular product, or perform a particular service. And the buyer gives their consent too: not only does the buyer consent to transfer an agreed upon sum of money in return for the product or service in question, but they also consent to whatever difference receiving the product or service in question will make to their life. It is a familiar thought that consent has morally transformative power, making the difference between a morally wrong act and a morally permissible act. Consent is what makes an act of sex (at least one between mentally competent adults) into a morally permissible act, rather than rape. Likewise, consent makes (part of) the difference between a morally wrong act of assault and a morally permissible surgical operation.5 The application of this thought to the transaction between a manufacturer and a purchasing customer says that, as long as it forms part of a voluntary transaction, no imposition of risk— and, indeed, no imposition of harm—can count as morally wrong. The buyer’s consent, as it were, wipes away any potential wrongness. With that we arrive at the second view about product safety which we must consider. This view will deny that individuals have the right not to be exposed to products which risk causing them harm. If anything, this view will say, individuals have the right to choose, from among the products available, the product with the level of safety which best suits their personal preferences. A market in risk? The most permissive view about product safety says the fact that a product risks being defective in a way which could cause harm never makes it morally impermissible for a business to put that product on sale. Someone who holds the most permissive view about product safety is likely to regard any laws requiring minimum safety standards as unwarranted government interference. What can be said in favour of the most permissive view about product safety? In effect, what the most permissive view about product safety advocates is a free market in risk. This market already exists to a very large degree. For example, if you wish to reduce the risk that your home will be burgled or that you will be attacked in your home, then you can pay Chapter 7 · Product safety and liability · 135 to have a burglar alarm installed, to have a high perimeter wall or electric fence put up, or to have security guards patrol outside your home. Similarly, when you are choosing which car to buy, just as you can pay more to have a faster car or a car with a better sound system, so you can also pay more to have a car with more safety features, meaning that—for example—the risk that you will die if you have a head-on collision is significantly reduced. Different people value safety to different degrees. Some people would never choose to go hang-gliding, mountain-climbing, skiing or drag-racing, because the risk of physical injury attached to these activities puts them off. For others, though, the risk of injury is easily outweighed by the excitement of these activities—in some cases, it perhaps even adds to the excitement. A free market in risk allows people to choose a safer or a more dangerous product, according to where safety is on their individual list of priorities. To make a product less likely to be defective in a way which might cause harm, the manufacturing business must invest in extra components, new manufacturing procedures or additional staff to carry out tests and reviews. These costs must then be made up, almost always by passing them on to the customer, who pays a higher price for the finished product. When there is a free market in risk, a customer who chooses this more expensive product will do so because they value safety highly enough to think it worth their while to pay extra. Customers who value safety less highly will, for their part, pay less for a product which has a higher chance of being harmfully defective, and spend the money they save on things they care about more than safety. Under free market conditions, different manufacturers will compete to provide products with different levels of safety at the lowest possible price. The result will be—defenders of a market in risk would argue—that the “equilibrium price” is reached for each product, at each of the different levels of safety for which there is demand among the consumer population. In other words, a free market in risk, just like a free market in any other commodity, would tend to generate both “productive efficiency” and “allocative efficiency” for the commodity of risk. (If you need to refresh your memory of the processes by which classical economic theory says free markets generate efficiency of production and allocation, turn back to the section of Chapter 5 entitled ‘How is the invisible hand argument thought to create economic efficiency?’) If the government imposes legal minimum safety requirements on the manufacturers of certain products, then—the defender of a market in risk would argue—it effectively forces individual consumers who would have preferred a lower level of safety to pay money for safety which they would rather have spent on something else (such as excitement). Consequently, legal minimum safety requirements give rise to an inefficient allocation of risk. In real life, many people circumvent the extra cost of products which meet governmentimposed safety standards by purchasing in the informal sector. For instance, if you need a new part for your car, you may choose to buy it from an unregistered dealer whose production process does not live up to the government-imposed minimum standards. When you do this, you pay less than you would have if you had bought from a registered dealer, but you also expose yourself to a greater risk that the part will be harmfully defective. Defenders of a free market in risk would point to these purchasing decisions as evidence that there is demand for cheaper, higher-risk products that cannot be sold legally in the current regulatory environment; and they would advocate bringing the manufacturers of such products out of the informal sector by legalising their operations. So it is clear that a strong case can be made for a completely unregulated market in risk, by appealing to the good consequences—in terms of efficiency—which it will have. 136 · BUSINESS ETHICS & OTHER PARADOXES Now let’s consider what can be said against it. It is tempting to object to the idea of an unregulated market in risk on the grounds that it is unjust. After all, the people who are most likely to purchase cheap, dangerous products are those who don’t have the money to buy anything safer. Shouldn’t the poor be protected from defective products which might cause them harm? However, this is not a problem specific to a free market in risk. It is, rather, an instance of the general truth that less well-off people in a society have to make do with worse products and services than their better-off peers. In the field of risk, “worse” means more; and the rich will tend to use their superior spending power to reduce the risk of harm to which they are exposed. If steps were taken to make the allocation of goods in society more equal in general—for example, by abolishing inheritance and giving all members of each generation an equal starting allocation, as Michael Otsuka has proposed6—then it is not clear that the existence of a free market in risk would on its own count as an injustice. Moreover, given present inequalities, it may well be to the advantage of the less well-off to be able to purchase cheap—albeit more dangerous—products, if the alternative is to be “protected” in a way which puts risky—but nonetheless beneficial—products firmly outside their budget. A different way to object to an unregulated market in risk is to challenge the idea that it would allocate risk efficiently. As was discussed in detail in Chapter 5, a free market in a commodity will only give rise to an efficient allocation of that commodity if certain assumptions about the circumstances in which the market operates are correct. But often these assumptions prove to be false, in which case there is “market failure”. When there is market failure, we cannot expect the market to allocate the commodity in question efficiently. Theorists have pointed out that there are forms of market failure to which a free market in risk is particularly prone. So this objection, unlike the last one, is an objection to a market in risk in particular, rather than an objection to the free market in general. As a result, this market failure objection could justify introducing regulations specific to product safety, rather than more general redistributive measures such as taxes on wealth, income and inheritance. Here we will consider four forms of market failure to which a free market in risk is particularly prone. Firstly, a market in risk is likely to exhibit a high degree of “information asymmetry”. Information asymmetry occurs when the producer of a commodity knows much more about that commodity than the consumer, and is able to use that extra knowledge to bring the consumer to make a purchasing choice which they would not have made had they been fully informed. Most customers would not know which features of a product to check, or what questions to ask a salesperson, to determine a product’s level of safety. This means it would be relatively easy for a producer to persuade a consumer to purchase a product which was more dangerous than the consumer really wanted, even without going so far as to deceive the consumer at any point along the way. Secondly, as was made clear in Chapter 5, free markets only allocate goods efficiently as long as individuals behave in a self-interested and rational way in their market interactions. But there are grounds for doubting whether consumers are generally able to think rationally about how much they value reducing the chances of various forms of harm befalling them by tiny percentages. This could seem like a condescending and paternalistic thing to say—implying that individuals are too stupid to think sensibly about safety, and so governments ought to do it for them. However, the basic point is not at all controversial. Jonathan Wolff, a political philosopher Chapter 7 · Product safety and liability · 137 who works on the ethics of risk, puts it like this: If asked ‘how much would you pay to avoid a 1 in 100,000 chance of death?’ most people, I think, would not feel that they could give a robust or reliable answer.7 Even if consumers were fully informed of the level of danger attached to a given product, to the extent that the salesperson specified the numerical probability of injury or death, it is doubtful whether many of them would be in a position to feed that information into a self-interested decision-making process in any rational way. Thirdly, a free market in risk will tend to create “negative externalities”. As was covered in Chapter 5, the argument that free markets allocate goods efficiently relies on the assumption that all the costs of producing goods are borne by the producer—who then recoups them through the price paid by the purchaser of the goods. “Negative externalities” are costs of producing a commodity which are borne by neither the producer nor the consumer of that commodity. When a manufacturer of car parts decides to invest less in their production process, thereby producing parts which are more likely to be dangerously defective, it is not just the customer who buys the car parts who is thereby subjected to a greater risk of injury or death. If, for example, the customer’s new brakes fail when they are on the highway, then, more likely than not, third parties—people who were neither the buyer nor the seller of the faulty brakes— will be injured or killed as well as the customer themselves. In this case, the manufacturer saved money by passing on a cost of production—in the form of a risk of injury or death—to third parties who happened to be in the vicinity of the car fitted with its faulty parts. Since products which are dangerous to their users are very often dangerous to those around them too, we can expect a market in risk to throw up a considerable number of negative externalities in this manner. Fourthly, a free market only generates efficient outcomes when several producers are competing to offer consumers the cheapest, best-quality goods they can; but there is quite often a “natural monopoly” in a potentially dangerous product or service. In some circumstances, the supply of electricity, water or gas is a natural monopoly, as is, often, the supply of transportation services. For example, it would be difficult for two competing businesses both to offer transport by train from Cape Town to Johannesburg—the expense of laying duplicate line and building duplicate stations would not be worth a competitor business’s while. And so customers do not have the option of choosing a less risky train journey from another provider. Likewise, though different airlines often service the same routes, demand for air travel is often not great enough for a city or region to be served by more than one airport; so those travelling by air in effect have no choice but to submit themselves to the level of safety maintained at that one airport. Where there is a natural monopoly in a potentially risky product, the free market cannot be expected to allocate risks associated with that product efficiently. So it looks as though somebody who defends a free market in risk on consequentialist grounds is going to have to admit that some regulation might be called for, if only to correct instances of market failure. That said, even when there is market failure in a market in risk, it will sometimes be possible to correct it without resort to minimum safety standards. For example, let us say some tasty type of food very occasionally has a laxative effect when it is eaten, due to bacteria which can collect on it. If there is no natural monopoly in it, the laxative effect is restricted to the individual who eats the food, and the nature and level of the risk are quite easy to understand and rationally process, then it would normally be enough for the regulator simply to insist on proper labelling 138 · BUSINESS ETHICS & OTHER PARADOXES of the food, so that consumers are aware of the risk. Banning the sale of this food outright would surely be too heavy-handed. But when the market failure extends beyond information asymmetry, it is difficult to see how it could be corrected without minimum safety standards. If there is a natural monopoly in some dangerous product, or it brings negative externalities in the form of risks to third parties along with it, or the nature and level of the risk are very difficult for people to understand and rationally process, then there will be a good case for introducing minimum safety standards for that product. At this point, though, you might be wondering whether it is really necessary to show that a free market in risk would allocate risk efficiently, let alone in accordance with distributive justice, in order to show that it is morally defensible. After all, the thought which led us to consider the idea of a market in risk in the first place was that the buyer’s consent “wipes away any potential wrongness” in a market transaction. But perhaps it is worth revisiting that thought. It is, for one thing, doubtful whether absolutely any market interaction would be rendered morally permissible by the buyer’s consent. Earlier we considered the example of a dentist’s patient who requests to have all their perfectly healthy teeth removed. While consent may make the operation morally permissible in that case, would it also in the case of a patient who asked a surgeon to remove the front half of their brain, because they were plagued by feelings of guilt, and wished to be rid of them once and for all? If you think the answer is, “No,” then you must acknowledge there are limits to the “morally transformative power” we attributed to consent at the end of the previous section (‘Risk and rights’). Once it is granted that there are such limits, it is surely plausible to think that many cases of risk-imposition would fall outside them. For example, imagine that a thrill-seeking friend of yours asks for an unusual Christmas present this year: a Christmas pudding in which one of the raisins contains a cyanide capsule. She will eat just one quarter of the pudding, making sure to chew each raisin thoroughly, and throw the rest away. If you go along with her gift idea, inserting a cyanide capsule into one of the raisins in the pudding, you will be imposing a 1 in 4 risk of death on her. Is it morally permissible to do this, because of the fact that she consented to it—indeed, requested that you do it? Surely the answer is, “No;” or, at least, it is if she requests the poisoned pudding purely for the sake of a thrill (if she is terminally ill, in insufferable pain, things quite possibly get more complicated). For another thing, some philosophers have argued that the idea of consent faces special problems in cases of risk imposition. Specifically, it proves difficult to home in on exactly what somebody is consenting to when they consent to a risk. For example, it is uncontroversial to say that somebody who buys a ticket in a fair lottery, knowing the odds, has no moral grounds for complaint if they lose. However it is far from clear that this is so simply because of the consent they gave in buying a lottery ticket. As Judith Jarvis Thomson has pointed out, giving one’s consent to enter a lottery is certainly not the same thing as giving one’s consent to lose a lottery.8 In more general terms, consenting to a transaction is not the same thing as consenting to the harm which risks ensuing because of it. This suggests that we may have been too hasty, in the last section, when we assumed that the buyer of a product consents to whatever difference receiving that product will make to their life. The point here is not that every time a purchaser is injured by a risky product they automatically have moral grounds for complaint. Rather, Thomson’s point is that, if the purchaser does not have moral grounds for complaint, this is not Chapter 7 · Product safety and liability · 139 because they consented to the harm they suffered, but rather for some other reason—for example, because the level of risk they were exposed to was not unreasonable. The above considerations at least suggest the following: that we shouldn’t take it for granted that the imposition of a risk of injury by a defective product automatically becomes morally permissible when it forms part of a consensual market transaction.. The value of preventing a fatality Let’s pause and briefly take stock of where we have got to so far. We’ve seen that it’s implausible to claim that no risk of harm to consumers from defective products is ever morally permissible. But we’ve seen that it’s equally implausible to claim that any risk at all of harm to consumers from defective products is morally permissible, just as long as the consumer willingly bought the product in question. Our investigation so far suggests we need not only to answer the question, “Is the consumer exposed to risk?” or the question, “Has the consumer given their consent?” At a number of stages we’ve seen the importance of finding an answer to a further question: “Is the level of risk to which the consumer is exposed acceptable?” One of the objections to the “linking” principle discussed in the last section but one of this chapter (‘Risk and rights’) was that it takes no account of the level of risk imposed on people in particular cases. Then, in the last section of this chapter (‘A market in risk?’), we saw that a free market in risk generally will not allocate risk efficiently, and so that it will often be necessary for a regulatory body to decide what is an acceptable level of risk for consumers to be exposed to. In addition, we saw good reasons to doubt that the consent involved in a market transaction is enough to justify consumers’ exposure to risk (or, indeed, exposure to harm) on its own— independently of whether the level of risk associated with the transaction is a reasonable one. However, it would be naive to suppose that the decisions by central regulatory authorities— banning dangerous products, or making new safety-enhancing parts and checks compulsory— have a purely cost-reductive effect on consumers, by eliminating or reducing risks to which they are exposed. In the previous section we noted the financial costs to manufacturers of complying with product safety regulations—costs which are normally passed on to consumers, some of whom will likely discover they are no longer able to afford the product at all. Complying with safety regulations can also have a cost in terms of time. It may take months, or even years, for a manufacturer to run tests and gather data establishing that a new type of product meets the minimum safety standard set by the regulator. This is time during which no consumers may benefit from the new product, and during which the manufacturer cannot benefit from it through sales either. If the product in question is a new medical drug, this cost in terms of time can make the difference between life and death for patients who would have benefited from the drug; and the manufacturer of the new medical drug may well have to raise the price of other drugs it sells in order to make up the costs of developing and testing the new drug which it is not yet permitted to put on sale. Surely it is conceivable that the benefits of a product or service could be so great that even quite a high level of risk associated with it would be tolerable. Equally, there are surely some reductions of risk which, though desirable in themselves, are not desirable but, all things considered, harmful, when their financial cost—passed on by the producer to the consumer— rises above a certain level. What we need, then, is a way of weighing the benefits of new safety regulations—in terms 140 · BUSINESS ETHICS & OTHER PARADOXES of reduction of risk—against their costs—both financial costs and “opportunity costs” (i.e. benefits society-members will lose the opportunity to enjoy for the sake of an improvement in safety). This is precisely what risk cost-benefit analysis claims to provide. So in this section we will examine a view about product safety which is intermediate between the most restrictive view and the most permissive view (discussed in the last two sections). This intermediate view about product safety says that it is always morally permissible for a manufacturer to sell a product which risks being harmfully defective, except when risk cost-benefit analysis would recommend a regulation banning the sale of that product at its current level of risk. In effect, this intermediate view answers the question whether a risk consumers are exposed to is morally acceptable via its answer to a different question: whether the regulator morally ought to introduce regulation eliminating or reducing that risk. When the answer to the latter question is, “No,” the answer to the former question is, “Yes;” and vice versa. And the answer to the latter question is, on this intermediate view, to be determined by risk cost-benefit analysis. So this intermediate view takes different forms, depending which form of risk cost-benefit analysis is utilised. To begin with, let us consider the most elementary form of risk cost-benefit analysis (R.C.B.A.), which we can call “crude R.C.B.A.”. This elementary form of risk cost-benefit analysis calculates a numerical value for various contemplated courses of action, based on what outcomes each course of action could have, and how likely those outcomes are to materialise. For each course of action, crude R.C.B.A. assigns a numerical value to all of its potential consequences—a positive value to beneficial consequences, and a negative value to harmful consequences; a larger positive value to more beneficial consequences, and a larger negative value to more harmful consequences. After that, it sums the values of the consequences involved in each potential outcome, to arrive at a value for each potential outcome of the course of action in question. And then it multiplies the value assigned to each potential outcome by the probability (from 0 to 1) that the outcome in question will materialise. Once that is done, the value of each course of action can be calculated by summing the products of each of its potential outcomes and that outcome’s probability of materialising. For example, a regulatory agency might be deciding between two different minimum safety standards for product P: standard A and standard B. If standard A were implemented, beneficial consequence x, with value 48, would be certain to materialise, but there would also be a likelihood of 0.005 that harmful consequence y, with value -200, would materialise. If standard B were implemented, on the other hand, harmful consequence y, with value -200, would have a likelihood of 0.1 of materialising, but there would also be a certainty of beneficial consequence z, with value 560, materialising. So standard A has two potential outcomes: outcome A1, in which x, but not y, materialises, with value 48, and probability 0.995; and outcome A2, in which x and y both materialise, with value 48 + -200 = -152, and probability 0.005. And standard B has two potential outcomes: outcome B1, in which z, but not y, materialises, with value 560, and probability 0.9; and outcome B2, in which y and z both materialise, with value 560 + -200 = 360, and probability 0.1. Crude R.C.B.A. says that the value of implementing standard A is 0.995 · 48 + 0.005 · -152 = 47.76 + -0.76 = 47. And crude R.C.B.A. says that the value of implementing standard B is 0.9 · 560 + 0.1 · 360 = 504 + 36 = 540. Chapter 7 · Product safety and liability · 141 Evidently, crude R.C.B.A. would tell the regulatory agency to implement minimum safety standard B for product P, because, although this will mean the probability of harmful consequence y rises from 1 in 200 to 1 in 10, this increase in danger is outweighed by the certainty of beneficial consequence z, in comparison to which beneficial consequence x pales decidedly. As you recall, we turned to risk cost-benefit analysis because we realised that some safety improvements, even though they would reduce the risk of harm to consumers, are simply too costly. We wanted to determine when the costs of regulations outweigh, and when they are outweighed by, their benefits. Crude R.C.B.A., by weighing the chances of bad outcomes against the chances of good outcomes for each alternative course of action, provides us with a systematic way of doing just that. However, there are several reasons why you might find risk cost-benefit analysis—or, at least, the elementary form of it which we have been examining—an unsatisfactory way to decide which safety regulations should be introduced. These largely arise from the fact that R.C.B.A. takes a consequentialist approach to the acceptability of risk—that is to say, it assigns values to courses of action based solely on the overall likely consequences of those courses of action. Let us here ignore questions about whether numerical values could ever be assigned in a non-arbitrary way to all the possible consequences of product safety regulations, and questions about whether interpersonal comparisons of harms and benefits could ever practically be made. Let’s instead focus on two central problems with crude R.C.B.A. The first problem has to do with how crude R.C.B.A. assigns values to harmful consequences for individual consumers, in particular consumer deaths. Crude R.C.B.A. would say to calculate the value of preventing somebody’s death, one should compare the value of the consequences of their staying alive with the value of the consequences of their dying. It would probably put a high value on preventing the death of a doctor, or an innovative entrepreneur who was creating jobs and making beneficial new technologies available to the public. On the other hand, if the person in question was an elderly person receiving expensive medical care, or an AIDS-sufferer whose life insurance policy had been purchased by speculators in the hope that he would die quickly, allowing them to cash in,9 then crude R.C.B.A. would unhesitatingly assign a positive value to the individual’s death: in other words, it would say that it would be preferable that the person die. Most people would agree that it is morally unacceptable to assign values to individual people’s lives in this purely instrumental fashion—simply on the basis of how much the rest of society stands to gain or lose through their death. In practice, crude R.C.B.A. will not assign a value to the death of any named individual. But that response is scarcely to the point. One can still object that the method for determining an average figure—the value of a “statistical death”—would be based on an unacceptably instrumental view of the value of people’s lives. Crude R.C.B.A. views individual people as no more than “human capital”.10 The second problem is that crude R.C.B.A. allows a monstrous risk of harm to be imposed upon a minority of society-members for the sake of a high chance of a great benefit to the majority. In the example illustrating crude R.C.B.A. above, safety standard B could have been a standard permitting sale of a petrol additive which would impose a 1 in 10 risk of death on a minority of pedestrians and bystanders (those with a genetic predisposition to a particular illness, say), but which would certainly make maintaining a motor vehicle far cheaper for the 142 · BUSINESS ETHICS & OTHER PARADOXES majority of society-members. Most people would agree that allowing sale of this additive would be extremely unjust. Discussing cases similar to this one, the American philosopher Carl Cranor writes the following: When risks are internalized within the life of one person, this poses fewer issues of justification than when risks created by one party are imposed on another party.11 Cranor’s point is that there is no moral problem with one individual choosing to do something which risks harming them in order to reap some benefit for themselves. But it is another matter entirely when society imposes a high risk on one group of individuals in order that another group of individuals can reap some benefit. This is an example of an invidious tendency of consequentialist reasoning which John Rawls noted when he wrote that ‘the utilitarian extends to society the principle of choice for one man’.12 Surely a just society would not, as a matter of course, disadvantage some of its members in a severe, yet perfectly avoidable, way, solely so as to benefit other society-members. Rather, we would expect a just society to introduce policies which were equally justifiable from the points of view of all its members. When it comes to regulating risk, we can agree with Cranor that the question for a just society ought to be the following: Under what conditions would risks to the lives of persons be justified even to those most at risk?13 Crude risk cost-benefit analysis rightly stresses the importance of cost-effective safety regulation, but it ignores the equally crucial matter of the distribution of the risk of harm among society-members. One alternative to crude R.C.B.A. is the “state of the art” approach. Richard DeGeorge is an example of a theorist who advocates this approach to product safety. He writes: Companies have the obligation to make products at least as safe as the state of the art (an admittedly vague term) for that product permits and demands.14 As DeGeorge indicates, there is little consensus about how the phrase “state of the art” is to be understood. Some theorists understand it literally as meaning ‘that all known techniques should be used’15 to improve safety. Others view this understanding of the “state of the art” as too demanding, because, as DeGeorge says, ‘none of us wants to drive cars that weigh as much as army tanks, even if they would be safer than the cars we do drive’. DeGeorge himself understands the “state of the art” as ‘[t]he level of risk a society wishes to accept in using products’.16 There is something unsatisfying even about DeGeorge’s more moderate understanding of the “state of the art”, though. The initial appeal of the idea of the “state of the art” is that it promises a ‘technology-based criterion’17 for safety: an objective criterion corresponding with the extent of technological advance in a given industry. If it is reinterpreted as “the level of risk a society wishes to accept”, then our first question ought to be whether the level of risk a society wishes to accept in using products is the right one. Isn’t it conceivable that public opinion could sometimes be wrong—even irrational—in its assessment of this? To give a real-life example, in the late 1990s and early 2000s a series of accidents took place Chapter 7 · Product safety and liability · 143 on the newly privatised U.K. railway network. In their aftermath public opinion and the British media appeared to agree that railway companies had been irresponsible in not introducing “state of the art” equipment and technology which had already been adopted in some other countries. However, when the U.K.’s Railway Safety group commissioned the philosopher Jonathan Wolff to advise them on the ethics of risk on the railways, he did not concur with this judgement. In the first place, he noted that, recent accidents notwithstanding, the risks associated with railway travel—especially compared with road travel—were still very low, and that this was something people understood: ‘in general people think, and act as if they think, that traveling on the railways is a very safe form of transport’.18 And, in the second place, in Wolff’s words, ‘replacing the RCBA approach with a state-of-the-art approach will be incredibly expensive’.19 Reflecting on the context of his report for Railway Safety in a later book, Wolff explained: [A]t the time … government and industry, stirred by the media, were debating whether to introduce a new computerized signalling system called ATP (Automatic Train Protection). Even its defenders admitted that it could not save more than a couple of lives a year, on average. Yet it would cost around 6 billion pounds to introduce. That is 6 billion pounds to save two lives a year, for, say ten years. Now if you have 6 billion to spend and your goal is to save lives, putting it into railway safety must be one of the most stupid things you could do. Road safety, the health service, or overseas aid, could use the money to save ten, a hundred, perhaps a thousand times as many lives.20 As Wolff makes vivid in this passage, the “opportunity cost” of following the “state of the art” approach (whether understood literally, or on DeGeorge’s more moderate version of it) can just be unacceptably high. Might it be possible for risk cost-benefit analysis to accommodate this insight, while distributing risk in a way which would be justifiable even to those put most at risk? The development, over the last few decades, of a more sophisticated form of risk cost-benefit analysis—which we can call “refined R.C.B.A.”—suggests that it might. To keep things relatively simple, let’s focus on the risk of just one type of harm: death. (What is said, in what follows, about preventing fatal injuries can easily be adapted to other kinds of injury, such as loss of limbs.) And let’s restrict the discussion to cases where only the consumer themselves is exposed to risk—i.e. cases where danger is not a negative externality. Refined R.C.B.A. proposes a four-step procedure for deciding whether it would be worthwhile to introduce a new safety measure which is available: Step One Establish the cost of the new safety measure Step Two Establish how many lives, statistically speaking, the new safety measure can be expected to save Step Three Divide the cost of the new safety measure by the expected number of lives saved, to establish the cost of preventing a fatality (C.P.F.) Step Four If the C.P.F. is less than or equal to the value of preventing a fatality (V.P.F.), introduce the new safety measure21 144 · BUSINESS ETHICS & OTHER PARADOXES Evidently, this four-step procedure requires us to put a monetary value on reducing—by one—the number of deaths to be expected due to a defect in a product or service: the value of preventing a fatality (V.P.F.). But on what basis could we put a price on that? We have seen that crude R.C.B.A. can give an answer to this question, but an answer which is unacceptable because it entails a purely instrumental view of the value of human life. What we need is a way of establishing the value of preventing a fatality which respects the fact that humans are autonomous decision-makers in their own right, not just tools which government can manipulate to achieve social purposes. You may be inclined to retort that there could not be any way of doing this, because it is impossible—indeed, morally repugnant—to put a financial price on human life: in other words, there is no limit to how much it is acceptable to pay to prevent a fatality. Before consigning refined R.C.B.A. to the scrap heap, though, it is worth considering three points. First, the claim that no price is too high when it comes to reducing a risk of death takes us straight back to the most restrictive view about product safety. But, as discussed earlier, that most restrictive view outlaws a huge number of activities whose moral permissibility we take for granted in daily life. This is what moral philosophers who work on risk call “the problem of paralysis”.22 Second, the V.P.F. as it features in refined R.C.B.A. does not put a value on saving the lives of known individuals which are at risk because of some calamity. As the U.K. government’s Health & Safety Executive puts it, ‘VPF is not the value that society, or the courts, might put on the life of a real person or the compensation appropriate to its loss’.23 For example, it is not designed as a measure of how much one should spend to rescue trapped miners or people stranded by a flood. Rather, the V.P.F. is meant as a measure of how much one should spend to reduce a small statistical risk of death for a large number of people. Third, and most significant for refined R.C.B.A., most of us take decisions about whether it is worthwhile to reduce a small risk of death to ourselves every day. For example, for the sake of speed and convenience, we are often prepared to drive by car rather than walk or take the train, even though we know this slightly increases the risk that we will die today. Similarly, most pedestrians sometimes cross the road at a crossing before the lights have changed, deciding that a tiny reduction in the risk of death or injury is not worth the wait. And many of us would rather spend our money on clothes and outings than on “state of the art” burglar alarms and security gates for our homes, even though we know this equipment could further reduce the slight risk that we and our families will be attacked and killed by intruders. This third point is significant for refined R.C.B.A. for the following reason. It could be possible to derive a V.P.F., in a statistically sound way, from observation of the willingness consumers show in their own lives to assume a risk of death for the sake of various benefits. If so, it would be possible for the risk cost-benefit analysis guiding the regulator’s decisions about safety measures to trade off the risk of death against benefits in the same way as the consumer makes these trade-offs in everyday situations. In that case, refined R.C.B.A.—unlike crude R.C.B.A.—would not be open to the charge that it instrumentalises human life. On the contrary, refined R.C.B.A. would appear to have good grounds to claim that, by trading off risk against benefits in the same way as the consumer does in their everyday life, it is showing the proper respect for individual persons as autonomous decision-makers. Furthermore, once R.C.B.A. bases its V.P.F. figure on actual choices consumers make about risk, safety regulations set in accordance with R.C.B.A. can be thought of as correcting the market failure to which, as we have seen, unregulated markets in risk are prone. Thus Herman Leonard and Richard Zeckhauser, two economists who advocate a form of R.C.B.A., argue for Chapter 7 · Product safety and liability · 145 it on the basis of its ability to simulate an efficient market in risk. They write: In choosing among alternative projects that create different levels of risk, the government (or other responsible decision-makers) should seek the outcomes that fully informed individuals would choose for themselves if voluntary exchange were feasible.24 By taking decisions about the regulation of risky products and services—railway travel, for example—according to the same trade-off principles as would appear to guide consumers’ everyday decisions about risk, the regulator could claim to be simulating the choices a consumer would have made themselves about railway safety, were it not for the fact that a market in railway safety will inevitably exhibit market failure. Several governments now use refined R.C.B.A. to take decisions about safety and the regulation of risk. In 2007 the U.K. government was operating with a V.P.F. of a little over £1 million;25 in 2002 the U.S. government was operating with a V.P.F. of a little over $6 million.26 Let’s look in a little more detail at how the V.P.F. is arrived at. By asking a consumer about trade-offs they would make between risks and benefits, or observing those they do make in familiar everyday situations, you might be able to plot the graph in Figure 7.1 representing—approximately—how that consumer trades off risk against benefit.27 Figure 7.1 0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 39 37 35 33 31 29 27 25 23 21 19 17 15 13 11 9 7 5 3 1 0 Figure 7.1 represents what level of risk to their life (in probability from 0 to 1, represented on the vertical axis) the consumer would be willing to assume for the sake of benefits of various sizes (measured in 10s of 1000s of dollars, on the horizontal axis). If you extrapolate the line on this graph to the point at which the risk of death to the consumer is 1 in 1, you will find the notional amount in dollars this consumer would need to be given in order to put themselves forward for certain death. This is the V.P.F for this consumer. In fact, of course, the risks of death to individuals whose reduction a regulator will consider will almost exclusively be in the lower left-hand region of this graph, where the probability of death is between 0 and 0.05. The extrapolation to the point where the probability of death is 1 is not meant to suggest that the consumer would be prepared to die for that amount of money. 146 · BUSINESS ETHICS & OTHER PARADOXES Rather, it is handy statistical way of applying the consumer’s own trade-off principles regarding low-risk situations to the large-scale decisions a regulator must make, where deaths are statistically to be expected. Even though you may grant that refined R.C.B.A. does not instrumentalise human life in the way its crude cousin does, there are three serious reservations you might have about its method for calculating a V.P.F., which should be addressed right away. First, you might think that it would, in practice, be impossible to collect reliable data about the value individuals place on reducing their risk of dying. If one simply asked them to name a price, they would, more likely than not, either refuse to answer or simply pluck a number from thin air. If, on the other hand, one observed their decisions about driving, road-crossing and other risky pursuits on a day-to-day basis, there would be so many shifting variables in play (how late they were for an appointment, what mood they were in, how much traffic they judged there to be, and so on) that one could never be sure one had zeroed in on the value they put on reducing their risk of death by a given percentage. The methodological challenge identified here is certainly considerable. Evidently, what is needed is for researchers to observe individuals’ decisions about risks in situations which are familiar to those individuals—where they have a “feel” for the risks involved—but under relatively controlled conditions, where as many variables as possible are held constant. An experimental environment of this kind would be difficult, but perhaps not impossible, to create. There will also be methodological challenges associated with establishing the true value (in monetary terms) of various risky products and services to consumers. Here again, we must simply assume that social scientists will find reliable ways of establishing at least approximations of these values. Second, so far we have talked about the risk-benefit trade-offs made by just one consumer, but regulators must take decisions which have an impact on millions of consumers. However, if refined R.C.B.A. is to operate with one V.P.F., then it cannot take into account variations in individuals’ level of risk-averseness, nor can it take into account the different amounts people with more resources, as compared with people with less resources, would be willing (and able) to spend to avert a risk of death. Cautious people, and people who have more money, would generally be willing to spend more to avert a risk of death than poor people, or temperamentally incautious people. But refined R.C.B.A. will take the average of the values rich, poor, cautious and reckless assign to averting a given risk of death, in order to calculate a one-size-fits-all V.P.F.—one which, quite possibly, does not perfectly match any individual’s personal V.P.F. This objection shows that, though refined R.C.B.A. certainly brings us closer to a principle for deciding on regulation which is justifiable to everyone, it does not take us all the way. Equally, it shows that safety regulation guided by refined R.C.B.A. cannot deliver anything more than a rough approximation of an efficient market in risk. In its defence, we can point out that the rich, and (some of) the risk-averse, will often be able to pay more for particularly safe versions of products and services. In addition, it could sometimes be possible for government to avoid forcing the less well-off to pay for more risk reduction than they would have chosen to, by funding a portion of the safety enhancement required on a product or service publicly, out of income tax. Since less well-off people generally pay little or no income tax, they would not be made to pay as much for safety improvements as the more well-off, who would have been more likely to choose to pay extra for safety in an efficient market.28 Nonetheless, it should not be denied that this objection highlights a real limitation of refined R.C.B.A., considered as a Chapter 7 · Product safety and liability · 147 procedure for setting minimum safety standards. Third, even if one could collect reliable data on the V.P.F. people implicitly operated with in one type of situation, one could not assume that meant they were committed to operating with the same V.P.F. in a very different—for instance, much higher-risk—type of situation. For example, say you are willing to take on a 1 in 2,000,000 risk of death for 5 dollars. Can we really say that makes it irrational for you to decline to assume a 1 in 2 risk of death for 5,000,000 dollars? Jonathan Wolff, who makes this point, writes: ‘For many people, I assume, there is simply no price which would tempt them to take a 50 per cent chance of death’.29 What this point alerts us to is that we cannot assume people’s risk-benefit trade-offs will be linear, as they are in Figure 7.1. Indeed, a moment’s reflection suggests they are a lot more likely to take the shape of the graph in Figure 7.2 (in which, again, the horizontal axis represents increasing benefits in tens of thousands of dollars, and the vertical axis represents increasing probabilities of death from 0 to 1).30 Figure 7.2 0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 40 38 36 34 32 30 28 26 24 22 20 18 16 14 12 10 8 6 4 2 0 0 Figure 7.2 represents the reasonable conjecture that most people would be prepared to take less money in exchange for a given increase in risk—say, an increase of 0.01 in the probability of death—when the risks involved are at the lower end of the spectrum—between 0 and 0.05, for example—than when the risks involved are at the higher end of the spectrum. Indeed, there will come a point when they would only accept that increase in risk in return for an infinite amount of money—which is, effectively, to say that no amount of money would induce them to take on that extra risk. Non-linear risk-benefit trade-off functions may count as irrational according to some theories of rational choice, but that is arguably a problem with those theories rather than a problem with the individuals who operate according to those functions. In any case, if refined R.C.B.A. wants to take risk-benefit decisions in the same way as consumers do in their everyday lives, then it must respect consumers’ actual risk-benefit trade-off functions. Of course, it is a matter for empirical investigation whether the average consumer trades risk off against benefit more in the way portrayed in Figure 7.1 or in the way portrayed in Figure 7.2. However, non-linear risk-benefit trade-offs of the kind portrayed in Figure 7.2 might seem 148 · BUSINESS ETHICS & OTHER PARADOXES to present a decisive problem for refined R.C.B.A., because they set the V.P.F. at infinity. There is a way around this problem, though. Refined R.C.B.A. could operate with different V.P.F.s for different levels of risk. In effect this would mean treating the graph in Figure 7.2 as a broken curve, with straight lines joining—say—the point where y = 0 and the point where y = 0.000001, the point where y = 0.000001 and the point where y = 0.000002, and so on. Each of these straight lines could be extrapolated to the point where y =1, yielding a different V.P.F. for each band of risk of width 0.000001. When a risk reduction within one of these bands was being contemplated, the V.P.F. for that band would be used. When a risk reduction from within one of the bands to within another of the risk bands was on the table, the mean of the V.P.F.s for the two bands would be used. This solution to the problem raises a further question, though. It will sometimes happen that different groups of people are exposed to different levels of risk by the same potentially dangerous product. For example, the provider of tap water might treat the water with a chemical which exposed everyone over the age of 12 to a risk of death of 1 in 2 million, and everyone of age 12 and under to a risk of death of 1 in 50,000. When it is contemplating whether to introduce a regulation banning water-treatment using the chemical in question, should the regulator use the V.P.F. for a risk of death of 1 in 2 million, or should it use the (presumably much higher) V.P.F. for a risk of death of 1 in 50,000? This question is best answered in conjunction with a further reservation you might have about refined R.C.B.A. This fourth reservation is about whether refined R.C.B.A. would distribute risk any more fairly than crude R.C.B.A. does. We have seen that its method for calculating the value of saving a statistical life does not instrumentalise human life in the way that crude R.C.B.A. does. But we have not yet seen any reason to think refined R.C.B.A. wouldn’t recommend exposing minority groups to very large risks for the sake of large benefits to the majority, just as crude R.C.B.A. does. How can we ensure that refined R.C.B.A. yields decisions about risk which are justifiable, even to those most exposed to risk? One answer suggests itself immediately. This is to stipulate that, when different groups are exposed to different levels of risk by the same potentially dangerous product, refined R.C.B.A. should operate with the V.P.F. for the level of risk to which the most exposed group is subject. So, in the example of chemically-treated tap water, refined R.C.B.A. should operate with the V.P.F. relevant to the under-13s, who are exposed to most risk by the chemical treatment, when deciding how to regulate the water industry. By making riskbenefit trade-offs in the way the group most exposed to a given risk would, refined R.C.B.A. would move a step closer to taking decisions which are justifiable even to those most exposed to risk. (Of course, it is only necessary for the regulator to adopt this procedure when there is market failure, such that—for instance—a consumer cannot easily know when they are being exposed to a risk or cannot easily avoid being exposed to that risk. In other cases clear product labelling, or other less intrusive measures, should be sufficient.) In effect, the U.K. government’s Health and Safety Executive operates according to this suggestion to some degree, already. When an industrial procedure exposes any group of members of the public to a risk of death of 1 in 10,000 per year or more, then it classes the risk as ‘unacceptable’31—effectively setting the V.P.F. at infinity. More detail would have to be filled in before refined R.C.B.A. could truly be said to output recommendations which were justifiable even to those most exposed to risk. For one thing, a way would have to be found for R.C.B.A. to take into account the different extents to which Chapter 7 · Product safety and liability · 149 different groups benefit from risky products—as this is surely relevant to the tolerability of the different levels of risk to which they are exposed. For another thing, refined R.C.B.A. must take care not to prioritise those most exposed to risk in a way which imposes an intolerable cost on another group of society-members. Still, we have at least seen that refined R.C.B.A. has the potential to bring us much closer to a fair and efficient distribution of risk than crude R.C.B.A. or the “state of the art” approach could. Nonetheless, one might still have reservations about basing a regulatory regime entirely on refined risk cost-benefit analysis. Here we will consider two objections which raise difficulties with a regulatory regime based solely on refined R.C.B.A. It does not seem likely that the difficulties these objections raise could be addressed from within risk cost-benefit analysis itself. The first objection we can call the “negligence objection”. It says that there are circumstances in which it can be morally wrong for a producer to impose a risk of harm on a consumer, even when the risk that their products will be dangerously defective is below the level R.C.B.A.-guided safety regulations would prescribe. Say, for example, a producer could make its products less likely to be dangerously defective by performing an additional test, which was free and took hardly any time to carry out, but decided not to, because it knew its products would meet the minimum safety standard without it. Many people would say that producer was culpably negligent. They would say it failed to discharge a general “duty of care” which all of us have towards our fellow human beings. And many would say the same about a producer which recklessly omitted to perform a certain standard test, or to fit its products with a standard safetyenhancing part, because—again—it knew its products would meet the minimum safety standard even without the test, or the part, in question. The moral problem in these cases is not with the level of danger of the products per se, but rather with the irresponsible course of action which led to their having that level of danger. It is particularly hard for profitable private manufacturing businesses to avoid complaints along these lines. That is because, for as long as there remain relatively cheap, potentially lifesaving product tests and alterations which could be carried out, it will be true that the business is siphoning funds to shareholders which it could have spent on reducing the danger of death for consumers. Wolff noted in his report for Railway Safety that, ‘[i]f risks are perceived to be the result of reckless, negligent, incompetent or selfish behaviour this moral issue can become a matter of great concern, independently of any concern for the actual harm likely to be done’.32 He suggested that the public outcry over railways which were still, by any standard, extremely safe reflected not so much pervasive irrationality—let alone a preference for “state of the art” safety measures—as public indignation at perceived ‘‘profiteering’’33 on the part of the newly privatised railway companies, which were putting money ‘in the pockets of shareholders’34 that could have been spent on improving safety. (This is one instance of a general style of moral problem which arises when private providers of essential services seek to introduce rationing on grounds of cost-effectiveness. Another instance occurs when health care provision is predominantly private, as it is in the U.S.A., where, as Dan Brock notes, ‘physicians cannot justify withholding beneficial care from some patients on the grounds that the resources will go to other patients who need them more. Instead, they have no assurance about where the savings will go; they can as easily be directed to higher executive salaries or to increased profits in a for profit health plan as to other more needy patients.’)35 150 · BUSINESS ETHICS & OTHER PARADOXES The second objection can be called the “non-exposure objection”. It says that it is unfair for one party to profit from exposing other parties to risks to which the first party is not itself exposed. As Carl Cranor puts it, [f]rom a moral point of view, when one party creates a risk and another bears the costs of it, this raises issues about the distribution of benefits and risks of an activity.36 The worst type of case would be where one party benefited from imposing a risk—to which it was not itself exposed—on other parties who did not benefit from the risk at all themselves. It is easy to understand how that kind of scenario could be exploitative. However, Cranor is suggesting that such a case of risk imposition could be unfair even if the other parties did benefit from the risky practice. As in the negligence objection, the moral problem in these cases is not with the level of danger imposed per se. Rather, the thrust of the non-exposure objection is that it can be unfair for a manufacturing business to profit from selling customers goods which risk being defective and causing an injury (even though the risk to customers is below what refined R.C.B.A. would prescribe) if the manufacturing business is not in some sense exposed to the same risk as its customers. For example, let us say that all the buyers of a certain electrical appliance benefit from the manufacture and sale of that appliance, because it is very useful to them. But, by buying it—let us say—they also expose themselves to a small risk that the appliance they have bought will be faulty and will start a fire, causing damage to them and their property. Only the manufacturer of the appliance benefits from the manufacture and sale of the appliance, without being exposed to the risk. This inequality is what the non-exposure objection regards as unfair. This objection raises a concern about the distribution of risk—but not a concern about the distribution of risk in society as a whole. Rather, it raises a concern about the distribution of risk among those who benefit from some risky practice—a concern which may apply even when the risk imposed on each individual is below the maximum level refined R.C.B.A. would prescribe. You might want to respond to the non-exposure objection by pointing out that, though it is generally true that a manufacturer isn’t exposed to precisely the same risks as the consumers of its products, it is exposed to other risks, which the consumers are not exposed to— malfunctioning factory equipment, for example, and industrial unrest. However, it is standard practice for businesses to take out insurance against such eventualities, and to pass on some of the insurance premium to consumers in the form of slightly higher prices. In this way, a manufacturing business can, in effect, make the purchasers of its products share the risk of malfunctioning equipment, industrial unrest, and other menacing prospects which keep its managers awake at night. In the next section (‘Liability for harmful defects’), we will see whether it is possible to make manufacturers share the risks consumers are exposed to in a similar way. Liability for harmful defects In this section we finally arrive at the topic of product liability. Our question in this section is in what circumstances, if any, manufacturers should pay compensation for harm caused by defects in products they have put on sale. It would be possible to address this question with the assumption that no product safety regulations were in place. However, it will both be more relevant to real-life conditions and make more sense in the light of our discussion so far, if we assume that a government regulator Chapter 7 · Product safety and liability · 151 is implementing minimum safety standards guided by refined risk cost-benefit analysis. If the previous section showed that refined R.C.B.A. does a much better job of determining what risks are acceptable than its competitors, it also exposed some significant flaws which remain when regulation is guided solely by refined R.C.B.A. In what follows, we can investigate whether liability law could offset some of the deficiencies of R.C.B.A.-guided safety standards, with a view to sketching what the fairest and most cost-effective overall regulatory package would look like. We will consider the merits and demerits of three different product liability standards: “caveat emptor”, “negligence”, and “strict product liability”. Caveat emptor “Caveat emptor” is Latin for “the buyer beware!” The caveat emptor liability standard says that manufacturing businesses do not become morally liable to pay compensation simply because products they have put on sale have caused harm. Of course, if it has undertaken, in an explicit contract with the consumer, to provide compensation up to a certain amount, then a manufacturer is obliged to abide by the terms of this contract. And, even if it hasn’t, any manufacturer is free to provide compensation to a consumer who has suffered harm, as a “goodwill gesture”. But—according to the caveat emptor standard—in the absence of a prior contractual undertaking, the fact that they have suffered harm because of a product defect does not mean a consumer has a legitimate claim to compensation from the product’s manufacturer. If there were no minimum safety standards which a manufacturer had to abide by, then the caveat emptor liability standard would be open to the same sorts of criticism as the most permissive view about product safety discussed earlier (in the section of this chapter entitled ‘A market in risk?’). In 19th-century Britain there really was hardly any product safety regulation, and the result was that—to cut costs—bakers plumped up their bread with chalk dust, and wallpaper manufacturers brightened their patterns with lethal arsenic-based pigments.37 (For example, Emperor Napoleon I of France may have died because of arsenic fumes from the wallpaper in Longwood House, Saint Helena, where he was being held in British custody, in 1821.)38 Yet, even in 1855, the chairman of a British local health board could be heard telling a parliamentary select committee, ‘I think the public are sufficiently protected by competition.’39 The problems with a free market in risk discussed earlier would indicate that he was wrong. However, if manufacturers were already required to abide by R.C.B.A.-guided minimum safety standards, would the caveat emptor liability standard still be problematic? If the manufacturer had violated the safety regulations in place, we might certainly insist that it should compensate consumers harmed by defects in its products: it would be natural to make this part of the penalty for violating minimum safety standards. But could it ever be justifiable to require a manufacturer to provide compensation, even if it hadn’t violated safety regulations? One type of situation in which this could be justifiable is suggested by the “negligence objection” to a regulatory regime based solely on refined R.C.B.A.—discussed in the previous section. This objection said that it can be morally wrong for a manufacturer to expose consumers to a level of danger which is below what refined R.C.B.A. would permit, if exposing them to that level of danger could easily have been avoided, and is purely the result of carelessness, recklessness, or—perhaps—greed, on the manufacturer’s part. That thought brings us to the next liability standard we need to consider—the negligence standard. 152 · BUSINESS ETHICS & OTHER PARADOXES Negligence The negligence standard for product liability says that a manufacturer becomes morally liable to pay damages for injuries caused by defective products when the defect which caused the injury exists due to the manufacturer’s negligence. A manufacturer is generally held to be negligent if it omits to exercise reasonable care not to harm other people—in other words, if it fails to discharge its “duty of care”. So—according to the negligence standard—a passenger injured in a railway accident should be able to secure compensation from the railway company, if the crash occurred because the railway company had recklessly, or carelessly, omitted to perform standard safety tests or make use of standard safety-enhancing equipment. There is clearly room for disagreement about what “reasonable care” would consist of. In the railway crash example, this disagreement would centre on questions about what “standard safety tests” or “standard safety-enhancing equipment” would be. A legal system guided by the negligence standard would need to give relatively clear-cut answers to such questions, resisting the temptation to fall back on the problematic notion of the “state of the art”. According to the negligence standard, would a passenger injured in a railway crash be entitled to compensation, if the crash occurred because the railway company decided not to fit its trains with some standard safety-enhancing part because it wished to keep back the money so that its profits were slightly higher? In practice, the answer will often be, “No.” But there is no reason, in principle, why the concept of negligence should not be expanded to include, not just reckless and careless omissions, but also omissions motivated by an excessive preoccupation with increasing profits. If it was expanded in this way, there would—again—be ample room for disagreement about what counts as “excessive” when it comes to a “preoccupation with increasing profits”: shareholders could be counted on to take a rather different view on this to passengers (even, perhaps, when they were the same people). But, however the details are ultimately decided, one point is clear: those who think that manufacturers should be penalised for various forms of negligence, even when their manufacturing process meets an R.C.B.A.-guided minimum safety standard, will welcome the negligence standard for product liability. A regulatory package comprising both R.C.B.A.guided product safety standards and the negligence product liability standard would both foster fairly distributed cost-effectiveness and penalise culpable negligence. On the other hand, those who were not persuaded by the negligence objection in the first place are likely to find the negligence liability standard overly harsh. What’s more, the negligence standard faces practical difficulties. It is in practice very difficult for the plaintiff to prove to a court that the harm they suffered was due to negligence on the defendant’s part. When the defendant is a large corporation, the plaintiff would usually need somehow to gain access to internal company documents showing how particular decisions were taken. Even if they were able to do this, in order to prove recklessness, carelessness, or an excessive preoccupation with profit, on the defendant’s part, the plaintiff might well have to ask the court to speculate about the thought-processes of key decision-makers in the corporation. In practice, it would seem, the negligence standard will make it nigh-on impossible for an injured consumer to prosecute a negligent manufacturer and procure relief. Partly because of these practical difficulties, the legal systems of many countries today operate, not with the negligence standard, but with a product liability standard which is much more favourable to the consumer: strict product liability. Chapter 7 · Product safety and liability · 153 Strict product liability The strict product liability standard says that a manufacturing business is morally liable to pay full compensation for harm to a consumer, whenever that harm is a consequence of a defect in a product the manufacturer has put on sale. In the eyes of this liability standard, a manufacturer is not only morally obliged to pay compensation when it has been negligent, or when it has violated safety regulations. Rather—according to the strict product liability standard—the mere fact that a consumer has suffered harm because of a defect in a product it has put on sale makes a manufacturer morally liable to compensate that consumer for the harm they have suffered. Countries whose legal systems operate with the strict liability standard include the U.S.A. and South Africa. The South African Consumer Protection Act declares that the producer or importer, distributor or retailer of any goods is liable for any harm … caused wholly or partly as a consequence of— (a) supplying any unsafe goods; (b) a product failure, defect or hazard in any goods; or (c) inadequate instructions or warnings provided to the consumer pertaining to any hazard arising from or associated with the use of any goods, irrespective of whether the harm resulted from any negligence on the part of the producer, importer, distributor or retailer, as the case may be.40 If we ignore questions about when the importer, distributor or retailer—rather than the producer—is to be held liable, what makes this a strict liability regime is that the producer is held to be liable, “irrespective of whether the harm resulted from any negligence”. The strict product liability standard shifts the burden of proof in a court case from the consumer to the producer. As you will remember, earlier in this chapter we settled on the following definition of a defective product: Revised definition A defective product is a product which doesn’t function in the way it is meant to, when it is used for the purposes it was designed for, or used in other reasonable and foreseeable ways Under a legal system guided by the strict liability standard, it is not up to the plaintiff to prove that the defendant was negligent. Instead, if it is to avoid paying compensation, the defendant must prove that the plaintiff did not use the product for the purposes it was designed for, or in other reasonable and foreseeable ways. The strict liability standard is extremely controversial. Many people believe it is fundamentally unfair. Recall the two connected thoughts, about the manufacturer of a harmful defective product, which formed the starting point of this chapter: first, “It should have prevented this from happening,” and, second, “It should compensate me for the harm I’ve suffered.” If the manufacturer of a defective product which caused you harm neither behaved negligently, nor violated R.C.B.A.-guided minimum safety standards, then the first of these thoughts begins to look out of place. It is clearly possible for a defective product to make its way into the marketplace, not through violation of minimum safety standards, nor through negligence on the manufacturer’s part, but through sheer bad luck. Surely in those circumstances we cannot claim the manufacturer is morally blameworthy for any harm which ensues. But, if that is true, what justification could remain for the second thought—that the 154 · BUSINESS ETHICS & OTHER PARADOXES manufacturer should compensate you for the harm you’ve suffered? Defenders of the strict product liability standard have tended to reply to the unfairness objection in two different ways. In the first place, they have made the consequentialist point that strict product liability law is an excellent incentive to manufacturers to make their products as safe as they possibly can. However, we can all think of unjust laws which would incentivise beneficial behaviour. For example, introducing the death penalty for speeding would be sure to reduce the number of deaths on the roads, but would still be unjust. So this reply cannot, on its own, defeat the unfairness objection. In the second place, strict product liability’s defenders have claimed that it is a fair liability standard, because manufacturers are generally more able to bear the costs of harm caused by product defects than individual consumers are. In fact, under a strict liability regime, most manufacturers will take out liability insurance, spreading the cost of that insurance among shareholders (in the form of slightly lower capital returns) and consumers (in the form of slightly higher prices). So, in the words of two commentators on product liability law, ‘strict liability is seen as a mechanism for spreading the costs of accidental product defects’.41 In response to this, one could point out that many small businesses would be crippled by liability insurance, and that many consumers are perfectly able to shoulder the costs of injury or damage caused by faulty products—especially those consumers who are themselves large corporations. But, even if one accepts what this second reply says about manufacturers’ ability to pay, one might still find fault with its reasoning. After all, if ability to pay is what should determine who bears the costs of product-related injuries, the chances are we could find people who could bear those costs even more comfortably than the manufacturing business—the Sultan of Brunei, for instance, or Prince Al-Waleed bin Talal al Saud. On the other hand, if the most important thing is spreading costs, why not simply share out the costs of all productrelated injuries among taxpayers in the People’s Republic of China? We need to find a good reason to deliver the bill to the manufacturer of the defective product, rather than simply to the first comfortably-off person we come across. If the manufacturer had been negligent, or had violated minimum safety standards, this would be easy: when the manufacturer is to blame for harm suffered, that is a superb reason for insisting the manufacturer should pick up the bill. But that reason is not available here, since the strict liability standard insists the manufacturer should pay even when the manufacturer is not at fault. John McCall points out that the strict product liability standard distributes the costs to those who have benefitted from the availability of the injury-causing product. Ordinarily, the cost of product liability is passed on in the form of higher product prices to those who demand the product. But even in cases in which an individual business in an elastic market has markedly higher insurance premiums, costs are still assigned to those who benefitted—the shareholders.42 However, it is not clear that benefiting from something harmful by itself adds to one’s moral liability for the harm in question. If I benefit from a forest fire, because it warms my bedroom in the night-time, does that make it any more morally incumbent upon me to pay for the damage that fire caused than upon someone who lives the other side of the mountain, who neither benefited nor suffered on account of the fire? At this point, it may once again be helpful to think of a liability standard as filling the gaps left by R.C.B.A.-guided minimum safety standards. The “non-exposure” objection to a Chapter 7 · Product safety and liability · 155 regulatory regime based solely on refined R.C.B.A.—discussed in the previous section—said that it is unfair for one party to profit from exposing other parties to risks to which the first party is not itself exposed. Those who are sympathetic to the non-exposure objection, and believe it unfair for a manufacturer to profit from selling customers goods which risk being defective and causing injury, if the manufacturing business is not in some sense exposed to the same risk as its customers, can put this forward as a justification of the strict product liability standard. As we saw in the previous section (‘The value of preventing a fatality’), the nonexposure objection raises a concern about the distribution of risk among those who benefit from some risky practice which applies even when the risk imposed on each individual is below the maximum level refined R.C.B.A. would prescribe, and even when no party has behaved negligently. As was said in the previous section, manufacturers are able to pass on some of the costs of risks they must bear to consumers, in the form of slightly higher prices. The strict product liability standard in effect enables consumers to pass on some of the costs of risks they must bear to the producer, since, though consumers are likely to pick up some of the liability insurance premium, shareholders will most probably have to make a contribution as well. Thus the strict product liability standard makes impossible what the non-exposure objection regarded as morally objectionable: that a manufacturer should impose a risk of harm on consumers without being exposed to that risk itself. There are, though, two problems which you might raise with this justification of strict product liability. Firstly, you might point out that it is not necessary to make manufacturers bear the full cost of product-related injuries in order to expose them to some of the risk consumers of their products are exposed to. And, secondly, you might be concerned that the strict product liability standard leaves no room for negligence to be penalised, since it says manufacturers should pay compensation whether they have been negligent or not. In view of these two objections, one option would be to introduce an intermediate liability standard, lying somewhere between negligence and strict product liability. This standard would make manufacturers automatically liable for some proportion—half, say—of the costs of harm due to product defects; but if the manufacturer could prove the consumer had used the product in an unreasonable and unforeseeable way, then its liability would be annulled; and if the consumer could prove the harmful product defect was a result of negligence on the manufacturer’s part, then the manufacturer would become liable for the full costs. However, we should bear in mind a practical difficulty which might arise if this intermediate standard were written into law—a difficulty which, admittedly, also afflicts legal systems operating with versions of the negligence or the strict product liability standard. This is the extent to which it incentivises ‘extensive litigation over both a plaintiff’s and a defendant’s conduct’,43 which is potentially both expensive and intrusive, and could clog up the legal system if it became the norm. Product liability law is sure to remain a contentious topic. It must be sensitive to both matters of principle concerning moral responsibility and the mundane practicalities of the court system. In this section we have seen that it can also be constructive to view product liability law as a foil to product safety law, offsetting deficiencies in the latter so that the overall package of safety and liability regulation is as fair and cost-effective as it can be. Conclusion New technologies and production processes, and new methods of harnessing natural resources 156 · BUSINESS ETHICS & OTHER PARADOXES to serve human ends, bring huge benefits to many of us. But they also create new risks, some of which are invisible to the naked eye—and even incomprehensible to all except trained experts. For the reasons explored in this chapter, and others besides, it would be foolhardy to trust unfettered commerce between producers and consumers to keep those risks at an acceptable level. Governments and businesses must, therefore, put commercial interests to one side, and formulate safety and liability standards which both keep risks at morally acceptable levels and ensure they are fairly distributed. In this chapter we have seen that a form of risk cost-benefit analysis can be very helpful for setting clear and justifiable safety standards. However, it is important to note that R.C.B.A. can only help with this when the likelihoods of beneficial and harmful consequences are known to us. In the many cases in which we know a technology or production process could have devastating consequences, but we can’t put a probability on their occurrence, R.C.B.A. delivers no determinate result, and we must look elsewhere for guidance. Though the topic of this chapter has been the dangers posed by products which are defective, many of the same arguments would apply to products which, even when functioning as intended, are dangerous. For instance, several of the reasons given earlier for why a market in risk will generally exhibit market failure are as applicable to potentially harmful intoxicants, such as heroin, alcohol and tobacco, as they are to bicycles and railway travel. Equally, if it is right for liability law to make producers share the risks to consumers and third parties of being injured by a malfunctioning car or electrical appliance, then, by the same logic, producers ought to share the risks to consumers and third parties that a handgun or rifle, functioning as it is meant to, will harm them. These cases raise their own, complex, issues, which there is no room to discuss here. But in these cases too we are in need of standards for product safety and liability which are sensitive to moral responsibility, distribute risk fairly, and keep danger to society-members at a morally acceptable level. Chapter 7 · Product safety and liability · 157 CONTENT QUESTIONS (1) What is a defective product? (2) What does the most restrictive view about product safety say? (3) Give an example of a market interaction between a buyer and a seller which most people would agree is not rendered morally permissible by both parties’ consent. (4) What does the “caveat emptor” standard for product liability say? (5) What is the “negligence standard” for product liability? CRITICAL ANALYSIS QUESTIONS (6) Outline three reasons why a “market in risk” is particularly likely to allocate risk inefficiently. (7) The “refined” version of risk cost-benefit analysis (R.C.B.A) involves putting a financial value on preventing someone’s death—the “value of preventing a fatality” (V.P.F). Many people would take the view that this involves taking an unacceptably instrumental approach to human life. Outline two points which could be made against this view. DISCUSSION QUESTIONS (8) “Risk cost-benefit analysis can be used to frame product safety regulations which are not only cost-effective, but also fair.” Discuss. (9) “The ‘strict product liability’ standard requires businesses to pay compensation for consumer injuries caused by product defects even when the businesses are not morally blameworthy for these injuries. This is unjust and the ‘strict liability standard’ should be scrapped.” Do you agree or disagree with this statement? Explain why. 158 · BUSINESS ETHICS & OTHER PARADOXES CHAPTER SEVEN NOTES AND REFERENCES 1 Georges Surdez, ‘Russian Roulette’, Collier’s, 30 January 1937. Surdez’s sources suggest that, in the original version of the game, the player removed just one round from a fully loaded pistol—rather than loading just one round into an empty pistol. 2 Stephen Perry, ‘Risk, Harm, Interests, and Rights’, in Risk: Philosophical Perspectives, ed. Tim Lewens (London & New York: Routledge, 2007). 3 The figures in this example are invented. 4 Judith Jarvis Thomson, ‘Imposing Risks’, in her Rights, Restitution, and Risk: Essays in Moral Theory, ed. William Parent (Cambridge: Harvard University Press, 1986), p. 177. 5 I owe this way of putting the point to David Benatar. 6 Michael Otsuka, ‘Self-Ownership and Equality: A Lockean Reconciliation’, Philosophy & Public Affairs, vol. 27, no. 1, 1998. 7 Jonathan Wolff, Ethics and Public Policy: A Philosophical Inquiry (London & New York: Routledge, 2011), p. 100. 8 ‘Imposing Risks’, pp. 188-189. Thomson cites two articles by other philosophers in which a similar point is made: Jules Coleman, ‘Efficiency, Utility, and Wealth Maximization’, and Ronald Dworkin, ‘Why Efficiency?’, both in Hofstra Law Review, no. 8, 1980. 9 Michael J. Sandel, What Money Can’t Buy: The Moral Limits of Markets (London: Allen Lane, 2012), pp. 154-160. 10 Ethics and Public Policy: A Philosophical Inquiry, p. 97. 11 Carl F. Cranor, ‘Toward a Non-Consequentialist Approach to Acceptable Risks’, in Risk: Philosophical Perspectives, p. 50. 12 John Rawls, A Theory of Justice: Revised Edition (Cambridge: Belknap, 1999), p. 25. 13 ‘Toward a Non-Consequentialist Approach to Acceptable Risks’, p. 50. 14 Richard T. DeGeorge, Business Ethics: Seventh Edition (International Edition) (Upper Saddle River: Pearson, 2013), p. 273. 15 Jonathan Wolff, Policy and Risk: Railway Safety and the Ethics of the Tolerability of Risk (London: Railway Safety, 2002), p. 12. 16 Business Ethics: Seventh Edition (International Edition), p. 276. 17 Health & Safety Executive, Reducing Risks, Protecting People: HSE’s Decision-Making Process (London: Health & Safety Executive, 2001), p. 41. 18 Policy and Risk: Railway Safety and the Ethics of the Tolerability of Risk, p. 6. 19 Op. cit., p. 44. 20 Ethics and Public Policy: A Philosophical Inquiry, p. 89. 21 Jonathan Wolff, ‘What is the Value of Preventing a Fatality?’, in Risk: Philosophical Perspectives, p. 54. Wolff is following the decision procedure set out in Part 3 of Reducing Risks, Protecting People: HSE’s Decision-Making Process, which sets out the U.K. government’s approach to decision-making about risk. 22 Madeleine Hayenhjelm & Jonathan Wolff, ‘The Moral Problem of Risk Impositions: A Survey of the Literature’, European Journal of Philosophy, vol. 20, suppl. S1, 2012, p. e26. 23 Reducing Risks, Protecting People: HSE’s Decision-Making Process, p. 36. 24 Herman B. Leonard & Richard J. Zeckhauser, ‘Cost-Benefit Analysis Applied to Risks: Its Philosophy and Legitimacy’, in Values at Risk, ed. Douglas MacLean (Totowa: Rowman & Allanheid, 1986), p. 33. 25 ‘What is the Value of Preventing a Fatality?’, p. 54. 26 Cass R. Sunstein, Risk and Reason: Safety, Law, and the Environment (Cambridge: Cambridge University Press, 2002), p. 165. 27 The numerical values included here are invented. 28 I owe this suggestion to Jonathan Wolff. 29 ‘What is the Value of Preventing a Fatality?’, p. 61. 30 The numerical values included here are invented. 31 Reducing Risks, Protecting People: HSE’s Decision-Making Process, p. 46. 32 Policy and Risk: Railway Safety and the Ethics of the Tolerability of Risk, p. 28. Chapter 7 · Product safety and liability · 159 33 Op. cit., p. 46. Op. cit., p. 45. 35 Dan W. Brock, ‘Health Care Resource Prioritization and Rationing: Why Is It So Difficult?’, Social Research, vol. 74, no. 1, 2007, p. 146. 36 ‘Toward a Non-Consequentialist Approach to Acceptable Risks’, p. 39. 37 Philip Ball, ‘William Morris made poisonous wallpaper’ (www.nature.com/news/2003/030612/full/news030609-11.html), 12 June 2003. 38 David E.H. Jones & Kenneth W.D. Ledingham, ‘Arsenic in Napoleon’s wallpaper’ (www.nature.com/nature/journal/v299/n5884/abs/299626a0.html), 14 October 1982. 39 Jane Garnett, ‘Commercial Ethics: A Victorian Perspective on the Practice of Theory’, in Business Ethics: Perspectives on the Practice of Theory, ed. Christopher Cowton & Roger Crisp (Oxford: Oxford University Press, 1998), p. 128. 40 Act no. 68, 2008, article 61 (‘Liability for damage caused by goods’), in Republic of South Africa Government Gazette, vol. 526, no. 32186. Consult subsection 5 for a definition of ‘harm’, and subsection 4 for circumstances which exempt a producer, importer, distributor or retailer from liability. 41 Joseph R. DesJardins & John J. McCall, Contemporary Issues in Business Ethics: Fifth Edition (Belmont: Wadsworth, 2005), p. 286. 42 John J. McCall, ‘Fairness, Strict Liability, and Public Policy’, in Contemporary Issues in Business Ethics: Fifth Edition, p. 306. 43 Richard A. Epstein, ‘Beyond foreseeability: consequential damages in the law of contract’, in Liability and Responsibility: Essays in Law and Morals, ed. R.G. Frey & Christopher W. Morris (Cambridge: Cambridge University Press, 1991), p. 109. 34 Chapter Eight IS ADVERTISING IMMORAL? by Greg Fried This topic deals with general criticisms of the advertising industry and responses to these concerns. Many people accept that some advertisements—such as those which try to get consumers to believe objective falsehoods, or which express sexist or racist attitudes—are morally problematic. Advertising codes, like that of South Africa’s Advertising Standards Authority, seek to distinguish between morally acceptable and dubious advertising.1 But the criticisms we will consider are broader and more radical: they claim that all (or nearly all) advertising is harmful. For instance, some critics hold that advertising in general hinders us in various important pursuits, including truly being ourselves, making rational decisions, acting freely and finding out the truth. By the end of this topic we will have aired some general concerns about advertising and considered their merits and flaws. The latter activity aims not only to stimulate more careful thinking about the nature and influence of advertising, but—more generally—to provide practice in evaluating ethical claims by means of reasoning and thought experiments. General critiques of advertising Concerns about advertising in general include concerns about the methods of advertisers and the effects that these methods have on us. The methods of advertising are sometimes said to be undesirable because they do not honestly present the features of the product. Take ‘puffery’, for instance, which Robert Arrington describes as ‘the practice by a seller of making exaggerated, highly fanciful or suggestive claims about a product or service’.2 As Arrington points out, puffery is a common and highly successful advertising technique. However, we might suspect that puffery is wrong, since it describes the product or service misleadingly. The effects of advertising—its influences on our desires and actions—are sometimes said to be undesirable because advertising leads us to acquire desires that are irrational, or not really our own, or that are in some other way objectionable. We will consider some well-known literature that fleshes out such objections and offers responses to them. Chapter 8 · Is advertising immoral? · 161 First, though, it is worth asking why general criticisms of advertising matter. Even if the charges are well-founded—in other words, even if advertising in general is problematic—what will the practical consequences be? It is one thing to argue that some aspect of advertising is problematic; such an argument might stimulate a reform in that aspect of the industry. But (one might say) to argue that advertising in general is objectionable is pointless, because the industry is not going to go away. One response to this line of thought is that even if a practice is so well-established that there is no significant chance of removing it, it is still important for me to consider whether this practice is valuable, as this will inform my attitude towards it and the extent to which I associate with it. If I find the practice morally problematic, I may even be inspired to influence the views of others in an effort to undermine or improve the practice. For instance, if I decide that the advertising industry is deeply morally dubious, I may decide against a career in it, try to reduce the influence of advertising on me, or alert others to my criticisms. The general criticisms and responses we’ll consider are: J.K. Galbraith’s famous claim that the desires produced in us by advertising are not worth satisfying, and Friedrich Hayek’s response to Galbraith. A well-known paper by Arrington in which he lists potential charges against advertising— that it destroys our autonomy, makes us irrational, etc.—and replies to all these charges. Theodore Levitt’s vigorous and influential defence of advertising against the claim that its elaborations and distortions are undesirable. Galbraith’s Dependence Effect In The Affluent Society, the economist J.K. Galbraith holds that in a society where people’s basic needs are satisfied, the production of new goods and services must be accompanied by the production of a desire for them.3 Otherwise, there would be no market for these goods. How can producers generate these desires? For this, they turn to the advertising industry.4 The central function of advertising is ‘to create desires—to bring into being wants that previously did not exist’.5 While ‘[a] man who is hungry need never be told of his need for food’,6 a more affluent person may need prompting to want a new gadget. Galbraith’s claim is that the desire for goods in an affluent society depends on the production of these goods. Had the goods not been produced, then they would not have been advertised, so there would have been no desire for them. The process of stimulating desires in this way is sometimes called ‘manufacturing demand’. You might have thought that production is shaped by demand for goods and services: consumers have wants, and producers make goods and services designed to satisfy those pre-existing wants. Galbraith, however, argues that the process also goes in reverse: producers sometimes shape what people want. Galbraith’s term for the dependence of desire on production is ‘the Dependence Effect’. When we reflect on the Dependence Effect, according to Galbraith, we should see that the desire for such goods is not ‘urgent’, by which he means that the desire is not worth satisfying. His reason is that the source of the desire is not in people themselves, but rather in the producers, and more specifically in the advertisements for the producers’ goods. ‘If the individual’s wants are to be urgent, they must be original with himself. They cannot be urgent if they must be contrived for him.’7 Thus, for Galbraith, the advertising industry performs a worthless activity when it creates desires in us. It stimulates desires that are not urgent—not worth satisfying—precisely because they do not originate with us. Of course, Galbraith would have to admit that some advertising 162 · BUSINESS ETHICS & OTHER PARADOXES merely serves an informational purpose: it straightforwardly informs people how to acquire products and services that they already want. But Galbraith could accept this while still criticising a large proportion of advertisements for seeking to stimulate new desires. The economist Friedrich Hayek responds, in a brief and elegant article, by attacking a crucial feature of Galbraith’s position: his notion of an urgent desire.8 For Galbraith, a desire that is urgent, in his sense of being worth satisfying, must originate in oneself, and not be contrived by external influences. In response, Hayek suggests that very few desires originate in ourselves. Such desires include our wants for food, shelter and sex.9 By contrast, we might add, a great many of our wants have their source elsewhere. For instance, the desire for literature does not originate in us, independently of external influences. Often, it is education which stimulates this desire in us; or if not education, then some other feature of the society to which we belong. Hayek holds that if we accept—as we should—that the category of desires originating in ourselves is inadequate to contain all the desires worth satisfying, then we must reject Galbraith’s position. Is Hayek’s criticism convincing? In the following paragraphs, I shall try to defend Galbraith’s views by exploring them in more detail than Galbraith provides, but the defence will ultimately fail. This seems to confirm that Galbraith’s criticism requires (at least) more substantiation if it is to be plausible. Recall Galbraith’s remark: ‘If the individual’s wants are to be urgent, they must be original with himself. They cannot be urgent if they must be contrived for him.’ Suppose we explicitly distinguish—though Galbraith does not—between two claims that Galbraith seems to accept: My desire for X is urgent—i.e. worth satisfying—if and only if it: (i) originates in me. (Call this the self-origination claim.) (ii) does not result from someone else’s contrivance. (Call this the non-contrivance claim.) To begin with the self-origination claim: Galbraith does not explain what is meant by a selforiginating desire (and neither does Hayek), but a natural interpretation is that it is a desire that I have formed without any influence from my environment. How am I to identify such desires? Well, if I have formed a desire without influence from my environment, then perhaps I would also have had that desire had my environment been completely different. Thus, it seems that one way to identify self-originating desires is to consider which desires people tend to have no matter what their environments are. If this is our approach, then the desire for food would presumably count as self-originating, since (nearly) all people want food, no matter what their environment (though of course what food they want—their more detailed desires—would be influenced by their particular circumstances). However, the desire for literature would not count as self-originating, since the production of fiction and the desire to read it is not a feature of all societies. Clearly, then, this desire is influenced to some extent by one’s environment. In short, if Galbraith retains the selforigination claim, then it seems that Hayek is right to say that he admits far too narrow a range of desires as worth fulfilling. (Of course, the desire for literature is not the only example we could use to argue that Galbraith’s claim is too restrictive. You might think of many others.) We could try to save the self-origination claim by modifying it. It has just been noted that while the desire for any particular food may not be universal, the more general desire for food seems common to almost everyone. Similarly, while not all societies value literature, perhaps nearly all people, no matter what their background, have the more general desire for well-told Chapter 8 · Is advertising immoral? · 163 stories. With this proposal in mind, suppose that the self-origination claim is modified to state that my desire for X is worth satisfying if and only if it either originates in me or falls under a more general desire that originates in me. Then, assuming that nearly all people desire well-told stories—and hence, that this desire plausibly counts as self-originating—the desire for literature does seem to count as worth satisfying, since it falls under the more general desire for well-told stories. If we accept this modification, then the self-origination claim might no longer be too restrictive. However, it may now be too permissive, since just about any desire that anyone might have could fall under a highly general and universally held desire; for instance, my desire to buy a vastly expensive new sports car may fall under the more general desire for pleasurable experiences. On the modified self-origination claim, the desire for a new sports car would then count as worth satisfying. But of course, Galbraith would not wish to be so permissive. Hence, the self-origination claim as it stands or with the given modification, will not serve Galbraith’s purposes. What, then, if Galbraith were to abandon the self-origination claim while still asserting the non-contrivance claim? Contrivance is sometimes associated with morally dubious qualities, such as cunning or manipulation. Thus, the non-contrivance claim seems not to prohibit all kinds of external influence, but only those which are morally inappropriate. If that is Galbraith’s position, then the non-contrivance claim amounts to the position that my desire for X is worth satisfying if and only if it does not result from the morally inappropriate influence of others. Galbraith may then be able to distinguish between the desire for literature and the desire for the latest gadget: the former has been stimulated by an appropriate social influence (such as education), while the latter has merely been contrived; that is, it has been stimulated by a morally inappropriate influence (in this case, advertising). However, to substantiate this view, Galbraith would have to provide much more argument than he has done. Firstly, he would need to provide a plausible distinction between morally appropriate and inappropriate social influences. Secondly, his distinction would need to imply that advertising in general—not merely some advertising—falls into the morally inappropriate category. He has not begun to perform these tasks. Moreover, Galbraith could not simply assume that advertising is a morally inappropriate influence. Recall that he seeks to conclude that advertising is worthless. If he were to assume that advertising is morally inappropriate, then his assumption might be so similar to his conclusion that he would risk begging the question, assuming what he seeks to conclude. In short, it seems that neither Galbraith’s self-origination claim nor the non-contrivance claim is acceptable. The self-origination claim admits too few desires as worth satisfying, or— on the modified version—more desires than Galbraith would wish to admit as worth satisfying. The non-contrivance claim is either unsubstantiated or question-begging. Hence, since these claims are all that Galbraith offers, it seems that his position is unpersuasive. We now turn to Arrington’s discussion of general objections to advertising. It is a natural progression: the discussion of Galbraith’s position raised the question of whether we can identify a category of morally unacceptable influences into which advertising might fall, and Arrington’s discussion will explore this question. The next section will explain Arrington’s views; the subsequent section will offer an evaluation. 164 · BUSINESS ETHICS & OTHER PARADOXES Arrington on four potential objections Arrington identifies four potentially tempting ways to object to the advertising industry in general. Each objection holds that advertising in general is morally objectionable because it undermines some valuable ideal about ourselves. In particular, advertising allegedly undermines the ideals that our desires be autonomous and rational, that our choices be free, and that our actions not be controlled by others. Arrington, however, is no supporter of these objections. He aims to show that all these objections fail. For each objection, his technique is to analyse that objection and then show that while the objection may apply to some advertising, it does not apply to all advertising. Below are the four objections, along with Arrington’s analysis and response. (Arrington regards his own analyses as incomplete and tentative, but since these are what he offers, we will consider them.) Advertising produces desires in us that are not autonomous What is an autonomous desire; in other words, a desire that is self-ruling, or ‘truly mine’?10 The notion of autonomy may seem obscure. Arrington proposes an analysis—an attempt to clarify and understand a potentially difficult or confusing notion—which he draws from the philosopher Harry Frankfurt. Frankfurt distinguishes between a first order desire and a second order desire, i.e. wanting X versus wanting to want X. Frankfurt’s view is that a person’s first order desire is autonomous when it conforms to her second order desires—in other words, that her wanting X is autonomous when she also wants to want X—and otherwise it is not autonomous. His idea is that autonomy involves conformity to a higher-order desire, while nonautonomy involves non-conformity. Suppose, for example, that I am training for a race, and trying to adopt an attitude of wanting only healthy foods. Yet I am tormented by the desire for a slice of chocolate cake. In this situation, I have a first order desire for the cake: I want that slice. But I do not want to want the cake; rather, what I would like is to desire only healthy foods. So my first order desire for the cake does not conform to my second order desires. Thus, on Frankfurt’s account, my desire for the cake is not autonomous. And this may seem intuitively appealing: since my desire for the cake torments me—I do not want to have this desire—I might want to say that it is not truly my desire. By contrast, suppose I am trying to want only healthy foods, and in fact I feel like a plate of lentils. Then—since lentils are healthy—my desire for the lentils conforms to my second order desire to want healthy food, and is therefore autonomous on Frankfurt’s account. Again, this may seem intuitively appealing: since I wholly identify with this desire—I am satisfied to have it—it might seem appropriate to say that it is truly my desire. On Frankfurt’s account of autonomy, some desires acquired from advertising will be autonomous, and some will not be. To see this, imagine that I acquire the desires in the two examples—for cake and for lentils—from watching advertisements on TV. The first desire acquired as a result of advertising will not be autonomous, but the second desire will be. Thus, it is false that advertising in general produces desires in us that are not autonomous. Advertising produces irrational desires in us What is it to have a rational desire for a product X? One might think that my desire for X is rational if, in full knowledge of the features of X, I desire X. Such circumstances would ensure Chapter 8 · Is advertising immoral? · 165 that my desire is not based on ignorance of X. But Arrington points out that this is too strict a criterion. Because we are always ignorant of a product to some extent, this criterion would never allow us to have a rational desire for X. In an attempt to be more moderate, Arrington proposes an account of rational desire that is relative to the desires of the individual. As Arrington approvingly remarks: ‘Normally a rational desire or choice is thought to be one based upon relevant information, and information is relevant if it shows how other, prior desires may be satisfied’.11 One way to describe Arrington’s account of rational desire, a way which explicitly brings out the subjective element of his account, is this: My desire for X is rational if, in the knowledge of those features of X that I regard as relevant, I desire X. On this account, some of my desires acquired from advertising will not be rational, but some will be. Suppose I want to buy a motorcycle, and I’m interested in (a) its engine capacity and (b) whether it’ll make me look attractive. If I see an advertisement for the motorcycle and I’m so excited by its sleekness and capacity to make me attractive that I want it, despite not knowing its engine capacity, then I have acquired an irrational desire from advertising. But if I first check the engine details (on the advertisement or elsewhere) before desiring the motorbike, then my desire is rational. So it would be wrong to say that advertising in general produces irrational desires. Choices that we make as a result of advertising are not free What is it to choose freely? For Arrington, to choose X freely is to be able to cite a reason for doing X.12 Someone who does X despite not being able to provide any reason for it seems to be acting unfreely: such a person is yielding to an impulse, rather than making a free choice. On this account, some choices as a result of advertising will be free, while some will not. Suppose I watch an advertisement for a lawnmower, and as a result I buy the mower. Did I do so freely? Well, what do I say when asked to justify my purchase? If I can give a reason for my purchase (‘I need a lawnmower, and this seemed like a good one’), then I have indeed acted freely. If I can think of no reason (‘Hm...I already have a lawnmower, and I can’t see why this one would be any better...I don’t really know’) then I have acted unfreely, purely on an impulse stimulated by the advertisement. Advertisers control us Spookily, some people maintain that advertisements control our actions. What is it for one person to control another’s action? Arrington’s position is this: A person C controls the behaviour of another person P iff [an abbreviation for ‘if and only if’]: (1) C intends P to act in a certain way A; (2) C’s intention is causally effective in bringing about A; and (3) C intends to ensure that all of the necessary conditions of A are satisfied.13 To take an example of control, on this view: suppose Cynthia captures Pablo and works for months, brainwashing him to assassinate someone. Cynthia manages to convince Pablo that this person deserves to die, manages to remove all of Pablo’s scruples against killing people, gives him confidence that she can do it, trains him in effective assassination techniques, and removes all other obstacles to the assassination. When Pablo actually does the deed, it seems right to say that Cynthia has controlled him. 166 · BUSINESS ETHICS & OTHER PARADOXES Teaching a philosophy class, by contrast, does not amount to controlling the students. If I intend my students to learn something about (say) advertising ethics, then even if they do so as a result of my intention, I have not controlled them, according to Arrington’s account. This is because Arrington’s condition (3) is not fulfilled: I have not tried to ensure that all obstacles to their learning are removed. As their lecturer, I do not, for instance, pay them to give up any demanding part-time job so that they can focus on their studies, and I do not terminate any emotionally draining and distracting relationships they might have. Most, if not all, advertisements would also fall short of control on Arrington’s account. I may see a movie as a result of seeing an advertisement for it, but the advertisement does not aim to remove all obstacles to my seeing the movie (my busy schedule, financial constraints, etc.). Evaluation of Arrington If Arrington has offered plausible analyses of the four charges that he considers, then we can join him in denying that these charges are generally applicable to advertising. His analyses, if they are plausible, also have a further use: we might employ these analyses to identify cases where one or other charge does apply to a particular advertisement; in which, for instance, someone has indeed chosen unfreely as a result of an advertisement.14 However, it will be argued here that Arrington’s analyses of the charges against advertising are not credible. If the arguments below are persuasive, then Arrington has not shown that four general charges against advertising are generally inapplicable, because he has not explained these charges appropriately. This is not to say that the charges against advertising do hold in general; the point is rather that Arrington’s analyses have not settled whether the charges succeed because they have not explained what the charges amount to. The method will be to use a standard, non-technical and useful philosophical tool—thought experimentation—in order to reveal each of Arrington’s analyses as counter-intuitive. We can understand thought experiments as descriptions of hypothetical scenarios designed to elicit our intuitions about philosophical matters. In each case, support for Arrington’s analysis of X will be undermined in two ways: (i) by considering a scenario designed to show that X can hold even if the conditions of Arrington’s analysis are not fulfilled, and (ii) by considering a scenario to show that the conditions of Arrington’s analysis can be fulfilled even if X does not hold. Each of these thought experiments, if successful, would suffice to show that Arrington’s analysis is problematic. Together, they aim to present a serious challenge to Arrington, indicating that the fulfilment of his conditions for X is neither necessary nor sufficient for X to hold. After the criticism of each analysis, there will be a brief and broad indication of some ways in which the analysis might be improved. However, these points are not so substantial and detailed as to amount to new analyses. The focus is firmly on criticism by means of thought experiments, rather than on the replacement of one analysis with another. Autonomy Is it the case that a first-order desire of mine is autonomous if and only if it conforms to a second order desire of mine? We will try to undermine this claim by considering an example of (i) a first order desire that seems autonomous despite not conforming to a second order desire, and (ii) a first order desire that seems not to be autonomous despite conforming to a second order desire. Example of (i): suppose that I’ve always loved art—my desire to paint feels like an Chapter 8 · Is advertising immoral? · 167 expression of my true self—but my parents tell me that law is the appropriate path for me. I am a dutiful child, eager to obey them wholeheartedly—I want to want to be a lawyer—and yet I don’t actually want to be a lawyer, but an artist. Then, one might think, my first order desire is autonomous—it is truly mine—though it fails to conform to my second order desire. Example of (ii): Consider the scenario described in George Orwell’s novel 1984. The main character, Winston Smith, rebels against a totalitarian state and its leader, Big Brother. He is caught, and is tortured and brainwashed until he becomes a true believer. By the end of the book, Winston accepts that he loves Big Brother—and hence, to put the point in ‘desire’ talk, that he wants Big Brother to thrive, wants Big Brother to defeat enemy states, etc. Moreover, it is fair to say that Winston desires to have all these desires too; no part of him rebels against them. Still, given this scenario, we might think that Winston’s first order desires, despite their perfect conformity to his second order desires, are not autonomous: they are not truly his. The point that underlies these examples is that whether a first order desire is autonomous does not wholly depend on its relations to second order desires. The question of autonomy seems to depend also on the strength and duration of the desire, and the way in which the desire has been acquired. Rational desire Recall that according to Arrington, my desire for X is rational if, in the knowledge of those features of X that I regard as relevant, I desire X. We will try to rebut this claim by considering examples of (i) a desire that seems irrational despite being accompanied by the knowledge that Arrington regards as appropriate, and (ii) a desire that seems rational despite a lack of the knowledge that Arrington regards as appropriate. Example of (i): Suppose that my job is to procure wood for a furniture manufacturer. My criterion for choosing a supplier among the many contenders—a criterion that I am sensible enough to keep hidden from my colleagues—is the physical attractiveness of the supplier’s employee with whom I would be interacting. The more attractive the employee, the more likely I am to choose that supplier. When I then select a supplier that best meets my criterion, I have indeed fulfilled Arrington’s requirement for a rational desire. But even though Arrington’s requirement for a rational desire is fulfilled, surely my desire for that particular supplier is not rational. Example of (ii): Suppose instead that as the procurer, I have a broader set of criteria: I plan to select a supplier based on the standard criteria for this kind of decision (price, quality, response time to orders, sustainable environmental practices, etc.) and physical attractiveness of the supplier’s employee. I intend to weigh all of these factors in my decision. But when my colleagues present me with a body of information about each supplier, I find myself wanting to choose a particular provider, based on the standard criteria alone, even before I have found out how attractive the various suppliers’ employees are. Isn’t this a rational desire, even though I have acquired it before I have checked all the criteria I have in mind? It would seem odd to insist that my desire for a particular supplier, based on the standard criteria, is not rational because it excludes knowledge of its employee’s attractiveness. The point underlying these examples is that the rationality of a desire for X seems to depend at least partly on the rationality of the criteria we have for wanting X. If we establish that X fulfils one of our irrational criteria, this does not make our desire for X rational; and if we want X without first checking whether it fulfils one of our irrational criteria, this does not make our desire for X irrational. 168 · BUSINESS ETHICS & OTHER PARADOXES Free choice For Arrington, to choose something freely is to be able to cite a reason for doing it. We will try to rebut this claim by considering an example of (i) a choice that seems free despite the inability of the actor to cite a reason (in any substantial sense), and (ii) a choice that seems unfree despite the actor’s ability to cite a reason. Example of (i): I dreamily spend a week on an island holiday. At the end of my holiday, someone asks me for the reasons why I acted in certain ways. ‘Why,’ she asks, ‘did you take a stroll along the beach in the late afternoon?’ In response, I find that I can offer nothing beyond the most vague, uninformative responses that seem too insubstantial to enjoy the status of reasons, such as ‘It just seemed like something to do’. (My inability does not arise from a failure of memory; I would not have been able to do any better immediately after performing the action.) And yet it seems too harsh to suspect me of having chosen unfreely. Indeed, one might think that during my island holiday, I was wholly free. Example of (ii): I am successfully brainwashed into holding an extremist political doctrine. (Imagine some extended, violent process in which I am kept in isolation, the doctrine is repeatedly explained to me, I am rewarded for remembering and praising it, etc.). After that, I can certainly cite reasons for my political actions. But perhaps the sources of my beliefs and actions preclude me from making free political choices.15 The underlying point is that free choice should not be so tightly linked with the capacity to offer reasons for one’s choice. Sometimes I choose freely even if my choices are not based on any substantial reason that I can provide; and sometimes, when I can offer reasons for my choices, the sources of my choices and of my reasons seem antithetical to freedom. Control Recall that Arrington’s analysis of control includes three conditions. We will try to undermine Arrington’s analysis by considering an example of (i) an action that does not seem to have been controlled despite the fulfilment of all three conditions, and (ii) an action that does seem to have been controlled despite the fact that not all the conditions have been fulfilled. Example of (i): Recall the scenario described in the earlier discussion of control: the case of Cynthia, who trains Pablo for an assassination. Let’s now modify this scenario. Cynthia, in the new case, is thoroughly incompetent. She intends to—and tries to—train Pablo in assassination techniques, remove his scruples against killing people, etc. However, all her attempts fail. Nonetheless, Pablo still performs the assassination. That is because Cynthia’s intention for him to perform the killing has caused him to think carefully about the propriety of doing so, and he has decided that assassination is indeed warranted. Now, are Arrington’s three conditions fulfilled? Firstly, Cynthia does intend Pablo to carry out the assassination. Secondly, it seems that her intention is indeed causally effective in bringing about the assassination. We can suppose that if Cynthia had not brought up the matter with Pablo, then the notion of assassination would not have entered his mind, so he would not have reflected on it, and would therefore not have performed it. Finally, Cynthia does indeed intend to ensure that all the necessary conditions for the assassination are satisfied. Yet, given the substantial role of Pablo’s own considerations, we might be reluctant to say that she has controlled him. Rather, we might say that she has tried to control him, but has failed. Example of (ii): Modify the original case of Cynthia and Pablo in a different way. Imagine that Cynthia does indeed ensure that the necessary conditions for the assassination are fulfilled—except that there is one necessary condition she does not ensure, or even attempt to Chapter 8 · Is advertising immoral? · 169 ensure: physical proximity between the assassin and the target. The target—the King, let us suppose—usually stays in his palace. He appears in public seldom, and in unpredictable locations. Thus, Cynthia trains Pablo only in the hope that he may one day find himself near enough to stab the King. But when, fortuitously, Pablo does see the King near him, and kills him, it still seems appropriate to say that Cynthia has indeed controlled the action—thanks to her, her trainee is thoroughly skilled and dedicated to the action—even though she did not even try to ensure that a particular necessary condition for the killing was fulfilled. Arrington could evade the example of (i) by altering the third condition of his analysis: he could replace ‘intends to ensure’ with ‘ensures’. But the example of (ii), in which an action is controlled even though the controller does not ensure, or intend to ensure, the satisfaction of a particular condition that is necessary for that action, is not so easily evaded. What might we learn from these extended criticisms of Arrington’s analyses, beyond the skill of using thought experiments in an effort to undermine a position? We might come to suspect—though admittedly, in the absence of any conclusive evidence—that it will be difficult to make a plausible general charge against advertising that cites the notions of autonomy, freedom, rationality or control. These matters are hard to explain clearly and uncontroversially. Anyone who wishes to criticise advertising by citing them will have to venture into deep waters, and is likely to make claims that are vulnerable to objection. Levitt on the value of advertising Is there some other general criticism, not considered by Arrington, that might be levelled against advertising? Here is one: Advertising should provide the plain facts about a product—no more or less—but fails to do so Sometimes an advertisement might fail to provide the plain facts by telling an objective falsehood about a product. For instance, several shoe manufacturers—including Sketchers, Reebok and New Balance—manufactured ‘toning shoes’ around the years 2009-12, claiming that people who wore the shoes would enjoy various health benefits, including strengthening of the lower body muscles and weight loss. These claims were found to be without substance, and the companies responded to lawsuits by agreeing to refund their customers.16 However, cases involving objective falsehoods are certainly not general to advertising. Most if not all advertisements, though, do go beyond a plain statement of the facts in other ways: they seek to appeal to our emotions, for instance, or they link the product to a certain lifestyle; they may create associations with wealth, happiness, serenity, toughness, kindness, fun, sensuality and many other qualities. The charge raised here therefore differs from those discussed by Arrington—none of those charges were generally applicable to advertisements. But is this feature of advertisements undesirable? If so, we have identified a general and problematic characteristic of advertisements. Theodore Levitt attempts to defend advertising from the charge that it is wrong to go beyond the straightforward facts.17 Levitt admits that people ‘want less fluff and more fact about the things they buy. They want description, not distortion, and they want some relief from the constant, grating, vulgar noise.’18 But Levitt boldly claims that the very features of advertising that seem unacceptable are what we should value in it. He argues that ‘embellishment and distortion are among advertising’s legitimate and socially desirable purposes’.19 170 · BUSINESS ETHICS & OTHER PARADOXES Levitt points out that in many spheres of life, we embellish and distort objects in ways not required by their basic function. These practices can be seen, for instance, in architecture, poetry and clothing. Why do we do this? One reason is to increase the interest of objects: ‘to introduce into an otherwise harsh or bland existence some sort of purposeful and distorting alleviation’.20 A second reason is to link the objects strongly with our identity or aspirations. These points also apply to advertising. Advertisements do not merely make the world appear more interesting; they also ‘describe the product’s fullness for us’.21 In other words, they give us a way of seeing how the product might suit the life we have or want; they are ‘the symbols of man's aspirations’.22 On Levitt’s view, we do not want bare functionality from an advertisement (e.g. a mere list of the objective features of a product or service), but rather an alleviation of dullness, and a sense of the broader role that the product might play—even a vision of our ideal life. Though we do want objective truth to be available to us (e.g. ingredients, guarantee of quality), the subjective story is crucial to us too. You might think there is something wrong here. For example, you might suspect that advertising in some way compels us to accept a story, obliging us to take on the fantasy that some advertiser has concocted. But what does compulsion amount to? If there is a central lesson in this chapter, it is that when we try to explain the concepts often cited in general objections against advertising—for instance, the notion of a desire that is worth satisfying, autonomous, or rational—we tend to find our analyses open to objection. If you wish to object to advertising in general, one thing you will first need to do is to give a clear and persuasive analysis of your terms. If you can achieve this, then it seems you will be doing better than Galbraith and Arrington. Chapter 8 · Is advertising immoral? · 171 CONTENT QUESTIONS (1) What does Galbraith mean by ‘the Dependence Effect’? (2) Galbraith offers an account of an urgent desire—i.e. a desire worth satisfying—that can be divided into two components. Describe each component. (3) Hayek criticises one of the components referred to in question 2. Explain Hayek’s criticism. (4) According to Arrington, what makes a first order desire autonomous? (5) Explain one criticism of Arrington’s account of autonomous first order desire. CRITICAL ANALYSIS QUESTIONS (6) In his discussion of advertising ethics, Arrington includes analyses of rational desire, free choice and control. Choosing one of these four phenomena, explain and then criticise Arrington’s evaluation of the phenomenon. (7) Explain how Levitt defends advertising from the claim that it should not go beyond stating the straightforward, objective facts about a product. DISCUSSION QUESTIONS (8) ‘We can say whether an advertisement is effective or ineffective, but it makes no sense to ask whether an advert is morally good or bad; we have no good way to explain what it is for an advert to be moral or immoral.’ Explain whether you agree and why. (9) ‘No general criticisms of the advertising industry are plausible. In fact, there is good reason to believe that advertising tends to enrich our lives.’ Explain whether you agree and why. 172 · BUSINESS ETHICS & OTHER PARADOXES CHAPTER EIGHT NOTES AND REFERENCES 1 The code of the Advertising Standards Authority of South Africa is at http://www.asasa.org.za/Default.aspx?mnu_id=11 2 Arrington, R. 1982, ‘Advertising and Behavior Control’. Journal of Business Ethics, 1, pp. 3-12, at p. 3 3 Galbraith, J. 1976, ‘Chapter XI: The Dependence Effect’. The Affluent Society (3ed), pp. 126-133. 4 Galbraith holds that another source of desires for new goods is social values. If a society places a special value on new products (because, for instance, they are seen as better than the old), then the mere production of a new item will generate a desire for it. Since we are focusing on advertising rather than social values, we will not pursue this point. 5 Ibid, p. 129 6 Ibid, p. 131 7 Ibid, p. 126 8 Hayek, F. 1961: ‘The Non Sequitur of the “Dependence Effect” ’. Southern Economic Journal, 27, pp. 346-348. Downloaded from the Ludwig von Mises Institute: http://mises.org/resources/1039 9 In fact, Hayek makes a bolder claim: he proposes that only these three desires originate in us. But his criticism of Galbraith does not require this bolder claim, and many people would find it implausible. Hence, since this claim seems to make him needlessly vulnerable to criticism, the discussion will proceed as if he had not made it. 10 Arrington, 1982, p. 6 11 Ibid, p. 8 12 Ibid, p. 9 13 Ibid, p. 10 14 Whether, in such cases, moral responsibility for the unfree choice (or lack of autonomous desire, or irrational desire, or controlled action) lies with the advertiser, or the person who views the advertisement, or is shared, would be a distinct matter requiring further reflection. 15 It is worth pointing out that brainwashing is—for some critics of advertising—an extreme version of what advertising does. Their worry is that advertising falls somewhere on the line that leads towards brainwashing, and that advertising shares some portion of the moral wrong that brainwashing involves. Explaining this worry carefully and plausibly, however, would be challenging. 16 For a summary of the cases, see Wendy Bumgardner, ‘Toning Shoe Settlements and Refunds: Are you eligible for a refund?’ 31 May 2014, About.com: Health>Walking (walking.about.com/od/toningshoes/tp/Toning-Shoe-Refunds.htm). 17 Levitt, T. 1970: ‘The Morality (?) of Advertising’. Harvard Business Review, 48(4) (July-August), pp. 84-92. Levitt’s article is boldly and entertainingly written. The flamboyant style worked for the business magazine in which he published it, but don’t aim to emulate it in your academic writing. 18 Ibid, p. 85 19 Ibid, p. 85 20 Ibid, p. 87 21 Ibid, p. 90 22 Ibid, p. 90 Section A FOUNDATIONS OF BUSINESS ETHICS Section C BUSINESSES AND THEIR EMPLOYEES Chapter Nine MEANINGFUL WORK by George Hull It could seem crass to devote space to the topic of meaningful work, when so many people—not just in poorer countries—would be grateful to have any job at all, and those who are employed often have little real choice about what work they do. But the fact remains that at this stage in history more people than ever before face a variety of different options when they enter the job market. And, beyond that, it has become more and more common for people to abandon one career midway through their working life, and make a success of another line of work—something which, not very many decades ago, would have been virtually unheard of. Given that career choices are increasingly there for the making, it seems sensible to examine how philosophical reasoning can inform them. What’s more, an understanding of what meaningful work is may shed light on the further issue of what (if anything) should be done for people whose work is not meaningful. In a truly just society, would everybody do work which was meaningful? Does every employer have an obligation to provide its employees with meaningful work? In order to address this chapter’s questions, we will need to think about value in a way which goes beyond the duties and obligations traditionally associated with morality. This chapter is thus about ethics in the broadest sense, meaning the study of what is worth doing, having and being—the study of all that which is valuable in a human life. It will start with the question of what meaningful work is, before moving on to ask what obligations society or employers might have in the light of that. Work, meaning, value, happiness Our topic is meaningful work; so a good way to start will be by clarifying what is meant by “meaning” and what is meant by “work”. (This will prove easier in the former case than in the latter.) After that we can go on to deal with further issues that arise from clarifying these terms. Work In his Philosophical Investigations (first published posthumously in 1953), the Viennese Chapter 9 · Meaningful work · 175 philosopher Ludwig Wittgenstein wrote: Consider … the proceedings that we call “games”. I mean board-games, card-games, ballgames, Olympic games, and so on. What is common to them all?—Don’t say: “There must be something common, or they would not be called ‘games’”—but look and see whether there is anything common to all.—For if you look at them you will not see something that is common to all, but similarities, relationships, and a whole series of them at that.1 Wittgenstein argued that no definition of the concept game can be given. ‘For how is the concept of a game bounded?’ he continued. ‘What still counts as a game and what no longer does? Can you give the boundary? No.’ Wittgenstein thought the same was true of most of our central concepts, and that we should not see this as a problem, as it does not prevent us from using them to think and communicate. We can at least agree with him when it comes to what is arguably the opposite concept to game: the concept work. Whereas games are fun and playful, work—one might think—is serious and arduous. However, just as not all games are playful or fun (think of the anxiety and discipline involved in being a professional chess grand master), so some work is both trivial and enjoyable (such as being an extra in a battle scene in a film, if it means a fun day out with friends and getting close to film stars). Equally, plenty of things are arduous and unpleasant which you could not literally call “work”—stringing out the conversation on a disappointing date, for instance (unless, like a growing number of European students, you are funding your studies through sugar daddy dating).2 This might suggest that an activity should only be counted as work if one gets paid for doing it. But to see that this idea is also flawed it is enough to recall that individuals who are kept as slaves, though not paid, undoubtedly work. And people who do unpaid internships at the start of their career, or do volunteer work for non-governmental organisations (N.G.O.s), also work without receiving any pay. For some people, the difference between work and leisure is one of place: when at the factory, or call centre, they are at work; when at home, or about town, they are not. The advent of laptops, e-mail and Blackberries, though, means that in an increasing number of jobs the boundaries of the “workplace” are fuzzy or even non-existent. In any case, it is hard to deny that the activities of cleaning, washing, cooking, child-rearing, and so on, which take place in the home, are forms of work. Recent research in the U.K. suggests the unpaid work of a mother in the home is, on average, worth about 30,000 pounds per year.3 It appears impossible to come up with a set of characteristics which all types of work—and nothing apart from types of work—share. So, instead of searching for a distinctive kind of meaningfulness which only work has, it will be sensible, in what follows, to try to establish what makes a human life meaningful in general, and then to think about the ways in which the very different things we class as work can contribute to this. We can safely use types of paid employment as our central examples of work, since these are what first come to mind when most of us think about what work is. Meaning A fruitful way to start thinking about meaning in human life is by contrasting it with its absence. During times when someone’s life seems meaningless to them, how do they act, and what do they say? 176 · BUSINESS ETHICS & OTHER PARADOXES Often a person who feels their life lacks meaning is overtaken by inertia: they can’t find it in them to do their daily tasks, perhaps even to get out of bed in the morning. And this is not simply laziness. It’s not that they know they should be doing things, and just lack the will-power to translate that knowledge into action. Rather, it’s the knowledge itself that is absent. As far as they can see, there is no good reason for them to do anything. So they might have all the willpower in the world, but still they don’t see anything which would justify harnessing it. Even if somebody in this situation can stir themselves into action, they may report that they are merely “going through the motions”. Their habitual activities may all at once seem empty and pointless to them. When they are right in the middle of doing something, they may say to us, “This serves no purpose.” To say that an activity lacks a point or a purpose, or that there is no reason to do it, is to say that there is nothing which makes the activity worthwhile—worth doing. If somebody’s daily activities seem meaningless to them, then, this can mean that those activities appear worthless or valueless to them. This indicates that, if we want to know what makes a life, or the activities which go to make up a life, meaningful, we will need to investigate the ways in which a life, and its constituent activities, can have worth or value. We might also be tempted to say that somebody’s life lacks meaning for a slightly different reason. If a person’s path through life just doesn’t make sense, in that they appear to flit arbitrarily from one thing to another without any overarching structure, we might want to call their life, and their behaviour, senseless or meaningless. This is similar to the way that a story lacks coherence if it is just a series of disconnected events, without a unifying narrative or theme. Indeed, the Scottish philosopher Alasdair MacIntyre has suggested that ‘[w]hen someone complains—as do some of those who attempt or commit suicide—that his or her life is meaningless, he or she is often and perhaps characteristically complaining that the narrative of their life has become unintelligible to them …. [T]he point of doing any one thing rather than another at crucial junctures in their lives seems to such a person to have been lost.’4 There’s no doubt that work can often provide meaning in this sense of giving somebody’s life an intelligible narrative arc. When an individual decides to pursue a particular career—a career in law, medicine, the civil service or the military, for example—their chosen career supplies them with standards of behaviour and attainment, and a series of goals to aim at, often accompanied by societal recognition in the form of qualifications and promotions. It arguably shows what a significant role someone’s job plays in our efforts to make sense of them that, when working-age people meet for the first time, one of the first questions they ask is usually what the other one does for a living. Of course, a career is by no means the only thing that can provide an individual’s life with narrative intelligibility—a coherent plot. Their identity as a member of a family—as a son, grandson, nephew, cousin and brother, for example—can also provide that kind of intelligibility, as can their membership of a nation, religion or other group. These various subplots of a life do not always co-exist harmoniously. Often they clash, calling for tricky, and sometimes tragic, choices—as when, according to West African legend, the Yoruba princess Moremi Ajasoro had to submit to the river-spirit Esimirin’s demand that she sacrifice her own son, in order to save her people. Closer to home, think of the many parents whose working hours mean that they must choose between spending enough time with their children and advancing in their career. But the fact that it involves difficult decisions in no way detracts from a life’s meaningfulness. So far we have looked at two familiar ways in which people talk about “meaning” in life: Chapter 9 · Meaningful work · 177 first, when somebody’s life, or the activities which make it up, have value or serve a worthwhile purpose; second, when somebody’s life exhibits the kind of narrative intelligibility to which MacIntyre draws attention. Clearly, these two types of meaning are not incompatible. Indeed, it is plausible to think that no life could truly be said to be meaningful (except in an extremely limited sense), unless it exhibited both these sorts of meaning—firstly, value or purpose, and, secondly, narrative intelligibility—to quite a high degree. We can see this by considering lives which contain one sort of meaning, but are bereft of the other sort of meaning. For example, imagine a man whose sincere devotion to the cause of world peace led him to spend almost all his time lying in his bathtub, muttering about world peace and smiling. It seems fair to say that, though the purpose this man has dedicated his life to is eminently worthwhile, that purpose has not given his life enough of an intelligible narrative arc for us to count his life as a truly meaningful one. It is equally doubtful whether the second type of meaning—narrative intelligibility—on its own could justify us in calling a life meaningful. It’s perfectly possible to lead a structured life, unified by a strong narrative thread, in the service of a purpose or cause which has no value at all, or even negative value. For example, many people who made a career serving in the South African Defence Force in the decades-long “Border War” in South-West Africa and Angola ‘now do not think it was worth fighting’.5 This suggests that what we do can lack meaning—in the sense of lacking purpose, point, or good reason—even when it is organised into a coherent narrative. When a life has narrative intelligibility, but does not serve any worthwhile purpose, or serves a cause which has negative value, it again seems wrong to call that life “meaningful”. We can summarise the points just made by making a distinction between meaning, on the one hand, and meaningfulness, on the other. What we have seen is that a life can contain meaning without being truly meaningful; what’s more, meaningfulness requires both the sorts of meaning discussed above. One implication of this is that, in order to understand what it is for a human life, and human activities, to be meaningful, we need to understand what it is for human activities to have worth or value. So let’s explore that question further. Value Value comes in different shapes and sizes. Philosophers often divide it into three main types: moral value, aesthetic value, and prudential value. Moral value was the subject of Chapter 2, and there is no need to go over the same ground again. Aesthetic value is possessed by anything, natural or man-made, which is beautiful or is a successful work of art. Prudential value attaches to whatever improves or maintains an individual’s welfare—how well things are going for them in their life. Walking off a cliff or selling one’s house for half its market price would usually be imprudent ways to behave. Taking care of one’s health with a balanced diet and regular exercise is, in contrast, a classic case of prudence. While this division of value into three types can be a helpful rule of thumb, we ought to keep an open mind as to whether these are the only types of value, and also as to whether they really are utterly distinct and separate from one another. For instance, the Ancient Greeks were not as eager to separate moral from aesthetic value as people today are prone to be: they used the same word, “kalos”, to mean both “beautiful” and “good”. And many people have come to the view that morality is, in the last analysis, a central part of what it is for an individual’s life to go well—meaning that prudential value and moral value are inextricably bound up with one another. 178 · BUSINESS ETHICS & OTHER PARADOXES But there is another important way in which value can be divided into different types—this time having to do with its form, rather than its substance. Sometimes doing, having or being something is worthwhile because of the further worthwhile things that this will bring about. For example, it is worth brushing your teeth twice a day because this will mean you can continue to eat without experiencing pain, and can make a good impression when you smile. Likewise, when people say that “honesty is the best policy”, what they mean is that being honest is worthwhile because it will increase your welfare in the long run—since liars tend to get caught out in the end, and people tend to gravitate to those they think they can trust. When something is valuable because it leads to other things which are of value, it has what is called instrumental value. If the only way in which something is valuable is by leading to other things which are valuable, then it is of purely instrumental value. To test whether you regard something as of purely instrumental value, ask yourself whether you would ever choose to do it, have it or be it, if it didn’t bring about anything else which was of value. Most of us regard activities like shaving, grocery shopping and paying bills as having purely instrumental value, and would not do them if it weren’t for their beneficial consequences: we see them purely as a means to an end. However, as long as we accept that some things do have value, it is inconceivable that all the things which are valuable could be of purely instrumental value. Nothing could be valuable as a means, if there were no end, valuable in itself, from which the instrumental value of the means derived. When something is valuable, not just because it leads to other valuable things, but in itself (“as an end in itself”, as philosophers sometimes say), it has what is called intrinsic value. To test whether you regard something as of intrinsic value, ask yourself the same question as before: would you ever choose to do it, have it or be it, if it didn’t bring about anything else which was of value. If you answer, “Yes,” then you do regard it as having intrinsic value—you see it as an end, and not just as a means to an end. Nothing rules out something possessing both intrinsic and instrumental value. For example, you might see your relationship with your mother as something intrinsically valuable, because it is not just a means to further ends. Nonetheless, you might well admit that it happens to be instrumentally valuable too: perhaps she is a good cook, pays you a monthly allowance, or has hooked you up with an internship at her company. And honesty, if it is not only “the best policy” but also a morally valuable character trait in itself, arguably has both intrinsic and instrumental value. What does this tell us about the value of work? It is pretty clear that jobs can be valuable in all three of the substantial ways philosophers have traditionally distinguished. Working as a concert pianist (at least a minimally good one) has aesthetic value, for example, because it involves realising musical art-works. Painting and repainting road markings is another job which can have aesthetic value—though to a lesser degree. Furthermore, we can divide up the constituent activities of these jobs according to the two formal types of value introduced above. For example, while a concert performance of Schubert’s Wanderer-Fantasie arguably has intrinsic value, the years of arpeggio exercises necessary to achieve it may be instrumentally valuable only. There are also many morally valuable purposes which paid employment can serve, ranging from caring for children, sick people or old people, through campaigning on behalf of oppressed or disadvantaged groups, to volunteering to fight for one’s country in a just war. Availing oneself Chapter 9 · Meaningful work · 179 for public office can be a moral action too, though of course it is also possible to do this from immoral motives. When people reflect on the extent to which their work has added meaning to their life, they often highlight an aesthetic or moral purpose which gave value, or point, to some of their working activity. Indeed, the aspiration to do work which has such a purpose is a common reason people give for switching careers. For instance, “Lisa”6 (interviewed by Roman Krznaric of The School of Life) started out as an aerospace engineer, but began to yearn for a line of work with more aesthetic value: It turned out that the answer was all around me, in the horrifying suburbs of Wisconsin I had been living in: urban planning. The existence of soulless urban sprawl enraged me to such a degree that I had to do something about it.7 Similarly, “Henry” (interviewed for this book) in middle age quit a lucrative job at a global consultancy firm, where ‘the majority of [his] work ha[d] been devoid of meaning’, to do more morally valuable work at a charity: I led a project that piloted an approach to improve the ways that free advice is given to those in debt in the U.K. About 500 people benefited from the approach during the pilot and there is potential for it to be rolled out much wider. Achieving social justice for people in need, who are often marginalised in society, gave meaning to this work.8 And no one is likely to deny that paid employment can have prudential value—i.e. that it can contribute to an individual’s overall welfare. This can happen in a number of different ways. Some jobs—such as being a removal man or a riding instructor—involve a regular workout. This contributes to an individual’s welfare by keeping their body strong and resistant to disease. Other jobs—such as journalism and public relations work—involve regularly meeting new people on equal terms. This can contribute to an individual’s welfare by enabling them to acquire a wide circle of friends. A further obvious way that paid employment can have prudential value is through the salary or wage one is paid to do it. Money, being the medium of exchange, has immense, multifaceted instrumental value. With one’s monthly wage—assuming it is fairly substantial— one can buy food, clothes and medical care, as well as paying the rent on a place to stay, and a television and internet subscription to keep up to date with what is going on in the world. Used strategically, together with a modicum of charm, money—in sufficient quantities—can arguably procure you friendship, love, fame and political influence too. No wonder, then, that our prospective wage is such an important factor for almost all of us when we are considering what job to apply for, or what line of work to become qualified for. “Kaveh” (interviewed for this book), a 30 year old working for a global asset-management company in London, U.K., even goes so far as to say: I place [no]thing but monetary value on the jobs I have done.9 For Kaveh, the prudential value of work is purely instrumental. He is certainly not alone. Many people regard their work as bearing a purely instrumental relationship to how well their life is going. This raises the question of whether, at least in the sphere of prudential value, the work most of us do, day in, day out, could ever be anything more than a means to an end. 180 · BUSINESS ETHICS & OTHER PARADOXES Given the amount of time and energy even the least workaholic among us devote to our occupations, that can’t help being a troubling idea. Admittedly, due to technological progress, working people now enjoy more leisure time than they have for centuries. ‘Between 1850 and today,’ writes Lars Svendsen, ‘average working hours in advanced OECD countries have been reduced by almost 50 per cent’;10 and that trend is mirrored in other industrialised countries with a substantial middle class. Nonetheless, many people will identify with what Dawn Tinsley, the receptionist in the B.B.C. television series The Office, says about trying to do something constructive with her leisure time, on evenings and weekends: I always wanted to be a children’s illustrator and, when people said to me, “What do you do?” I would say, “Well, I’m an illustrator, but I do some reception work for a bit of extra cash.” And for years I was an illustrator who did some reception work. And then Lee thought it would be a good idea for us to both get full-time jobs. And, you know, then you’re knackered after work, and it’s hard to fit in time for the illustrating, you know. So, now, when people say, “What do you do?” I say, “I’m a receptionist.”11 A standard working week involves eight hours a day for five days; and many people work a great deal more than that. Over a lifetime, the average working person spends far more time working than they spend on any other activity, with the possible exception of sleeping. It would seem to be a great shame if all of that time was spent on something which was merely a means to welfare, rather on something prudentially valuable in and of itself. Worse, if work is only a means to our welfare, we may discover—like Dawn Tinsley—that our work leaves us too little time or energy to experience and enjoy the goals it was meant to serve. Do we spend our working lives making endless preparations for a feast we are ultimately too tired, or too old, to enjoy? In the coming section of this chapter (‘Realising your potential’) we will examine the ideas of philosophers who have thought that work can be more than just a means to our welfare. But first we must address the more general claim that not just work, but everything we do, is of no more than instrumental value, because we do it ultimately as a means to become happy. One reason it is important to consider this claim is that, if it is true, then—contrary to what has been said above—we would have no cause to be especially disappointed that work is of purely instrumental value, as the same would apply equally to all of life’s activities. Happiness We have already seen that many people view moral and aesthetic purposes as bestowing meaning on their activities (including their work). But, when asked what their ultimate goal in life is, a lot of people will mention something else: happiness. Indeed, people often think of happiness as an overriding goal, to which all else in life—including morality and beauty—is ultimately subordinate. It would appear to follow that our work, just like everything else we do that has any value, is of purely instrumental value, because the only point to any of our activities (including work) is to achieve happiness. So let’s assume, for the sake of argument, that happiness is the one and only ultimate goal of human life; and let’s see what would really follow from the primacy of happiness. The argument that our activities have—at best—purely instrumental value goes more or less as follows: Chapter 9 · Meaningful work · 181 The “primacy of happiness” argument P1: Everything we do in life that has value is ultimately of value purely as a means to achieving the one and only ultimate goal of happiness P2: If something we do is of value purely as a means to achieving some different goal, then that activity has purely instrumental value P3: Happiness, the ultimate goal, is something different from all our activities Therefore: C: Everything we do in life that has value has purely instrumental value P1 is what we are assuming for the sake of argument. P2 sums up what we said earlier about things which are of purely instrumental value. And P3 is required for the conclusion C to follow, because if there was any activity which was not separate from happiness (i.e. which was identical with happiness, or which was part of happiness), then that activity might be of more than just instrumental value. In other words, the “primacy of happiness” argument will only be valid if happiness is not itself comprised of activities. P3 seems very plausible on the face of it, because happiness is a feeling, or a state of mind, whereas activities are things we do, so it would seem they must be separate. Of course, when people talk about happiness, they often distinguish between a passing state of euphoria, on the one hand, and a more settled feeling of contentment, or satisfaction, with how one’s life is going, on the other. Usually people say that the latter—the settled feeling of contentment—is the true aim of life. But that surely does not undermine P3; it’s just a matter of being clear which emotion we’re talking about. Still, there is a distinction between different types of emotion, or feeling, which is relevant here. In the first place, there are feelings which are self-contained: feelings like nausea, bodily pain, an itch, and, perhaps, the first type of happiness above, the passing state of euphoria. Feelings of this first type can be caused by a variety of different things, but they are not themselves directed at anything. In the second place, though, there are feelings which are about, or directed at, things in the world. Examples of this second, object-directed, type of feeling include admiration, amusement, embarrassment, love, and the second type of happiness above, the more settled feeling of contentment. To see the difference between the two, imagine what it would be like if we experienced love in the same way as we experience nausea or bodily pain. We would experience a twinge of “love”, faint at first, then more pronounced. When we were sure it was definitely “love” that we were feeling, we would start to ask ourselves what it could be that had brought on this attack of “love”. We would cast our mind back over the people we had met in the last few days, trying to work out who could be the cause of our “love”—in the same way as, when we have an attack of nausea, we recall to mind everything we have eaten lately, trying to work out what the guilty article could be. Love differs from a feeling such as nausea or bodily pain in that the feeling of love itself involves an awareness of who it is directed at. The same is true of admiration. We don’t feel admiration and then wonder who it might be that we admire. The object of our admiration is already revealed to us in the feeling itself. Philosophers make this point by saying that feelings of the second type, object-directed feelings, have an intentional object—something which they are about, or directed at. Not only do object-directed feelings have an intentional object, but that intentional object appears, in the feeling, in a very particular light. When we feel admiration for somebody, for 182 · BUSINESS ETHICS & OTHER PARADOXES instance, that person appears to us in an admirable light. When we are amused by a joke, that joke appears to us, in our feeling of amusement, as funny. When we are embarrassed by something we have done, that action appears to us in an embarrassing light. The light in which an intentional object appears to us, in an object-directed feeling, philosophers call its mode of presentation. When we experience, not a passing state of euphoria, but a settled feeling of contentment, or satisfaction, is that a feeling which has an intentional object? Surely the answer is, “Yes.” The type of happiness which many people hold to be the ultimate goal of life is a feeling of contentment, or satisfaction, directed at how one’s life is going—understood inclusively, as covering how things are going for the people one loves, and the causes one supports, as well as how things are going for oneself. And what light must this intentional object appear in for the feeling truly to be a feeling of happiness, rather than one of disappointment, despair or anguish? Surely it must be presented in a positive light: as, in the broadest sense, good. But to say that something is presented as good, in the broadest sense (i.e. in a sense which goes beyond the duties and obligations traditionally associated with morality), is to say that it is presented as having value. What’s more, the intentional object of happiness—how things are going in one’s life—encompasses, though it is not restricted to, one’s own activities. Consequently, the very feeling of happiness—where by this is meant a settled feeling of contentment, or satisfaction—involves appraising one’s activities (as well as the rest of what is happening in one’s life) as being of value. The value one’s activities are presented as having in the object-directed feeling of happiness could not be their instrumental value as things which produce happiness. That would be viciously circular—like saying a scientist deserves the Nobel Prize for winning the Nobel Prize. Rather, it seems that it is impossible to aim for happiness in life without aiming to achieve other things which are valuable in themselves—valuable independently of the fact that one can be happy about them. This conclusion is confirmed by a thought experiment the American philosopher Robert Nozick concocted. He pointed out that, if all that mattered to us was our feelings—how our ‘experiences feel “from the inside”’—then we would jump at the chance to be plugged into what he called “the experience machine”: Superduper neuropsychologists could stimulate your brain so that you would think and feel you were writing a great novel, or making a friend, or reading an interesting book. All the time you would be floating in a tank, with electrodes attached to your brain. Should you plug into this machine for life, preprogramming your life’s experiences?12 Nozick conjectures—surely correctly—that hardly any of us would opt for the experience machine over a real life in the real world. As he puts it, ‘we want to do certain things, and not just have the experience of doing them’. Furthermore, ‘we want to be a certain way, to be a certain sort of person. Someone floating in a tank,’ he points out, ‘is an indeterminate blob’.13 Nozick concludes: ‘We learn that something matters to us in addition to experience by imagining an experience machine and then realizing that we would not use it.’14 Equally, by examining the structure of the emotion of happiness, we have learnt that happiness is achieved by being and doing things which have value in their own right— independently of the fact that we can be happy about them. It follows from this that it is not just misguided, but actually self-contradictory, to aim to do everything that one does in life solely in order to become happy. Aiming at happiness, we can now see, itself entails aiming to take part Chapter 9 · Meaningful work · 183 in activities which are themselves of intrinsic value. The problem with the “primacy of happiness” argument, then, would seem to be its very first premise, P1. What we have just concluded would suggest that P1 is false, and that, as a result, the “primacy of happiness” argument is unsound. (If you are unsure what “unsound” means, read over the section of Chapter 3 entitled ‘What is a sound argument?’ again.) However, we should recall from Chapter 3 that, in opposing an argument, it is important to exercise a degree of interpretative charity. Perhaps there is a way to reinterpret P1 so as to save the “primacy of happiness” argument. How could we understand P1 in such a way that it is true despite what we have learned about happiness? So far we have understood “the one and only ultimate goal of happiness”, in P1, as referring to the feeling of happiness alone. But we might be able to save P1 if we interpret “happiness” as meaning not only the feeling of happiness, but also anything we can be, have or do which has intrinsic value, and about which, as a consequence, we can justifiably be happy. In order to save P1 we would also have to understand the word “means”—as in “a means to achieving the one and only ultimate goal of happiness”—differently to the way we have understood it so far. We would have to enlarge our understanding of the phrase “a means to an end” to encompass, not just things which cause an end to come about (causal means), but also things which themselves help to constitute an end (constitutive means). For example, a good conversation with a friend could be understood as a means to a pleasant lunch hour in this latter way: it is not something separate from the pleasant lunch hour which causes a pleasant lunch hour to come into existence, but rather it is part of what that particular pleasant lunch hour consists of. It is a constitutive means, not a causal means, to a pleasant lunch hour.15 Reinterpreting P1 in this way casts new light on the idea that happiness could be an overriding goal, to which all other kinds of value are ultimately subordinate. On this understanding of “happiness”, the other kinds of value (such as moral and aesthetic value) would not be of purely instrumental value, as things which cause happiness, but rather would be constituent parts of what it is to be happy. Similarly, those of our activities which are valuable in their own right would not be of purely instrumental value, as things which cause happiness, but rather would be constituent parts of happiness. Perhaps this reinterpretation is in fact a better way to understand “happiness”. Certainly, interpreting “happiness” in this way brings it closer in meaning to the Ancient Greek word “eudaimonia”—translated as “happiness”, “flourishing” or “well-being”—which the philosopher Aristotle used to describe the ultimate goal of human life. ‘[B]eing happy,’ wrote Aristotle in his Nicomachean Ethics (a set of lecture notes on ethics written in the 4th century B.C.), should be understood as ‘equivalent to living well and acting well’.16 However, though reinterpreting “happiness” and “means” in the ways we have done saves P1 of the “primacy of happiness” argument, it means that P3 is false. Our activities are not all distinct from happiness, if those of our activities which have intrinsic value can be constituent parts of happiness. Thus, either we can operate with a narrow interpretation of P1, in which case it is false, or we can operate with a broader interpretation of P1, in which case P3 is false. The “primacy of happiness” argument turns out to be unsound either way, and so it fails to prove that nothing we do is of anything more than instrumental value. Our investigation so far suggests that for the activities of a human life to be meaningful, it is not enough that they merely fit together into a coherent narrative whole. Beyond that, they need also to be orientated towards something, or several things, which are genuinely of value. We 184 · BUSINESS ETHICS & OTHER PARADOXES have seen how work activities which are dedicated to a moral cause, or which manifest moral or aesthetic value themselves, can make a person’s life more meaningful. And it is clear that paid employment can be instrumentally valuable for our welfare, especially—though not only— because of the money it provides us with. We have now also seen that, even if it is true that happiness is the ultimate goal of human life, this does not mean that everything we do is of purely instrumental value. Rather, to aim at happiness is precisely to aim at a life aspects of which have intrinsic moral, aesthetic or prudential value, many of whose constituent activities are valuable in and of themselves. Now it is time for us to investigate whether any of the activities we call “work” can contribute to our welfare in more than a purely instrumental way. A distinction made in the above discussion of happiness gives us another way of formulating that question: Can work be a constitutive means, not just a causal means, to human welfare? Given the amount of time and energy we spend on our work, it would be nice if the answer was, “Yes.” Realising your potential What is it for a human life to go well? What is it—in other words—for a human being to flourish? A long and influential tradition in philosophy says the answer to this question can be found by first arriving at an understanding of human nature. After all—says this tradition—if we understand the nature of an eagle, then we will understand that no eagle can flourish in the way characteristic of an eagle if its wings are clipped and it cannot fly. Similarly, if we understand what an oak tree is, then this very understanding will tell us that no oak tree can flourish in its characteristic way if it is kept in a container which prevents it from growing more than a metre high. So—says this tradition—if we want to know when a human being is flourishing, and when it is not, we need first to understand what a human being is. But this is not a matter which can be left to anatomists: it is not just a question of appreciating what a human being is made of, and how it is organised. We need also to understand what Aristotle called a human being’s “ergon”, its characteristic activity—just as, to understand the nature of an eagle, we must know not only what its wings are made of, and how they are structured, but also what an eagle characteristically does with them. You might think that the notion of the characteristic activity of human beings is flawed from the get-go. After all, haven’t humans through the ages been endlessly inventive in coming up with new activities to keep themselves occupied? And doesn’t the range of cultures to be found in different countries—even, in the typical 21st-century metropolis, in different houses on the same street—rule out there being any activity characteristic of all humans? The philosophical tradition we are examining does not seek to deny the variation through history and across cultures. Instead, it suggests that amid this variety it is possible to discern a few general characteristics which are central to human nature, and which are realised in various different ways in different times and places. For our purposes, three of these general characteristics are most relevant. The first two, rationality and sociality, form the basis of Aristotle’s account of the ethical human life in his Nicomachean Ethics. Unlike other animals, humans do not merely react instinctively to their environment. Humans are also able to think consciously about the situations which confront them, as well as Chapter 9 · Meaningful work · 185 about other situations which have arisen in the past or might arise in the future. They have the ability to formulate plans, which can guide their behaviour. And they can critically assess different options in the course of deciding how best to deal with problems. That is to say, it is characteristic of humans to use their intelligence—their rationality. It is also characteristic of humans to interact co-operatively with other humans. As Aristotle wrote, ‘a human being is by nature a social being’.17 (In fact, what Aristotle thought is that it is part of human nature to live in an Ancient Greek city-state; but we can safely understand sociality in a rather broader sense here.) Many of humans’ most characteristic forms of sociality—such as conversations and jointly executed plans—also manifest rationality. The German philosopher and economist Karl Marx, whose thinking about work and human nature were firmly in the Aristotelian tradition, drew attention to a third general characteristic of humans: productivity. It is not characteristic of human beings to pass through life without leaving a trace behind them. On the contrary, it is characteristic of humans to change the world around them, leaving their mark on it by producing something, or many things, out of the materials in their environment. Their productivity is, of course, not random; nor does it always follow the same more or less pre-set pattern, like that of animals who build nests, webs or dams. Rather, humans are able to produce things according to their own ideas and designs. Just like human sociality, then, human productivity manifests the human ability to reason and plan consciously. A consequence of this is that the productive human being can, as Marx puts it, ‘look at his image in a world he has created’.18 The productive human being, in other words, puts some of their own intelligence and personality into their product—a process Marx calls “objectification”. We can think of “objectification” as putting one’s individuality into the objects one produces so that one subsequently recognises oneself in them. As Marx puts it, ‘[t]he practical creation of an objective world, the working-over of inorganic nature, is the confirmation of man as a conscious species-being’.19 What the philosophical tradition we are examining says (at a slight risk of oversimplifying) is that when a person’s activities embody these three characteristic human features—rationality, sociality and productivity—to a sufficient degree, those activities enable the person to flourish in a characteristically human way. Consequently, if somebody’s work embodies these three features, then their work enables that person to flourish. In the terms of the threefold division of value we introduced earlier, such work has prudential value. But its prudential value is not—like that of a wage—that it is useful for achieving or procuring other things. Rather, it has intrinsic—and not merely instrumental— prudential value. Another way of putting this is to say that work which embodies rationality, sociality and productivity to a sufficient degree is a constitutive—not just a causal—means to human welfare. It is meaningful in the sense that it is a way of realising your human potential. To make that more concrete, let’s return to the example of a concert pianist. We have already seen this job can be meaningful because of the aesthetic value it has, and it can sometimes be financially rewarding too. But is it also a way in which people can realise their human potential? It certainly involves a high degree of rationality. A pianist must study the pieces they play carefully, applying their intelligence to arrive at an interpretation of them and overcome technical problems of performance. It also involves a high degree of sociality. In performance a pianist must communicate their interpretation of the piece they are playing to the audience in 186 · BUSINESS ETHICS & OTHER PARADOXES the hall. If they perform together with an orchestra or chamber group, they must, in addition, work co-operatively with others in rehearsal and during performance. And the performance itself—if all goes well—is a product of a distinctively human kind: one in which the pianist can recognise some of their own thought and individuality, enabling them, in Marx’s metaphor, to look at their image in a world they have created. But many less glamorous forms of work also have a claim to being ways of realising one’s human potential. For example, “Rob” (interviewed for this book), who went on to have a successful career in the U.K. civil service, in retirement looks back on the work he did as a child, on his parents’ farm, as among the most meaningful work he has done: When I was about 10, I used to help my dad on the farm on Saturdays. I used to feed the chicken, trim the hedges, collect and sell the eggs, remove the dung from living quarters and generally— as I thought—make myself useful. I even masterminded an early marketing campaign. I gained enormous satisfaction doing this meaningful work, even though it came with no reward. The connection between a successful farm and our family's well-being was apparent. This work on the farm clearly embodied productivity: Rob could see the difference it made to the farm’s success. And parts of it—especially the “marketing campaign”—undoubtedly bore his individual imprint: I inherited the uninspiring "large", "standard" and "medium" labels for the eggs. Replacing these with the titles "king-size", "family-size" and "baby giants" stimulated excited chatter in the sales room.20 Planning and executing his “marketing campaign” evidently embodied rationality. Moreover, since much of the work he did on the farm was in collaboration with his father, and its purpose was to add to his family’s well-being, Rob’s work also embodied sociality. But not all work counts as a way of realising your human potential, by the lights of this philosophical tradition; and that includes much of the work done by people in richer countries. Indeed, Marx thought it a revealing paradox of industrial capitalism that, while the capitalist economic system, viewed as a whole, exhibits the characteristic human features of rationality, sociality and productivity to an unprecedented degree, the tasks and activities which fall to individual workers under capitalism barely manifest these characteristic human features at all. For reasons which we will come to presently, Marx described the condition of workers under capitalism as one of “Entfremdung”—translated as “estrangement”, or “alienation”. If you look around your home at the objects which you own and make use of on a daily basis—clothes, shampoo, toothpaste, a fridge, a hi-fi, a microwave, your books, your laptop— or think about the means of transport you use practically every day—whether it be bus, train, taxi, bicycle or car—you’ll realise you are the beneficiary of a series of immensely complex global schemes of co-operation devised for the purpose of fulfilling your needs and desires, and the needs and desires of people like you, almost as quickly as they arise. A Martian’s-eye view of the Earth would reveal billions of human beings collaborating in the most ingenious ways—growing foodstuffs, extracting minerals, manufacturing metals and plastics, assembling parts, transporting goods and transferring funds—to fulfil each other’s needs and desires, though they are separated sometimes by tens of thousands of miles. This was already true to a great extent in the mid-19th century, when Marx was beginning to study the economies of the industrialised nations. And yet Marx observed that the tasks of Chapter 9 · Meaningful work · 187 workers in the factories of Germany, England and France were, as a rule, mindlessly repetitive, and, what’s more, disconnected from the final products the workers were helping to manufacture. As Adam Smith had noted almost a century earlier, industrialisation takes the division of labour to ‘a completely new level, in which the division is no longer between crafts, but rather between specific tasks’.21 Smith’s famous example was the 18th-century pin factory, where the important business of making a pin is … divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands, though in others the same man will sometimes perform two or three of them.22 Though the hours are now much shorter and a larger number of tasks are delegated to machines, the nature of factory work has remained fundamentally unchanged since the 18th century. “Marleen” (interviewed for this book) started working at the Philips factory in Eindhoven, in the Dutch province of Brabant, in 1999, when she was in her early 20s. She worked together with 100 other women, in a hall the size of a small field. Her job was to place metal parts—‘like an aluminium hand with the fingers upright’—onto a conveyor belt, which fed them into a machine to be connected up with tubes: Marleen: They would go on top. The tube would be on the lower end. There would be something technical in between, with wires and pins. And the wires would be connected to the pins. And the other pins would be connected to another—thing. And then that part would be placed on top. G.H.: And where did you get these parts from? You didn’t make them yourself? Marleen: They were coming from a box. Somebody across the ocean had put them in the box for me. G.H.: Do you know where it was that they did that? Marleen: They probably came from China, but I’m not exactly sure. But I remember noticing the parts were coming from far. And they would be shipped back. G.H.: I see. Marleen: Which was really funny to me, because I wondered, “Why are you shipping all that stuff here so we can assemble it in order to send it back?” G.H.: And they would send it back to China? Marleen: China, or Bangladesh, or wherever. You know, somewhere foreign. G.H.: And when it was sent back there, did they assemble it more in that country? Marleen: Yeah. The tubes, with “aluminium hands” attached, were destined to become components of television and computer screens: Marleen: That’s what I figured out after a while, after questioning several people. 188 · BUSINESS ETHICS & OTHER PARADOXES G.H.: Oh, but you didn’t know—at the beginning you didn’t even know it was part of a television? Marleen: No. No, I had no idea. G.H.: Gosh. On her first day at work, the co-ordinator of Marleen’s assembly line had shown her the ropes: G.H.: And so when you were introduced to this, did the lady—the co-ordinator—did she tell you what the tubes—the things—were for? Marleen: She didn’t really know. G.H.: She didn’t know herself? Marleen: She didn’t know herself. And she was working there for 25 years. In his “Paris manuscripts”, written in 1844, Marx argued that workers under capitalism are “alienated”, firstly, from the process of work, secondly, from the product of their work, and, thirdly, from their fellow human beings. Marleen’s experiences, as she tells them, exemplify all three of these forms of alienation. Let’s start with alienation from the process of work. As noted earlier, the capitalist process of production as a whole embodies the characteristic human feature of rationality to a very high degree. However, this is not true of the tasks which form the work of individual workers. Far from manifesting their rationality in the working process—as Rob did in his “marketing campaign”—the typical worker under capitalism, in Marx’s words, ‘deploys no free physical and intellectual energy, but mortifies his body and ruins his mind’.23 Consider Marleen’s experience. The manufacturing process Marleen’s work formed part of was a highly complex, meticulously planned co-operative enterprise. Marleen’s work itself, on the other hand, was mindless and isolating. The other people involved in the manufacturing process were, to her, anonymous figures “somewhere foreign”. The components she was handling were, to her, nothing but “things”: “pins” and “wires” and “something technical”. More to the point, even if she had known who, “across the ocean”, had packed the “aluminium hands” in the box for her, or exactly what function those “hands” performed, the knowledge would not have enabled her to do her job any better. If alienation from the process of work involves a deficit of rationality, alienation from the product of work involves a deficit of productivity. Again, this form of alienation is well exemplified by Marleen’s experience. Though the television and computer screens manufactured partly through her labour no doubt bore the characteristic marks of Philips products, the manufacturing process left no room at all for Marleen to express her individuality: G.H.: Did you feel you were putting your personality into your work? Marleen: No. No. I was putting my personality into my interaction with the women during their breaks, during our coffee breaks. That’s when you start—yeah—you connect to people, you start talking. Yeah.24 Though capitalism as an economic system, and the sub-systems which form parts of it, Chapter 9 · Meaningful work · 189 certainly leave their mark on the world, embodying the characteristic human feature of productivity, the situation for most individual workers is very different. The product of their work, far from being something for which they can feel responsibility and in which they can recognise themselves—as the concert pianist can recognise themselves in their performance of a piece—‘confronts’ the typical worker under capitalism, in Marx’s words, ‘as an alien being, as a power independent of the producer’.25 If Marleen had come across one of the televisions she had helped manufacture, she almost certainly wouldn’t have recognised it, let alone known what contribution she had made to it. It would have been “an alien being”. Next let’s turn to the alienation from their fellow human beings which Marx believed afflicts workers under capitalism. In the working process under capitalism, as he put it, ‘one man is alienated from another’.26 This too manifests itself in the way Marleen speaks about her work. Think of the way Marleen’s work isolated her, and how anonymous the other workers “across the ocean” seemed to her. The tasks assigned to her involved no direct interaction with human beings at all: only interaction with the parts sent to her in a box and the machine which assembled them. As for the women working in the same factory as her, she had no reason or opportunity to interact with them until her coffee break. So far we have discussed workers’ alienation from, firstly, the process of work, secondly, the product of their work, and, thirdly, from their fellow human beings. Though the example we have used to illustrate them was factory work, many other types of contemporary work would have served equally well. In the average call centre, for instance, workers must mindlessly read out a script whose rationale and place in the overall provision of a service they do not understand. Though it may appear to embody more sociality than factory work, call-centre workers are isolated from each other and are generally not able to respond to customers on the telephone spontaneously, using their own words. So it is likely that work in a call centre would embody Marx’s three forms of alienation as well. According to Marx, the upshot of these three forms of alienation is a fourth one: ‘man is alienated from his species-being’, or, as Marx also puts it, ‘from the human essence’.27 This doesn’t just mean that, because their work fails to embody rationality, productivity and sociality to a sufficient degree, the typical worker under capitalism is unable to flourish in a characteristically human way—although Marx certainly did think that. Rather, Marx’s point is that the typical experience of work under capitalism produces a shift in the way we think of ourselves. Work, when it does not enable an individual to realise their potential as a human being, comes to appear as merely instrumental to their activities in other areas of their life. But because—like Dawn Tinsley (the character from The Office quoted earlier in the chapter)—we tend to be worn out after work, we spend most of our remaining time merely recuperating: eating and drinking, washing, sleeping, or doing something completely passive like watching television. Nonetheless, we come to identify ourselves with this rest and recuperation far more than with our work. So our “me time”—funded by the necessary evil of work—becomes our time in the bath, having a drink or a meal, or simply slumped on the sofa. But this—points out Marx—is getting things completely the wrong way around. There is nothing characteristically human about sleeping, eating or drinking. Any other animal can do these things just as well. It really ought to be our rest and recuperation which we see as instrumental—as a mere causal means; and, given what we know about human nature, our “me time” ought to be time spent on intrinsically valuable work activities embodying the characteristics of rationality, sociality and productivity to a high degree. However, as Marx puts it, ‘alienated labour degrades man’s own free activity to a means, it turns the species-life of man 190 · BUSINESS ETHICS & OTHER PARADOXES into a means for his physical existence’.28 In another place he writes: The result we arrive at … is that man (the worker) only feels himself freely active in his animal functions of eating, drinking, and procreating, at most also in his dwelling and dress, and feels himself an animal in his human functions.29 You might object that the negative features of industrial work which Marx highlights are inevitable consequences of technological improvement and sophistication, so that it is quite misguided of Marx to blame them on the capitalist economic system. However, capitalism’s driving force, the profit motive (the desire to acquire more and more money), at the very least exacerbates these negative features. It is the profit motive which leads companies to reap the financial benefits of “economies of scale” by manufacturing goods in enormous factories, where the manufacturing process is divided up into a multitude of tiny, mindless tasks—think of Adam Smith’s pin factory, mentioned earlier. It is likewise the profit motive which leads workers to accept more and more mindless employment, provided it is sufficiently well paid—so that it can finance slightly more comfortable rest and recuperation (“me time”). For example, the workers at the Philips factory in Eindhoven ‘would sometimes even work during weekends, because you could earn more money during weekends’—and that money could ultimately be spent recuperating on a beach, somewhere hot. As Marleen says, in retrospect, about her fellow workers: These people were mainly concerned with their holidays, you know. That was what they were living for. They were working and living for their next holiday. They were talking about it all the time. Like: “I’m going to Bali this year.” So there would be an entire year of talking about that one particular holiday: “I’m going to Bali.”30 Beyond that, the profit motive can undermine the characteristically human trait of sociality in a particularly pernicious manner. As one recent interpreter of Marx puts it, [t]he human response to a fellow being in need is to do whatever is required to fulfil that need. Under capitalism another response is appropriate: to use that need as a source of power or profit. Those extremely short of money, for example, will work for very little pay. Thus we relate to each other not with mutual need in mind, but individual profit.31 It is worth repeating that what fascinated Marx about capitalism was above all its paradoxical nature. The economic system of capitalism, considered as a whole, exhibits the characteristically human features of rationality, productivity and sociality to an unprecedented degree. But, of course, it is not economic systems which need to exhibit these features, but rather individual humans: our starting point in this section was the claim that the activities of an individual human need to embody these three features if that individual is to flourish in a characteristically human way. So (again, at a slight risk of oversimplifying) the paradox of capitalism is that it is an economic system which itself “flourishes” in a characteristically human way, but does so by requiring individual humans to lead lives which make it impossible for them to flourish in a characteristically human way. Let’s once again consider each of the three characteristic features of human beings, contrasting how they are manifested by capitalism at the system level with how they are manifested under capitalism at the individual level, in order to be clear about Marx’s view: Chapter 9 · Meaningful work · 191 (i) Rationality. The capitalist system, when viewed as a whole, is a stupendously complex and intricate triumph of human rationality; but when you look at the tasks most individual workers are carrying out, you see largely dull repetition of mindless operations. (ii) Productivity. Though almost every aspect of our lives, and almost every corner of the globe, bears the distinctive imprint of capitalist production, the typical worker under capitalism has no room to express their individuality in their work: they cannot, in Marx’s metaphor, look at their image in a world they have created. (iii) Sociality. As was covered in Chapter 5, many defenders of capitalism take it to be capitalism’s great virtue that it harnesses individual selfishness precisely in order to fulfil human needs. So, while individuals under capitalism are isolated, selfish and manipulative, the capitalist system, viewed as a whole, is a co-operative enterprise which satisfies people’s needs and desires. Marx’s near-contemporary the philosopher Ludwig Feuerbach had criticised the Christian religion for projecting all the best and most characteristic human qualities onto an imaginary supernatural being, and encouraging people to worship them as something separate from themselves, rather than realising those qualities in their own lives. According to Feuerbach, Christianity projects the characteristic human features of reason (i.e. rationality), will (i.e. productivity) and love (i.e. sociality) onto an imaginary omniscient, omnipotent and omnibenevolent being. Feuerbach claimed that Christian believers are alienated from their own nature, in the sense that, instead of striving to know more, to be more moral and to have more power to change the world for the better, they squander their energy venerating those characteristic human features magnified in the person of God. The Christian, according to Feuerbach, ‘contemplates his nature as external to himself’,32 which has a paralysing effect on the Christian’s own life. At the time of his “Paris manuscripts”, Marx thought the central problem with capitalism was almost exactly parallel to the problem with Christianity identified by Feuerbach. Rather than realising the characteristic human traits of rationality, sociality and productivity in their own work, human beings had—Marx believed—created a hugely complex system which embodied those traits in their place. Humans under capitalism are thus, according to Marx, alienated from their own nature, in the sense that their nature is realised, not in their own lives, but rather in the system of production they form part of. Though the capitalist system has an awe-inspiring productive capacity, and has led to tremendous improvements in people’s health and living conditions, it has required workers to sacrifice the chance to flourish in a characteristically human way in their individual working lives. Marx, for one, thought that this price was too much to pay. So Marx’s theory of alienation remains interesting and relevant for two reasons. Firstly, it describes how work sometimes—far from enabling us to realise our human potential—actually prevents us from flourishing in a characteristically human way. But, secondly, it is also one of the most subtle and perceptive critiques of the capitalist economic system. Jobs fit for human beings Marx thought that, in order to overcome alienation and ensure people could realise their human potential in their work, revolutionary social change was required. Altering the political 192 · BUSINESS ETHICS & OTHER PARADOXES leadership, or tinkering with the distribution of goods, would not be enough. Not only would patterns of ownership, and authority structures, need to be revolutionised, but a new, different type of human being would have to be created—one freed from the insidious self-interest capitalism had fostered. Perhaps he was right. However, there are several steps in Marx’s reasoning which might raise doubts in your mind. For one thing, you might question whether the outlook for workers under capitalism is quite as bleak as Marx suggested. After all, Lisa’s urban planning work, Henry’s charity work, Rob’s “marketing campaign”, and the work of a concert pianist—each of which, when we discussed them earlier, seemed meaningful enough in its own way—all took place against a more or less capitalist backdrop. For another thing, you might wonder whether the scandalous egotism of us children of capitalism is so exclusively a product of our socialisation as Marx believed—or hoped. Taking a different tack, you might suspect Marx’s error was to think it is only in their working lives that people can flourish in a characteristically human way. If 6-day weeks and 12hour working days are the norm (as they were in Marx’s day, and still are in many places), this is perhaps a safe assumption. But we have already noted the trend towards shorter, less draining, working days; indeed, the workers of 200 years ago, or even just 50 years ago, would have regarded the majority of us as part-time workers.33 Perhaps the idea that we could flourish in our non-working lives, by taking part in leisure activities which embody rationality, productivity and sociality to a high degree, does not deserve to be dismissed as quickly as it was by Marx. You might even object that the conception of human flourishing advocated by the Aristotelian-Marxian tradition is an elitist ideal dreamt up by sedentary bookish types, who had no real sense of either the trials or the satisfactions of a hard day’s manual labour, or a hard day in the call centre. Perhaps what some of us need is, not only to lose our selfishness, but to acquire the humility to be satisfied with repetitive, unexciting work, in the knowledge that it contributes to satisfying the needs and desires of other humans. However, even if we grant that Marx’s criticisms of work under capitalism are well-founded, it may be that many of the problems he identifies can be alleviated without a full-scale revolution. Let’s accept—at least for the sake of argument—that work of the kind Marleen experienced, or work in the average call centre, does not enable humans to realise their potential, and that it can even prevent people from flourishing in a characteristically human way. Next, let’s admit that this is a regrettable state of affairs—a waste of human potential. Now let’s ask what follows, morally speaking, from that. Have the workers in those jobs suffered an injustice? Has a right of theirs been violated—their right to meaningful work? There are at least two reasons why we should be cautious about ascribing to people a right to meaningful work. In the first place, work (meaningful or not) is not the kind of thing that you can passively receive—unlike healthcare, food, or shelter, the provision of which requires, at most, minimal co-operation on your part. Work is not something done to you—in the way most medical procedures are, for instance—but rather something that you do. The human characteristics which the Aristotelian-Marxian tradition says can be embodied in meaningful work— rationality, sociality and productivity—are all active capacities, not mere passive proclivities. They are manifested not only when somebody is in paid employment, and successfully rises to Chapter 9 · Meaningful work · 193 the demands of their role, but also when somebody creates an employment opportunity for themselves—by coming up with an innovative entrepreneurial idea, say. The idea of a right to meaningful work risks being incoherent, in the same way as the idea of a right to friendship risks being incoherent. Since neither meaningful work nor friendship could simply be provided, by the state, or any other agency, it makes little sense to say that people have a right to them. What can help here is the concept of a capability, which the Indian economist Amartya Sen has explored in his studies of welfare and disadvantage. Sen argues it has been a mistake for theorists of social justice to focus on the distribution of goods and resources—think of the “primary social goods” in John Rawls’ theory of justice, which you encountered in Chapter 5. ‘If people were basically very similar, then an index of primary goods might be quite a good way of judging advantage,’ grants Sen. ‘But, in fact, people seem to have very different needs varying with health, longevity, climatic conditions, location, work conditions, temperament, and even body size (affecting food and clothing requirements).’34 Different people can achieve different levels of welfare with the same allocation of resources, or “primary social goods”. For example, a disabled person can achieve less mobility than an able-bodied person with the same amount of resources. The just society, consequently, is the society in which there is a fair distribution of capabilities—where capabilities are freedoms to achieve certain “functionings”, including mobility, nutrition, and so on. The concept of a capability is relevant for our purposes, because it is possible for somebody to have a particular capability without making use of it. For example, a priest might have the capability to achieve adequate nutrition, but choose not to, because he was fasting.35 And somebody might have the capability to do meaningful work, but might not make use of it, because of opportunities they omitted to seize and initiatives they failed to take. While the idea of a right to meaningful work risks being incoherent, the capability to do meaningful work—an important good—runs no such risk. If we are interested in justice with regard to meaningful work, we will be interested in the distribution of this capability. This distribution will be influenced by the way corporations, and society as a whole, are organised, among other things. What’s more, in the second place, it is by no means obvious that any human society could be organised in such a way that each of its members was doing meaningful work. When something is in short supply, so that there is no prospect of everybody having an adequate share of it, it becomes vacuous to say that everybody has a right to that thing. If the crop repeatedly fails, for example, so that a community has enough food to feed less than half of its members, does each member of the community have a right to adequate food? Surely the deaths from starvation that ensue are best thought of not as an injustice, but as a tragedy. Similarly, it may tragically be the case that meaningful work is simply not available in sufficient quantities for everybody to do it. But, even if it is misguided to think that people have a right to meaningful work, we still need to work out what justice demands in cases where it is possible to increase the number of people who are doing—or at least who have the capability to do—meaningful work. If justice with regard to meaningful work is a matter of achieving a fair distribution of the capability to do meaningful work, two questions remain. Firstly, what is a fair distribution of that capability? Secondly, who is responsible for achieving that distribution? A broad consensus has emerged in modern times that justice in employment—whether in the private sector or the public sector—requires a form of equality. However, the equality 194 · BUSINESS ETHICS & OTHER PARADOXES required is not equality of outcome: we have already seen what is problematic about insisting that everybody should end up doing equally meaningful work. Rather, most recent political philosophers—and Rawls is one of them—have concluded that what is required in employment is equality of opportunity. This concept was introduced in Chapter 5 in the context of Rawls’ theory of justice. Applied to the topic now under discussion, equality of opportunity would certainly disallow excluding anybody from doing meaningful work on the basis of their race, religion or sex. You might well think it would demand that everybody have an equal chance of ending up doing meaningful work. However, that is probably not the case, partly because natural differences between people mean that two individuals who put the same amount of effort into their work, or into seeking work, will often achieve results of very different calibres. This is an issue which we will revisit in Chapter 10, when we examine the principle of equality of opportunity in detail. A case could be made, though, for thinking that meaningful work is as central to human welfare as wealth and liberty. Certainly, the Aristotelian-Marxian tradition we have been examining would count it as having that centrality. Indeed, when Rawls talks in detail about the “primary social goods” which he believes should be distributed according to the “difference principle”, he states that ‘the most important primary good is that of self-respect’, which includes ‘a person’s sense of his own value’.36 If it is true to say that doing meaningful work is an important precondition for self-respect of this kind, then Rawls’ argument from the original position (discussed in Chapter 5) could be harnessed to argue that, if not (for the reasons already mentioned) meaningful work itself, then the capability to do meaningful work, would be distributed according to Rawls’ “difference principle” in a just society. That is to say, any inequalities in the distribution of the capability to do meaningful work would have to be to the advantage of the least well-off. This would be a more stringent requirement than mere equality of opportunity. The answer to the second question will depend, partly, on what you think the moral obligations of businesses are—the topic of Chapter 6. For instance, if you agreed with the shareholder primacy view, then you will think that companies should only seek to increase the capability of their employees to do meaningful work when that will increase the long-term value of the company to its shareholders. On the other hand, if you agreed with the stakeholder model, then you may well think that companies have an obligation to their employees to increase their capability to do meaningful work, whenever this can be done without excessively harming other stakeholders. One way in which companies may be able to increase the capability of their employees to do meaningful work is by making their operations—for example, their factories—smaller-scale. As the economist E.F. Schumacher has observed, the complexity of very large-scale manufacturing operations tends to necessitate a comprehensive system of rules which the majority of the workers are required to follow almost robotically. In contrast, it can add to the rationality, sociality and productivity embodied in employees’ work when operations are on a smaller scale: Strive to find structures which need minimum administration. Very small structures administer themselves; there is no problem. It’s not a matter of abstractly framing rules, because the human mind encompasses the whole thing and can make decisions ad hoc, and consultation of course is very easy.37 Democratic decision-making within a company—perhaps facilitated by a degree of Chapter 9 · Meaningful work · 195 common ownership—may also increase employees’ ability to flourish in a characteristically human way in their working lives. In addition, businesses can attempt to reduce the specialisation, fragmentation and repetitiveness of workers’ tasks, or assign a project to a group of workers to see through to completion, rather than dividing the project up into discrete tasks assigned to individual workers.38 However, we should be wary of thinking there is a one-sizefits-all formula for what businesses should do to improve the meaningfulness of their employees’ work. Often the best plan will be for representative trade unions with real bargaining power to negotiate with employers over working conditions, based on the experiences and concerns of their members on the ground. In Chapter 11 we will explore the role of trade unions further. Finally, the state can also play its part by introducing laws which require—or incentives which encourage—companies to lay the foundations for more meaningful work for their employees. For example, the state could require a minimum level of employee involvement in company decisions or a maximum degree of fragmentation of tasks. However, government is in practice quite far removed from the experiences and concerns of workers on the ground in particular workplaces. For this reason, it may in many cases be more effective for the state to empower trade unions than for it to introduce regulations itself. In Chapter 11 we will explore further how the state can empower representative trade unions to negotiate about working conditions on employees’ behalf. To the extent to which the state can constructively intervene with regulations to increase the meaningfulness of employees’ work and reduce their alienation, this is another instance of a point made in Chapter 5: that objections to “pure capitalism” may often lose much of their sting when applied to “regulated capitalism”. Nonetheless, for all the reasons already given in this section, we should not be overly optimistic about the state’s ability to introduce regulations which directly improve the meaningfulness of employees’ work. Conclusion If the meaningfulness of our work is as decisive for our individual welfare as the AristotelianMarxian tradition claims, then it should not be surprising that our discussion of meaningful work has returned us to the questions of justice first broached in earlier chapters. Though we have seen reasons to doubt that we should ascribe to individuals a right to meaningful work, achieving a fair distribution of the capability to do meaningful work must be a central goal of social justice. Our investigation indicated that the choice between pursuing happiness and pursuing something of value in one’s life is badly posed, because it is not possible to do the former without doing the latter. However, there still remain choices between different kinds of value. Our discussion of human flourishing suggests that realising true prudential value will almost always involve realising other kinds of value, such as moral value, as well. But the opposite is not always true. Our discussion has not ruled out the possibility that dedicating your life to a moral or aesthetic cause could sometimes involve sacrificing your opportunity to flourish in a distinctively human way. In Chapter 11 we will take up once again the questions of what working conditions employees are entitled to, how these entitlements can be justified, and how they should be implemented. There we will also investigate in more detail the central role trade unions can play in identifying and working for the resolution of problems employees experience with their working conditions. 196 · BUSINESS ETHICS & OTHER PARADOXES CONTENT QUESTIONS (1) Describe two types of “meaning” that an individual’s life can have. (2) What does it mean to say that an activity you take part in has “prudential value”? (3) Give an example of an activity which most people would agree has purely instrumental value. (4) Give one example of work which has “aesthetic value”. (5) Give three examples of measures a business could introduce to increase the meaningfulness of its employees’ work. CRITICAL ANALYSIS QUESTIONS (6) Explain why one might think it was a bad thing if the prudential value of one’s work was purely instrumental. (7) Give two reasons why one might not think that individuals have a right to meaningful work. DISCUSSION QUESTIONS (8) “Everything we do in life which has any value is ultimately done for the sake of achieving happiness. So happiness is the only thing which can truly be said to be intrinsically valuable.” Do you agree or disagree with this statement? Explain why. (9) Describe the four types of “alienation” which Karl Marx believed afflict workers under capitalism. Was he right that only a full-scale revolution could end the problem of alienation? Chapter 9 · Meaningful work · 197 CHAPTER NINE NOTES AND REFERENCES 1 Ludwig Wittgenstein, Philosophical Investigations: Third Edition (trans. G.E.M. Anscombe, Oxford: Blackwell, 2001), § 66, p. 27e. 2 Andrew Marszal, ‘Cambridge is top university for ‘sugar daddy dating’’ (www.telegraph.co.uk/education/universityeducation/student-life/9817588/Cambridge-is-topuniversity-for-sugar-daddy-dating.html), 22 January 2013. 3 www.legalandgeneralgroup.com/media-centre/press-releases/2011/group-news-release-876.html. 4 Alasdair MacIntyre, After Virtue: A Study in Moral Theory (London: Duckworth, 1981), p. 217. 5 Gary Baines, ‘South Africa’s Forgotten War’, History Today, vol. 59, no. 4, 2009. 6 Inverted commas on the first use of a name indicate that it may not be the person’s real name (not that it’s not a real person!). 7 Roman Krznaric, How to Find Fulfilling Work (London: Macmillan, 2012), p. 63. 8 Interview with the author, 27 December 2013. 9 Interview with the author, 2 January 2014. 10 Lars Svendsen, Work (Durham: Acumen, 2008), p. 59. 11 The Office, Series 2, Episode 2, ‘Appraisals’, written and directed by Ricky Gervais & Stephen Merchant, BBC Two, 7 October 2002. 12 Robert Nozick, Anarchy, State, and Utopia (Oxford: Blackwell, 1974), p. 42. 13 Op. cit., p. 43. 14 Op. cit., p. 44. 15 See David Wiggins, ‘Deliberation and Practical Reason’, in his Needs, Values, Truth: Essays in the Philosophy of Value (Oxford: Clarendon Press, 1987), pp. 219-225. 16 Aristotle, Nicomachean Ethics (trans. Roger Crisp, Cambridge: Cambridge University Press, 2000), Book I, 1095a, p. 5. 17 Op. cit., Book I, 1097b, p. 11. 18 Karl Marx, Economic and Philosophical Manuscripts, in Karl Marx: Selected Writings, ed. David McLellan (Oxford: Oxford University Press, 2000), ‘Alienated Labour’, p. 91. 19 Op. cit., p. 90. 20 Interview with the author, 22 December 2013. 21 Work, p. 33. 22 Loc. cit. Svendsen is quoting from Smith’s The Wealth of Nations. 23 Economic and Philosophical Manuscripts, p. 88. 24 Interview with the author, 9 July 2013. 25 Economic and Philosophical Manuscripts, p. 86. 26 Op. cit., p. 91. 27 Loc. cit. 28 Loc. cit. 29 Op. cit., p. 89. 30 Interview with the author, 9 July 2013. 31 Jonathan Wolff, ‘Playthings of Alien Forces: Karl Marx and the Rejection of the Market Economy’, in Reading Political Philosophy: Machiavelli to Mill, ed. Nigel Warburton, Jon Pike & Derek Matravers (London: Routledge & The Open University, 2000), p. 276. 32 Ludwig Feuerbach, The Essence of Christianity, in The Young Hegelians: An Anthology, ed. Lawrence S. Stepelevich (New York: Humanity Books, 1999), p. 154. 33 Work, p. 57. 34 Amartya Sen, ‘Equality of What?’, The Tanner Lecture on Human Values, delivered at Stanford University, 22 May 1979, tannerlectures.utah.edu/_documents/a-to-z/s/sen80.pdf, pp. 215-216. 35 Amartya Sen, Development as Freedom (Oxford: Oxford University Press, 2001), p. 76. 36 John Rawls, A Theory of Justice: Revised Edition (Cambridge: Belknap, 1999), p. 386. 37 E.F. Schumacher, Good Work (London: Jonathan Cape, 1979), p. 69. 38 Manuel G. Velasquez, Business Ethics: Concepts and Cases (Upper Saddle River: Prentice Hall, 1997) pp. 462-463. Chapter Ten AFFIRMATIVE ACTION by George Hull In countries—including South Africa and the U.S.A.—where affirmative action for disadvantaged groups has been implemented on a large scale, it is hardly ever out of the news. Come election time, politicians know that their position on this contentious issue will be chewed over endlessly by columnists and broadcasters. For the rest of us, it can be confusing—to say the least—to hear one speaker persuasively argue that affirmative action is an urgent requirement of justice, only for another equally persuasive speaker to make the case that it violates justice’s first principles. Affirmative action is a topic about which it’s tempting to say, “I don’t know what to think.” Unfortunately, people who want to make a career in business don’t have this luxury. Among the tricky business decisions facing companies are such decisions as whether or not to introduce preferential hiring policies themselves, and whether or not to restructure their ownership so as to take advantage of preferential government tenders, when these are on offer. To take decisions like both of these, a business will need to make up its mind about whether preferential hiring and contracting are ethical. (If you think this is just another compliance question for the company lawyers, you might want to review the section of Chapter 2 entitled ‘Will you be ethical in business if you simply obey the law?’.) Employees who are not involved in a business’s strategic planning might still find themselves on a committee interviewing job applicants—in which case they will need to be clear in their own mind about whether it is ethical to give weight to the sex, race or nationality of an applicant when deciding whether to give them a job. And, of course, for those readers of this chapter who may in the future be—or who may already have been—beneficiaries of affirmative action programmes, it will be particularly important to work out whether justice or injustice is their benefactor. So this chapter’s central question is under what circumstances (if any) affirmative action policies would be in line with the requirements of justice. It will start by evaluating the often heard claim that affirmative action is always unjust, because it violates the principle of equal opportunities. Chapter 10 · Affirmative action · 199 Affirmative action and equal opportunities “Affirmative action” and “equal opportunities” (or “equality of opportunity”) are positivesounding slogans that invite our support. But, when it comes to determining what they mean, both can prove decidedly slippery. So, before we decide whether they are compatible with each other, let’s examine them in some detail one at a time. Affirmative action The phrase “affirmative action” was first used by U.S. politicians in the 1930s, and then again in the 1960s. Originally it meant positive steps employers should take to ensure they were not treating some employees, or job applicants, less favourably than others simply because of their race or trade-union affiliation. It is fair to say the phrase has shifted in meaning since then. Nowadays, when people talk about affirmative action, they mean more than simply ending discrimination; they mean preferential treatment for members of certain disadvantaged groups (most often black people or women). For example, a university or medical school might give preference to black or female applicants; or an employer (public or private) might give preference to job applicants who were black or female; or government (local or national), when awarding public-works contracts, might give preference to companies with majority black, or majority female, ownership. This preferential treatment can take a variety of forms, including the following four: (1) Outreach Outreach affirmative action is when steps are taken to encourage, and often to incentivise, applications from members of disadvantaged groups. Sometimes outreach just involves ensuring members of disadvantaged groups learn of positions, places or contracts on offer by, for example, advertising them in a wider range of media—in women’s as well as men’s magazines, say. Modest outreach of this kind does not involve giving any preference. However, there are more determined forms of outreach which do give preference to members of disadvantaged groups. For example, some universities write personally to high-performing black high school pupils, encouraging them to apply and inviting them for a personalised campus visit. And some bursaries for university study can only be taken up by black students, or by female students. Outreach programmes of this more determined variety give preference to members of disadvantaged groups by offering them encouragement, information and financial incentives which they do not offer to members of other groups. (2) Tie-breaker Tie-breaker affirmative action is the policy of always favouring a member of a disadvantaged group over an equally qualified member of another group, when both are applicants for the same position, place or contract. This form of affirmative action favours members of disadvantaged groups, not just by encouraging and incentivising their application, but in the selection process itself. For example, imagine Limpopo Province was seeking a contractor for a public construction project, and the two best bids for the contract were identical in costeffectiveness, risk and all other important respects—except that one was from a majority blackowned, and the other from a majority white-owned, company. If Limpopo Province had a tiebreaker affirmative action policy, it would always award the contract to the majority blackowned company in such circumstances—but it would not if the majority white-owned company’s bid was superior in any way (more cost-effective, less risky, etc.). 200 · BUSINESS ETHICS & OTHER PARADOXES (3) Strong preference Strong-preference affirmative action goes further than the tie-breaker form. It involves awarding positions, places or contracts to applicants from disadvantaged groups ahead of applicants from other groups, even when the applicants from disadvantaged groups are less qualified than the applicants from other groups. In other words, strong-preference affirmative action gives enough weight to—for instance—an applicant’s race or sex for this to outweigh the fact that they are less qualified than another applicant of a different race or sex. Many universities have policies of strong preference in undergraduate admissions, meaning that black or female candidates are often admitted ahead of white or male candidates who scored more highly than they did on other predictors of success (exam results, impression made in interview, etc.). For example, in recent years the University of Cape Town has included race as a factor in its admissions decisions, aiming to achieve a target of 65 per cent non-white students in its most popular degree programmes. In concrete terms this meant that to be admitted in 2012 to study medicine at U.C.T., if you were white or (South African) Indian you would have needed to score 84 per cent or more overall in your final school examinations, whilst if you were Coloured you would have needed only 69 or more, and if you were black 67.1 (4) Quota Affirmative action quotas are more demanding than the goals or targets (such as U.C.T.’s target of 65 per cent non-white students) which often accompany strong-preference affirmative action. If a company adopts a quota of 50 per cent female new hires, then it commits to hiring a woman for every man it hires. Achieving an affirmative action quota may (but will not always) require set-asides—jobs for which only applicants from the relevant disadvantaged group are even considered. For example, Vata Ngobeni, sports editor of the Pretoria News, has suggested that in South Africa ‘[h]alf the starting line-up’ of all junior provincial and national rugby teams ‘should be made up of players of colour’. (Obviously it couldn’t literally be half of 15. Ngobeni says he would be happy with 7.)2 Since Ngobeni doesn’t say where on the field the ‘players of colour’ should be, this quota could be met without the use of set-asides. However, if 8 positions in the starting line-up had already been assigned to white players, the remaining 7 positions would effectively be set-asides. Frequently, though, quotas are adopted with the proviso that they will only be filled if sufficiently qualified applicants come forward; so there is often little difference in practice between strong-preference affirmative action with targets, and affirmative action quotas. Equality of opportunity Equality of opportunity is the idea that which jobs or public offices a person can hold should not be determined by their birth or social circumstances: rather, individuals across society should have equal opportunities to attain the job or public office to which they aspire. Equality of opportunity rules out nepotism, the practice of reserving jobs and offices for family or friends. And it outlaws all caste systems which would dictate an individual’s place in society on the basis of who their parents were. It was the centrepiece of the Napoleonic Code, a set of laws embodying the ideals of the French Revolution, which the Emperor Napoleon— whom we encountered in Chapter 7—imposed on his European conquests in the first decades of the nineteenth century. Europe’s hereditary rulers ultimately formed a coalition which forced Napoleon into exile on Saint Helena, but the idea he left behind him proved much harder to banish. Chapter 10 · Affirmative action · 201 (Admittedly, Napoleon rather spoiled the effect by insisting his son should succeed him as emperor upon his abdication. Perhaps this just goes to show that even the best of us are prey to the cognitive biases discussed in Chapter 4.) Originally, equality of opportunity just meant that there should be no legal barrier preventing any person from applying for the job or public office they aspire to. This is known as formal equality of opportunity. But many political thinkers have come to the view that justice demands more than mere formal equality of opportunity. These thinkers remind us that social factors, such as how wealthy your family is when you are growing up, or whether you happen to live near a good public school, can prevent you from realising your career aspirations just as surely as laws can. John Rawls (whose thinking on distributive justice you encountered in Chapter 5) has pointed out that these sorts of social factor are no less ‘arbitrary from a moral point of view’3 than what caste or bloodline one happens to be born into. It is not through their own effort or their high moral standing that some people are born into rich families, just as it is not through their own effort or moral standing that some people are born into royal lineages, like the house of Bourbon or the house of Zulu. And—continues Rawls’ reasoning—it is unfair for anyone to be ‘debarred from experiencing the realization of self which comes from a skilful and devoted exercise of social duties’4 because of any such ‘social contingencies’.5 In other words, it is unfair for an accident of birth to determine someone’s chances of having the career they aspire to. This more demanding conception of equal opportunities entails that every person should have, not only an equal opportunity to apply for whatever job or office they aspire to, but also an equal opportunity to become qualified for that job or office. In concrete terms, this would mean that all children should have equal educational opportunities when growing up, and that rich parents should not be permitted to give their children a competitive edge by securing them places at elite private schools, or by paying for private tuition. The idea that no one should face any social barrier preventing them from becoming qualified for whatever job or office they aspire to is called substantial equality of opportunity. Now that we have looked briefly at what both affirmative action and equality of opportunity are, we can proceed with our task of deciding whether they are compatible or not. It is hard to deny that the reasoning which leads so many people to support equality of opportunity would seem, on the face of it, to rule out affirmative action. After all, most affirmative action programmes give applicants preference based on their race or their sex. And surely what race one is born with, and what sex one is born with—just like whether one is of noble birth, or whether one’s parents happen to be rich—are both factors which are (in Rawls’ phrase) arbitrary from a moral point of view: they are just accidents of birth. So it would seem, at least, that affirmative action programmes are guilty of precisely the unfairness which equality of opportunity condemns. Indeed, since affirmative action involves giving some applicants preference (i.e. more of an opportunity), and others no preference (i.e. less of an opportunity), then, if we accept that morality demands equality of opportunity, it would appear that the following simple argument can be constructed against it: The “unequal opportunities” argument P1: It is morally wrong to give people unequal opportunities to hold a job or office P2: Affirmative action gives people unequal opportunities to hold a job or office 202 · BUSINESS ETHICS & OTHER PARADOXES Therefore: C: Affirmative action is morally wrong This argument is pretty clearly valid. (If you are unsure what that means, have another look at the section of Chapter 3 entitled ‘What is a valid argument?’.) So it is easy to see why so many people oppose affirmative action on the basis that it violates equality of opportunity. Nevertheless, there are two promising ways of responding to this argument, both of which question its soundness. (Look back at the section of Chapter 3 entitled ‘What is a sound argument?’, if you are unsure what soundness is.) The first response questions the truth of P2, while the second questions the truth of P1. As we saw earlier, advocates of substantial equality of opportunity have highlighted the social barriers that prevent people from following careers to which they aspire. Some of these are financial, and some physical (such as an absence of good schools in one’s neighbourhood). But many are much more subtle. In societies where there has, in the past, been overt discrimination against a particular group, negative stereotypes about that group often linger on long after overt discrimination has come to an end. These stereotypes may influence the judgement of people interviewing members of this group who apply for jobs or university places; and this may happen without them being aware of it, so that they believe they are being fully impartial. But such stereotypes may also influence the thinking of members of the group themselves. They may, for instance, come to think of certain high status jobs as not real possibilities for “someone like me”. And, as negative stereotypes cause the numbers from that group doing those jobs to stay low, this reality can in turn reinforce the stereotypes, setting up a vicious cycle which it is hard for a society to get out of. To take a contemporary example, Gill Marcus, Governor of the South African Reserve Bank, has described the way stereotypes about black women affect their career prospects in South Africa today. Speaking to an audience of businessmen and –women, she suggested that for many of them their ‘experience … with African women is of the domestic worker we have in our homes, and therefore there is the assumption that that’s what African women do’. She went on: ‘Black women have to be a thousand times better, a thousand times smarter and have a skin as thick as a rhinoceros because there are assumptions before you open your mouth. And those won’t go away easily.’6 Some defenders of affirmative action have argued that affirmative action is necessary precisely to dissipate destructive stereotypes like the assumption that domestic work is “what African women do”. Partly because these sorts of stereotype are so pervasive, it takes determined outreach programmes and preference in the recruiting process for members of disadvantaged groups to become qualified for, and occupy, higher status positions. But once they are visibly in those positions, this reality will challenge the stereotypes which their colleagues and other members of society may previously have operated with. Not only that, but the presence of members of a disadvantaged group in high status positions will provide other members of that group with role models, letting them see very clearly that high status jobs are possibilities for “someone like me”. For example, the South African insurance company Liberty recently introduced a development programme targeted specifically at black female-owned suppliers. Speaking in April 2013, when the company had achieved the 4th highest black economic empowerment score Chapter 10 · Affirmative action · 203 of all financial services companies in South Africa, a representative of Liberty explained: ‘A series of workshops aimed at developing black female-owned businesses took place between 2010 and 2011. These workshops also served as a platform for the business to engage with black female-owned businesses and we were able to grow our supplier network as a result.’7 By assisting black female-owned businesses, actively engaging with them and awarding them supply contracts preferentially, a programme of this kind may well contribute to destroying negative stereotypes about black South African women in the long run. So this response challenges P2 of the “unequal opportunities” argument against affirmative action. It does so by arguing that, far from giving people unequal opportunities, affirmative action achieves substantial equality of opportunity for members of disadvantaged groups by breaking down some of the social barriers still holding them back. This response to the “unequal opportunities” argument amounts to an argument in favour of affirmative action in its own right, which we can call the “breaking barriers” argument.8 The “breaking barriers” argument (which we will break down into premises and a conclusion shortly) is a consequentialist argument—but a consequentialist argument of a rather unusual sort. Though it advocates affirmative action on the basis of the expected consequences of affirmative action, it is not a utilitarian argument (like the “invisible hand” argument for pure capitalism you encountered in Chapter 5). That is because it does not defend affirmative action on the grounds that it will improve the overall welfare, or the average happiness, of societymembers. Rather, the good consequence to which the “breaking barriers” argument appeals is that society will become more just if affirmative action is implemented for a period of time, since its members will end up enjoying more substantial equal opportunities. The American constitutional scholar Ronald Dworkin, who defended affirmative action on this basis, called this type of consequentialist argument an “ideal argument”. An “ideal argument” (of which the “breaking barriers” argument is just one specimen) says that a policy will make society ‘more just, or in some other way closer to an ideal society, whether or not average welfare is improved’.9 Though this argument for affirmative action certainly has some plausibility, you might be uneasy about it for at least two reasons. In the first place, you might question whether affirmative action really does destroy stereotypes and create role models in the way the “breaking barriers” argument claims. You might even think it does the opposite—like one black student at the University of California who said, ‘“I feel like I have AFFIRMATIVE ACTION stamped on my forehead.”’10 When it is widely known that a business or university has an affirmative action programme, this can have the effect of stigmatising those of the ethnicity or sex which receives preference. Referring to affirmative action in American universities, the philosopher (and critic of affirmative action) Carl Cohen writes: ‘An ethnic group given special favor by the community is marked as needing special favor—and the mark is borne prominently by every one of its members.’11 Even somebody who could easily have got a university place without preference may come up against the suspicion that they have only got where they are because of “special favour”. As Cohen puts it, ‘[p]reference puts distinguished minority achievement under a cloud. It imposes upon every member of the preferred minority the demeaning burden of presumed inferiority.’12 Similarly, chief executive of AfriForum Kallie Kriel, in his reply to Vata Ngobeni on rugby team quotas (see above), wrote: ‘Under a quota system, the presence of every black rugby player in a team is, by default, suspect—and black players have to work harder than their white peers to validate their inclusion.’13 204 · BUSINESS ETHICS & OTHER PARADOXES Moreover, though it can be important to have role models who one identifies with as “someone like me”, we must beware of assuming that “someone like me” just means “someone of my race/sex”. If affirmative action were to advance only an already rather privileged class within a disadvantaged group, there is no reason to suppose other members of the group would change their estimation of their own prospects. Of course, we mustn’t rely on armchair speculation to decide these matters. We would need to turn to empirical (evidence-based) social research to find out whether, overall, affirmative action breaks down barriers to equal opportunities, or simply erects new ones. So it might be thought that the “breaking barriers” argument at least manages to prove that the question of whether affirmative action is right or wrong from a moral point of view is partly an empirical question—not a question which can be answered through philosophical reasoning alone. This might be too hasty, though; because, in the second place, you might question whether P2 of the “unequal opportunities” argument against affirmative action really has been disproved. The “breaking barriers” argument may, for all we know, be right that affirmative action will give people across society more substantial equality of opportunity in the long run. But the means by which it proposes to achieve that end is by giving some people more opportunity than others to attain positions, places or contracts in the present. In other words, the “breaking barriers” argument, even if it was right in everything it said, would not show P2 of the “unequal opportunities” argument was false. Rather, it would just append a clause on the end of it: P2*: Affirmative action gives people unequal opportunities to hold a job or office, thereby increasing the probability that in the future more people will have equal opportunities to hold jobs or offices Dworkin acknowledges this complication when he writes that we need to recognise ‘the distinction between equality as a policy and equality as a right’.14 “Equality as a policy” is, in this case, the goal of achieving, in the future, a society with substantial equal opportunities. But the question is whether using affirmative action as a means to achieve that goal in the future doesn’t violate “equality as a right”, the treatment to which each one of us has a just claim in the present. We can all think of unjust means of bringing about desirable goals—for example, murdering a healthy man in order to provide organ transplants for several terminally ill patients. So one can’t prove that affirmative action is compatible with justice merely by showing that it promotes a desirable goal (even a goal which is desirable because it is just). The following formulation of the “breaking barriers” argument preserves what is most plausible in it, whilst not exaggerating how much it can prove: The “breaking barriers” argument P1: Anything which increases the probability that in the future more people will have equal opportunities to hold jobs or offices serves a crucial social purpose (creating a more just society in the future) P2: Affirmative action increases the probability that in the future more people will have equal opportunities to hold jobs or offices Therefore: C: Affirmative action serves a crucial social purpose (creating a more just society in the future) Chapter 10 · Affirmative action · 205 Of course, even this modest version of the “breaking barriers” argument is controversial. As we have just seen, many people would dispute the claim made in P2 of this argument, and it is a matter for empirical research whether P2 is true or false. But the more pressing problem for the “breaking barriers” argument is that, even if they accept its conclusion, opponents of affirmative action can continue to deploy the “unequal opportunities” argument against affirmative action. Opponents of affirmative action can happily admit that breaking down barriers to substantial equality of opportunity is a vitally important goal, but then deny that affirmative action is a morally permissible means to achieve that goal. So the “breaking barriers” argument neither proves that P2 of the “unequal opportunities” argument is false, nor does it amount to a compelling case for affirmative action on its own. It would appear that opponents of the “unequal opportunities” argument need also to challenge its first premise, P1. P1 of the “unequal opportunities” argument is a statement of the principle of equal opportunities: P1: It is morally wrong to give people unequal opportunities to hold a job or office As we saw earlier, this principle can be interpreted in a formal, or else in a more substantial, way. But, whichever way it is interpreted, there are persuasive reasons for thinking the statement of the principle in P1 is too strong. To see why, imagine a society in which both formal and substantial equality of opportunity have been realised. In this imaginary society, everybody receives an education of the same quality, no prejudices or stereotypes disadvantage any section of society, children who do not get support and encouragement from their family do so at after-school clubs or from statefunded nannies, and nobody is barred from applying for any university course, job or public office. In this society, does everyone have an equal opportunity to hold every job or office? The answer is almost certainly, “No.” It is generally agreed that natural differences between individuals mean that, even when they all receive the same training, some will turn out better at certain activities than others. General experience teaches that some people naturally are more musical, for instance, or have better hand-to-eye co-ordination, than others. Likewise, some people have a good head for maths, or have a knack for inspirational public speaking, while others, try as they might, fail to master these arts. Consequently, even in a society with formal and substantial equal opportunities, we would expect individuals who were more naturally able than their peers to have more opportunities to hold jobs and public offices. The Emperor Napoleon summed up his vision of equal opportunities in the catchphrase “la carrière ouverte aux talents”—“the career open to talents”. But what this means is that individuals’ prospects of getting jobs and offices should in fact not be equal—as they would be if they were assigned by lottery, for instance. Rather, jobs, political offices and places on degree programmes or training schemes should go to the people with the most talent and ability. Once one realises that this is what most people mean by equal opportunities, it can seem like a great injustice. After all, jobs and offices with important responsibilities attached to them give their occupants fulfilment, increased self-esteem and—usually—economic benefits too. But people’s level of natural talent or ability is purely an accident of birth: it is, as Rawls would say, 206 · BUSINESS ETHICS & OTHER PARADOXES arbitrary from a moral point of view. Mustn’t it count as unfair to allocate such important goods on such an arbitrary basis? Reflecting on the significance of the cognitive characteristics grouped under the label “intelligence” in the allocation of jobs in industrialised societies, the American philosopher Thomas Nagel was prompted to write: ‘When racial and sexual injustice have been reduced, we shall still be left with the great injustice of the smart and the dumb, who are so differently rewarded for comparable effort.’15 However, this is to look at jobs and offices purely in terms of what they do for the individuals who hold them. There is, of course, another side to the story: what these individuals’ holding those jobs and offices does for the rest of us. When we go to see a doctor or dentist, hire a lawyer, open a bank account, or consult a civil servant or post-office clerk, we rely on the person opposite us being good at their job. It is bad for everyone when people in positions of responsibility—on whom we rely for our health, financial security, communications, and an awful lot more—are not up to performing the tasks attached to their role. So the justification for allocating jobs and offices according to ability is that doing so serves the crucial social purpose of increasing the welfare of all of society. If positions, places and contracts were allocated in a way which really gave people identical opportunities to attain them—by lottery, say, or on a “first come, first served” basis—everyone, including (probably especially) the least well-off members of society, would suffer. These considerations indicate that P1 of the “unequal opportunities” argument must be replaced with: P1*: It is morally right to give people unequal opportunities to hold a job or office, if doing so serves a crucial social purpose But the defence of preference for the talented which justifies replacing P1 of the “unequal opportunities” argument with P1* also opens the way for a parallel defence of preference for disadvantaged groups. We have already noted one crucially important social purpose that preference for disadvantaged groups could serve: removing the social barriers to substantial equality of opportunity which past discrimination has left in its wake. But defenders of affirmative action have argued there are ways in which preference for disadvantaged groups can also improve the welfare of all of society. It is often said that increasing the diversity—with regard to sex and ethnicity, for example— of employees in an organisation contributes to innovation and excellence. Having a different cultural background, or different life experiences, can make someone more likely to notice flaws in an organisation’s status quo, or able to suggest new approaches to tasks and problems. When their ideas and suggestions turn out to be misguided, the organisation can maintain its previous mode of operating; but when they lead to improvements, this will benefit not just the organisation itself, but the whole of society. The philosopher Joseph LeFevre has argued that, because ‘there is no “mechanical” method for devising hypotheses’, diversity can lead to progress in science. ‘The creation of a hypothesis,’ he writes, ‘is affected by everything that is involved in forming a person’, including ‘[o]ne’s education, culture, ethnicity, sexuality, racial identity’, and other factors besides. Consequently, ‘[t]he diversity of the community of scientists will increase the diversity of responsible and relevant hypotheses’.16 For very similar reasons, diversity in the business sector can be beneficial as well. For example, the director of marketing, communication and corporate affairs at Old Mutual, Mohale Ralebitso, has said that ‘diversity is a powerful catalyst for idea generation and innovation’.17 Chapter 10 · Affirmative action · 207 Another positive social consequence affirmative action is said to have is that it improves service delivery to disadvantaged communities. For example, defenders of affirmative action in the U.S.A. say that doctors or lawyers who come from poor black urban neighbourhoods are statistically far more likely to set up their practice in those neighbourhoods, after they have finished their training, than white doctors or lawyers who come from a more affluent part of town. Consequently, if law schools and medical schools give preference to black applicants, this will tend to ensure that all of society, and not just the affluent communities, have access to vital legal and medical services. So this response challenges P1 of the “unequal opportunities” argument against affirmative action by showing that it sometimes is morally justifiable to give people unequal opportunities to hold a job or office, since giving preference to the most able or talented applicants is morally justifiable. Furthermore, it argues that affirmative action can be justified on the same grounds as preference for the talented, since affirmative action, just like preference for the talented, serves the crucial social purpose of significantly increasing overall social welfare. This latter part of the response can be formulated as an argument in favour of affirmative action with a similar structure to that of the “breaking barriers” argument: The “increased welfare” argument P1: Anything which promotes innovation which will benefit all society-members and improved delivery of essential services to all society-members serves a crucial social purpose (significantly increasing overall social welfare) P2: Affirmative action promotes innovation which will benefit all society-members and improved delivery of essential services to all society-members Therefore: C: Affirmative action serves a crucial social purpose (significantly increasing overall social welfare) Just like the “breaking barriers” argument, the “increased welfare” argument does not amount to a compelling case for affirmative action on its own. Opponents of affirmative action could accept its conclusion, and yet insist that affirmative action should be outlawed as an unacceptable means to achieve the admittedly vital social goal of increasing overall social welfare. But one might also question whether the “increased welfare” argument is even able to establish its modest conclusion, C. Specifically, one might have reservations about the idea— upon which P2 rests—that an increase in diversity achieved via affirmative action would increase overall social welfare. Diversity will only lead to innovation, in the way outlined above, if the people to whom affirmative action gives preference genuinely do have different cultural backgrounds, or life experiences, to other members of society; and this is not always the case. Moreover, it may be that the benefits of new ideas can be achieved by means of a very small increase in diversity, which would mean that more extensive affirmative action programmes could not be justified on these grounds. The claim that affirmative action improves service delivery to disadvantaged communities certainly has some plausibility. Still, it could be undermined if it were found that many lawyers and doctors from poor black neighbourhoods use their degree, not to set up practice in their old haunts, but to get the hell out of Dodge. And it might be unduly pessimistic to expect that no practitioners born in affluent white neighbourhoods will serve disadvantaged communities. 208 · BUSINESS ETHICS & OTHER PARADOXES As Carl Cohen points out, ‘[t]he record of professional services completely transcending difference of race or religion or nationality is long and honorable’.18 A further, very powerful, objection is that affirmative action actually runs the risk of decreasing overall social welfare by passing over the most qualified applicants for positions, in favour of less qualified members of disadvantaged groups. We have already noted the dangers of passing over the most able and talented applicants for jobs or offices, but it seems that affirmative action programmes—by giving applicants preference on the basis, not of their talent or ability, but of their race or sex—will end up doing just that. Discussing affirmative action in the U.S.A., Carl Cohen writes: ‘The intellectual level of some who are admitted preferentially in order to reach racial goals is scandalous. At leading law schools and medical schools, it is common for the average of the test scores and the grade point averages of admitted minority applicants to be below the average of Asian and white applicants who were rejected.’19 If this is true, it is certainly concerning, because a society will suffer which does not take care that those selected for a medical or legal training have a good aptitude for that career (though, on the issue of test scores and grade point averages, see the next section of this chapter, ‘Proxies for disadvantage’). Just like the “breaking barriers” argument, the “increased welfare” argument has a controversial second premise whose truth or falsity cannot be determined just by armchair speculation. To get a final verdict on the “increased welfare” argument, philosophers would need to hand over to empirical researchers. But this second response to the “unequal opportunities” argument which we have been considering did not only put forward the “increased welfare” argument. Before that, it also showed that P1 of the “unequal opportunities” argument was too extreme, and needed to be replaced with P1*: P1*: It is morally right to give people unequal opportunities to hold a job or office, if doing so serves a crucial social purpose With P1 of the “unequal opportunities” argument jettisoned in favour of P1*, the “unequal opportunities” argument can no longer securely establish its conclusion, C: C: Affirmative action is morally wrong That is because P1* specifies the kind of circumstances in which it would not be morally wrong to give people unequal opportunities to hold jobs or offices, as affirmative action does—indeed, the kind of circumstances in which this would be the right thing to do from a moral point of view. Combining both responses to the “unequal opportunities” argument gives us a new argument in favour of affirmative action. This argument does not just aim to establish the modest conclusion of the “breaking barriers” argument and the “increased welfare” argument: that affirmative action serves a crucial social purpose. It goes further, by aiming to establish that—at least in a society where barriers to substantial equal opportunities remain, and where there is still room to improve overall social welfare—it is, morally speaking, right to implement affirmative action: Chapter 10 · Affirmative action · 209 The “combined” argument P1: It is morally right to give people unequal opportunities to hold a job or office, if doing so serves a crucial social purpose P2: Affirmative action gives people unequal opportunities to hold a job or office, thereby not just increasing the probability that in the future more people will have equal opportunities to hold jobs or offices, but also promoting innovation which will benefit all society-members and improved delivery of essential services to all society-members P3: Anything which increases the probability that in the future more people will have equal opportunities to hold jobs or offices serves a crucial social purpose (creating a more just society in the future) P4: Anything which promotes innovation which will benefit all society-members and improved delivery of essential services to all society-members serves a crucial social purpose (significantly increasing overall social welfare) Therefore: P5: Affirmative action serves a crucial social purpose Therefore: C: Affirmative action is morally right P1 and P2 of the “combined” argument are the amended and augmented versions of P1 and P2 of the “unequal opportunities” argument which result from our discussion above. P3 and P4 are lifted, respectively, from the “breaking barriers” argument and the “increased welfare” argument. P5 follows as a conclusion from P2, P3 and P4, which amount to three premises of an argument-within-an-argument. And the conclusion, C, can then be established on the basis of P1, P2 and P5. The “combined” argument is a powerful response to the charge that affirmative action is unjust because it violates equal opportunities. Opponents of affirmative action cannot reject the “combined” argument’s crucial first premise, P1, without also denying that it is morally right for jobs to be awarded according to talent and ability. However, the “combined” argument gives defenders of affirmative action no cause for complacency. For one thing, there might be some further reason which we haven’t thought of— having nothing to do with equal opportunities—why affirmative action is morally wrong. For another thing, even though P1 of the “combined” argument receives strong support from our judgement that it can be fair to award jobs according to talent and ability, one might still have lingering reservations about it. If 99 per cent of the population of a society loathed a minority which made up one per cent of the population, the extreme anger and disgust 99 percent of the population would feel if members of that minority came to occupy high status jobs might be thought to mean that overall social welfare would be increased if members of the minority were barred from occupying high status jobs. And that would certainly be an unjust measure. The right way to respond to this concern is probably to argue that the satisfaction of individuals’ discriminatory preferences does not in fact contribute to social welfare, properly understood. But mounting such an argument would take us too far out of our way, so we must leave that as a loose end here. Finally, since P2 of the “combined” argument is simply the sum of the controversial second premises of the “breaking barriers” argument and the “increased welfare” argument, it is vulnerable to empirical refutation in just the same way as they both are. P2 of the “combined” 210 · BUSINESS ETHICS & OTHER PARADOXES argument does, admittedly, have the advantage of a safety net, in the sense that, if either P2 of the “breaking barriers” argument or P2 of the “increased welfare” argument was empirically refuted, but not both, then P2 of the combined argument could be altered accordingly and still establish the interim conclusion P5 in conjunction with whichever of P3 and P4 remained applicable. If, however, both P2 of the “breaking barriers” argument and P2 of the “increased welfare” argument were empirically disconfirmed, then P2 would go the same way—its safety net in tatters. So far our investigation suggests that whether affirmative action is just or unjust depends on what outcomes it in fact brings about. If, as its defenders argue, it promotes substantial equality of opportunity and tends to increase overall social welfare, then it is no less defensible than giving preference to the talented and able. But we have also seen quite plausible reasons to suspect that it risks endangering social welfare in various ways, and might even create new barriers to substantial equal opportunities. Since large-scale affirmative action has been underway in the U.S.A. since the 1970s, one might have hoped there was already empirical research available which could settle these matters. However, what research has been done appears open to differing interpretation by the opposing sides in the affirmative action debate.20 Still, it is a significant conclusion in itself that philosophical reasoning cannot adjudicate the debate about affirmative action and equal opportunities on its own. Shortly (in the next section but one of this chapter, ‘Affirmative action as redress’) we will look at a different approach to justifying affirmative action, which does not rely in the same way on the nature of its consequences. But first we must turn briefly to something which is often thought to be affirmative action, but which in fact is not affirmative action at all. Proxies for disadvantage When an applicant from a disadvantaged group is selected for a university place or job, despite having formal qualifications (e.g. school-leaving exam marks) which are inferior to those of applicants who were rejected, it is not always the case that this applicant has been given preference over other, more qualified, applicants. To see why this is true, first consider the case of a German school-leaver who applies for university study in the U.K. The British university would have to find some way of determining the meaning of her German school-leaving exam (Abitur) results, thus allowing her ability and prospects of success to be compared with those of British applicants who had taken the U.K.’s school-leaving exams (A Levels). This will be no easy matter if, for example, Abitur candidates study subjects in rather less depth than A-Level candidates, but study more subjects, so that the breadth of their knowledge is greater than A-Level candidates’. But a university or employer can be confronted with this kind of challenge of translation, even when an applicant has sat the same exams as all the other applicants. This is because the same exam result can have very different meanings depending on the context in which it was achieved. If a school pupil who had to work 7 days a week managing his family’s livestock, walk for two hours each day to get to school, and take responsibility for feeding and clothing his younger siblings, managed to scrape a pass in his school-leaving exams—despite not owning the correct textbooks, and being taught by a teacher with neither the will nor the ability to do her job properly—this might well be proof of exceptional natural intelligence and nigh-on superhuman diligence. If a pupil at an expensive boarding school, taught in small classes by the country’s best teachers, and tutored one-to-one after hours in subjects she was struggling in, Chapter 10 · Affirmative action · 211 achieved the same result, this would, in contrast, demonstrate either pathological laziness or a very low degree of natural intelligence. In an ideal world, a university or employer could determine the precise meaning of each applicant’s formal qualifications, by investigating how disadvantaged their family was and what challenges they personally faced before and during their education (up to and including whether they had a cold on the day of their exams). In the real world, endeavouring to carry out such extensive background checks would ensure only that no admission or employment decisions were ever taken. So recruiting organisations must instead rely on easily detectable characteristics of applicants which have a strong statistical correlation with a disadvantaged background and challenges faced during education. These so-called “proxies” for disadvantage are never 100 per cent reliable, and inevitably lead to unfair decisions in some individual cases. This is the same problem of needing to trade accuracy off against efficiency which leads motor insurance companies to sell expensive policies to all young male drivers, despite the fact that many of them drive much more safely than their older, and female, counterparts. When it comes to determining what an applicant’s formal qualifications say about their ability to perform the tasks attached to a job or degree programme, factors including what school they went to, their family’s wealth, and whether their parents attended university are likely to be good proxies for educational disadvantage. But we have also seen that certain barriers to opportunity affect people because of what their race or gender is—for instance, the social stereotype mentioned by Gill Marcus that domestic work is “what African women do”. This is one reason why an applicant’s race or sex may in some societies be a reliable proxy for educational disadvantage. A second reason is that some societies have systematically deprived people of opportunities by means of unjust discrimination written into their legal system—the “Bantu education” laws and pass laws in South Africa are cases in point. In those societies, even decades after the discriminatory laws have been repealed, the characteristic which formed the basis of unjust discrimination in the past (race or sex, say) may still be the most reliable indicator of certain kinds of educational disadvantage. Using applicants’ race or sex in this way, as a proxy which helps to establish what their formal qualifications really say about their ability, is sometimes called “compensating for disadvantage”. But the phrase “compensating for disadvantage” is ambiguous, so it is important to appreciate what it means in this particular context. The compensation in play here is like that of a hunter with a rifle which pulls to the right, who compensates for this by aiming always slightly to the left of the eland he is tracking. (The analogy is more exact if we say his rifle pulls to the right 8 times out of 10, so that the hunter knows he is bound to miss 20 per cent of the time if he compensates by aiming to the left, but also that this is, in the long run, far more effective than aiming straight at the eland.) Since the purpose of the compensation which concerns us here is to arrive at correct beliefs about the ability of applicants for positions or places (and not to bring home an eland), we can call this sort of compensation for disadvantage “belief compensation”. There are plainly limits to how much it is justifiable to compensate for educational disadvantage in this way. If, through the fault of his school and his circumstances, an applicant for a place in an Economics degree programme has not yet mastered basic maths, no amount of general brightness or mental agility could justify awarding him the place. Sadly, he just wouldn’t be able to catch up with his peers quickly enough. However, in less extreme cases, it would certainly be justifiable on this basis to award a place or position to an applicant who, because of 212 · BUSINESS ETHICS & OTHER PARADOXES educational disadvantage, would require some extra coaching or on-the-job training to catch up with their peers at the outset. If, setting aside their educational disadvantage, the applicant is talented and able, then this initial investment of coaching or on-the-job training should be more than made up for by their excellent performance later on. “Belief compensation”, which seeks, on the basis of their level of educational disadvantage, to determine what a candidate’s formal qualifications actually say about their talent and ability, does not involve any preferential treatment—just as a British university’s attempt to establish what a German school-leaver’s Abitur grades actually say about her ability relative to that of U.K. school-leavers does not involve any preferential treatment. So this sort of compensation for disadvantage, widespread among employers and higher education institutions, is not affirmative action. Affirmative action as redress Up to now we have encountered two ways in which the injustices suffered by disadvantaged groups in the past ought to influence the recruiting decisions of universities and employers. First, unjust discrimination can create special barriers to opportunity for certain disadvantaged groups—recall the stereotype about black women to which Gill Marcus drew attention. It can also mean that some communities do not have adequate access to services, such as medical and legal services. If giving preference to members of disadvantaged groups in recruiting decisions would break down these barriers to opportunity, and broaden the delivery of vital services in society, without creating even worse social problems in the process, then this is what recruiters should do. Second, prolonged discrimination, especially when backed by the legal system, can lead to the clustering of various forms of disadvantage in a particular societal group. It can, as a consequence, be sensible for recruiters to use membership of that group as a proxy for educational disadvantage, when they are assessing what applicants’ formal qualifications say about their ability. In concrete terms, it can justify admitting or appointing a member of the disadvantaged group whose formal qualifications are inferior to those of an applicant, from another group, who is rejected; and this does not, strictly speaking, involve giving preference to anyone. However, many people believe that the fact of past discrimination provides a far more direct justification of affirmative action. These people advocate affirmative action as a way of making “redress” to the victims of past injustices. In South Africa, for example, not just the African National Congress government, but also the main opposition party, the Democratic Alliance, support affirmative action as a means of redress. ‘The DA specifically supports race-based redress,’21 D.A. leader Helen Zille wrote towards the end of 2013. Similarly, the vice-chancellor of U.C.T., Max Price, in early 2013 explained that his university used race ‘as a measure for redress and as a proxy for disadvantage’22 in admissions decisions, suggesting that U.C.T.’s admissions policy at that time (discussed in the section of this chapter entitled ‘Affirmative action and equal opportunities’) aimed partly to establish the true meaning of applicants’ formal qualifications (see the previous section of this chapter, ‘Proxies for disadvantage’), and partly to provide redress. But what does “redress” mean? Roughly speaking, to make redress to somebody is to do something for them in order to make up for treating them badly in the past. Chapter 10 · Affirmative action · 213 We will try to make this more precise presently. But even when it is stated in such general terms, we can see that there will be constraints on who can make redress to whom. In the first place, if nobody has treated you badly, then nobody can make redress to you. Redress is a matter of making up for bad treatment of people, so it only makes sense for somebody to receive redress if they have indeed been badly treated. In the second place, if I am not the one who treated you badly, then it will normally make no sense for me to try to make redress to you. If you were badly treated by a stranger completely unconnected to me, then, though you might be grateful for what assistance I offer, you will not see it as making up for the bad treatment. These points might both appear to undermine the idea that affirmative action for presentday school-leavers and job-seekers could count as redress for unjust discrimination in the past. In the first place, many school-leavers and job-seekers in countries—like the U.S.A. and South Africa—which have a history of legally enforced racism were born after the discriminatory laws had been repealed. So it might seem that it is not to them, but only to their elders, that redress ought to be made. In the second place, the individuals responsible for enacting and enforcing discriminatory laws in the past are now for the most part dead, or in retirement (or, in the South African case, on the chat show circuit). It is, generally speaking, not the individuals who were responsible for past injustices who are now responsible for affirmative action programmes. So it might seem that, even if affirmative action did give assistance to victims of past injustices, it would be inaccurate to call it redress. However, even though young black Americans and South Africans were born after the end of legally enforced racism, it is nonetheless largely because of the prolonged discrimination in the past that so many young black Americans and South Africans are economically, socially and educationally disadvantaged today. If a man takes revenge on his ex-girlfriend by lacing her food with a poison which paralyses any babies she will have while they are still in her womb, then not only she but also her paraplegic children will have a legitimate grievance against him.23 There is no incoherence to the idea that one person might owe another person redress for something the first person did before the second person was born. Furthermore, the individuals who enacted and enforced discriminatory laws, in countries like South Africa and the U.S.A., were acting, not in their private capacity, but as representatives of the state (as politicians, soldiers, policemen, administrators and judges, for example). Though they might very well also owe redress as individuals, it is primarily the state itself which must make redress for the state’s bad treatment of people in the past. And this is true even if the present-day government has a very different ideology, and very different personnel, from past governments. Just as a corporation does not suddenly turn into another corporation when it acquires a new chief executive and new management personnel, so a state remains the same state when a new political party takes over the task of governing it—even if that party governs very differently from the previous party in government. That is why we expect a corporation to honour contracts its previous management entered into on its behalf, and, similarly, we expect a state to honour treaties, debts and contracts which date back to the previous administration. And that is why the state must make redress for the state’s bad treatment of people in the past, despite changes of personnel, territory and policy—think of how the present-day Federal Republic of Germany continues to make redress for the atrocities committed by Hitler’s Nazi government of the 1930s and -40s, despite a new constitution, territorial changes and several changes of government and policy in the interim. So it is right and fitting that redress on the part of a state should be effected today by the 214 · BUSINESS ETHICS & OTHER PARADOXES individuals who today act as representatives of that state. Publicly owned companies and public universities are arms of the state (though not, hopefully, arms of government), so it is clearly legitimate for the state’s redress to be made via them. It might be thought that private companies do not owe redress, unless they drew up and implemented their own policies of unjust discrimination. However, we have to recognise that, when unjust discrimination is enshrined in the legal system, it is in effect implemented by the state in a broader sense, which includes private citizens and private companies who connive in implementing discriminatory laws (for example, the apartheid law forbidding a black manager to be appointed over a team including white workers), thereby making themselves complicit in injustice. When injustices have been perpetrated by the state in that broader sense, it is appropriate for the state in that broader sense also to make redress. It is in this light that we can understand the South African Employment Equity Act’s requirement that large and mediumsize businesses make use of ‘preferential treatment and numerical goals’ to increase the representation of ‘designated groups’ in ‘all occupational categories and levels in the workforce’.24 Now that we have looked briefly at the issue of who should make redress to whom, let’s turn to the issue of how affirmative action can constitute redress for past injustices. This is where “compensation for disadvantage” takes on a completely different meaning from the “belief compensation” discussed in the last section (‘Proxies for disadvantage’). If I have treated you unjustly, in a way which reduced your welfare in some respect, then I must do something for you which restores your total welfare to the level it would have been at had I never treated you unjustly. For example, if I stole your car, I ought to provide you with enough money to buy a new car, and pay your bus fares in the meantime; if I assaulted you unprovoked, and hacked off your leg, I ought to fund a state-of-the-art prosthetic leg, as well as all the physiotherapy it takes to get you used to walking on it. By the same principle, if the state passed unjust laws which meant you did not accomplish as much—educationally, professionally and personally—as you otherwise would have, then the state ought to do what is required to restore your total welfare to the level it would have been at had it never passed those unjust laws. This sort of compensation for disadvantage—very different from “belief compensation”—we can call “redress compensation” (or “compensatory redress”). Affirmative action can serve as “redress compensation” to individuals harmed by injustice, because it can provide them with a job, a place on a training scheme or degree programme, or a contract, which they would not have secured without preferential treatment. The benefits attached to that position, place or contract can go some way towards restoring an individual’s welfare to the level it would have been at had the state never treated them unjustly. However, it has been pointed out that affirmative action generally does not benefit individuals in proportion to how much they were harmed by past injustices. The people who suffered most harm because of past discrimination are so unqualified that they can’t get a position or place even with strong-preference affirmative action or quotas. Those who benefit most from preferential policies are often—in the words of the South African philosopher David Benatar—‘the least disadvantaged of the disadvantaged’.25 And some beneficiaries of affirmative action are the lucky few who did not suffer any harm at all, despite laws discriminating against them—‘those who received a good education despite discriminatory policies’.26 There is no doubt that “redress compensation” ought to be in proportion to the harm suffered due to injustice, because it is meant to restore individuals to the level of welfare they Chapter 10 · Affirmative action · 215 would have been at had the injustice not occurred. This suggests that affirmative action, considered as a means of making redress, is vulnerable to the following argumentative assault: The “inadequate compensation” argument P1: A policy is an inadequate method of providing compensation to victims of past injustice, if it does not benefit victims in proportion to how much they were harmed by past injustice P2: Affirmative action policies generally do not benefit individuals in proportion to how much they were harmed by past injustice Therefore: C: Affirmative action policies are generally inadequate methods of providing compensation to victims of past injustice Though the “inadequate compensation” argument is a strong argument against affirmative action, conceived of as a means of compensatory redress, there are a number of ways in which you might respond to it. Firstly, even if its conclusion, C, is true, it might be that a combination of affirmative action and other means of compensation would provide fully adequate compensation to victims of injustice. Secondly, it may be that more pressing moral demands in the present mean that it is, regrettably, impossible for a state to provide fully adequate compensation to victims of past injustice. In those circumstances, surely affirmative action would be better than no compensation at all. Thirdly, P2 might not be so problematic if it could be shown that, via family networks, many of the older people who were most severely disadvantaged by past injustice benefited indirectly from the preference in recruiting decisions given to their younger family-members. It is, furthermore, worth noting that critics of affirmative action who make the “inadequate compensation” argument against it are committed to proposing more adequate means of compensation in its place, because, by claiming that affirmative action is an inadequate method of compensating victims of past injustice, they grant that injustices have occurred for which compensation must be provided. However, many critics of affirmative action harness the premises of the “inadequate compensation” argument to try to establish a much more wide-ranging conclusion: The “inadequate redress” argument P1: A policy is an inadequate method of providing compensation to victims of past injustice, if it does not benefit victims in proportion to how much they were harmed by past injustice P2: Affirmative action policies generally do not benefit individuals in proportion to how much they were harmed by past injustice Therefore: C: Affirmative action policies are generally inadequate methods of making redress to victims of past injustice As it stands, this argument relies on an unstated premise. While the first premise, P1, makes reference to compensation, the conclusion, C, refers to redress. Consequently, to be valid the 216 · BUSINESS ETHICS & OTHER PARADOXES argument requires the following additional premise: P3: Compensation for harm suffered due to past injustice is the only form of redress owed to victims of past injustice Without P3, the most the argument could establish is the much more modest conclusion of the “inadequate compensation” argument. It is only with the help of this unstated premise, P3, that the conclusion of the “inadequate redress” argument, C, could be derived from the conclusion of the “inadequate compensation” argument. But there are good reasons for thinking that the unstated premise, P3, of the “inadequate redress” argument is false, and that there exists another form of redress, apart from compensatory redress, which is owed to victims of unjust treatment. To show this, let’s take the hardest possible case: that of someone who has not just failed to be harmed by, but has positively benefited from, unjust treatment. Imagine that a doctor, fed up with one of his patients, decides to murder him by administering an overdose of a drug. Unbeknownst to the doctor, giving that patient this dose of the drug will in fact cure the patient of a severely debilitating condition. So, though he has treated his patient unjustly, by trying to murder him, the doctor ends up benefiting the patient considerably. Now imagine that the doctor, consumed by remorse, goes to his freshly cured patient, tells him how sorry he is for trying to murder him, and offers to do something for him, “by way of an apology”, to make up for his unjust treatment of him. He might offer personally to pay his patient’s medical bills for the rest of his life, for instance. If P3 of the “inadequate redress” argument was true, and compensatory redress was the only form of redress, the doctor’s behaviour would strike us as bizarre, even incomprehensible. Far from harming the patient, his action actually benefited him considerably, so what could there possibly be for the doctor to make up for? But, far from being incomprehensible, doing something for someone, “by way of an apology”, to make up for our bad behaviour towards them, is in fact one of the most familiar parts of our moral experience, which is why we can immediately understand the doctor’s offer. What this indicates is that, besides compensatory redress, which cancels the reduction in welfare caused by unjust treatment, there is a further form of redress—what we can call “rectificatory redress”—which attempts to make up, not for the harmful consequences of an unjust act, but for that unjust act itself. When a thief lands up in court, we expect him not just to have to pay his victim full compensation for all damage and loss of property, but to be punished on top of that—by means of a fine or a jail sentence, for example—for the criminal act itself. Similarly, when a state is making redress for a very serious injustice, it must not just compensate its victims for the reduction in welfare they suffered as a consequence of the injustice, but also do something for them to make amends for—to “rectify”—the unjust act itself. While it is (often) possible to restore somebody to the level of welfare they would have been at but for an unjust act, there is no way of going back in time and literally undoing the unjust act itself. As a consequence, rectificatory redress inevitably has a somewhat symbolic character. Compensation can literally cancel the harm caused by injustice, by restoring the victim’s level of welfare. In contrast, all rectification can do is symbolically cancel an unjust act by means of an “opposite” act, which expresses the perpetrator’s remorse and their wish that they could undo what they have done. The doctor’s rectificatory redress to his patient has this quality of “opposite”-ness, because facilitating the enhancement and prolongation of somebody’s life can Chapter 10 · Affirmative action · 217 plausibly be thought of as the “opposite” of trying to end it. Affirmative action can be construed as having the “opposite”-ness appropriate to methods of rectificatory redress, because giving people preference when allocating positions, places and contracts can plausibly be thought of as the “opposite” of disadvantaging people in, or excluding them from, the competition for those places, positions and contracts—which is what unjust discrimination does. It is often objected that making redress by means of affirmative action involves perpetrating the same injustice all over again, only this time against a new group of people. While affirmative action may provide redress to disadvantaged groups, it is said, it does this by unjustly disadvantaging other groups. However, one can reply to this objection by pointing out that, before it can consider how to allocate goods and opportunities fairly, a state, no less than a person, must first pay its debts— whether these happen to be money it owes, or redress it owes because of past injustices. It might be fair, other things being equal, for a dying man to bequeath equal shares of his fortune to each of his sons. But if he already owes one of them $10,000, then he should first pay that debt, and then reconsider what would count as fair bequests from that new starting point. Likewise, if a state needs to make redress to some of its citizens by means of an affirmative action policy for its unjust acts against them, then it is only after redress has been made, in accordance with the state’s obligation to its victims, that positions, places and contracts could be allocated purely according to equal opportunities (discussed in the section of this chapter entitled ‘Affirmative action and equal opportunities’). Sometimes the impression is given that, when a state makes redress for its past injustices by means of affirmative action, it is actually not the state which is paying what is owed in redress, but those individuals who would otherwise have been awarded the positions, places or contracts awarded preferentially. These individuals, it is often thought, are making a sacrifice so that redress can be made to past victims of wrongdoing. It is then supposed that defenders of affirmative action (conceived of as a way of making redress) must show that those individuals who make this sacrifice were either perpetrators of, or, at the very least, beneficiaries of the injustices for which redress is being made. Otherwise—says this train of thought—it would be wrong to expect, let alone to demand, such a sacrifice on their part. But a good case can be made that this impression, and the ensuing train of thought, is misguided. After all, in order to sacrifice something, one must first have it, or at least be entitled to it, in the first place. Now, the fact that some good or opportunity would have been allocated to you, if the state had not had certain special obligations to other citizens, surely does not entail that you have, or are entitled to, that good or opportunity. All it entails is that, if the state had not had certain obligations that it did in fact have, then it would have been right for it to allocate certain goods and opportunities in a different way—a way more beneficial to you. This does not mean that, as things stand, any of the goods or opportunities in question are rightfully yours. If this response is correct, then there is in fact no need to establish that those who would have been awarded places, positions or contracts, in the absence of an affirmative action policy, were perpetrators or beneficiaries of the past injustices for which redress is being made. If affirmative action is introduced (at least partly) as a method of rectificatory redress, and not (or not just) as a method of compensatory redress, then it is right for it to benefit all those discriminated against by unjust laws, regardless of how much (or how little) harm they suffered as a result of the unjust discrimination. Unlike compensatory redress, which aims to cancel a 218 · BUSINESS ETHICS & OTHER PARADOXES specific quantity of harm, rectificatory redress aims symbolically to cancel an unjust act, and is thus not bound to be in proportion to the harm suffered by individuals. When a state passes laws discriminating against citizens of a particular sex or race, it commits an injustice against all citizens of that sex or race, even if only some of those citizens suffer actual harm as a result of the injustice of which they are the victim. If it is correct that victims of serious injustice are owed, not just compensatory redress for the harm they have suffered as a result of the injustice, but also rectificatory redress from the perpetrator of the injustice to make amends for the unjust act itself, then P3 of the “inadequate redress” argument is false, and affirmative action can be justifiable as a means of redress even if it does not constitute an adequate method of making compensatory redress. This is by no means the end of the story. Once we open the door to the idea of rectificatory redress, an army of new questions and complications tumbles in with it. For instance, you might ask how long affirmative action needs to go on for, if it is to constitute adequate rectificatory redress. And you might wonder whether a state can owe rectificatory redress only to its own citizens, or also to other residents in its territory who are of the sex or race which formed the basis for the state’s past discrimination. These are just some of the important and pressing questions to which defenders of affirmative action, conceived of as a means of rectificatory redress, would have to provide answers. Conclusion The German philosopher Friedrich Nietzsche wrote that punishment is ‘a certain strict sequence of procedures’ to which ‘not just one meaning but a whole synthesis of meanings’ has been attached.27 Something similar applies to affirmative action, in that one and the same sequence of recruiting procedures can have a host of different meanings attached to it. There’s no doubt that this fact has often clouded the debate about affirmative action; and it has meant organisations can often get away with presenting their recruiting policy in one way to one audience, and in an another way to another. However, now that we have isolated the different rationales for such recruiting policies, we can also see that there are a number of quite legitimate ways in which they could be combined. For instance, a recruiting policy which used race or sex as a proxy for disadvantage when establishing what an applicant’s formal qualifications really said about them, but aimed, on top of that, to make redress for past injustices, could constitute “compensation for disadvantage” in both of the senses discussed in this chapter. Equally, an organisation’s choice of affirmative action as its method of rectificatory redress could be justified by the fact that more positive social consequences were to be expected from affirmative action than from any other potential method of rectificatory redress. Since many of the justifications of affirmative action that are offered rely on it having certain social consequences, philosophical reasoning can’t have the last word in the debate about affirmative action. But it can highlight the flaws in many popular arguments against affirmative action, and it can distinguish the different reasons for which a preferential recruiting policy could be introduced. Chapter 10 · Affirmative action · 219 CONTENT QUESTIONS (1) What is “tie-breaker” affirmative action? (2) Give one example of a positive social consequence affirmative action has been said to have. (3) What is meant by a “proxy” for disadvantage? (4) Describe, in general terms, what it is to make redress to someone. (5) What is “compensatory redress”? CRITICAL ANALYSIS QUESTIONS (6) What is the difference between formal and substantial equality of opportunity? Why do many theorists believe that in a just society citizens would be given not only formal equality of opportunity but also substantial equality of opportunity? (7) Give two reasons why one might think that affirmative action for disadvantaged groups would break down barriers to opportunity for those groups. Give one reason why one might think it would do the opposite. DISCUSSION QUESTIONS (8) “Affirmative action is morally wrong because it violates the principle of equal opportunities.” Do you agree or disagree with this statement? Explain why. (9) “Affirmative action is an inadequate way for a state or business to make redress to people it has unjustly discriminated against in the past, because those who benefit from affirmative action programmes often suffered little or no harm as a result of being unjustly discriminated against in the past.” Discuss. 220 · BUSINESS ETHICS & OTHER PARADOXES CHAPTER TEN NOTES AND REFERENCES 1 Dan Newling, ‘Racial antidote to apartheid poison has unwanted side effects’, Times Higher Education, 2 February 2012. 2 Kallie Kriel & Vata Ngobeni, ‘Sunday Debate: Are quotas taking rugby backwards?’, The Sunday Independent, 1 September 2013. 3 John Rawls, A Theory of Justice: Revised Edition (Cambridge: Belknap, 1999), p. 63. 4 Op. cit., p. 73. 5 Op. cit., p. 62. 6 ‘Black women have more obstacles to overcome, says Marcus’, Cape Argus, 22 August 2013. The article reports Marcus’ remarks at a Pricewaterhouse-Cooper breakfast at the Johannesburg Country Club in Sandton. 7 Colin Anthony, ‘How Liberty achieved its gains’, Mail & Guardian, Business, 12-18 April 2013. 8 I am grateful to Jimmy Winfield for discussions and suggestions which helped me formulate this argument, and the other arguments in this chapter, more clearly. 9 Ronald Dworkin, ‘DeFunis v. Sweatt’, in Equality and Preferential Treatment, ed. Marshall Cohen, Thomas Nagel & Thomas Scanlon (Princeton: Princeton University Press, 1977), p. 74. 10 Carl Cohen & James P. Sterba, Affirmative Action and Racial Preference: A Debate (New York: Oxford University Press, 2003), p. 118. Cohen cites Troy Duster, a sociologist at the University of California featured in Time, 27 May 1991, for this quotation. 11 Op. cit., p. 110. 12 Loc. cit. 13 ‘Sunday Debate: Are quotas taking rugby backwards?’. 14 ‘DeFunis v. Sweatt’, p. 67. 15 Thomas Nagel, ‘Equal Treatment and Compensatory Discrimination’, in Equality and Preferential Treatment, p. 17. 16 Joseph LeFevre, ‘The Value of Diversity: A Justification of Affirmative Action’, Journal of Social Philosophy, vol. 34, no. 1, 2003, p. 129. 17 Jocelyn Newmarch, ‘Change is a conscious decision’, Mail & Guardian, Business, 12-18 April 2013. 18 Affirmative Action and Racial Preference: A Debate, p. 98. 19 Op. cit., p. 135. 20 For example, compare the different views Carl Cohen and James Sterba take of the same studies in Affirmative Action and Racial Preference: A Debate. Likewise, compare the different views taken of the same studies in Xolela Mangcu, ‘UCT’s senate in the problem’ (Cape Times, 20 February 2013), David Benatar, ‘Unfair admissions’ (Cape Times, 22 February 2013), and R.W. Johnson, ‘Affirmative action does not further the cause of students’ (Cape Times, 1 March 2013). 21 Tony Ehrenreich & Helen Zille, ‘Employment Equity Debate: Redressing historic injustice?’, Cape Times, 26 November 2013. 22 Vice-Chancellor Max Price’s letter to the U.C.T. academic community (12 February 2013), quoted from in Xolela Mangcu, ‘UCT’s senate is the problem’. 23 I owe this example to Greg Fried. 24 Act no. 55, 1998, article 15 (‘Affirmative action measures’), in Republic of South Africa Government Gazette, vol. 400, no. 19370. Consult article 1 (‘Definitions’) for definitions of ‘designated employer’, ‘designated groups’ and ‘black people’. 25 David Benatar, ‘Justice, Diversity and Racial Preference: A Critique of Affirmative Action’, South African Law Journal, vol. 125, no. 2, 2008, p. 283. 26 Op. cit., p. 282. 27 Friedrich Nietzsche, On the Genealogy of Morality: A Polemic (trans. Carol Diethe, Cambridge: Cambridge University Press, 1997 [1887]), ‘Second essay’, § 13, pp. 52-53. Chapter Eleven EMPLOYEE RIGHTS by George Hull In many of the hierarchical societies of the past, in which—theoretically, at least—everybody knew their place, it was taken as a given that a large proportion of the population would labour all their lives chiefly for the upkeep of a lord or master. Though this was a burden on the masses of the people, a reciprocal burden was placed on those of noble birth: to ensure the welfare of their serfs and villeins, including in times of childhood, sickness and old age. Nowadays, committed as we are—theoretically, at least—to equality and individual rights, we look askance at such feudal notions, preferring to view the employer-employee relationship as a contractual relationship between two autonomous individuals who have agreed to do business with one another. However, voices are increasingly to be heard insisting that employers’ obligations to their employees go beyond what is detailed in their employment contracts. Some even argue that businesses should serve their employees’ interests as assiduously as they do those of their investors.1 But are they right? This chapter will begin by examining an argument that employees are entitled to no more— though also no less—than what was promised to them in their contract of employment. We will need to establish in what circumstances this argument would be sound. In circumstances where employees’ entitlements are not limited to what is detailed in their contracts, we will need to find out whether it is possible to determine what rights employees have, and how they should be protected, without relying on either outdated traditions or the terms of an employment contract. This will be our task in the remainder of the chapter. Contractual obligations In the next section of this chapter (‘Workplace safety’), and the section after that (‘Workplace privacy’), we will investigate what employees are morally entitled to expect in some specific areas of their relationship with their employer. However, you might think there is no need to go into those specifics—and, indeed, that it could be quite misleading to do so. After all, as we noted above, the relationship between 222 · BUSINESS ETHICS & OTHER PARADOXES employer and employee is a contractual relationship. In a written contract, the employer can make explicit the kind of work, including its level of danger, it requires the employee to do, the kind of personal information it requires the employee to disclose, and many other things besides, such as the wage, pension and health benefits the employee will receive, and the process employer or employee must go through in order to terminate the contract of employment. What these clauses of the employment contract say will differ, depending on who the employer is, what line of business it is in, and countless other factors. That is why you might think it could be misleading to set down anything general about employees’ legitimate expectations: these will vary, depending what is stipulated by the particular contract they have signed. Equally, you might think there is no need to go through philosophical contortions to explain the moral obligations of employer and employee: when they sign the contract of employment, the employer becomes morally obliged to ensure the working conditions are as stipulated in the contract, and the employee consents to work under those conditions. And that’s all there is to it. We can call this view of employee rights the “contract view”. The contract view of employee rights says that employees are morally entitled to the working conditions stipulated in their contract of employment, whatever those may be—nothing more, and nothing less. The contract view of employee rights is based on a very plausible idea. This is the idea that, when somebody makes a voluntary undertaking—by making a verbal promise, say, or signing a written agreement—this undertaking changes what that person is morally entitled to, as well as what moral obligations they are under. We need to consider, though, whether signing a contract of employment always changes an employee’s rights and obligations in quite the way—or to quite the extent—that the contract view assumes. In order to do so, let’s consider the strongest argument for the contract view of employee rights, the argument from agreement: The argument from agreement P1: When one competent, informed party voluntarily enters into an agreement with another, both parties are morally obliged to abide by the terms of that agreement P2: Competent, informed persons who sign a contract of employment with an employer voluntarily enter into an agreement with the employer to work for that employer under the conditions stipulated in the contract Therefore: C: Competent, informed persons who sign a contract of employment with an employer are morally obliged to work for that employer under the conditions stipulated in the contract P1 is a statement of the general moral principle on which the contract view of employee rights is based. If you make a promise to meet your brother at the airport at a particular time, then that changes your obligations and entitlements in the following way: it means that you are morally obliged to meet your brother at the airport at that time, and (consequently) that you are not morally entitled to do whatever else might take your fancy at the time when you are meant to meet him. Likewise, if you make a written undertaking to work for an employer under specified working conditions, this means you are morally obliged to work under those conditions, and you are not morally entitled to other working conditions (better working conditions, for instance). In both cases, the general moral principle at work is the one stated in Chapter 11 · Employee rights · 223 P1. P1 only applies to “competent” people. By this is meant people who have reached the age of maturity and are in a rational frame of mind at the time when they enter into an agreement. P1 would be objectionable if it claimed children could be held to all promises they might make. It would be equally objectionable if, when a wounded soldier on morphine signed a deed transferring his house to an opportunistic comrade-in-arms for 50 dollars, it counted him bound to honour the deed. What’s more, P1 only applies to voluntary agreements. If you are forced to sign a contract— if you are given no choice but to sign it—then you are not bound to honour that contract simply because you signed it. And we must not be too literal-minded about what it is to be “given a choice”. When a highwayman descends on your carriage, brandishing his pistol, and offers you the choice, “Your money or your life!” we cannot regard your transfer of all your money to him as voluntary. The mature individual in a rational frame of mind who voluntarily enters into an agreement must also be adequately informed. It would be hard to accept that the mere fact someone has agreed to do something could oblige them to do it, if they did not even know what it was they were agreeing to do. To the voluntariness, competence and informedness conditions is sometimes added the condition that the persons entering into an agreement must have sufficient time to deliberate— or else must have a “cooling-off period”, during which they can change their mind without penalty. We can see this condition, together with the other three, as ensuring the autonomy of people’s decisions to enter into agreements. If they are to bind themselves to do something in the future simply by making an undertaking now, then that undertaking must manifest a mature person’s capacity to direct their own life based on reasons and informed deliberation—their autonomy. It must not be something they’re coerced, hurried or tricked into, or which they are not in a position (perhaps, have never been in a position) to deliberate about rationally. Arguably, even hedged with all these qualifications, the principle stated in P1 is not exceptionlessly true. Many moral philosophers would insist that one cannot make oneself morally obliged to do something immoral, simply by entering into an agreement stating that one will do it. Consequently, if you signed a contract saying that you would kill an innocent person to appease your employer’s jealousy, or that you would lie to customers about products you were selling in order to make more sales, then you would (contrary to P1) not be obliged to abide by the terms of the contract. Other moral philosophers would take a different view, saying that in such cases the agreement you entered into retains its moral weight, but that another, more important, moral duty—the duty not to kill innocents, in the one case, the duty not to deceive people for the sake of gain, in the other—overrides your contractual obligations. In the present chapter, we will not be concerned with cases in which employers instruct their employees to do immoral deeds, so we can sidestep this controversy. Let’s put to one side cases where the content of the agreement is itself immoral, and grant that P1 is otherwise true. Is the argument from agreement then a sound argument? It certainly instantiates a valid form of argument, so if P1 and P2 are both true, then the conclusion, C, is true as well. We should, however, note that, even if the argument from agreement is sound, it is restricted in application. Its conclusion, C, applies only to employees who were competent and informed at the time when they signed their contract of employment. It does not apply to 224 · BUSINESS ETHICS & OTHER PARADOXES children or mentally impaired people, and would not ground any obligations upon people who were drunk or delirious when they entered into an agreement with an employer. The restriction to people who were adequately informed at the time of entering into an agreement is especially significant. To make an informed undertaking, or give one’s informed consent to something, one must not just be told what one is letting oneself in for, but must also have sufficient understanding of this to be able to deliberate rationally about whether it is in one’s interests to go through with it. For example, imagine a doctor seeking consent from a cancer patient, who had no medical education, to carry out a complex and risky surgical procedure on her. Just getting the answer, “Yes,” to the question, “Do you consent to undergo a gastroduodenostomy?” would not be enough. This would not count as informed consent. At a minimum, the doctor would need to have explained to her what the operation involved and its likely outcome, as well as giving her a good sense of its risks and possible side effects. In Chapter 7 we saw that explaining to people the nature and level of risks they are exposed to, in a way which enables them to deliberate rationally about them, is often no mean feat. Sometimes, as we saw, it is for all practical purposes impossible. Going back to the cancer patient and her doctor, this gives us a reason to insist that the provision of medical services be regulated. But it also means that, when an employer can’t provide their employees with a comprehensive enough understanding of the risks they will be exposed to at work for them to deliberate rationally about those risks, then the argument from agreement will not apply to the employees in question. This is a point we’ll return to in the next section (‘Workplace safety’). Now let us turn to P2. If this premise is true, then the argument from agreement can at least justify taking the contract view of employee rights when employees were competent and informed at the time they signed their contract of employment. On the other hand, P2 will be undermined if it can be shown that employees—or, at least, many employees—did not voluntarily enter into an agreement with their employer when they signed their contract of employment. This would most obviously be the case if the employer used violence or serious threats to induce the employee to sign. But we must consider whether there are less obvious types of case in which the voluntariness condition is violated. Think back to the highwayman example. We agreed that, when the highwayman says, “Your money or your life!” he is forcing his victim to hand over their money, even though, technically, he is offering his victim a choice. The second option, death, is so dire that no reasonable person could find it acceptable. Consequently, we are happy to say the victim “has no choice” but to hand over their money to the highwayman. Their action is thus not voluntary. This type of situation can also arise without the threat of violence. Imagine that you have accidentally swum too far out from the beach, and have then been swept even further out to sea by an ocean current. The water is cold, and you will not survive for long unless you are rescued. A ship heaves into view. You wave, and it comes up alongside you. The ship’s captain now offers you a choice: either she will take you on board in return for all your property and an undertaking that you will give her 75 per cent of all your future earnings, or you can stay where you are. She gives you time to deliberate. Though you are not in a thoroughly good state, you are in a rational frame of mind—rational enough to realise that if you don’t accept the captain’s offer, you will die. You accept. In the circumstances, you had no choice! Unlike the highwayman, the ship’s captain has not restricted your options by threatening you with violence. Nonetheless, most people would agree you are not morally obliged to give her all your property and 75 per cent of all your future earnings, even though you agreed to do Chapter 11 · Employee rights · 225 so in exchange for being allowed on board her ship. Why is this? The answer may seem obvious: it is simply because, just as in the highwayman example, your consent was not given voluntarily. If you have no choice but to agree to something—or all the other options are so dire that no reasonable person could find them acceptable—then you are not obliged to abide by the terms of the agreement you enter into. However, this answer is not plausible as it stands. To see why, consider another imaginary example. In a remote region of a less economically developed country (L.E.D.C.), the harvest has repeatedly failed. The inhabitants have run out of money and provisions, and have no means of transport. They face starvation, and the L.E.D.C.’s government has no interest in their plight. Just when it seems there is no hope, a multinational corporation (M.N.C.) builds a factory in the remote region, and offers the inhabitants employment in decidedly safe and comfortable conditions for a very generous wage. The M.N.C. even offers them their first 6 months’ wages in advance. The inhabitants of the remote region consider this offer unhurriedly, in a rational frame of mind, and decide to accept it. Soon they are back to full health and rebuilding their lives. It seems clear that the inhabitants of the remote region are now morally obliged to work at the M.N.C.’s factory for at least the next 6 months. How could it be otherwise, given that they have signed the contract of employment and been paid their first 6 months’ wages in advance? (And let’s stipulate that their work does not involve doing anything immoral, to forestall that objection.) However, their decision to accept the M.N.C.’s offer of employment was just as nonvoluntary as your undertaking to transfer your property and three quarters of your future earnings to the ship’s captain. In both cases there were two options: either to die or to accept the offer, terms and conditions and all. Consequently, if you are not obliged to honour your agreement with the ship’s captain because you did not enter into it voluntarily, then the inhabitants of the remote region are not obliged to work for 6 months at the M.N.C.’s factory either—because their acceptance of the M.N.C.’s offer of employment was not voluntary either. We seem to be faced with a troubling dilemma. If we grant that you are not obliged to honour your agreement with the ship’s captain, it seems we must agree that the M.N.C.’s employees are not obliged to honour their employment contract either. On the other hand, if we insist that the M.N.C.’s employees are obliged to honour their employment contract, we seem forced to admit that you are obliged to transfer your property and 75 per cent of your future earnings to the ship’s captain after all. We can escape the clutches of this dilemma, if we cease to concentrate solely on the question whether agreement was voluntary. In the ship’s captain example, the fact that your consent was not voluntary is certainly part of the explanation of why you are not morally obliged to honour the agreement. But it is not the full explanation. To appreciate this, change the example somewhat by imagining that the price demanded by the ship’s captain for your rescue was simply that you do your share of the tasks necessary for the upkeep of the ship, like every other crew-member. In those circumstances, it seems plausible to think that you would be obliged to abide by your agreement with the ship’s captain, and muck in on board. But why, given that your consent has not become any more voluntary? Surely the answer is that in the original version of the example the terms of the agreement proposed by the ship’s captain were unfair, whereas in the adapted version of the example the terms of the agreement are fair. It seems right to insist that when a person’s consent is not voluntary, it cannot make them morally obliged to honour an agreement whose terms are 226 · BUSINESS ETHICS & OTHER PARADOXES unfair. However, it also seems right to grant that, if the terms of an agreement are fair, the fact that a person’s consent to it was not voluntary does not rule out their being morally obliged to honour it. The M.N.C. example is a case where, though consent was not voluntary, the fact that the terms of the agreement were fair means that it is morally binding nonetheless. Let’s return from the world of hypothetical examples to the matter at hand. What are the implications of our discussion of these imaginary cases for the contract view of employee rights, and for the argument from agreement, on which that view relies? There are two main lessons we can draw from it. In the first place, it seems certain that many employees will have signed their contract of employment in circumstances which meant their decision to sign was not fully voluntary. Even if they were not faced with the stark choice of either signing or dying, the implications for many people of not taking a job which is offered to them will be so dire that no reasonable person would find them acceptable. For example, they might not be able to afford a place to stay, or to feed and clothe their children, if they turned down the job in question (or a job of exactly the same kind offered by another employer). This also applies in many countries where unemployed people receive welfare payments from the state; because usually unemployment benefits are only paid out on condition that the recipient is actively seeking employment, and not turning down any offers of work—even unpleasant and hazardous work. This means that the argument from agreement cannot justify taking the contract view of employee rights in general, because P2 of the argument from agreement will not generally be true. Of course, there are cases in which informed, competent persons have plenty of desirable options to choose from, in addition to the job they have been offered. In such circumstances, if they do agree to do the job, then the conclusion of the argument from agreement applies to those people. So we must grant that the argument from agreement does apply to some employees. But, since it is safe to assume that employees’ agreement to terms of employment is not voluntary in a large proportion of cases, the contract view does not provide us with a generally applicable account of employees’ moral entitlements. It could not, for instance, form the basis of national employment law. There is a second lesson we can draw from the discussion of the ship’s captain example and the M.N.C. example. This is that, if we are to arrive at a more satisfactory view of employee rights than the contract view, we need to investigate what fair terms of employment and fair working conditions would be. This is because, as the examples above showed, as long as the terms and conditions specified in their employment contract are fair, an employee will be morally obliged to honour their agreement to work for their employer even if their consent was not fully voluntary. It is important to note in passing that, even when the terms of an employment contract are fair, the employee’s consent must not be thought to be unnecessary or without value. No one can become obliged to work for a business without having expressly agreed to do so. But because that consent—at least in a very large number of cases—cannot be counted as fully voluntary, it is generally only when the terms of the employment contract are fair that we can say an employee who has signed that contract is morally obliged to abide by it in full. Chapter 11 · Employee rights · 227 So what are fair terms and conditions of employment? To answer that question all in one go would be a mammoth undertaking. Think of all the factors bearing on the issue of a fair wage alone. One would have to factor in the training and experience required for the job, the cost of living in the area, the employer’s ability to pay, the level of job security, the physical or emotional demandingness of the work, consistency with what the employer pays other employees doing comparable work—and the list goes on. Fair pay, though, is just one of a multitude of issues which lead to disputes between employers and their employees. The approach we will take in the remaining sections of this chapter is as follows. In the next two sections (‘Workplace safety’ and ‘Workplace privacy’), we will look in some detail at employees’ rights in two important areas of their work. These sections will illustrate the kind of reasoning that is required to establish what fair working conditions would be. In the section after that (‘Collective bargaining’), we will take a different tack. There, instead of focusing on working conditions directly, we will look at the institutional arrangements for bargaining which businesses, governments and employees can put in place in order to try to ensure that employment conditions remain fair, and are not systematically skewed to the advantage of either employers or employees. Workplace safety For many people, the workplace is a hazardous environment. In the U.K., ‘there are at any one time around 1.2 million workers suffering from illnesses caused or made worse by their work’.2 In industries such as the construction industry, the chemicals industry and the iron and steel industry, accidents and even deaths at work are not uncommon. In South Africa, 969 people died due to workplace accidents between 2011 and 2013.3 Common non-fatal injuries include burns caused by chemical or electrical explosions, lung diseases brought on by inhaling chemicals and dust, and limbs severed by machines. In an example of the latter, ‘30-year-old Nhlanhla’—a worker in South Africa—‘lost his lower arm after it was stuck in a machine’. Nhlanhla’s arm ‘got stuck between the rollers of a machine he was cleaning, necessitating an amputation’.4 It is tragic when the risks to which employees are exposed eventuate in horrible injuries, or premature death. However, the fact that work involves risks is not by itself morally problematic. Many risks are worth taking, and so being obsessively risk-averse is not a virtue. Indeed, as we saw in Chapter 7, many of our familiar daily activities and purchasing decisions expose us (and others) to risks. It would be a failure of the human spirit to abdicate from all of these activities just because they entail some risk of harm. The risks to which people’s work exposes them are often justifiable because of the value that work has. In some cases—as we saw in Chapter 9—work has intrinsic value. A war correspondent might see the very real risks of death and injury to which she is exposed in the course of her work as justified by its moral value—because it brings to her compatriots’ attention atrocities committed in their name overseas, for instance. Or she might feel that the activities involved in her work—conducting interviews, negotiating with fixers, distilling what she has experienced and seen into concise newspaper articles—together enable her to realise her potential as a human being. In this case, in terms of the classification used in Chapter 9, we would say the risks involved in her work are justified by its intrinsic prudential value. Significant risks of harm might even be justified by the intrinsic aesthetic value of the work which gives rise to them—think of the work of trapeze artists, for instance. 228 · BUSINESS ETHICS & OTHER PARADOXES For many people, though, as we know from Chapter 9, the only value their work has is as a means to other things. The wages employees receive for their work can, for example, pay for necessities including accommodation, clothes, transport and food, as well as luxuries such as holidays and books. Still, even when the value of work is purely instrumental, it can still be sufficiently great to justify quite a substantial degree of risk. The more instrumental value work has—the higher the wage associated with it, for instance—the higher the level of risk it would normally justify. Sometimes, though, the risks employees are exposed to in the course of their work are unacceptable. To take a real-life example, hundreds of former employees of the South African state-owned corporation now known as Necsa (Nuclear Energy Corporation of South Africa) claim they became seriously ill because of the radiation and chemicals they were exposed to while working on South Africa’s nuclear programme. When Dr Murray Coombs, an occupational health expert, examined 208 of them for a study released in 2006, he found that ‘45% of the workers … had been exposed for ten years or more to radiation and/or hazardous chemicals, and that each of the former Necsa employees … had at least one disease’. The conditions former Necsa employees were suffering from included ‘Uranium Hexafluoride exposure[,] … leukaemia, cancer, asthma, and Graves’ disease (an auto-immune disease of the thyroid)’. His research ‘showed eight confirmed cases of radiation exposure’, and Dr Coombs ‘concluded that, of the 208 people examined 40% were suffering from illnesses that were probably occupation related’.5 For us, cases like the one above raise the following question: how can we draw the line between occupational risks which are acceptable and occupational risks which are not? One answer to this question is suggested by the contract view of employee rights, discussed in the previous section. The contract view says that employees are morally entitled to the working conditions stipulated in their contract of employment, whatever those may be. So the contract view would say that if Necsa employees agreed to work for the corporation under the dangerous conditions in which they claim to have worked, then they were not morally entitled to a higher level of safety. But—as we concluded in the previous section—there are at least two problems with this answer. First of all, the contract view could only apply if the employees in question were adequately informed of the risks they would be exposed to before they signed their employment contract. Unfortunately, many businesses make hardly any effort to inform their employees of the risks they are exposed to at work. It could be that Necsa is a case in point—or, at least, was from 1989 to 2000, when Alfred Sepepe worked for South Africa’s nuclear programme at Pelindaba. Sepepe states: ‘I first worked at Advena, then I was moved to Pelindaba …. There I saw for myself that the place was bad. I saw how they worked with all of these chemicals. I asked my foreman why we had to work with chemicals, and why we didn’t wear protection. He chased me out.’6 But, as we saw in Chapter 9, even with the best will in the world, it may not be possible for a business to inform ordinary labourers of the nature and level of unfamiliar risks (from chemicals, dust particles and radioactive materials, say), in a way which would enable them to deliberate rationally about whether it is worth their while to assume those risks. Describing what a chemical can do to the human body, and giving the numerical probability that this will happen, remains, for many people, too abstract a consideration to inform their decision-making process in any constructive way. (It goes without saying that this broader point does not relieve Chapter 11 · Employee rights · 229 businesses of the duty to inform employees of risks as best they can. Autonomous decisionmaking is to be fostered, even when in a particular case the decision to give consent could never be autonomous enough to justify working conditions on its own.) A second difficulty with taking the contract view when it comes to workplace safety is that—even if they could be adequately informed of the risks involved—employees’ consent to work in a hazardous environment cannot typically be relied on to be fully voluntary. This is especially so when the employees in question are poor people, with families to support, who are recruited to do unskilled manual labour—a description which fits the hundreds of Necsa employees who claim to have been exposed to unacceptable risks at work. Clearly, what we concluded in general in the previous section of this chapter (‘Contractual obligations’) applies to the specific case of workplace safety: we need a way of establishing what fair working conditions would be that does not rely on employees’ having given their informed and voluntary consent. For this purpose, we can draw on our investigation in Chapter 7 of what levels of risk it is reasonable for consumers to be exposed to. Just like a fair standard of product safety, a fair standard of workplace safety would not allow individuals simply to be used as instruments to promote overall social welfare, or—worse still—the welfare of just one group within society. Here again, we can agree with Carl Cranor that the question for a just society ought to be: Under what conditions would risks to the lives of persons be justified even to those most at risk?7 A fair standard of workplace safety, then, would be one which was justifiable even to those individuals put most at risk in the workplace. Assuming our reasoning in Chapter 7 was correct, we must conclude that workplace safety standards should be set using the “refined” form of risk cost-benefit analysis (R.C.B.A.) which, in Chapter 7, we concluded should determine product safety regulations. If workplace safety standards are set using refined R.C.B.A., they will be set in a way which—albeit approximately— mirrors the way workers take decisions about risks which are familiar to them in their nonworking life. Consequently, unlike the “crude” form of risk cost-benefit analysis, also discussed in Chapter 7, which takes an unacceptably instrumental view of the value of human life, refined R.C.B.A. would do its best to simulate workers’ autonomous decision-making in areas where their actual decision-making would normally be under-informed or even non-voluntary. There is no need to repeat all the details of the discussion of R.C.B.A. in the section Chapter 7 entitled ‘The value of preventing a fatality’. As we concluded there, it is reasonable to assume that people would trade less risk for a set amount of value when the overall level of risk is at the higher end of the spectrum than they would when it is at the lower end of the spectrum. Consequently, as we saw, it makes sense for refined R.C.B.A. to operate with different V.P.F. (value of preventing a fatality) figures for different bands of risk. In order to ensure that levels of risk in a workplace are justifiable even to those workers most at risk, when setting safety standards for a particular type of work, refined R.C.B.A. should operate with the V.P.F. for the risk band applicable to those workers most exposed to risk. (Just as in Chapter 7’s discussion of product safety, what is said here about preventing fatal injuries can easily be adapted to other kinds of injury, such as loss of limbs.) As in the case of product safety, it will normally be more efficient and reliable for a regulatory agency to determine minimum safety standards for various types of industrial 230 · BUSINESS ETHICS & OTHER PARADOXES operation, using refined R.C.B.A., than for individual businesses to do this themselves. If no such standards have been codified, then it should probably be left to collective bargaining of the kind described later in this chapter to determine safety standards. Just as with product safety, it will be desirable for these workplace safety regulations to be supplemented by liability legislation which, in certain cases, requires businesses to pay compensation to employees for injuries or illnesses caused by their work. Just as with harm to consumers due to product defects, it can be appropriate to require the employer to pay compensation for an employee injury, illness or death even when working conditions satisfied minimum safety standards. There are two reasons for this, both familiar from Chapter 7. Firstly, an employer should be penalised for negligent omissions to improve workplace safety, even when the overall level of workplace safety is in line with R.C.B.A.-guided safety regulations. (This is the “negligence objection”, discussed more fully in Chapter 7, which appeals to employers’ “duty of care”.) Secondly, and more controversially, it is unfair for the employer to profit by imposing a risk on another party—here, its employees—to which the employer is not itself exposed. (This is the “non-exposure objection”, discussed more fully in Chapter 7). Both these points could be accommodated by a standard of liability for workplace injuries which took the following form. The liability standard would make employers automatically liable for some proportion—half, say—of the costs suffered by the employee due to a workplace injury. But if the employer could prove the employee had been injured because they were not taking reasonable care, then its liability would be annulled; and if the employee could prove their injury was a result of negligence on their employer’s part, then the employer would become liable for the full costs of the injury. Those who were never persuaded by the “non-exposure objection” could, alternatively, put forward a pure “negligence standard” of liability for workplace injuries. This liability standard would say that, if an employer’s workplace safety level meets the R.C.B.A.-guided minimum standards, then it can only become liable to compensate employees for injuries they suffered in the workplace when the injury in question occurred due to negligence on the employer’s part. Finally, a point which came up in the Chapter 7’s discussion of product liability applies in this context as well. This is that the liability standard written into law must be sensitive to the practicalities of the court system, as well as to matters of moral principle. If implementing either of the liability standards outlined above would, in practice, clog up the legal system with extensive litigation about whether employers or employees—or both—behaved without due care in various circumstances, then that would be a reason to settle for a liability standard which did not have this effect. We can see now that the regulatory package proposed for product safety in Chapter 7 is morally justifiable in the case of workplace safety too. In both cases, refined R.C.B.A. enables safety standards to be formulated which (approximately) simulate autonomous decision-making— that of consumers in the one case, that of employees in the other—in a context where individuals’ actual decision-making cannot be relied upon to be fully autonomous. In both cases, R.C.B.A.-guided minimum safety standards arguably need to be supplemented with a liability standard which is tailored so as both to penalise negligence and to distribute the costs of risk imposition fairly among those benefiting from it. However, our application of refined R.C.B.A. to the issue of workplace safety may seem to have an unacceptable consequence. There are some jobs which, by their nature, involve very Chapter 11 · Employee rights · 231 high levels of risk, including the risk of death: soldier, firefighter, police officer, intelligence operative, security guard and Formula One driver are examples that spring to mind. It could well be that refined R.C.B.A., based on the average risk-benefit trade-off function of all societymembers, would rule out allowing people to do such risky jobs—at least, for anything less than astronomical wages. Quite apart from the fact that these types of work (with the possible exception of Formula One racing) are socially necessary, it is surely wrong for any regulator to prevent an adult member of society from becoming a soldier—say—if that is genuinely the person’s vocation. If a career as a soldier would, more than any other career, enable the individual in question to realise their potential, or would be sufficiently valuable to them in other ways, then the risks entailed by this career would be outweighed by the value associated with it. In those circumstances, why should the population-wide average figures with which refined R.C.B.A. operates be permitted to overrule the individual’s wishes? The answer is that they needn’t. Towards the end of the previous section, we noted that, though the argument from agreement doesn’t provide a generally applicable account of employee rights, nonetheless, in those cases where an informed, competent person has voluntarily consented to some specific terms of employment, the conclusion of the argument from agreement does apply to them. This means there is no need to prevent individuals from becoming intelligence operatives, firefighters, Formula One drivers, and the rest, just as long as it is clear that their decision to do so was adequately informed, voluntary, and taken whilst in a rational frame of mind. One implication of this condition is that, in order to become obliged by one’s employment contract to do very risky work of the kinds mentioned just now, an individual would need to have some other less risky, but nonetheless desirable, employment options to choose from as well. In practice, this could mean that candidates for very risky jobs must also have the option of getting a job which could satisfy their basic needs—food, clothing, shelter, family life, and so on—and is compliant with R.C.B.A.-guided minimum safety standards. Otherwise it would be possible to object that the individual effectively had no choice but to take the dangerous job, and thus that their consent was not voluntary. Ensuring that society-members have enough options to choose from in their lives for the decisions of those who choose to do dangerous jobs to count as voluntary is not a task for private-sector employers alone. This is a task for government, and society as a whole, as well. It could involve steps such as providing all society-members with good basic education, as well as making training programmes available to them later in life, so that the option of choosing another career path remains genuinely open to them. It is possible that, once the social conditions for voluntary choice are in place, not enough people will opt for dangerous work like that of soldiers, intelligence operatives and firefighters— even, perhaps, with the incentive of higher wages. Given that this work is socially necessary, a government would in these circumstances probably be justified in making such dangerous jobs compulsory. Needless to say, it would have to ensure the allocation of this risky work among society-members was just; and it could be that the fairest solution in the circumstances would be to make one or two years of national service compulsory for all citizens. Of course, the issue would not arise at all, as long as enough people found these dangerous jobs fulfilling, or otherwise valuable, enough to choose to do them of their own accord. 232 · BUSINESS ETHICS & OTHER PARADOXES Workplace privacy Recent technological developments mean employers can now infringe on their employees’ privacy in a host of different ways. Shortly we will consider some of these, and in what circumstances—if any—they would be justified. In order to put these matters in context, though, we need first to answer two more general questions: What is privacy? And why is it worth protecting? When we talk about privacy, most theorists now agree, ‘our core concern is the protection of personal information’.8 “Information” should not be understood too narrowly. As Swedish philosophers Anders Persson and Sven Hansson put it, ‘[a]n individual’s privacy concerns the degree to which others may have information about her and sensory access to her’.9 Spying on somebody in their bedroom through the keyhole is as much an infringement on their privacy as publishing their medical records online without their permission, or picking the lock on their diary and reading their personal thoughts. Let us count “sensory access” (e.g. spying on, or listening in on) as also a kind of “information”. Then we can say that all these examples involve somebody accessing or disclosing information about an individual over which that individual ought to have control. It ought to be up to them who can read their diary, or access their medical notes, or see them in their bedroom. Somebody who accesses or discloses this information against their will thereby undermines the individual’s autonomy in a quite specific regard: they undermine the individual’s ‘informational self-determination’.10 However, the ideal of “informational self-determination” does not extend to all information about an individual. There is nothing wrong with observing somebody as they stroll through a public park (though it’s rude to stare). Likewise, if you are at a party and you ask your host, “What is the name of the person standing over there?” your host does not violate the person’s privacy by disclosing this information. It is only over some of the information about them that an individual ought to have control: only over personal information. Can we say what this is, without circularly defining “personal information” as information which is private? It will help us with this task to consider another example. You are at a job interview, and the selection committee is asking you some informal questions in a spirit of “getting to know you”. Then one of them comes out with, “So, tell us, do you have any genital piercings?” One reaction you might have is, “Sorry, what does that have to do with the job?” (unless you’re applying to be a porn actor or escort). But this doesn’t really get to the root of the problem; because it would have been perfectly in order for them to ask whether you came by car or by bus to the interview, or whether it was your first time in this part of town, though these things (let’s assume) have nothing to do with the job you’re applying for either. The problem with the interviewer’s question is not primarily that it is irrelevant. We should also be able to agree that—especially if you refuse to answer the question—it is not in itself an infringement on your privacy. Rather, the problem with the question is that it is disrespectful and offensive. Again, though, we must be cautious. It is not that the question per se is disrespectful and offensive, because the very same question coming from a best friend with whom you share everything might not be offensive at all (though it could well occasion some hilarity). What is disrespectful and offensive is being asked that question by somebody who is barely even an acquaintance—aggravated by the fact that the question is asked openly in a professional setting. We may sometimes find social conventions constrictive, or even dream of a world in which strangers could at once speak to each other as intimates. But the truth is that almost all cultures Chapter 11 · Employee rights · 233 one can think of acknowledge a range of types of social relationship that can exist between equals, differentiated by their degree of closeness. People almost automatically categorise the relation in which other individuals stand to them using concepts such as (ranked roughly by ascending degree of closeness) stranger, acquaintance, colleague, classmate, friend, lover, familymember, old friend, best friend, intimate life-partner. Though by no means the only mark, it is certainly one of the marks of friendship that one shares more information—or, at least, information about more areas of one’s life—with a friend than one does with a mere acquaintance, say, or with a colleague who is not a friend. And, generally speaking, as one moves along the list of social relations provided just now, one will find people standing in the relation in question to each other sharing more and more information with one another. This is part of what it means to say that friends are closer than acquaintances, or than mere colleagues, that best friends are closer than friends or mere classmates, and so on. It is important to point out that this is not just a statistical observation. Rather, the institution of friendship—just like the institution of intimate life-partnership (as one might call it)—carries a bundle of norms and expectations with it. We are disappointed, sometimes even indignant, when a friend refuses point-blank to share with us any details about some area of their life, because in doing so they are treating us like a mere acquaintance. In the opposite type of case (of which the interviewer’s question is an example), we are appalled, and—again— indignant, when a stranger, or mere acquaintance, acts as though they were entitled to information about us which would normally be shared only between friends, or intimate lifepartners. A crucial aspect of friendship, as of intimate life-partnership, is that it is up to each individual whether they are willing to upgrade the status of their relationship with a given person to that of friendship—or of intimate life-partnership. Nobody can be obliged to be friends with someone who is currently a mere acquaintance—though, once they have willingly upgraded their relationship with that person to friendship, this certainly does carry certain obligations with it. We can now say that “personal information” is, roughly, information which is normally shared only between people whose relationship is one of at least friendship, if not closer. And we can see that it is important for individuals to have “informational self-determination” with regard to personal information about them, because controlling this information is a central way in which they can retain control over the status of their relationships with others. (People may also want to control personal information about them for other reasons—for instance, because they are ashamed of it, or because it could be used to blackmail them. However, this is also true of a great deal of information which is not personal at all. For example, if you have been convicted of murder or arson, you might be ashamed of this fact and fear it could be used to blackmail you. Nonetheless, it is perfectly in order for the court which convicted you to put this information in the public domain, and for your employer to ask whether you have a criminal record.) Though it is possible for friends, and even intimate life-partners, to infringe on each other’s privacy in some circumstances, in what follows we will only consider infringements on privacy committed by strangers, mere acquaintances, or colleagues who are not friends. This is the form taken by most infringements by employers on their employees’ privacy. To infringe on somebody’s privacy is to access or disclose personal information about them against their will. Our discussion so far indicates two ways in which infringing on somebody’s privacy is morally problematic. In the first place, an infringement on someone’s privacy 234 · BUSINESS ETHICS & OTHER PARADOXES (i) disregards the boundary between different types of social relationship This is wrong for the same reason that the interviewer’s question was wrong: it is disrespectful, and so whoever is on the receiving end of it may properly take offence. In the second place, an infringement on someone’s privacy (ii) undermines an individual’s autonomy with regard to personal information about them As already stated, it is particularly important that people retain control over personal information about them, because controlling this information is a central way in which they can retain control over the status of their relationships with others. To these we can add a third, somewhat subtler, moral problem with infringements on privacy. The various types of social relationship between equals, differentiated by degree of closeness, which we have been considering are, as was noted earlier, maintained by social convention. That is to say, it is only because society-members—or enough society-members— continue to acknowledge and respect the boundaries between acquaintanceship, friendship, intimate life-partnership, and so on, that these different types of social relationship continue to be available to us. One infringement on privacy will not bring the institutions of friendship and intimate life-partnership crashing to the ground. But infringing on privacy, especially when it becomes widespread, is a type of action which tends to weaken these institutions. Compare some parallel cases. Failing once to wash one’s hands after using the toilet is unlikely to start a pandemic; but it should be avoided because it is a type of action which tends to destroy public health. Using sloppy grammar or syntax once will not do much damage; but it is bad to do so because it is a type of action which tends to make the precise expression of thought unavailable to others. So, likewise, a third reason why an infringement on someone’s privacy is morally problematic is that it (iii) is a type of action which tends to make the repertoire of types of social relationship between equals unavailable to society-members in general It defaces the currency of social relations. Finally, we should not forget that infringements on privacy—at least when the victim is aware of them—cause feelings of embarrassment, shame and vulnerability in the individual whose privacy has been infringed upon.11 So a further reason to avoid infringing on someone’s privacy is that it (iv) causes negative emotions (shame, embarrassment, vulnerability) in the victim of the infringement No doubt, one of the main reasons infringements on privacy evoke these negative emotions in their victims is that they are morally problematic in the ways described in (i) and (ii) above. But the fact that an infringement of someone’s privacy tends to evoke these negative emotions in them aggravates its moral wrongness nonetheless. Chapter 11 · Employee rights · 235 There are many circumstances in which we decide, for good reason, to share personal information with people who are mere colleagues, mere classmates, mere acquaintances, or even strangers. For example, if we suspect we have contracted a sexually transmitted infection, or have an enlarged prostate gland, we are likely to allow our doctor a kind of sensory access to intimate parts of our body which we would normally deny even to a best friend—and perhaps even to a lover or intimate life-partner. Such medical examinations are discomforting at the best of times, evoking the negative emotions described in (iv) above; and they are always somewhat regrettable, for the reason given in (iii) above. However, we submit to them because of our overriding interest in being cured of what ails us. We also sometimes decide to share personal information with a mere colleague, or mere acquaintance, not for the sake of our own interests, but for the sake of the other party’s interests. For instance, if a colleague, who is not a friend, is plainly suffering from a disease from which we ourselves (unbeknownst to any of our colleagues) suffered in the past, we might decide to share this item of personal information with the colleague in question, so as to offer them advice and support based on personal experience. In this case, the overriding interest is our colleague’s need to get through a difficult time. There are a few points about cases such as these which are worth noting here. First off, we should note these are not cases in which our privacy is infringed upon, because it is not against our will, but rather with our consent, that others get access to personal information about us in these cases. Nonetheless, the access given to personal information in both cases remains somewhat regrettable. In both cases, this access is likely to elicit from us some of the negative emotions described in (iv) above; and in both cases our action can be viewed as somewhat problematic for the reason given in (iii) above. That is why we are likely to allow access to personal information in these types of case, only if we think it is absolutely necessary to serve the overriding interest in play. If it were possible for the doctor to diagnose and treat our ailment just as efficiently without being given sensory access to intimate parts of our body, then it would be better that this sensory access be denied them. If it were possible for us to offer support and advice to our colleague just as effectively without disclosing our past medical history to them, then it would be preferable for us to keep this to ourselves. For the very same reasons, once we have judged that in a given case access to personal information about us is necessary to serve the overriding interest in play effectively, it is important to ensure that this access is kept to a minimum. For instance, it may be necessary, for health reasons, for our doctor to examine our prostate gland; but that does not mean it is necessary for them to see us fully naked. Or it may be necessary, in order to offer adequate support and advice to a colleague, to tell them about one aspect of our medical history; but that does not mean it is necessary to tell them about all the problems in our love life as well. Just because it is necessary in a given case to give a stranger, acquaintance, mere classmate or mere colleague access to some personal information about us, that does not mean the floodgates should open completely. Rather, the access granted should be quite carefully tailored (though without being pedantic about it) to the overriding interest being served. Equally, it makes sense to limit the access to personal information about us to as few people as possible. For example, it would be advisable to share our medical history with our unwell colleague in a one-to-one conversation, rather than blurting it out in front of everybody, and on camera, at the office Christmas party. And we should be sure to continue to monitor whether our granting of access to personal information is still serving an overriding interest. For 236 · BUSINESS ETHICS & OTHER PARADOXES example, once the doctor’s examination has determined there is nothing wrong with us, there is no reason for it to continue. Can infringements on people’s privacy ever be justified because of the overriding interests they serve? The answer is surely, “Yes.” Imagine the case of a man with a psychiatric condition, who is much better off in the community than in a psychiatric hospital, but whose condition, when unsupervised, will occasionally put both himself and those around him at risk of harm. One’s psychiatric condition certainly counts as personal information; so, generally, people should have “informational self-determination” with regard to this information—it should be up to them who gets to know of it. Now let’s say that the risk of harm this man poses either to himself or those around him (or both) could be significantly reduced by letting his neighbours know about his psychiatric condition. But let’s also say that, because of his condition, any consent he gave to this disclosure of personal information would not count as truly informed or as fully voluntary. It seems right to say that letting his neighbours know this information could be justifiable, even though it would be an infringement on the man’s privacy, if it was necessary to further their or his (or both of their) overriding interest in being protected from harm. As with the medical examination example and the unwell colleague example discussed earlier, the amount of information disclosed should be carefully tailored to the overriding interests served. Persson and Hansson have this to say about a case like the one described just now: [I]f neighbours need information about his disease in order to help him or to protect themselves, then it may be morally justified to provide them with the information that they need for that purpose, but most probably not to let them read his complete hospital files.12 We can add that as few people as possible should be told of the man’s condition: only those people who really need to know about it in order to protect him or themselves from harm. We should also note that it would have been preferable for the disclosure to be voluntary—but this was not possible because of the man’s psychiatric condition. So we can conclude that, when an overriding interest is in play, it can not only be justifiable to make a voluntary disclosure of personal information, but it can also in some circumstances be justifiable to infringe on somebody’s privacy. In both types of case it is important to limit the access to as little information and to as few people as possible while serving the overriding interest effectively. Now we need to descend from this general discussion of personal information and privacy to address privacy in the workplace in particular. These days, it is not only by demanding that they make disclosures or by physically observing them that employers can gather personal information about their employees. They can also monitor an employee’s e-mails and telephone calls, and capture screenshots of their desktop computer. They can install C.C.T.V. cameras in their offices, and fit employees’ identity badges with chips so as to track their movements at all times. They can even take urine samples from their employees to test for drug use and alcohol consumption, and carry out genetic screenings to establish workers’ level of predisposition to various illnesses. Almost everyone would agree that employers who gather personal information using methods like these should inform their employees in advance—if possible, before they sign their contract of employment—so that the employees can take an informed decision about whether Chapter 11 · Employee rights · 237 to work under those conditions. If the employers’ methods of information-gathering change, employees should be warned in advance so that they can review their decision. Some people would add that, as long as employees have been informed and have given their consent in advance, none of these practices counts as an infringement on their privacy. After all, for access to personal information about someone to count as an infringement on that person’s privacy, it must happen against their will. If the employees have consented, how could it be against their will? Our earlier discussion of the argument from agreement will have prepared you to be suspicious of this line of reasoning. If the employees’ consent to their employer’s use of these information-gathering methods was fully voluntary, then it is true that they are not infringements on their privacy. However, for reasons which will by now be familiar, this will very often not be the case. Consequently, most employers who gather personal information about their employees using methods of the sorts mentioned above must reconcile themselves to the fact that they will be infringing on the privacy of many of their employees. Of course, that in itself is not a fatal objection to the information-gathering practices. But if they must be classed as infringements on employees’ privacy, then we need to ask whether there are circumstances in which they can be justified because they serve an overriding interest. Persson and Hansson argue that three different parties’ interests can sometimes justify an employer in infringing on their employees’ privacy: the employer’s interests, the employees’ interests, and the interests of customers (and other third parties). Let us consider these different sets of interests one at a time, asking when they would count as overriding interests that could justify an infringement on employees’ privacy. Interests of the employer Clearly, many interests of the employer do not justify any infringement on employees’ privacy. For example, an employer’s prurience could not justify installing C.C.T.V. cameras in staff changing facilities. Rather, it is only the interests of the employer which arise directly from the employment relationship between employer and employee which could justify infringements on privacy. Central among these is the employer’s interest in each employee’s doing their job effectively. Sometimes it will be necessary for an employer to infringe on an employee’s privacy somewhat, in order to ensure that they are doing their job effectively—something that, as employer, they are entitled to know. For example, if a customer-relations employee does most of their work on the telephone with customers, it may be impossible for the employer to know whether this employee is serving customers well without listening in on their telephone conversations—a kind of sensory access over which people generally ought to have “informational self-determination”. You might think this interest on the employer’s part could also justify far more intrusive infringements on employees’ privacy. For instance, employees who take large doses of recreational drugs in the evening arguably will not perform as well at work during the day as they would if they didn’t take drugs. Does this mean employers are entitled to make their employees submit to drug tests at work in order to ensure they are doing their work effectively? The answer will generally be, “No.” As Joseph DesJardins and Ronald Duska have pointed out, though an employer is certainly entitled to an adequate level of professional performance from their employees, and may fire them if they do not deliver this, ‘that does not necessarily mean that the employer has a right to a maximum or optimal level of performance, a level above 238 · BUSINESS ETHICS & OTHER PARADOXES and beyond a certain level of acceptability’.13 If their drug-taking has made the employee’s level of professional performance inadequate, then the employer will know this without needing to know they are taking drugs. If their drug-taking has made the employee’s level of professional performance suboptimal, but not inadequate, this is not something the employer has any need to know, because the employer is not entitled to absolutely optimal performance from each employee. Therefore, as DesJardins and Duska conclude, when it comes to an employer’s interest in their employees’ doing their jobs effectively, ‘drug use information is either unnecessary or irrelevant and consequently there are not sufficient grounds to override the right to privacy’.14 Interests of the employee What interests of the employee themselves could justify an employer in infringing upon their privacy? We know from Chapter 9 that many different interests of the employee may be served by their work, but also that it is to a large extent employees’ own responsibility to ensure their work serves these interests. However, in the previous section of this chapter (‘Workplace safety’), we saw that there is one interest of employees for which the employer has a high degree of responsibility: their interest in not being harmed in the workplace. Employers must ensure that the level of safety in their workplace meets R.C.B.A.-guided minimum safety standards. Furthermore, it is generally agreed they have a “duty of care” above and beyond this, which means they can be held responsible for harm to employees—even when their workplace meets the R.C.B.A.-guided minimum safety standards—if they have omitted to perform some relatively straightforward intervention for the sake of employee safety. Sometimes a measure which infringes on employees’ privacy will have the effect of reducing their risk of being harmed in the workplace. C.C.T.V. surveillance and identity badges which track their movements may sometimes have this effect, for example. If an employer would count as negligent if it did not introduce a certain safety-enhancing measure, then it is justified in introducing that measure for the sake of employee safety, even if the measure infringes on employees’ privacy. It will often be difficult to apply this principle in practice. After all, one could well think that, if a safety measure was omitted by the employer because it would have infringed upon employees’ privacy, this is a good argument against counting its omission as negligence. Clearly it will be necessary to weigh employees’ interest in not being harmed against their entitlement to privacy in particular cases. In the next section (‘Collective bargaining’), we will consider what frameworks would be conducive to constructive deliberation and negotiation about difficult matters of this kind. Interests of customers (and other third parties) It is not only to its workforce that an employer has a “duty of care”. We know from Chapter 7 that businesses also have a special responsibility to ensure that consumers of their products or services are not exposed to undue risks of harm—and this applies to bystanders who could be harmed by a product or service as well. Just like employees’ own interest in not being harmed at work, consumers’ (and other third parties’) interest in not being harmed can sometimes justify an infringement of employees’ privacy. For example, there are some circumstances in which, even though an employee can be known to be performing adequately without subjecting them to a drug or alcohol test, it would Chapter 11 · Employee rights · 239 count as negligent for the employer not to insist the employee take such a test, because of the risk of harm to consumers and bystanders which their work entails. This may apply to employees who are aeroplane pilots, or bus or train drivers, for example. Persson and Hansson write: It can plausibly be claimed that, for example, the management of a public transport corporation has a duty to decrease passenger risks as far as possible. It can then be argued that even if a drug-using employee performs as well, in terms of safety, as a drug-free employee whose performance is accepted, the employer has a legitimate interest to further increase the safety performance of the first employee. Arguably, drug testing can be a means to achieve that.15 Though—as we have now seen—the above sets of interests can sometimes justify infringing on employees’ privacy, the infringement should always be kept to a minimum and involve access to personal information being granted to as few people as possible. Collective bargaining In this section we will consider whether employees should have the right to join a trade union, and, if so, what their trade unions ought to be allowed to do. Let’s begin by establishing what trade unions are, and why we need them (if we do). A trade union is a membership organisation, whose members either all work for the same business, or else all do the same type of job, though they may be employed by different businesses. For example, the members of the University of Cape Town Academics’ Union (U.C.T.A.U.) are all academics employed by the University of Cape Town. The members of the South African Democratic Nurses’ Union (S.A.D.N.U.), on the other hand, are all nurses, but work at many different South African hospitals and healthcare institutions. The members of a trade union pay a subscription to the union. For example, members of the National Union of Metalworkers of South Africa (N.U.M.S.A.) pay a subscription of one per cent of their basic wage.16 And they elect union representatives, who negotiate terms of employment and working conditions—including wages, working hours, safety measures, pension and other benefits, and much more—with employers, on their behalf. The terms of employment and working conditions agreed to by an employer in negotiations with union representatives apply to all its employees who are members of that union. This is what is known as “collective bargaining”. If negotiations between employer and trade union stall, with the employer refusing to give ground, the trade union has a formidable weapon at its disposal: the strike. When a trade union calls a strike, it encourages all its members (or all the members of one of its branches) to withdraw their labour, either for a fixed period, such as one or two days, or else until such time as the employer agrees to the union’s demands (or offers a compromise). While on strike, employees do not receive wages. But their trade union will usually have kept a portion of subscriptions to one side in what is called a “strike fund”. This money can be drawn on to give financial assistance to striking workers, in lieu of wages. Union organisers usually encourage striking workers not simply to stay at home, but rather to “picket” the business being struck. This is when striking workers congregate at the business’s main entrance, holding placards which advertise their grievance, and making their complaint known to the business, other workers and the general public, by means of ordered chants and 240 · BUSINESS ETHICS & OTHER PARADOXES informal chats. The workers on the “picket line” discourage other employees from entering the business premises to work during the strike. The mere threat of a strike often acts as a strong incentive for an employer to come to an agreement with the trade union. At this stage, you might be wondering whether the tedium of union-employer negotiations and the drama of strike action are really necessary. Even if it is true that the contract view of employee rights is too limited, you might well think all this means is that the government (or some other central regulator) should issue regulations, with legal backing, to ensure that employees’ working conditions are fair. However, the idea of leaving it to government, or a central regulator, to ensure fair working conditions has three significant drawbacks. Firstly, it can take a long time for issues which arise in workplaces to come to the attention of a central authority at the national level. A pressing issue of which workers on the ground are aware immediately may need to filter through several layers of bureaucracy before the government begins to take notice of it. If legislation is needed for the central authority to address the issue, this leads to even more delays. Years can pass while bills are drafted, scrutinised by parliamentary committees, debated in the chamber, amended, debated again, and finally enacted. During such long periods of delay, the issue in the workplace will often have escalated dramatically. Secondly, regulations issued by an authority at national level will necessarily be framed in quite general terms. This tends to leave room for interpretation as to what course of action a given regulation would dictate on the ground, in a particular workplace. The difficulty of deciding whether a business would be negligent not to introduce a safety measure which infringed upon its employees’ privacy—highlighted in the previous section (‘Workplace privacy’)—is a case in point. Consequently, even when the government or a national regulator issues regulations, these regulations may, rather than settling disputes between employers and employees, become the focus of new disputes. Thirdly, it would be immensely costly for any central government or national regulator to employ the army of inspectors, and fund the ceaseless litigation, that would be needed to check businesses were compliant with all regulations, and to penalise those which were not. Since there are many other claims on taxpayers’ money, if the task of achieving fair working conditions for employees is left entirely to a central regulator, businesses’ compliance with regulations is likely to be policed haphazardly, at best. In contrast, workers can bring issues to the attention of their trade union representative— “shop steward”—straightaway, the union can negotiate directly with the employer about the specifics of a particular work environment, and it will usually be abundantly clear to union members and union representatives alike if the employer is not delivering the working conditions that it promised. Still, even if the desirability of some negotiation at workplace level has been established, why should this take the form of collective bargaining? The answer to this question arises from something we noted earlier in this chapter (in the section entitled ‘Contractual obligations’): though a few people have skills or training which mean employers are falling over each other to hire them, the majority of employed people do not have such an array of options, and very much need the job they have, often—as we saw—to the extent that their decision to sign their employment contract cannot be viewed as fully Chapter 11 · Employee rights · 241 voluntary. Of course, something faintly analogous can be said of employers as well: they need people to do various jobs for them, otherwise their business will fail. However, employers generally have two crucial bargaining advantages over individual employees. Firstly, though they need somebody to do a given job for them, it is rare indeed for an employer to need any one person in particular to do it. If one person is not prepared to do the job in question under the conditions on offer, the chances are there are many others from the “industrial reserve army”—as 19th-century socialists called the unemployed17—who will be. Employers generally have many prospective employees to choose from, whereas employees don’t generally have many prospective employers to choose from. Consequently, if individual employees were to insist on better working conditions, with no backing from a regulator or a trade union, in many cases the employer could simply send them packing and refill the vacancy within 24 hours. Secondly, if it did come to a stand-off over working conditions between an employer and an individual employee, the employer would normally be able to hold out for much longer than the employee. What we are imagining here is a situation where an individual employee demands better working conditions, and refuses to work until the employer gives in to this demand. We have seen just now how unlikely it is that such a situation would arise—because the employer could generally just fire the individual employee. But if this situation did arise, it would not be long before the employee started feeling the pinch. Most employees really need their monthly wage. In contrast, the business which employs them, especially if it is a large corporation drawing on the investments of thousands of people, is likely to have relatively large capital reserves. The business is also likely to have access to relatively cheap credit, whereas the employee would normally have to pay a very high interest rate for a loan. Adam Smith had noted this second bargaining advantage on the part of employers already in the 18th century. Discussing disputes over the level of pay, he wrote: In all such disputes the masters can hold out much longer…. Though they did not employ a single workman, [employers] could generally live a year or two upon the stocks which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year without employment.18 The existence of trade unions reduces—though rarely does it entirely eliminate—both these bargaining advantages on the part of employers. Though the removal of one individual’s labour will not significantly harm most businesses, if a large proportion of a business’s employees threaten to withdraw their labour, this is something the business must take seriously. And, equally, though one individual worker will tend not to be able to support themselves for long, should they withdraw their labour in protest against working conditions, if all members of a union have been paying into a strike fund for months, or years, then striking employees have a good chance of being able to hold out long enough to get the employer to accept their terms, or at least offer a compromise. This will especially be the case with nationwide unions, such as S.A.D.N.U. and N.U.M.S.A., since union-members from branches where there is no need to strike will effectively subsidise union-members from branches where strikes become necessary. This is an example of the way in which trade unions foster solidarity among workers, who might otherwise simply have been in competition with one another for whatever jobs, with whatever working conditions, employers were prepared to offer. As South African sociologist, and former Paper, Printing, Wood and Allied Workers’ Union (P.P.W.A.W.U.) official, Sakhela Buhlungu 242 · BUSINESS ETHICS & OTHER PARADOXES puts it, ‘the underlying premise of trade unionism [is] … combining in collective bodies to avoid competition among workers’.19 So, in favour of collective bargaining through trade unions, we can say it represents a way of defending employee rights which can respond speedily and effectively to concrete concerns of employees in the workplace, without negotiations over working conditions being too heavily skewed in favour of the employer (as they usually are if employees bargain on an individual basis). What can be said against collective bargaining through trade unions? We are going to consider some specific controversial practices of trade unions in a little while. At this stage, let’s restrict ourselves to two general objections which might be voiced to the very idea of trade unions. In the first place, it might be objected that trade unions, rather than being an effective way of securing fair working conditions, tilt the balance in negotiations about working conditions too far in favour of workers. This objection says it is unfair for workers to club together in what essentially amount to labour cartels, and threaten to stop working all together unless their demands are met. This is unfair, so the objection goes, because improving wages and working conditions is expensive, and consumers and investors will lose out disproportionately as a result of trade unions’ strong-arm negotiating tactics. For the longest period in human history, this was the view the authorities took of collective bargaining, and incipient trade unionism was punished most severely. For example, in England, [o]n 24 February 1834, six farm labourers from Tolpuddle, in Dorset, were arrested on a charge of taking part in an ‘illegal oath’ ceremony. They had dared to form a union—the Friendly Society of Agricultural Labourers—to defend their livelihood. They refused to work for less than ten shillings (50p) a week, their wages having been slashed to seven shillings with another cut to six shillings (30p) coming …. For this heinous crime, the Tolpuddle Six were sentenced to seven years’ transportation to the penal colonies of Australia.20 In modern times, it shouldn’t be denied that in some instances trade unions have become too powerful, and have used their power irresponsibly. When this has happened, though, it has usually been by means of some of the controversial practices—such as the “closed shop”—which we will discuss shortly. Or else it has been through outright corruption. For instance, Jo Phillips and David Seymour tell of how, until the 1980s, the London print unions had ‘ghost workers’ on their books, with ‘fake names like Donald Duck, John Wayne or, for those who liked to sail really close to the wind, Lassie or even Lord Beaverbrook’. The newspaper publishers had to pay all these “ghost workers” for their putative day’s work, ‘because if an objection was made, the printers would walk out over some petty pretence and a night’s production would be lost’.21 But such excesses on the part of individual trade unions don’t speak against trade unionism per se. We have already seen that, without collective bargaining, employee rights could only be protected either by slow and relatively clumsy central government legislation or by negotiations between individual employees and employers, which are bound to be ineffective. A further point to make is that it is not just workers who engage in a form of collective bargaining to protect their interests. Large supermarkets effectively pool the bargaining power of thousands of shoppers in order to induce producers of food, and other products, to cut costs and provide goods at the lowest possible price. An individual consumer haggling with a farmer could never hope to have anything like the success which a supermarket chain can, when it Chapter 11 · Employee rights · 243 threatens to stop putting a producer’s goods in the aisles frequented by many thousands of consumers every day. For example, the largest supermarket chain in the world, Walmart, has been estimated to make more than 600 dollars’ worth of savings on behalf of the average U.S. family per year.22 But where do those savings come from? Robert Reich, an economist, and former U.S. Secretary of Labour, explains: As the biggest single company in the world, Wal-Mart has huge bargaining power. ‘We expect our suppliers to drive the costs out of the supply chain,’ a spokesman for Wal-Mart said. Translated: We demand our suppliers squeeze the wages and benefits of the millions of people who work for them in the United States and abroad. If they don’t, we’ll buy from their competitors who will.23 Pension funds and mutual funds do much the same thing for investors, by combining the bargaining power of thousands of individual investors. If an individual investor threatens to remove their small investment from a large corporation unless it makes a change, the corporation will hardly take notice. But if the manager of a pension fund or mutual fund, containing the thousands of small investments of thousands of investors, makes the same threat, the corporation will jump to attention. For example, in 2000, when Alcatel, a mostly Frenchowned telecom company, announced its annual profit would be less than had been forecast, the pension fund for the State of California’s public employees, Cal.P.E.R.S., threatened to sell its shares in the company. In order to regain the confidence of Cal.P.E.R.S., Alcatel had to fire twelve thousand employees.24 Given that consumers and investors are able to use collective bargaining to their advantage, in ways which often have devastating consequences for businesses’ employees, surely what would really be unfair is to deny employees the ability to bargain collectively in their turn, in order to defend themselves from this onslaught. In the second place, it might be objected that trade unions reduce productivity and hold back economic growth. There are a couple of things to say in reply to this second objection. For a start, it is not clear that this objection is even to the point. The role of trade unions is to protect the rights of employees, ensuring that their working conditions are fair. We know from Chapter 5 that it will often be worth sacrificing some economic growth for the sake of a more just society. Though, as consumers and investors, we may find this sacrifice somewhat irritating, as citizens we know that injustice must not be allowed to prevail. So the test of trade unions’ success is not whether they are promoting economic growth, but whether they are promoting justice. But one should also say it is far from certain that trade unions do hamper productivity overall. Many businesspeople would admit that a well-functioning trade union can play a vital role in conveying information from workers to management, and vice versa. And the local talks between union and management which are often an almost continuous process in large businesses can be ‘essential to the smooth running of the company’.25 So it shouldn’t be too much of a surprise that, when trade unions are not permitted to operate, it is sometimes actually the managers of corporations who campaign for their legalisation. For example, in South Africa it was business leaders who finally persuaded the white-supremacist government to legalise black trade unions at the end of the 1970s. The South African political commentator Moeletsi Mbeki made this point at the Franschhoek Literary Festival in May 2013: 244 · BUSINESS ETHICS & OTHER PARADOXES It is not correct to say that the business community is against unions…. The Wiehahn Commission in the 1970s was what compelled the National Party government; [it] was driven by big business. They wanted the legalisation of black trade unions … they had no one to talk to. So business in SA is not against unions.26 In present-day South Africa, as law professor Richard Calland writes, most South African business leaders ‘understand that a weaker union movement is not necessarily good for South Africa or good for their business trajectory. They understand that a complex society, such as we have in South Africa, needs the unions as a social filter or sponge, and that a divided union … may lead to … disintegration of social cohesion’.27 When governments intervene to reduce trade union powers substantially, this tends not to lead to the rise in productivity which classical economics might predict. For example, in the 1980s and early 1990s a Conservative Party government introduced legislation severely curtailing the powers of British trade unions. The economic historian Chris Wrigley has summed up its impact as follows: The 1980-93 legislation removed protection from many groups of workers, thereby aiming to provide a more flexible labour force. Such studies as have been made of this have shown the conditions of the workers concerned have deteriorated but have not found evidence of substantial benefits for employers.28 If our investigation so far suggests that collective bargaining through trade unions often protects employee rights more effectively than central regulation can—and does not hamper productivity excessively in the process—does that mean there is no role for government in ensuring fair working conditions for employees? The answer is, “No;” for two main reasons. The first reason is that there is much which government can—and needs to—do to create a climate in which it is possible for trade unions to operate effectively (while minimising the possibility of them operating corruptly). For example, it can legalise trade unions, compel employers to recognise trade unions, affirm unions’ rights to peaceful picketing, and pass laws granting them immunity from prosecution for damages over productivity lost through strikes. In addition, government can make harassment of union members by employers illegal. But it can also ensure the leadership of a trade union is representative of its members when it calls a strike, by making strike ballots compulsory. Furthermore, it can pass laws facilitating mergers between unions, which create economies of scale for union administration. And it can make it illegal for businesses to fire workers for taking part in legitimate strikes. It would be imprudent for the state to give this “protected” status to all strikes, given the potential—mentioned above in the context of the London print unions—for strikes to be used corruptly. However, if all employees who go on strike can be fired for doing so, trade unions’ ability to safeguard the rights of employees will be significantly reduced. If a middle course is chosen, and some strikes are “protected”, but not others, this must not be for biased or partisan reasons on the part of the state (e.g. because of the party affiliation of an employer’s management or of union members). South African law seeks to tread a path through all these hazards by means of the Commission for Conciliation, Mediation and Arbitration (C.C.M.A.). The Labour Relations Act of 1995 established the C.C.M.A. as a body Chapter 11 · Employee rights · 245 ‘independent of the State, any political party, trade union, employer, employers’ organisation, federation of trade unions or federation of employers’ organisations’.29 If employees who are members of a registered trade union can show the C.C.M.A. that they have a determinate grievance, and that they have attempted to resolve this grievance through negotiation with the employer, but have failed to do so, then—barring exceptional circumstances30—a strike by these employees counts as “protected”.31 The second reason there is a role for government in safeguarding employee rights is that, even if government or a central regulator can often be slow and clumsy tools for protecting employee rights, there are some aspects of fair working conditions government can protect more effectively than trade unions on the ground. For example, as we saw earlier in the section on ‘Workplace safety’, there is a role for either government or a government-appointed regulator in setting minimum workplace safety standards through the use of refined risk costbenefit analysis. These standards are an example of standards more effectively set by a central regulator for the whole country than piecemeal in negotiation between every employer and its employees’ union. (However, as noted earlier, before such regulations have been set, the next best thing may well be collective bargaining over safety standards in the workplace.) Finally, let us consider four specific trade union practices which have stirred up controversy. In each case, we need to ask when, if ever, such a practice should be permitted as being necessary for the effective safeguarding of employee rights. Secondary strikes Secondary strikes—also known as “sympathetic strikes”—are strikes by workers who do not have a grievance in their own workplace, but withdraw their labour in order to put pressure on the employer of workers from a different workplace who do have a grievance. On the face of it, secondary strikes would seem hard to justify, since workers in a secondary strike will normally be harming the business of an employer against whom they have no grievance. That is why many people insist employers are entitled to treat employees’ participation in secondary strikes as plain absenteeism, and the state should not give such employees any encouragement or protection. Others argue, though, that there are circumstances in which secondary strikes are justifiable. An example of such circumstances is when one large business is the employer of both the employees who have a grievance and the employees in another workplace who have no grievance, but go on strike in sympathy. Defenders of secondary strikes argue that, if it is legitimate for union members to strike in solidarity with employees in their own workplace whose grievance they don’t directly share (as surely it is), then there can be nothing wrong with striking in solidarity with employees of their own employer who happen to be in a different workplace. After all, the only relevant difference between the two cases is one of geography. Some defenders of secondary strikes go further, arguing that, when a business whose employees have a grievance about working conditions is supplied with goods or services by another business, it is justifiable for the employees of the supplier to strike in solidarity with the employees of the business their business supplies, even when the two employers are not the same. That is because, if the business whose employees have a grievance stops receiving supplies, this will put it under great pressure to give in to the demands of its employees. However, it is very possible that the supplier business could be harmed by such a strike—for example, if the businesses it supplied switched to new suppliers. It is hard to avoid concluding that it would be 246 · BUSINESS ETHICS & OTHER PARADOXES unfair for employees to risk harming an employer against whom they have no grievance in this way. Secondary strikes remain controversial, and are now illegal in many countries. Disruptive and coercive strikes Sometimes trade union members do not picket peacefully when there is a strike, but instead damage the employer’s property, or intimidate or even assault employees who have elected not to take part in the strike (sometimes derogatorily known as “scabs”). There can be a fine line between applying strong moral pressure through persuasion, on the one hand, and intimidation, on the other. However, if union members resort to violence or threats in order to coerce employees into going on strike, then clearly they should be dealt with by the law in the same way it deals with violence and threats of violence in other contexts. The same applies when company property is vandalised during a strike. Coercive and disruptive strikes ultimately undermine trade unionism by giving union activists a bad name. Regrettably, there remain trade union activists who do think it is acceptable to use violence in the context of a strike. For example, in South Africa a poll whose results were released in August 2013 revealed that 24 per cent of shop stewards from the Congress of South African Trade Unions (C.O.S.A.T.U.) ‘felt that there were times when it became necessary to use violence against non-striking workers’.32 The “closed shop” There is a “closed shop” when, once a majority of employees of a business have chosen to be represented by one particular trade union, everybody who wishes to work for that employer has to join that trade union. Closed shop is controversial because it restricts workers’ freedom of choice. Those who oppose the closed shop object that each individual employee should have the freedom to choose which trade union they wish to be represented by in negotiations with the employer—and indeed whether they wish to be represented by any union at all. However, there is a reply to this objection to closed shop. This is that the improvements in working conditions which trade unions secure are usually enjoyed by all employees, whether they are members of the union or not. Defenders of closed shop argue that it is unfair for people who have not joined the union and paid their subscription to profit from improvements which result from the sacrifice of people who did join and pay their subscription. In these circumstances non-union members are (in ethicists’ jargon) “free-riding” on the sacrifices of others. A compromise position which takes this point about free-riding on board is what is known as “agency shop”. There is agency shop when workers at a business are not obliged to join any trade union in particular, but if they do not join a union, then they do nonetheless have to pay the equivalent of a union monthly subscription, which goes into a fund on which the trade union can draw for activities which directly benefit, not just its members, but all employees. Political affiliations of trade unions Many trade unions make large financial donations to, and campaign on behalf of, political parties which they believe have workers’ interests at heart. Indeed, the relationship is often even closer than that. In many countries, there are political parties which were created by, or work day to day in close alliance with, trade unions or national trade union federations. Those parties Chapter 11 · Employee rights · 247 sometimes share personnel or resources with unions, and formulate common political and industrial strategies with them. For example, in 1900, in the U.K., the Trades Union Congress (T.U.C.) created the Labour Representation Committee (L.R.C.), which became the Labour Party. The Labour Party still receives an enormous amount of funding from British trade unions today, and British unions exercise significant influence through representation on the Labour Party’s National Executive Committee (N.E.C.) and block votes on policy at party conference. In South Africa, C.O.S.A.T.U. is a partner with the South African Communist Party (S.A.C.P.) and the African National Congress (A.N.C.) in the governing “Tripartite Alliance”. C.O.S.A.T.U. puts forward candidates for national, regional and local elections through the A.N.C. and influences A.N.C. policy through joint deliberation and through the fact that many C.O.S.A.T.U. members hold senior positions in the A.N.C. There are two main concerns which get voiced about trade unions’ political affiliations. The first is that, in a democracy, it ought to be up to each individual citizen which political party they support. Consequently—so the argument goes—individuals should not be put in a position where, if their interests as employees are to be represented in collective bargaining by a trade union, some of their subscription money, and their implicit support as a union member, will go to whichever political party the trade union as a whole decides to back. For example, members of almost all U.K. trade unions have to make a small weekly payment into what is known as the “Political Fund”. This money goes to the Labour Party. In the 1980s a Conservative Party government made union members vote on whether they wished to carry on paying into the Political Fund.33 Interestingly, the response was ‘an overwhelming ‘Yes’ vote’.34 The agency shop regime, discussed above, represents a neat way of dealing with this first concern about trade unions’ political affiliations. This is because the money non-union members pay in lieu of a union subscription under agency shop can be used by the trade union only for purposes which directly serve the interests of employees (not for political purposes). So, in workplaces where there is agency shop, employees can be represented in collective bargaining without throwing their weight behind the political party which a trade union supports. It is, however, worth noting that in all countries where trade unions support and fund political parties, businesses also support and fund political parties, and indeed individual politicians—albeit sometimes by a roundabout route. This raises the question of whether it is right for shareholders’ money, and their implicit support as investors in a business, to go to whichever party or politician that business decides to back (which may not be the one a shareholder personally favours). It would certainly be a case of double standards if trade union support of political parties was outlawed, while businesses were permitted to continue funding political parties and politicians with their shareholders’ money. The second concern voiced about trade unions’ political affiliations is that, particularly when a union-backed party is in government, a political party’s dependence on union support (including financial support) can give trade unions a degree of influence which is capable of subverting the democratic process. To take a real-life example, in South Africa N.U.M.S.A. had initially set aside two million rand to campaign on behalf of the A.N.C. in the 2014 general election. However, in September 2013, N.U.M.S.A. issued a public warning that it would ‘not campaign for the ANC if the party includes the National Development Plan (NDP) in its current form in its election manifesto’.35 It is troubling to read warnings of this kind, because they indicate the possibility that a national government, which is meant to govern for all citizens, could be held to ransom by one section of its citizenry due to its financial dependence on them. 248 · BUSINESS ETHICS & OTHER PARADOXES (In this particular case, as it happens, the A.N.C. refused to drop the N.D.P. from its manifesto, and went on to win a resounding victory in the general election without N.U.M.S.A.’s support.) There are a number of points worth making about this concern. First off, this is one instance of a general problem about the influence wielded by political donors across the board. Those with whom trade unions principally negotiate—businesses—are equally implicated in this, often funding and influencing the same parties as the unions. An example from South Africa, involving the businessman Brett Kebble, who died in 2005 in what some described as an ‘assisted suicide’,36 can serve as an illustration which is perhaps not as atypical as one might hope. After his death, Kebble’s estate tried to recover the millions of rands he had donated to A.N.C. leaders on the amusing grounds that he had received no benefit from the government in return. Richard Calland records the A.N.C.’s extraordinary, and very revealing, response: Rather than return the money, in their answering court papers the ANC stated that ‘in return for the donation, Kebble obtained the benefit of access to political decision-makers and lawmakers that would be beneficial to him both directly and indirectly by virtue of its benefits to companies in which he had interests … so as to promote conditions more favourable for the conduct of his business and those of the companies in which he had an interest’.37 Again, it would be a case of double standards if trade union support of political parties was outlawed, while businesses were permitted to continue funding political parties and politicians in exchange for influence. Another important point is that, although trade unions’ principal role is to negotiate fair conditions for their members in the workplace, quite often they will not be able to do this effectively without getting involved in politics. In most countries, in order for trade unions to be able to defend employee rights, it was first necessary for unions to campaign politically to be granted the powers to do so. Then, on many issues, including ‘[h]ealth and safety …, the minimum wage, equality’,38 trade unions have found they can best protect members’ interests by campaigning for state legislation. In former colonial countries, there are further reasons why trade unions must involve themselves with politics. As Sakhela Buhlungu has described, in southern African countries, the conditions employers were able to impose on employees until relatively recently depended on a national government policy of ‘coercion, violence and the subjugation of indigenous populations’. Consequently, in these countries, as Buhlungu explains, ‘the emergence of unionism itself cannot be seen as a purely economistic impulse, as it represented a challenge to a labour regime which was intrinsically political’.39 If what is enabling employers to subject their workers to unacceptable conditions is a political policy of subjugation, then the trade unions’ struggle for better working conditions will be inseparable from a political struggle against subjugation and oppression. Nonetheless, once the political regime of oppression has come to an end, it is surely preferable for political parties and trade unions to separate into distinct entities. This is not to say that government and political parties shouldn’t consult and enter into dialogue with trade unions. But it is to say that it’s important they should not be so closely identified as to be effectively—in the Sicilian phrase—“the same thing”. Unlike trade unions, political parties, particularly when in government, have an obligation to serve the interests of all citizens, not just a section of the citizenry. Chapter 11 · Employee rights · 249 Conclusion This chapter began by establishing the limitations of the contract view of employee rights. After that, it explored the extent to which it is possible to reason ethically about what working conditions employees are entitled to expect from their employers, without relying on outdated feudal notions. It stressed the importance of, not just regulation by government or a central regulatory authority, but also negotiations between employers and employees on the ground, in securing fair working conditions. But it also outlined why such negotiations will inevitably be ineffectual unless employees’ right to collective bargaining is safeguarded. Throughout the 20th century, trade unions played a crucial role in securing fair working conditions for employees by means of collective bargaining. However, they did this in contexts where the majority of workers were permanent, full-time employees of a business working under one roof together with (at least a large number of) that business’s other employees. There is a consensus that trade unions have not adapted very well to current economic and industrial circumstances, in which many more workers than before have part-time or temporary contracts, and in which global mobility and communications have made a huge difference to the way business operates around the world—as we will explore a little further in Chapter 14. It remains to be seen whether trade unions, or something like them, will be able to support and protect employees in the future as well as they have done in the past. 250 · BUSINESS ETHICS & OTHER PARADOXES CONTENT QUESTIONS (1) What does the “contract view” of employee rights say? (2) Give three general reasons why infringing on somebody’s privacy is morally problematic. (3) What two bargaining advantages would most employers have over an employee who tried to negotiate better working conditions individually? (4) Give three examples of action governments can take to empower trade unions to represent their members’ interests effectively. (5) What does it mean to say a trade union runs a “closed shop” in a workplace? CRITICAL ANALYSIS QUESTIONS (6) “When a competent, informed person voluntarily enters into an agreement with another, that person is morally obliged to abide by the terms of that agreement. Consequently, in order to determine what working conditions an employee is entitled to, all that is necessary is to look at the terms of their contract of employment.” Outline two reasons why one might disagree with this statement. (7) “Employers’ legitimate interest in making sure their employees are performing well in their jobs can sometimes justify infringements on employees’ privacy. For example, if employees take drugs in the evenings, this may affect their performance at work the next day, so it is justifiable for employers to give drug tests to their employees.” Explain why one might agree with the first sentence of this statement, but not with the second sentence. DISCUSSION QUESTIONS (8) “It is up to individuals whether they want to do dangerous work. Governments and regulators have no business saying what work people can and can’t do.” Do you agree or disagree with this statement? Be sure to discuss reasons in support of it and reasons against it in your answer. (9) “Trade unions serve no good purpose. They give employees an unfair bargaining advantage and subvert the democratic process. It would be better if they did not exist.” Do you agree or disagree with this statement? Explain why. Chapter 11 · Employee rights · 251 CHAPTER ELEVEN NOTES AND REFERENCES 1 See, for instance, Colin Mayer, Firm Commitment: Why the Corporation Is Failing Us and How to Restore Trust in It (Oxford: Oxford University Press, 2013), pp. 32-34. 2 Jo Phillips & David Seymour, Why Join a Trade Union? (London: Biteback Publishing, 2010), p. 147. 3 Botho Molosankwe, ‘Workplace injuries soaring in SA’, Cape Times, 3 May 2013. 4 Loc. cit. 5 Mandy de Waal & Jon Pienaar, ‘Dead Men Walking’, Noseweek, May 2014. See also Greenpeace, The True Cost of Nuclear Power in South Africa (http://www.greenpeace.org/africa/Global/africa/publications/The%20true%20cost%20of%20Nuclear %20Power%20in%20SA-Screen.pdf), 2011. 6 ‘Dead Men Walking’. 7 Carl F. Cranor, ‘Toward a Non-Consequentialist Approach to Acceptable Risks’, in Risk: Philosophical Perspectives ed. Tim Lewens (London & New York: Routledge, 2007), p. 50. 8 Raymond Wacks, Privacy: A Very Short Introduction (Oxford: Oxford University Press, 2010), p. 92. 9 Anders J. Persson & Sven Ove Hansson, ‘Privacy at Work—Ethical Criteria’, Journal of Business Ethics, no. 42, 2003, p. 61. 10 Privacy: A Very Short Introduction, p. 111. Wacks is here citing a concept introduced by the German Constitutional Court. 11 David Benatar, ‘Confidentiality’, Continuing Medical Education, vol. 21, no. 1, 2003, p. 11. 12 ‘Privacy at Work—Ethical Criteria’, p. 62. 13 Joseph DesJardins & Ronald Duska, ‘Drug Testing in Employment’, in Joseph R. DesJardins & John J. McCall, Contemporary Issues in Business Ethics: Fifth Edition (Belmont: Wadsworth, 2005), p. 223. 14 Loc. cit. 15 ‘Privacy at Work—Ethical Criteria’, p. 68. 16 www.numsa.org.za/wp-content/uploads/2013/09/00011_Member-Form-all-sectors-18-March-201321.pdf. 17 See, for instance, Chapter XXV, Section 3, ‘Progressive Production of a Relative Surplus-Population or Industrial Reserve Army’, of Karl Marx, Capital: A Critique of Political Economy, vol. i: The Process of Capital Production, ed. Frederick Engels (trans. Samuel Moore & Edward Aveling, London: Lawrence & Wishart, 2003 [1887]), pp. 589-600. 18 William H. Shaw, Business Ethics: 8th Edition (International Edition) (Stamford: Wadsworth, 2014), p. 302. Shaw is quoting from Smith’s The Wealth of Nations. 19 Sakhela Buhlungu, A Paradox of Victory: COSATU and the Democratic Transformation in South Africa (Scottsville: University of KwaZulu-Natal Press, 2010), p. 154. 20 Why Join a Trade Union?, pp. 51-52. 21 Op. cit., pp. 156-157. 22 Robert Reich, Supercapitalism: The Battle for Democracy in an Age of Big Business (London: Icon Books, 2009), p. 92. 23 Op. cit., p. 91. Reich is quoting from an interview with a Walmart spokesman which appeared in The New York Times, 20 February 2005. 24 Op. cit., p. 122. 25 Why Join a Trade Union?, p. 126. 26 Richard Calland, The Zuma Years: South Africa’s Changing Face of Power (Cape Town: Zebra Press, 2013), p. 203. Calland is quoting from Mbeki’s remarks speaking on a panel he moderated at the Franschhoek Literary Festival. 27 Op. cit., p. 347. 28 Chris Wrigley, British Trade Unions since 1933 (Cambridge: Cambridge University Press, 2002), p. 78. 29 Act no. 66, 1995, article 113 (‘Independence of Commission’), in Labour Relations Act 66 of 1995 & CCMA Related Material, ed. Juta’s Statutes Editors (Cape Town: Juta & Co., 2013), p. 128. 30 Details of such exceptional circumstances can be found in Barney Jordaan, Rochelle le Roux & Marlize van Jaarsveld, Understanding the Labour Relations Act (Cape Town: Juta & Co., 2009), pp. 7273. 252 · BUSINESS ETHICS & OTHER PARADOXES 31 Op. cit., pp. 69-70. George Matlala, ‘What do shop stewards really feel?’, Sunday Independent, 1 September 2013. 33 Why Join a Trade Union?, p. 152. 34 Op. cit., p. 153. 35 Matuma Letsoalo, ‘Numsa may withhold R2m poll cash’, Mail & Guardian, 13-19 September 2013. 36 The Zuma Years: South Africa’s Changing Face of Power, p. 178. 37 Loc. cit. 38 Why Join a Trade Union?, p. 12. 39 A Paradox of Victory: COSATU and the Democratic Transformation in South Africa, p. 2. 32 Chapter Twelve WHISTLEBLOWING by Greg Fried Consider this hypothetical (but not far-fetched) case: Busi is twenty five years old, and has a Commerce degree. In a difficult economy, after an extensive job search, she found a position in information technology, developing and maintaining software for a large construction firm. Busi recently married an artist, Frank. She believes in Frank’s talent, but she is currently financially supporting him, hoping that his work will soon receive more interest from art-lovers. A year into her job, Busi hears from a colleague working on one of the firm’s current construction projects that he has several times seen industrial sludge being poured into a nearby river. He thinks that this is being done, despite environmental regulations forbidding it, to save the significant costs of transport and safe disposal at a dumping site; the project is behind time and over budget. Busi is no expert on the toxic effects of industrial sludge, but she knows that one may not dispose of waste in this way, and thinks it may well affect organisms in the river. She raises her concerns with the colleague who told her about it. He says that taking action on this is not his business. Then Busi speaks to her senior manager, who is running a number of large projects at once. The manager is clearly very busy, but says he will check and get back to her. He doesn’t do so, and when she raises it with him again a few weeks later, he gets irritable and says that he’s too preoccupied to check rumours. Meanwhile, the economy is looking grim. Frank has sold one painting only. But there is welcome news for Busi: her boss is impressed by her IT skills, and says that she may soon get a promotion. Should Busi continue as if she’s never heard anything about the dumping of sludge into the river? Should she go to the press or a public environmental body with what she’s heard? Or is there something else she ought to do? Clearly, it would be helpful to be able to reflect in an informed way on questions like these. And that is the business of this chapter. When, if ever, is it appropriate for me to ‘blow the whistle’ on an organisation to which I belong; in other words, to expose its misdeeds to the media or some public body? The question is of great practical importance to people of conscience who find themselves in a company 254 · BUSINESS ETHICS & OTHER PARADOXES where wrong has been done, or is being perpetrated or planned. And as we shall see, it is a question which not only employees but also employers, legislators and others must consider. The answer, however, is far from clear. Though several writers have proposed moral guidance, no set of guidelines has received widespread support. In the absence of a generally accepted approach to the justifiability of whistleblowing, this chapter will attempt to bring out a number of morally relevant factors. There will be no attempt to construct a coherent, highly plausible approach to whistleblowing; writers on the topic have not yet achieved this goal. Nonetheless, a person contemplating whether it is appropriate to blow the whistle in a given situation may find it useful to reflect on some factors mentioned here in order to think carefully and extensively about the decision. How can we draw out considerations relevant to the justifiability of whistleblowing? The method here will be to describe and evaluate a well-known set of guidelines; those of Richard DeGeorge.1 We will employ DeGeorge’s admirably clear, relatively straightforward position as a way of thinking further about whistleblowing. As we explain DeGeorge’s view and think about the merits and deficiencies of his account, we shall better understand the moral complexities of the topic. There is a further advantage of this approach: it encourages the more general skill of thoroughly and systematically setting out and then criticising a specific philosophical position. Basic considerations raised by DeGeorge According to DeGeorge, we should keep certain basic considerations in mind when we consider the justifiability of whistleblowing. He is explicit about two of them: company loyalty and free speech. A third consideration—prudence, in the sense of the employee’s long-term selfinterest—is implicit in his paper. Two of these, DeGeorge believes, are considerations against whistleblowing, and one is a consideration in favour of whistleblowing. How do these considerations arise? Of course, the consideration of company loyalty emerges only because the employee works for a company. But the other two considerations, of free speech and prudence, arise for the employee simply because she is a person: surely anyone may exercise free speech, to some extent, and we all have good reason to be prudent, i.e. to consider our own long-term interests. DeGeorge’s considerations against whistleblowing Loyalty. For DeGeorge, it is appropriate for an employee to be loyal—to have ‘a certain positive attitude’—to her company, her work, her fellow employees and her employers. He offers some reasons why an employee should feel loyal: Gratitude to her employer for offering her a job. Engagement in a mutually beneficial relationship with her employer. Identification with the firm and her fellow workers, since all are ‘engaged in a joint enterprise’: ‘if workers are to be more than cogs in an impersonal machine, they come to see the company as their company’.2 DeGeorge would presumably hold that this positive attitude implies a special reluctance to disobey authorities in the company or to injure the company. Now, whistleblowing may go against the explicit wishes of one’s superiors. And even if it does not, it may harm the company and those who work there, for example by generating bad publicity, creating an atmosphere of mutual suspicion among workers or prompting civil or even criminal charges. Thus, on DeGeorge’s view, company loyalty should incline one against whistleblowing. Chapter 12 · Whistleblowing · 255 Prudence. ‘Because the consequences for the whistle-blower are often so disastrous, such action is not to be undertaken lightly’.3 Penalties suffered by whistleblowers include: Dismissal, barriers to advancement, or measures to discredit the whistleblower; e.g. transfer to undesirable work roles, being given work for which one is unqualified, being given too much work, or even being pressured to undergo psychological examination for alleged instability. In response to some of these kinds of retaliation, an employee might be able to take legal action against the firm. But the legal process can be long and expensive, especially against a firm with extensive financial resources. Blacklisting in the industry: firms may be unwilling to hire someone who is known to have blown the whistle on her company. Ostracism by peers. As Sissela Bok points out, a whistleblower’s colleagues ‘may regard him as a crank, publicity-hungry, eager for scandal and discord, or driven to indiscretion by his personal bias and shortcomings’.4 Peers may dislike a whistleblower’s perceived disloyalty, or resent the whistleblower for doing the right thing when they did not. DeGeorge offers a psychologically insightful remark about resentment: ‘Rarely are whistle-blowers honoured as heroes by their fellow workers. A possible explanation might be that, by this action, the whistle-blower has implied that fellow workers who did not blow the whistle are guilty of immorality, complicity in the wrongdoings of the company, or cowardice. The whistleblower did what the others were obliged to do but failed to do. His or her presence is therefore a constant reminder of their moral failure.’5 DeGeorge’s consideration in favour of whistleblowing Free speech. Liberal societies—those that permit and value extensive individual liberty— standardly hold that we should freely be able to state our minds, unless by doing so we cause direct, significant harm to others. This view seems to permit public criticism not only of the state but also (at least sometimes) of companies, including those that employ us. Hence, if we value free speech, we should sometimes be inclined to accept that whistleblowing is legitimate. DeGeorge’s default presumption about whistleblowing When making some decisions, we rely on a default presumption, and the onus of proof lies in showing that this presumption is false. For instance, courts of law presume that a person accused of a crime is innocent, and the state must prove otherwise. Regarding whistleblowing, DeGeorge assumes by default that it is unjustified. The onus is therefore on showing, in a given situation, that it is appropriate to blow the whistle. Why presume that it is unjustified? DeGeorge’s explicit reasons include: Conformity to the traditional presumption in the literature on whistleblowing. Consistency with commercial practice: whistle-blowing is uncommon, indicating that it is probably usually regarded as inappropriate. But presumably DeGeorge is also relying on his discussion of basic considerations, since the considerations he raises against whistleblowing seem weightier. The kind of whistleblowing under discussion DeGeorge does not concern himself with all varieties of whistleblowing. He has in mind 256 · BUSINESS ETHICS & OTHER PARADOXES whistleblowing that is: External: information is revealed to a source outside the company, such as a government agency or the media. (This has greater capacity to damage the company than internal whistleblowing.) Impersonal: the whistleblower is not revealing information about an offence against herself in particular (e.g. sexual harassment). Private sector: the whistleblower is not a government employee divulging a governmental practice. Public sector whistleblowing is a prominent and crucial topic, as it amounts to one way of combating misdeeds in a sector where there is huge public interest in careful scrutiny of institutions. But it is not DeGeorge’s focus, or the primary concern of work on whistleblowing among business ethicists. DeGeorge points out that public sector whistleblowing is a significantly different topic. For one thing, a government worker is related to his employer—the state—not only by a contract of employment but also by citizenship. DeGeorge explains the object of his attention: ‘We shall be concerned with (1) employees of profit-making firms, who, for moral reasons, in the hope and expectation that a product will be made safe, or a practice changed, (2) make public information about a product or practice of the firm that owing to faulty design, the use of inferior materials, or the failure to follow safety or other regular procedures or state of the art standards, (3) threatens to produce serious harm to the public in general, to employees, or to individual users of a product.’6 The next two sections will explain DeGeorge’s conditions under which whistleblowing is permissible (that is, one may do it) and under which it is obligatory (that is, one must do it). In all other circumstances, whistleblowing is—given DeGeorge’s default presumption—prohibited (that is, one must not do it). Permissible whistleblowing Whistleblowing is permissible, for DeGeorge, when the following three conditions all apply: Condition 1: There is a threat of serious, considerable harm ‘The firm, through its product or policy, will do serious and considerable harm to employees or to the public, whether in the person of the user of its product, an innocent bystander, or the general public.’7 Presumably, ‘serious and considerable’ refers to the quality and quantity of harm: the harm has to be of a particularly bad kind, and there must be plenty of it. DeGeorge makes further remarks regarding ‘serious and considerable’: By making ‘serious and considerable’ harm essential, we plainly rule out cases that seem too insubstantial to justify whistleblowing. DeGeorge thinks it would be problematic to allow such cases even for initial consideration: he holds that if public bodies (such as the media or government agencies) were deluged with minor issues, this could reduce their willingness or ability to respond to significant matters. The phrase ‘serious and considerable’ is vague, and needs to be determined more precisely. But here is a clear case: ‘danger to life and health’ (for instance, by producing unsafe tyres, dumping cancer-causing toxic waste into a river or using substandard concrete in construction). Another potential case of serious and considerable harm—though DeGeorge does not commit himself to this position—is that of major financial harm. Chapter 12 · Whistleblowing · 257 Condition 2: The employee’s immediate superior has been informed—without result ‘Once employees identify a serious threat to the user of a product or to the general public, they should report it to their immediate superior and make their moral concern known.’8 Condition 2 is fulfilled if the immediate superior, having been informed, does not have the situation rectified. Why does DeGeorge think the issue should first be raised within the firm, rather than externally? It is appropriate that the firm be given the first chance, by its own employee, to rectify the situation, before the public is informed. Internal action should be the most direct and quickest way to rectify the situation. For one thing, the firm may have urgent incentives to act: many firms wish to avoid causing serious and considerable harm, either for moral or prudential reasons. Why should the issue first be raised with one’s immediate superior in particular? Reporting issues in general to one’s immediate superior—rather than anyone else—is the standard practice, so DeGeorge’s requirements conform to standard procedure. (If a firm does not have a hierarchical structure—just a group of equals—then one should simply report to one’s peers.) Condition 3: Others in the company have then been informed—without result ‘If one’s immediate superior does nothing effective about the concern or complaint, the employee should exhaust the internal procedures and possibilities within the firm. This usually will involve taking the matter up the managerial ladder and, if necessary—and possible—to the board of directors.’9 But sometimes the situation is still not rectified. If there is not enough time to raise the threat with all authorities within the firm, and the threat must be made public to be averted, DeGeorge regards the employee as having fulfilled Condition 3. In sum: ‘the point of the three conditions is essentially that whistle-blowing is morally permissible if the harm threatened is serious and if internal remedies have been attempted in good faith without a satisfactory result.’10 Obligatory whistleblowing Whistleblowing is said to be not merely permissible but obligatory when both the following two conditions apply, in addition to the three conditions outlined above. Condition 4: The employee has clearly persuasive evidence ‘The whistle-blower must have, or have accessible, documented evidence that would convince a reasonable, impartial observer that one’s view of the situation is correct, and that the company’s product or practice poses a serious and likely danger to the public or user of the product.’11 DeGeorge points out an attractive consequence of Condition 4. We may intuitively hold that those in higher positions are more likely to be obliged to blow the whistle than those in lower positions. Condition 4 supports this intuition: as one ascends an organisational hierarchy, one is likely to have more access to information and documentation; thus, stronger evidence of potential wrongdoing; hence, greater likelihood of fulfilling this condition. 258 · BUSINESS ETHICS & OTHER PARADOXES Condition 5: The employee has a reasonable belief that the whistleblowing will rectify the situation; so the success must be worth the risk ‘The employee must have good reasons to believe that by going public the necessary changes will be brought about. The chance of being successful must be worth the risk one takes and the danger to which one is exposed.’12 DeGeorge’s rationale is that given the harm that blowing the whistle may bring to oneself and the company, one can’t be obliged to do it if it may well turn out to be futile. Merits of DeGeorge’s guidelines Attractions of the account include: Clarity. Though some matters need to be spelt out further—in particular, what circumstances count as ‘serious and considerable’ harm (Condition 1)?—at least we have a clear framework for thinking about the issue. A degree of nuance. DeGeorge distinguishes between cases where one may and must blow the whistle. Usefulness to various parties. The guidelines can be consulted by: employees considering whether to blow the whistle; third parties judging whether it was appropriate, in a given case, to blow the whistle; lawmakers, professional organisations and unions aiming to support justified whistleblowing; and employers designing procedures to ensure that the circumstances which allow for justified whistleblowing never occur. For instance, DeGeorge recommends, based on his account, that organisations appoint an ethics officer. This officer’s role would be to hear and investigate charges from within, and—if not dealt with—to publicise them. Given DeGeorge’s Condition 3, the work of a diligent ethics offer will prevent employees from ever blowing the whistle with justification. (To support the role of the ethics officer, DeGeorge urges companies to create a culture that rewards the raising of concerns within a company as a sign of loyalty to the company.) Criticisms of DeGeorge Each of the following criticisms will imply that some or other of DeGeorge’s views are incomplete or incorrect. A charge of incompleteness (such as the criticism below of Condition 2) need not require a rejection of DeGeorge’s views, but might rather indicate that they should be supplemented by further details in order to deal sensitively with all cases of actual or potential whistleblowing. By contrast, a charge of incorrectness (such as the criticism below of Conditions 2 and 3 jointly) implies that these views ought to be changed in some way, rather than merely being supplemented. The basic considerations DeGeorge raises two considerations against whistleblowing, and one consideration in favour of it. His considerations against whistleblowing each strongly incline one not to do it. His consideration in favour of it, however, is less powerful, in the sense that it does not incline one strongly to do it. To see why this is so, imagine that we take each consideration in isolation, without bearing the others in mind. Then it seems that: Loyalty (in isolation) implies that we must not blow the whistle. Prudence (in isolation) implies that we must not blow the whistle. But free speech—the opposing consideration—does not imply that we must blow the Chapter 12 · Whistleblowing · 259 whistle. It merely implies that we may do so. (Free speech is discretionary: one can choose whether or not to speak.) These considerations seem heavily weighted against whistleblowing, and thus provide strong support for DeGeorge’s reluctance to condone whistleblowing. However, DeGeorge appears to have omitted or at least under-emphasised a powerful basic consideration on the side of whistleblowing: public interest. It is important to the public that significant harms—such as threats to health—are revealed. Though DeGeorge does not emphasise public interest, other authors have done so. Frederick Elliston, to take just one example, regards the central dilemma of whistleblowing as loyalty to one’s employer versus concern for public interest.13 Public interest is a more pressing consideration in favour of whistleblowing than free speech. We can see this by imagining that we are considering public interest in isolation, without keeping the other considerations in mind. Then public interest, unlike free speech, implies (in isolation) that we must blow the whistle. Hence, if we accept public interest as salient, then the basic considerations are not so clearly weighted against whistleblowing. It might be objected that DeGeorge is considering the private sector rather than the public sector, and that public interest is therefore irrelevant. We might reply that it is, of course, true that public interest is a central consideration for the public sector. Organisations in the public sector exist in order to uphold the interests of the public, while it would be implausible to say the same of businesses. However, even though businesses do not exist in order to promote public interest, they certainly can affect it in many important ways. (Consider how the Companies Act, 2008 in South Africa assigns a ‘public interest score’ to companies.) As Chapter 6 on the moral obligations of businesses showed, it may be that businesses, or some businesses, should in fact promote the public interest, but we should agree at least that all businesses are morally obliged not to act in such a way that significantly harms the public interest. In this sense at least, considerations of public interest are relevant to employees in the private sector considering whether to blow the whistle. Having considered an extra factor in favour of whistleblowing, we can also ask whether DeGeorge’s considerations against whistleblowing always work in the way he thinks they do: Prudence. While whistleblowers do often suffer for their actions, there may be rewards, including emotional (gratitude from affected parties in particular, or from the public in general) or financial. A famous recent case of extraordinary financial reward is that of Bradley Birkenfeld, a banker who provided information to United States authorities on how his employer, UBS, had promoted tax evasion. In return, Birkenfeld was paid a portion of the amount that the Internal Revenue Service of the United States received from UBS to resolve charges against the bank. Birkenfeld’s reward amounted to 104 million dollars. (Birkenfeld’s case is a complex one, because he was also penalised for his involvement in UBS’s criminal activities: he received a 40 month prison sentence.)14 Loyalty. Robert Larmer denies that showing loyalty to X must involve supporting the actions of X.15 Rather, he holds that showing loyalty to X involves promoting X’s best interests. Larmer also assumes, without argument, that it is always against one’s best interests to behave immorally.16 (We shall return to this idea in Chapter 15.) Hence, he concludes, loyalty to a company that is acting immorally involves somehow working against this immoral action. If Larmer is correct, then there are circumstances in which loyalty to one’s company is shown not by assisting the company in the performance of some 260 · BUSINESS ETHICS & OTHER PARADOXES action, or by allowing others to perform that action without hindrance, but rather by vigorously reversing or otherwise rectifying the action. This may include notification of external authorities when internal attempts are ineffective. Larmer’s view on loyalty is reminiscent of a similar position about patriotism, or, as one might say, loyalty to one’s country: that it doesn’t involve accepting all its deeds, but acting in its best interests. In a famous after-dinner toast in about 1820, the great United States naval officer Stephen Decatur said: ‘Our country! ... right or wrong, our country!’ But in 1872, the US Senator Carl Schurz offered, in response, a more nuanced view of patriotism: ‘My country, right or wrong; if right, to be kept right; and if wrong, to be set right.’ Condition 1 This condition considers only the threat of harm, which is to say a future harm. But recall that whistleblowing cannot be permissible, on DeGeorge’s view, if Condition 1 is not satisfied. DeGeorge’s guidelines therefore seem to imply that one may not blow the whistle about harms which have already been done, where there is no threat of further harm in future. However, even if it is too late to avert a harm, it may still be appropriate to hold the company liable for it. Possible justifications include the desirability of having the company compensate for the harm, deterring the company (and other companies) from acting similarly in future, and—most simply—a sense of desert: one might think that wrongdoers ought to be held liable for their deeds, even if those deeds are past. Thus, in cases where harm has already occurred, whistleblowing seems as if it may at least sometimes be appropriate. Another question about Condition 1 is whether it applies even when one’s immediate supervisor is implicated in the malpractice. Then perhaps it’s not appropriate to go to her, especially if she clearly knows of the practice, understands that it is wrong, and shows no inclination to correct it. More generally, perhaps an employee should not be obliged to report malpractice to a superior who clearly knowingly condones it. Condition 2 ‘Once employees identify a serious threat to the user of a product or to the general public, they should report it...’17 But suppose an employee only suspects that there is a threat, or has identified a threat, but does not know how serious it is. Then how much effort should she make in identifying whether there is a serious threat? Is it acceptable if she observes an event that may be a sign of such a threat, but does not make any effort to discover more? Is it acceptable if she goes so far as to make an effort not to notice any serious threats? DeGeorge does not give guidelines here. His silence seems to offer a loophole for someone who wishes to avoid moral responsibility. As long as an employee never identifies a serious threat, whistleblowing will never be a permissible option, according to DeGeorge, because Condition 2 will not be satisfied. Thus, employees—and employers—can avoid moral responsibility relating to a threat simply by keeping themselves ignorant of it. They might claim with impunity: ‘Of course I didn’t blow the whistle—I didn’t even know there was a problem!’ or ‘I thought something fishy might be going on, but I never took any steps to work out whether it really was’. This may allow people to dodge responsibility too easily. We might want to say that where an employee has at least a reasonable suspicion of a threat, she should find out whether there is a threat, and whether it is serious. This view may be particularly plausible when the person is directly involved in the potentially harmful activity, or more specifically if she orders the activity Chapter 12 · Whistleblowing · 261 to be carried out. If she does not, she may be morally responsible for the harm that results. Conditions 2 and 3 For DeGeorge, if either the immediate superior or other authorities in the firm rectify the situation, then subsequent whistleblowing is unjustified. It is arguable that this is not always correct. Suppose a worker finds out that her company is about to have protesters severely beaten. The worker informs her superiors, and as a result the beating is called off just in time. But this may let the company off too easily: it might even be that the worker has a moral obligation, here, to make the (abandoned) plan public. The consequent punishment of the company or complicit individuals within it may serve important functions, such as: Appropriate retribution for ordering the beating. Rehabilitation of those who ordered it. Deterrence of other companies that might otherwise consider similar actions. Conditions 1-3, which jointly generate ‘permissibility’; and conditions 4-5, which jointly generate ‘obligation’ The term ‘permissible’ surely covers various categories, including ‘highly desirable, though not actually mandatory’ and ‘acceptable, though not praiseworthy’. (If you’re writing an essay, for instance, doing extensive preparatory research is an example of the former, and using Arial rather than some other font is an example of the latter.) But adequate guidelines for whistleblowing should be sensitive to the difference between these categories, since the person considering whether to blow the whistle in a certain situation needs to know whether it would be a noble thing to do, or merely acceptable but not commendable. (If I know that my blowing the whistle would be an excellent action, then that should serve as a further motivation for me.) Hence, DeGeorge’s use of ‘permissibility’ without further distinction seems insufficiently nuanced. A similar criticism applies to the term ‘obligatory’. Some cases may be obligatory without being praiseworthy. Here is a possible example: the CEO of a company has ordered illegal acts that have caused environmental disaster. The cause of the disaster is likely to be discovered soon by the public. But before this occurs, the CEO reveals the company’s role in causing the disaster. Here the CEO does what she (presumably) morally ought to do, but at least some people would not regard her deed as praiseworthy. Other cases may be obligatory and also praiseworthy. Suppose someone discovers a severe misdeed in his company that gravely threatens the public interest, a misdeed that he is severely discouraged from reporting externally. To alert the public may be his duty—imagine for instance, a looming catastrophe that might well be averted if he makes public what he knows—but it may also require substantial courage. In such cases, doing one’s duty is likely to be commendable. Guidelines for whistleblowing ought to be sensitive to the difference between these kinds of cases. Anonymous whistleblowing In a case of anonymous whistleblowing, the whistleblower either (a) contacts the external authorities anonymously or (b) reveals her identity to the authorities, but requests that they do not mention her in their dealings with her company. DeGeorge regards anonymity as undesirable, since he holds that such information tends not to be taken seriously. But there is more to say on the topic. One (among other) authors who discuss anonymity is Frederick Elliston.18 262 · BUSINESS ETHICS & OTHER PARADOXES Elliston points out that whistleblowers who direct the authorities to evidence without letting their own identity be revealed have sometimes been held in low regard. For instance, people have claimed that: (i) individuals ought to take responsibility for their actions, especially those with serious consequences, such as major financial or legal trouble for a company; (ii) a company should be able to know the identity of its accuser; and (iii) the option of anonymous whistleblowing could greatly increase the number of tips to the authorities from employees, since their risk of whistleblowing is significantly reduced. However, Elliston offers various responses. (I shall mention only some of them.) To (i) and (ii), he replies that the company has significant power over its employees to take unfair retaliation, and that the legitimate desire to avert such retaliation may outweigh the desirability of revealing the accuser’s identity. To (iii), he replies that the authorities can of course decide whether to act on a tip; thus, a series of unfounded accusations need not consume much of their time. We might add that if the tips are well-founded, then they may be worth the attention of the authorities. This chapter does not serve to recommend some watertight set of guidelines on whistleblowing, because no such guidelines have (yet) been formulated. However, after considering DeGeorge’s guidelines in a critical way, you should find that you are more sensitive to the factual and moral considerations salient to the topic, and that you are better able to make thoughtful and reasoned judgements about blowing the whistle. Chapter 12 · Whistleblowing · 263 CONTENT QUESTIONS (1) DeGeorge believes that we should keep certain basic considerations in mind when we consider the justifiability of whistleblowing. Describe two considerations that he proposes (explicitly or implicitly) against blowing the whistle. (2) Public interest and free speech are both considerations in favour of whistleblowing. Which is a stronger consideration in favour? Explain why. (3) List the three criteria that must all be fulfilled, according to DeGeorge, in order for whistleblowing to be permissible. (4) When whistleblowing fulfils the criteria for permissibility, there are two further criteria, according to DeGeorge, that make it obligatory to blow the whistle if they are both fulfilled. List these two criteria. (5) Someone might blow the whistle on a company in an attempt to punish those who have done wrong. Give three standard motivations for punishing a person. CRITICAL ANALYSIS QUESTIONS (6) DeGeorge regards prudence and loyalty as basic motivations against whistleblowing. Provide arguments that prudence and loyalty may sometimes work contrary to this view. (7) What is anonymous whistleblowing, and is it desirable or undesirable? DISCUSSION QUESTIONS (8) ‘Every aspect of the simple procedure that DeGeorge recommends for deciding the moral status of whistleblowing is open to objection. It seems that the morality of whistleblowing is too complex to be adequately captured by DeGeorge’s procedure, or perhaps by any simple procedure.’ Explain whether you agree and why. (9) ‘The criticisms of DeGeorge’s guidelines for whistleblowing all support one central claim: that DeGeorge is too reluctant to support blowing the whistle. Whistleblowing is more often appropriate, and more to be encouraged, than DeGeorge admits.’ Explain whether you agree and why. 264 · BUSINESS ETHICS & OTHER PARADOXES CHAPTER TWELVE NOTES AND REFERENCES 1 DeGeorge, R. 2010. Business Ethics. Prentice Hall, pp. 298-317 Ibid, p. 304 3 Ibid, p. 303 4 Bok, S. 1986: Secrets: On the Ethics of Concealment and Revelation. Oxford and Melbourne: Oxford University Press, Chapter XIV, p. 216 5 DeGeorge, R. 2010. Business Ethics. Prentice Hall, pp. 303-304. Note that DeGeorge refers to ‘whistleblowers’, rather than ‘whistleblowers’. Both variants are acceptable. 6 Ibid, p. 301 7 Ibid, p. 306 8 Ibid, p. 308 9 Ibid, p. 309 10 Ibid, p. 309 11 Ibid, p. 310 12 Ibid, p. 311 13 Elliston, F. 1982: ‘Anonymity and Whistleblowing’. Journal of Business Ethics, 1, pp. 167-177 14 ‘Whistleblower Gets $104 Million’. The Wall Street Journal, 11 September 2012 (online.wsj.com/news/articles/SB10000872396390444017504577645412614237708) 15 Larmer, R. 1992: ‘Whistleblowing and Employee Loyalty’. Journal of Business Ethics, 11, pp. 125-128 16 Various philosophers, dating back to Plato, have attempted to offer good reasons for this position, but the issue is too large to cover in passing here. 17 DeGeorge, R. 2010. Business Ethics. Prentice Hall, pp. 308 18 Elliston, F. 1982: ‘Anonymity and Whistleblowing’. Journal of Business Ethics, 1, pp. 167-177 2 Section A FOUNDATIONS OF BUSINESS ETHICS Section D BUSINESSES AND SOCIETY-AT-LARGE Chapter Thirteen BUSINESS AND THE ENVIRONMENT by Greg Fried In this chapter we’ll discuss a variety of questions which are general and quite abstract, but have profound implications for our understanding of the role of business in relation to the environment: Who (or what) is wronged when the environment is damaged? What guidelines might companies use to determine their environmental moral obligations? How might governments regulate commercial activities that damage the environment? Who (or what) has moral standing? Various commercial activities can have significant consequences for the environment, including plants, animals and other entities. For instance, commercial pesticides may enter a river, degrading the quality of the water, damaging plant life, and killing fish and other organisms; or factory emissions might be dispersed far into the atmosphere, distributing toxic substances and polluting a variety of flora and fauna. Clearly, then, we must try to think lucidly about which commercial actions with environmental consequences are permissible, and which are not. We begin with a basic and crucial question. If an act that has consequences for the environment is morally wrong, then presumably someone (or something) is being wronged. But who, or what, is capable of being wronged? In other words, what is the category of entities that have moral standing? (There may be other notions of moral standing, but we will equate moral standing with the capacity to be wronged.) Note that having moral standing is different from being a moral agent, which we encountered in Chapter 6. To be capable of being wronged, one does not have to be a moral agent; that is, capable of right and wrong acts. For example, babies have moral standing, but are not (yet) moral agents. Once we have identified the category of entities with moral standing, we can base criticism of a particular act of environmental damage on the claim that it wrongs some entities with moral standing. We can also claim that some act is not morally problematic because it does not wrong any such entities. Three of the possible answers to the question, ‘What entities have moral standing?’ are: Chapter 13 · Business and the environment · 267 (i) Human beings (ii) Conscious beings (iii) Organisms These groups are successively more inclusive. Humans (together with mammals, birds, etc.) belong to the group of conscious beings, and conscious beings (together with plants, fungi, etc.) are varieties of organisms. Which of the above groups we identify as the category of entities with moral standing will influence the kinds of justifications we find acceptable for moral claims about the environment. For example, suppose we think that only humans can be wronged. Then, if we wish to criticise the destruction of a forest, we must explain how this destruction would harm humans. We could, for instance, appeal to the negative effects of this destruction on our ‘health, convenience, comfort, enjoyment, leisure, self-fulfilment, freedom from odor, [experience of] beauty’.1 This view of nature is sometimes called anthropocentric (i.e. human-centred): it sees the significance of nature in terms of human interests. The anthropocentric approach has long been employed for thinking about environmental damage. The seventeenth century philosopher John Locke, for example, claimed that the earth and its flora and fauna were given by God to humanity in order to help us survive and thrive. For Locke, if I damage a forest without good reason, I hinder the ability of people to thrive— and hence, I do wrong to humans. We can also broaden our perspective beyond humans. Suppose we think, contrary to the anthropocentric approach, that conscious creatures other than humans can also be wronged. Then our grounds for objecting to the destruction of a forest include not only the negative effects on humans, but also the consequences for all the other conscious creatures that inhabit the forest: we can claim that they are being wronged if they lose the environment that they need in order to survive and thrive. And if we think that organisms in general can be wronged, then we add the most straightforward criticism of all: by destroying the trees, we do wrong not only to humans and other conscious beings but also directly to the trees themselves and to the other organisms that depend on trees for their existence and thriving. It should be clear that the larger the category of entities with moral standing, the more grounds we would have for criticising damage to the environment. But how do we determine this category? We shall discuss the three groups mentioned earlier, from least to most inclusive, considering in each case whether all members of that group have moral standing. The discussion of two groups—the narrowest and broadest—will be brief, while the group of conscious beings will be considered at much greater length. (i) Human beings Various societies have singled out particular people as unworthy of moral standing. To take one of very many cases: the ancient Spartans maintained a group of people, the helots, in servitude, abusing them at will. The helots were systematically humiliated (for instance, it is said that they were made to wear animal skins and dogskin caps, to advertise their inferior standing), and for a certain period every year a Spartan could kill helots without any penalty. However, in political philosophy over the past few hundred years, it has been standardly held that human beings in general have moral standing. Any human being can be wronged. One way to encourage this view is to focus on common characteristics among people. The idea here is that despite various differences among people, at least some of the characteristics that we have 268 · BUSINESS ETHICS & OTHER PARADOXES in common imply that we all have moral standing. (ii) Conscious beings Human activities have profound influence on animal life. Some of our actions are intentionally aimed at animals in some way; for instance, raising and killing them for meat, experimenting on them, and eradicating some of them as pests. Other actions are not aimed at animals but affect them nonetheless, such as the logging of forests or the development of urban areas. In this chapter we will not try to consider all the ways in which we influence animals, but will rather focus on one prominent area: the factory farming of animals. The discussion of factory farming will, however, include general claims about animal ethics that are relevant to other ways in which we deal with animals. Human views about animal ethics often seem to be confused, or at least not easily reconciled. For example, consider some remarks salient to animal ethics by Desmond Tutu, who is regarded by many people as a moral role-model. The point of considering these remarks is certainly not to argue that Tutu is an unusually confused person, but rather to support the view that we have trouble thinking clearly about moral issues concerning animals. If even a potential moral role-model seems to hold conflicting views in this area, then it is unlikely that people in general have a more coherent approach. November 2008: Tutu speaks in support of the International Fund for Animal Welfare’s global campaign to stop the killing of whales. ‘Are we surprised that we have lost a sense of the worth of human life, when we kill so carelessly?...This [campaign against the killing of whales] warns us that we are slowly ourselves committing a kind of suicide. If it is not a physical suicide, it is a moral and ethical suicide. For our own sakes we need to recover our humaneness, and our humanity. It is time to say no, no, no! to the killing of whales.’2 September 2008: As the patron of the organisation Braai4Heritage, which advocates regarding Heritage Day also as National Braai Day, and encourages all South Africans to braai on that day in order to celebrate and strengthen national solidarity, Tutu says of the braaing initiative, ‘It’s a fantastic thing, a very simple idea. Irrespective of your politics, of your culture, of your race, of your whatever, hierdie ding doen ons saam [this thing, we do together]…Here is one thing that can unite us irrespective of all of the things that are trying to tear us apart.’ Asked what vegetarians should do on National Braai Day, Tutu replies, ‘They can stand and watch.’3 In short, Tutu holds that whaling amounts to killing carelessly and committing moral suicide. But since he wholeheartedly celebrates braaing, he presumably sees no problem in killing pigs, sheep, cattle or chicken for meat. If we are to make sense of this distinction, we need to explain why killing (say) pigs is unproblematic, while killing whales—which is done to acquire various products, often meat—is so bad that it amounts to moral suicide. What is the relevant difference? Here are some possibilities, followed by potential responses: Hunting whales is especially cruel. But it seems that the treatment of animals in factory farms (some characteristics of which will later be described) might be just as cruel. There is a limited number of whales, but there is no reason to expect the disappearance of (say) pigs. Pigs are practically unlimited—on farms, new pigs are continually caused to be born—but whales are not. Causing whales to become extinct might be wrong in itself, or wrong because it would cause disturbances in nature by removing a species from its Chapter 13 · Business and the environment · 269 ecological niche. But that point does not seem to express the essence of Tutu’s views. He didn’t say that killing the whales would be acceptable if they weren’t limited in number, or that they can be killed as long as we ensure that enough whales remain to avoid their extinction. A concern about extinction might be part of his views, but he also seemed to be expressing a view that many other people have: killing whales is wrong, no matter how many of them there are. Whales are intelligent. But some other animals which are eaten by many people without qualms are intelligent too, such as pigs. If the response is that whales are much more intelligent than animals we eat, then one rejoinder to that response is that comparisons of intelligence between species are highly contentious, given the differences in physical endowments, needs and environments among species. Another rejoinder is that it is implausible to hold that a potential cognitive difference makes such a difference that killing the more intelligent one is ‘moral suicide’ and killing the other one is acceptable. To hold this view might involve giving (some degree of) cognitive differences too great a moral weight. Whales are magnificent. But, even supposing we regard whales as magnificent in a way that animals that we eat are not, does the size and beauty of a creature make such a difference that killing the magnificent one is ‘moral suicide’ and killing the other is acceptable? To hold this view might involve giving aesthetic differences too great a moral weight. Whales are found in the wild, while most of the animals eaten in an industrialised society live from birth to death on a farm, usually a factory farm. But then one would need to explain how it is on the one hand acceptable to keep an animal in factory farming conditions for the duration of its life until killing it, while on the other hand killing the animal in the wild is vastly wrong. In short, it is not easy to reconcile the moral views behind Tutu’s remarks. This apparent inconsistency is characteristic of many views on animals.4 Let us try, then, to find some basic principle, or principles, in an attempt to reduce our confusion. Is there a reason to think that conscious beings other than humans can be wronged? One argument is that the features of humans which give us moral standing also apply to many conscious beings. The 18th-19th century philosopher Jeremy Bentham proposed that when we consider whether any beings have moral standing, ‘The question is not, Can they reason? nor, Can they talk? but, Can they suffer?’ What does suffering amount to? The philosopher David DeGrazia regards ‘suffering’ as an umbrella term for highly unpleasant states including pain, fear and anxiety.5 If we accept Bentham’s view, then when we encounter a creature suffering, we will not ask whether this creature can be wronged; we will accept by virtue of its suffering that it can be wronged, and will be concerned with the further question of whether it is being wronged. For instance, if the suffering is inflicted extensively, avoidably and without being deserved, then we may well be inclined to say that the creature is being wronged. On Bentham’s view, it seems appropriate to extend moral standing beyond humanity, since many creatures apart from humans can suffer—and hence, can be wronged—in at least some ways. Moreover it seems that in factory farms, animals are being wronged. Many billions of animals are killed on factory farms annually for human consumption. (DeGrazia estimates that in the U.S. alone, factory farming accounts for the deaths of one hundred million mammals and five billion birds every year.)6 Moreover, the suffering involved is often extensive. To be brief 270 · BUSINESS ETHICS & OTHER PARADOXES about potentially disturbing facts: chickens, pigs and other creatures may spend their lives in cramped and highly unhygienic confinement in cages or crates, sometimes unable to move from the crowding, sometimes in total isolation, be mutilated (removal of beaks for birds, castration for pigs) without anaesthetic, not have access to food or water for extended periods, receive broken bones and other injuries in transit, be kept apart from their mothers from infancy, in the abattoir remain conscious as their throats are slit or they are submerged in boiling water, and experience other conditions that cause extensive, avoidable and certainly undeserved suffering.7 Hence, if animals have moral standing, then it seems that humans are continually committing a great wrong in the treatment of factory farmed animals, both in terms of the number of creatures being wronged and the extent to which they are wronged.8 Indeed, there are further criticisms of factory farming—one prominent charge is that it extensively pollutes the environment—but these charges will not be considered here. Even if we consider only conditions on factory farms, as we have been doing, without attending to other ways in which we deal with animals, it seems that the adoption of Bentham’s criterion of moral standing would lead to a huge global change in the treatment of animals. Given the radical consequences of accepting Bentham’s criterion, and accepting that it bestows moral standing on animals, it is worth considering carefully whether we should adopt this view. Below are some possible challenges, with potential answers. The first two questions ask whether and to what extent animals can suffer. The third to fifth questions challenge, more fundamentally, whether we should accept Bentham’s criterion itself; in other words, whether we ought to accept that whatever can suffer has moral standing. How do we know that animals can suffer? The behaviour and internal constitution of various kinds of animals—for instance, their responses to stimuli and their neural structure—seems sufficiently similar to ours to give us good reason to believe that they can and do suffer. This is not to say that all conscious beings must feel pain. But for some kinds of animal— including pigs, sheep, cattle and fowl—it is hard to have any reasonable doubt; and this covers billions of animals raised in factory farms annually. Do animals suffer less than we do because they can’t think as well as we can? Additional cognitive capacities could conceivably increase one’s suffering (for instance, by allowing one to anticipate and dwell on further suffering to come), but could also diminish suffering (for example, by giving one the capacity to invent strategies that distance one from the immediate experience). Hence, there is no straightforward relation between cognitive ability and ability to suffer. If the capacity to suffer is the criterion for moral standing, then what would one say of a human who is so mentally impaired that she cannot suffer, for instance because she is continually unconscious? Must we say, disturbingly, that it is impossible to wrong such a person? Maybe we would say that one can’t wrong such a person, and that our actions towards her could only wrong other people who can suffer, such as relatives. But another response is to say that although the capacity for suffering is sufficient for moral standing, it might not be necessary: there could be other sufficient conditions, so that anything that fulfils at least one of these conditions has moral standing. For instance, we might think that an entity has moral Chapter 13 · Business and the environment · 271 standing if it can suffer or if it is a member of a species whose mentally unimpaired members can suffer. Can’t we disregard the criterion of suffering altogether and simply take a biological view of moral standing, accepting that humans alone—just members of our particular species—have moral standing? The idea here is that we have until now understood moral standing (the capacity to be wronged) in terms of the capacity to suffer. This has allowed us to ascribe moral standing to various species. But what if, instead, we linked moral standing not to the capacity to suffer, but rather directly to a particular species—our own? If we simply said that to have moral standing is to be human, then claims that animals were being wronged would no longer seem plausible, since our view would be that animals cannot be wronged. Here are two responses.9 First, we are biologically similar to a number of other species. It might therefore seem unfounded, an arbitrary and selfish convenience, to draw the division at our species in particular. Why just us—why not all primates? Or all mammals? Or all vertebrates? Secondly: we do not seem to understand moral standing essentially in terms of a particular species. Imagine, for instance, that an alien arrives who is identical to you in character and temperament. It would surely be outrageous to claim that the alien has no moral standing, on the grounds that it is not human. If you share this intuition, then it seems that when you think about moral standing, you are not thinking essentially about one species. Can’t we exclude other species from moral standing by taking cognitive capacity rather than the capacity to suffer as the criterion of moral standing? Various species other than humans exhibit degrees of cognitive capacity. Hence, in order to serve as a way of granting moral standing to humans only, this proposal would need to specify a minimum required level of cognitive capacity that is (a) higher than that of non-human creatures on Earth, but (b) no higher than that of humans. Moreover, some animals have certain cognitive capacities—or at least capacities that are related to cognitive capacities—that are superior to the corresponding abilities in humans. For instance, consider the ability of migrating and homing birds to navigate vast distances across the earth. This extraordinary ability is not standardly found in humans who lack special training and instrumentation. Hence, it seems that someone who wished to use the criterion of cognitive capacity to claim that animals lack moral standing would have to exclude the navigational ability of birds—as well as various other abilities of animals that we do not share—as irrelevant to cognitive capacity. Thus, like the previous proposal, this approach is open to the charge that it is an arbitrary and selfish convenience. Many general questions in animal ethics have not been covered in this discussion. For instance, here are some quite abstract questions that have not been discussed: Do animals have rights, in the sense that they must be treated, or must not be treated, in certain ways? Do animals and humans deserve equal consideration? Not identical treatment, clearly— unlike humans, lions have no need for primary and secondary schooling; unlike lions, humans do not require extensive roaming space—but ought equal care and attention be paid to animal and human interests? Do animals deserve substantial consideration, though not as much as people do, so that animals can be used and made to suffer substantially, but only for a vital human benefit, or 272 · BUSINESS ETHICS & OTHER PARADOXES to suffer briefly for moderately significant human benefit? And here are some more concrete questions, also untouched: May humans ever raise animals in order to eat them or to experiment on them? Is it unproblematic to kill animals if one does not cause them to suffer during their lives and when dying? Though there is a great deal of material on each of these claims, they will not be discussed here. We have focused on the abstract claim that animals have moral standing, from which the more concrete claim might be drawn that inflicting avoidable, extensive, undeserved suffering on billions of animals in factory farms is a great wrong. If you find it plausible that animals have moral standing, then many other ways in which we treat animals also seem open to further reflection and potential criticism. Now we turn our attention to the broadest of the three criteria for moral standing. Is there any argument for extending the category beyond conscious beings alone to organisms in general? (iii) Organisms Organisms that do not seem to be conscious—like trees or fungi—cannot, of course, be argued to have moral standing on the basis of the capacity to suffer. (The idea is that if they are not conscious, then they do not suffer either.) Yet some ethicists claim, nonetheless, that organisms in general do have moral standing. One method of arguing for this claim does not try to identify some characteristic of organisms other than consciousness that gives them moral standing; instead it articulates a thought experiment which might show that we do ascribe moral standing to organisms. (The thought experiment does not, however, identify why we give organisms moral standing.) The thought experiment has sometimes been called the ‘last man’ scenario. Suppose that a poison with extraordinary powers spreads through the Earth. It kills every conscious creature, and remains potent indefinitely, so that no conscious creature will be able to live on Earth again. This poison rapidly kills every conscious creature on earth, except for one—a last man—who has a few minutes still to live. Suppose further that this man has the opportunity, in his dying moments, to destroy the global environment; we can imagine that by pressing a button he can set off nuclear devices that will lay waste to organisms large and small. Would it be wrong for him to press the button? If our intuition is that it would be wrong, then we should ask: to whom, or what, is the last man doing wrong? Not to humans or other conscious beings, since they are all dead already (except him—but he soon will be, no matter what he does). Thus, the only option left (so the argument goes) is that he is doing wrong to the non-conscious organisms. But this means that we do think that non-conscious organisms have moral standing. Some people find this conclusion compelling. However, you may want to find some way to contest the argument, because you might think that the conclusion leaves us with a position that may demand too high a level of concern for organisms in general. For example, medical science treats certain illnesses in humans by killing microorganisms that cause these illnesses. We are even interested in eradicating certain organisms not just from particular people, but from existence altogether. For instance, we would presumably happily eradicate the bacteria that cause tuberculosis in humans. If we grant microorganisms moral standing, however, then we Chapter 13 · Business and the environment · 273 might hesitate to do this—and perhaps hesitation would be absurd. Must we consider future generations? It is common to hear in discussions of environmental ethics that we should be concerned about the consequences of our actions today on our children, on their children, and on generations after them. For example, many experts in climate change predict that as a result of our activities today, future generations will face catastrophic climatic events brought on by global warming. The melting of polar ice caps and glaciers will mean that coastal cities and even entire islands will be buried beneath the sea, some currently habitable areas will become deserts, and flash floods, tornadoes and hurricanes will cause greater and more frequent threats to human health and welfare. But why should we care about people who do not even exist yet? We have been considering who or what can be wronged, but so far the discussion has been limited to entities that currently exist. We’ll now briefly touch on the extent to which we should take the interests of future people into account in relation to our environmental actions. It may be appropriate to consider not only beings currently living, but also the interests of future generations. (For simplicity, we will consider only people, and not creatures other than humans.) Of course, it is not clear how many people will exist at any given time in future, or exactly what their lives will be like. But because we have an influence over future people, perhaps we should consider their potential interests when we act. Then before a forest is destroyed, we should reflect on how its destruction might affect the lives of future generations as well as people who now exist. When we decide on actions that influence the environment, to what extent should we take the welfare of future generations into account? The question seems of great practical importance: if we ought to guard against major threats to people not yet born, we may need to make significant sacrifices now. One response is to hold that the interests of future generations should be discounted: the further they are from us temporally, the less their wellbeing should matter to us. On this approach, even if we set a modest discount rate, the prospect of some catastrophic event in the fairly distant future—say, a century’s time—might not be weighty enough for us to forgo major benefits now in order to avert it. A recent critic of discounting is the political theorist Simon Caney.10 Caney claims that each person, at any time, holds a set of rights that we are obliged to protect, such as rights to life, health and subsistence. Everyone has rights, irrespective of whether he exists now or in future. If we fail now to act in a way that shelters future people against devastating events, then we fail to protect their rights, even if the rights of current people remain secure. For instance, Caney would regard it as impermissible to act now in a way that will foreseeably lead to floods, causing death, disease and hunger to future people, or to fail to take viable preventative actions. DesJardins’ guidelines for companies How are companies to think about whether their environmental actions are morally permissible? An initial question is whether there is anyone (or anything) who would be wronged by the company’s actions. Here, companies could potentially consider humans, other conscious beings, organisms in general or perhaps some other group. (Of course, it is controversial exactly which entities have moral standing: there is a moral decision to be made.) Moreover, the 274 · BUSINESS ETHICS & OTHER PARADOXES company might need to consider not only current but also future generations (to some extent, whether discounted or not). Companies could supplement these considerations with Joseph DesJardins’ guidelines.11 DesJardins holds that commerce must act in a way that sustains the environment. He proposes these rules: (i) Don’t use renewable resources faster than the earth can replenish them. When a resource is renewable, we can use some of it without permanently reducing its supply. Obviously energy from the wind and sun are renewable: we can use as much of it as we like, and it will still be undiminished. Trees are also a renewable resource, but here we have to be active to restore the supply—we must plant more. (ii) Don’t use non-renewable resources at a rate faster than the development of alternatives. When a resource is non-renewable, we permanently reduce the supply by using it. Oil or coal, for instance, took millions of years to be produced. DesJardins’ idea is that if we use up such resources, we should ensure that others will be able to derive similar benefits from alternative resources. Of course, it may be impossible to identify the exact rate at which alternatives to nonrenewable resources are being developed. However, despite this lack of precision, rule (ii) might still be of practical ethical use. For example, it would imply that if there is slow progress in the development of alternatives to oil, then we are doing wrong to extract great quantities of oil. Since we will once more be acting acceptably if the rate of development of alternatives improves, we may be inclined to invest more substantially in such development. Rule (ii) therefore serves as an ethical incentive for those who use non-renewable resources to work towards the development of alternatives. (iii) Don’t generate waste faster than the environment can assimilate it. Rule (iii) incentivises the minimising or treatment of waste; where there can be no assimilation, waste may not be generated. (What about practically unassimilable waste—in particular, nuclear waste? Might it be acceptable to generate such waste if it can be, and is, very securely insulated from the environment? DesJardins does not say.) We might regard DesJardins’ guidelines as a way of respecting a constraint raised by John Locke more than three centuries ago. Locke indicates that an individual may take a resource from nature for himself only ‘where there is enough, and as good, left in common for others’.12 DesJardin does not explain the extent to which a company should make up for its past environmental damage, caused before it began to adhere to his guidelines. Another point worth considering—though it will not be discussed here—is whether a company can always fulfil its duties in relation to the environment solely by obeying DesJardins’ considerations (and, perhaps, compensating for damage it has caused in the past). If some aspect of the environment is in a bad and worsening state, is it enough for a company merely not to do further damage itself, or is there an active duty to help improve the state of the environment, or at least to stabilise the situation? This question is profound, leading us back to fundamental reflections on the role of a company. Shaw and Barry on government regulation Finally we shall think from the perspective not of companies, but of governments. William Shaw Chapter 13 · Business and the environment · 275 and Vincent Barry regard government regulation as crucial for limiting commercial environmental damage. The need for state intervention in environmental affairs is widely accepted. For instance, section 24 of South Africa’s Bill of Rights is as follows (relevant phrase in bold): Everyone has the right a. to an environment that is not harmful to their health or well-being; and b. to have the environment protected, for the benefit of present and future generations, through reasonable legislative and other measures that i. prevent pollution and ecological degradation; ii. promote conservation; and iii. secure ecologically sustainable development and use of natural resources while promoting justifiable economic and social development.13 Shaw and Barry consider three methods that a government might employ, and discuss advantages and disadvantages of each method, several of which we shall consider.14 (1) The regulatory approach This involves the making of laws that establish environmental regulations, which are then enforced by government agencies and courts. On the one hand, the regulatory approach seems fair in the sense that environmental regulations apply to all businesses equally. On the other hand, the regulatory approach has possible drawbacks, including: Lack of nuance: Universal standards made to apply to all businesses equally are sometimes insufficiently nuanced to take potentially relevant contextual matters into account. For instance, Shaw and Barry point out that some US paper companies were required to install expensive equipment to deal with their emissions, even though these companies’ emissions were effectively diluted by the ocean. Lack of incentive: Regulation can take away an industry’s incentive to do more than the minimum required by law. (2) The incentives approach On this approach, tax breaks and subsidies are used to reward companies for developing environmentally sound equipment and practices. For instance, tax benefits might be offered to businesses that invest in environmentally sound equipment. An advantage of the incentives approach is that it encourages businesses to act voluntarily in protecting the environment, rather than coercing them to meet environmental laws. However, this approach also has disadvantages, such as: Slowness: Its effects are likely to come slowly, so it may not adequately address environmental problems that require an immediate solution. Rewards for reducing bad practices: It amounts to rewarding businesses for not polluting. Some people hold that rewards should not be given for behaviour that should be morally expected. (3) The pricing approach This defines a cost or charge for a specific kind of pollution in a specific area at a specific time. Charges are tied to the amount of damage caused. On one variety of this approach, the 276 · BUSINESS ETHICS & OTHER PARADOXES government allows companies to buy permits to pollute a limited amount. Companies may also be allowed to sell these permits to each other. For example, ‘carbon credits’—which allow holders to emit specific quantities of carbon dioxide into the atmosphere—are traded internationally. While the incentives approach rewards companies for acting appropriately, the pricing approach permits companies to pay for acting inappropriately. An advantage of the pricing approach is that it places the costs of pollution on the polluters themselves. Disadvantages include: Difficulty of pricing: It is hard to set the price tag for pollution permits. The questions, both scientific and moral, are sometimes perplexing: how much damage shall we decide that the pollution will cause, given that it may spread to an unknown extent, and cause a degree of unknown damage? And how should we determine the cost of environmental damage? What should be the cost, for instance, of eradicating some variety of flora that is similar to, but not quite identical to, another thriving variety, and that has no clear economic benefit to us? (Pricing difficulties are not unique to the pricing approach; the other two approaches also face difficulties of pricing when they set penalties for polluters or determine incentives for appropriate practices. But in some cases—when a permit is granted for a specific act of pollution—the pricing approach seems to call for a carefully-determined and precise amount, while we may have no way of achieving such precision.) Removes moral stigma of pollution: Recall that the incentives approach rewards businesses for not polluting, rather than penalising them for polluting. Arguably, this reduces the feeling that pollution is morally unacceptable. But the pricing approach, by selling a ‘licence to pollute’, seems to go even further towards setting aside moral judgement. The philosopher Michael Sandel has claimed that the pricing approach wholly removes the ‘moral stigma’ that—on his view—should be associated with pollution.15 The considerations in this chapter have ranged from fairly concrete policy arguments on how governments should intervene in environmental affairs to abstract questions about which entities have moral standing. But it is striking, in environmental matters, how even apparently highly theoretical considerations can have powerful practical consequences. It would be a mistake to dismiss debates about (for instance) moral standing as too far removed from actual environmental affairs to have a real bearing on them. Indeed, some of our most abstract beliefs about the significance of flora and fauna may have the most extensive implications for our environmental actions. Chapter 13 · Business and the environment · 277 CONTENT QUESTIONS (1) If we think that forests cannot be wronged, can we still raise a moral objection to the destruction of a forest? Explain. (2) If we accept Jeremy Bentham’s criterion of moral standing, then can we grant moral standing to human beings only? Explain. (3) Give one reason for or against holding that organisms in general (even those that are not conscious) can be wronged. (4) DesJardins claims that companies ought to follow three rules in order to sustain the environment. Give these three rules. (5) Shaw and Barry describe three ways in which a government might deal with commercial environmental damage. Identify one of these approaches, and describe a potential advantage and a potential disadvantage of this approach. CRITICAL ANALYSIS QUESTIONS (6) Propose an alternative criterion of moral standing to Bentham’s criterion. Weigh the strengths and weaknesses of your criterion and Bentham’s, and decide which criterion is preferable. (7) To what extent, if any, should we take the interests of future people into account in relation to our environmental actions? DISCUSSION QUESTIONS (8) ‘It is not worth trying to decide which entities have moral standing. Firstly, there is no good reason to choose one category of entities over another; secondly, questions of moral standing are merely theoretical, lacking practical implications for our behaviour.’ Explain whether you agree and why. (9) ‘A number of standard business practices that affect the environment are morally problematic, and we ought to change them radically.’ Explain whether you agree and why. 278 · BUSINESS ETHICS & OTHER PARADOXES CHAPTER THIRTEEN NOTES AND REFERENCES 1 Shaw, W. and V. Barry 2010. Moral Issues in Business (11ed). Wadsworth, p. 373 Quoted on the fund’s website—http://www.ifaw.org/africa/node/15456—and to be seen on a wall of Cape Town’s Two Oceans Aquarium. 3 ‘Tutu: One nation, one braai’. Mail & Guardian, 2 September 2008, http://mg.co.za/article/2008-0902-tutu-one-nation-braai 4 Tutu has recently offered a statement in favour of justice for animals in general. In a foreword to The Global Guide to Animal Protection, (A. Linzey (ed), University of Illinois Press, 2013), he remarks that issues of justice apply ‘not only for human beings but also for the world’s other sentient creatures. The matter of the abuse and cruelty we inflict on other animals has to fight for our attention in what sometimes seems an already overfull moral agenda. It is vital, however, that these instances of injustice not be overlooked.’ (See http://www.oxfordanimalethics.com/2013/12/we-must-fight-injustice-toanimals-as-we-do-injustice-to-blacks-women-and-gays-says-archbishop-desmond-tutu/.) Here, Tutu passionately articulates a general position in favour of animal welfare. However, it remains unclear how his role as patron of National Braai Day fits with this position. 5 DeGrazia, D. 2002: Animal Rights: A Very Short Introduction. Oxford: Oxford University Press, p. 45ff. 6 Ibid, p. 71 7 For details, see DeGrazia, pp. 67-74. 8 This has sometimes been acknowledged explicitly in commercial contexts; for instance, in the ‘McLibel’ trial, in which McDonalds accused environmental activists of libel, a UK judge conceded cruelty in the factory farming system. The Wikipedia entry ‘McLibel case’ summarises the affair (en.wikipedia.org/wiki/McLibel_case). 9 These responses are inspired by DeGrazia, p. 23-25. 10 See Caney, S. 2009: ‘Climate Change and the Future: Discounting for Time, Wealth, and Risk’. Journal of Social Philosophy, 40, 63-186. (Available at http://onlinelibrary.wiley.com/doi/10.1111/j.1467-9833.2009.01445.x/pdf) 11 DesJardins, J. 1998. ‘Corporate Environmental Responsibility’. Journal of Business Ethics, 17, 825-838. (Available at http://www.environmentalmanager.org/wp-content/uploads/2008/04/cer.pdf) 12 John Locke, 1690. Second Treatise of Government. Chapter V, ‘On Property’, sections 27 and 33. (Available at www.constitution.org/jl/2ndtr05.htm) 13 Available at www.westerncape.gov.za/legislation/bill-rights-chapter-2-constitution-republic-southafrica#24 14 For the full discussion, see Shaw and Barry 2010, pp. 376-80. 15 Sandel, M. 1997. ‘It’s Immoral to Buy the Right to Pollute’. New York Times, 15 December 1997, www.nytimes.com/1997/12/15/opinion/it-s-immoral-to-buy-the-right-to-pollute.html 2 Chapter Fourteen GLOBAL BUSINESS ETHICS by George Hull It has for a long time been a platitude to say that we live in an age of globalisation. Economic and political formations that once would not have overstepped the boundaries of the nation state are now thoroughly international affairs. Social life, family life, even our individual sense of an identity, now cross national borders effortlessly. Though none of these phenomena is without its historical antecedents, they do contrast with a period of relative dominance by the nation state which started coming to an end more than half a century ago. Moreover, instant communication and rapid transportation have an intensifying effect on the globalisation of today. In ethics, no less than in other disciplines, many a hard-won consensus was shattered when debates began to focus on transnational and international contexts. It will be beyond the scope of this chapter to examine all the controversies now raging about global distributive justice, for example. Debates about the ethics of business in an age of globalisation have overwhelmingly focused on one phenomenon: the rise of the multinational corporation (M.N.C.)—also known as the multinational enterprise (M.N.E.). Though comparable in many respects to the European chartered companies of the 17th, 18th and 19th centuries, today’s M.N.C.s arguably enjoy far more autonomy, and leverage over the states in which they are headquartered, than the formidable Dutch Vereenigde Oostindische Compagnie (V.O.C.) and British East India Company (E.I.C.) ever did. M.N.C.s are frequently accused of exploiting workers in less economically developed countries (L.E.D.C.s) or turning a blind eye when their suppliers do so. Their critics say M.N.C.s operate with double standards, exposing the consumers and workforces of poorer countries to hazards they would never dream of inflicting on the workforces or consumers of the richer countries in which they are headquartered. In addition, M.N.C.s face the charge that they have supported, or collaborated with, unjust regimes. On the other hand, many inhabitants of L.E.D.C.s welcome the investment and employment opportunities M.N.C.s bring to their countries. And it is frequently said that M.N.C.s could be a force for good in the world, if they put their considerable influence to work in the service of social development and environmental sustainability. 280 · BUSINESS ETHICS & OTHER PARADOXES In this chapter we will identify some of the main ethical issues that arise in connection with M.N.C.s. Drawing on the discussions in previous chapters, we will investigate what the responsibilities of M.N.C.s are, and what treatment their stakeholders, including their customers, their employees, and the governments they interact with, are entitled to. Globalisation Countless books have been written about globalisation. Here we will highlight just five features of globalisation, which provide relevant background for the issues to be discussed in this chapter. A red thread running through all five of these features is the declining influence of the nation state. Some theorists date the dominance of the nation state as lasting from the Peace of Westphalia in the mid-17th century—which broke up the Holy Roman Empire into independent nation states—until the mid-20th century. This 300-year period they call the “Westphalian setting”. Since the 1940s or 1950s, we have been living in the “post-Westphalian setting”.1 Among the central features of the post-Westphalian setting are: (i) Transnational identities. As individuals, our identity and sense of ourselves as members of society are not as contained within our citizenship of a particular nation state as they once were. Instead, people increasingly have identities which transcend national boundaries. They think of themselves as bankers or scholars, Africans or South Americans, Greenpeace members or PricewaterhouseCoopers employees. In all these cases the society of which an individual identifies themselves as a member does not coincide with the citizenry of a state. As German sociologist Ulrich Beck puts it, ‘we have been living for a long time in a world society’.2 (ii) International law and regulation. An increasing amount of law and regulation comes from above the level of the nation state. Many of the rules which affect businesses are negotiated in supranational bodies such as the European Union (E.U.) or the World Trade Organisation (W.T.O.). Some of this regulation is legally binding on member states (E.U. directives, for example). Some takes the form of clauses in treaties—whether bilateral investment treaties (B.I.T.s), or multilateral agreements such as the North American Free Trade Agreement (N.A.F.T.A.). Other rules are voluntary codes of conduct drawn up by bodies such as the United Nations (U.N.) and the Organisation for Economic Co-operation and Development (O.E.C.D.), which governments and M.N.C.s can sign up to. A recent example of the latter are the United Nations Guiding Principles on Business and Human Rights3 (often called the “Ruggie Principles”, after their principal author, John Ruggie). (iii) The rise of non-governmental organisations. Non-governmental organisations (N.G.O.s) are campaigning groups—often international—which raise public awareness about a specific set of issues and put pressure on governments, regulators and businesses to bring about change. For example, Greenpeace is an international N.G.O. which campaigns on environmental issues, while Amnesty International is an international N.G.O. concerned with human rights issues. International N.G.O.s increasingly set the agenda on topics such as development, the environment and protection of human rights. Chapter 14 · Global business ethics · 281 (iv) Privatisation. Particularly since the 1980s, there has been a worldwide trend of previously state-run provisions being transferred into private ownership. In many places, this has happened to the water supply, telecommunications, the electricity supply, transport services such as trains, and the postal service. The argument usually put forward to justify privatisation is that large public service monopolies tend to be inflexible and overly bureaucratic, and tend to deliver a mediocre service at too high a cost. Even war is being privatised: a 2006 report ‘estimated that there were three British private security guards for every British soldier deployed in Iraq’.4 (v) The rise of the multinational corporation. Before the advent of the M.N.C., international commerce largely took the form of trade. However, following the Second World War, corporations began using foreign direct investment (F.D.I.) to establish ‘locally incorporated but foreign-controlled entities inside numerous economies, simultaneously taking on multiple national citizenships’. In John Kline’s words, M.N.C.s ‘penetrated more deeply and exerted greater influence on national economic processes than traditional export/import transactions’.5 Sometimes M.N.C.s are referred to as “French companies” or “U.S. companies” or “South African companies”, according to where their headquarters are located. This can be quite misleading, however, suggesting that M.N.C.s—like individual people—could be expected to be particularly loyal to the country in which they have their main base. As Robert Reich pithily puts it, ‘[b]ig companies are global entities; people are not’.6 Accordingly, M.N.C.s are liable to shift their headquarters from country to country, depending on changes in the economic climate. For example, in the mid-1990s, several corporations moved their headquarters for economic reasons from South Africa to the U.S.A. or the U.K.7 International N.G.O.s such as Greenpeace and Amnesty International often prefer to lobby M.N.C.s directly rather than lobbying governments, because M.N.C.s are increasingly perceived as both more willing and more able than governments to address the issues N.G.O.s raise.8 Though many states have relatively harmonious relations with the M.N.C.s operating in their territory, there are a variety of ways in which the interests of states and the interests of M.N.C.s can come into conflict. For one thing, the government of a state has an obligation to protect the welfare of its citizens and an obligation to work to achieve a just society for its citizens. In previous chapters of this book, we have seen that these obligations often mean that governments should introduce regulations, such as minimum product safety standards, or a particular liability regime for harm caused by product defects, or legal protections for trade unions. In addition, justice may well demand that governments should tax the profits or the transactions of businesses, in order to fund public spending on infrastructure, schools and hospitals, for example. All of these measures which governments may introduce for the sake of justice or the welfare of their citizens can potentially add to the costs of doing business for M.N.C.s. So it is not surprising that M.N.C.s (like other companies) often oppose such measures. Another reason for potential conflict between the state and M.N.C.s is that the state, as an actor in the economy of a country, will often be in charge of providing services which M.N.C.s also provide, or would like to provide. For example, a state may provide health insurance or drinking water to its citizens. An M.N.C. which sold health insurance schemes or supplied 282 · BUSINESS ETHICS & OTHER PARADOXES drinking water would then be in competition with the state. We noted above that the rise of M.N.C.s is one of the features of globalisation which has tended to weaken the nation state. Later in this chapter, we will consider how M.N.C.s ought to use the substantial influence they have over nation states for positive change. At this stage, let’s pause and consider some of the ways—both within and outside the law—in which an M.N.C. can exert pressure or influence on a state. First, M.N.C.s are able to use what Ulrich Beck has called the ‘corporate power of transnational withdrawal’.9 If a national government does not enact laws and regulations which are favourable to them, M.N.C.s often have the option of withdrawing their operations from that country and setting up shop elsewhere. We saw above that they can even relocate their headquarters from one country to another for this reason. This can be a menacing prospect for governments, which need to protect the jobs and employment options of their citizens, and need the tax revenue that comes from M.N.C.s operating in the country. Consequently, by threatening to relocate their operations, M.N.C.s can often exert considerable pressure on governments to introduce laws and rules which favour them. This pressure has the potential to generate a “race to the bottom”, with countries vying with each other to offer the most favourable regulation to M.N.C.s—but delivering poorer protection and less justice to their citizens in the process. (The corporate power of transnational withdrawal can be used to exert pressure even above the level of the state. For example, in the 1980s M.N.C.s were pressuring the European Commission to harmonise regulatory standards across Western Europe. The representatives of M.N.C.s on the European Round Table of Industrialists (E.R.T.) ‘began,’ in George Monbiot’s words, ‘threatening national governments that if they did not lend their approval to the integration scheme, big business would move its operations elsewhere, making much of the European workforce redundant’.)10 Second, M.N.C.s can exert pressure and influence on states through lobbying. This is when representatives of M.N.C.s—including professional lobbyists employed by them—present information to politicians and government officials, usually in a selective or biased way, so as to try to persuade the state to do what is in the M.N.C.’s interests. Lobbying is often combined with lavish hospitality for politicians and officials. As a result of intensive lobbying, particularly in the U.S.A., an increasing number of legislative debates are effectively proxy wars between M.N.C.s jostling for competitive advantage, but ‘couch[ing] their arguments in terms of the public interest’. As Robert Reich says, ‘many of the battles that on the surface seem to concern public policy are, on closer inspection, matters of mundane competitive advantage in pursuit of corporate profit’.11 The extent of lobbying is enormous, as illustrated by this example given by Crane and Matten: When President Obama started to draft the first plans to reform healthcare in the US, the industries related to this project sent 3,300 lobbyists to Washington to influence the reform package. This adds up to no fewer than six lobbyists for each member of congress, and a total of US$263m in lobbying expenditure just in the first six months of 2009.12 Third, M.N.C.s can—directly or by roundabout routes—donate money to political parties and politicians to finance their election campaigns. This is a topic which we touched on during the discussion of trade unions in Chapter 11. Often there is the suspicion that corporations, or their C.E.O.s, make donations to political parties in government in return for specific favours. More often, perhaps, there is an implicit expectation on both sides that at a later date some Chapter 14 · Global business ethics · 283 favour will be shown to reciprocate. The latter—at least—seems to have been the case in the example of Brett Kebble’s donations to A.N.C. leaders which was discussed in Chapter 11. Since political parties and politicians are chronically in need of campaign funds, it is likely that they will sometimes be inclined to do what they can to reward past donations and thereby encourage future donations. Fourth, the actions of a state can often drift into alignment with the interests of an M.N.C. through a phenomenon known as “revolving doors”. This is when the same individual holds a position in government and a position in an M.N.C. either simultaneously or in quick succession. For example, in Italy for a long time Silvio Berlusconi was both prime minister of the country and owner of a large multinational media conglomerate. In the U.S.A., a famous example of revolving doors involves the engineering and construction company Bechtel. John Perkins summarises: George Schultz was secretary of the Treasury and chairman of the Council on Economic Policy under Nixon-Ford, 1972-1974, executive president or president of Bechtel, 1974-1982, secretary of state under Reagan-Bush, 1982-1989; Caspar Weinberger was director of the Office of Management and Budget and secretary of Health, Education, and Welfare under NixonFord, 1973-75, vice president and general counsel of Bechtel Group, 1975-80, secretary of defense under Reagan-Bush, 1980-87.13 When an elite group of individuals is shuffled back and forth between the government which makes the rules and the corporations which are meant to follow them, it is all too easy for the interests of the latter to guide the actions of the former. Fifth, M.N.C.s can influence government policy by bribing, or otherwise corrupting, politicians and government officials. When they take bribes in exchange for decisions which favour a corporation, politicians and officials fail to live up to their obligations to protect the welfare of citizens and to advance social justice. Representatives of corporations who successfully bribe politicians or officials play their part in undermining justice and putting the welfare of citizens at risk. Beyond that, bribery and corruption tend to undermine the rule of law more generally. When government corruption starts coming to light, citizens inevitably begin taking a more cynical approach to laws and regulations, speculating about the selfinterested motives that may lie behind them, disobeying them when they can get away with it. In the long run, this is bad for everyone: government, citizens and corporations. The sale of military hardware to governments is generally agreed to be a sector of the global economy in which bribery by M.N.C.s is rife. The U.S. Department of Commerce has estimated that the arms industry, ‘though only accounting for 1% of global trade, accounts for about half of all bribes paid globally’.14 For example, it is widely believed that British Aerospace paid bribes to a number of South African government officials and politicians, including the then minister of defence, in connection with the sale of a new fleet of warplanes to the South African military in the 1990s. Indeed, as Martin Plaut and Paul Holden record, the British Serious Fraud Office ‘was able to trace £115m in commission payments from BAe’s shell companies to individuals linked to the Arms Deal’.15 Later on in this chapter, we will be asking what use M.N.C.s ought to make of their influence over national governments. But for some of the methods of influencing governments detailed above, the answer is already clear: none at all. No M.N.C., or its representatives, should attempt to induce a politician or public official to abandon their obligation to serve justice and the public interest for the sake of private gain. Some of the other methods, though, such as the corporate 284 · BUSINESS ETHICS & OTHER PARADOXES power of transnational withdrawal, do not appear to be immoral in themselves, and so with these the question does arise of what ends they should serve. Before we take up the topic of M.N.C.s’ interactions with governments again, we must consider what treatment they owe to some of their other stakeholders: specifically, their customers and their employees. Standards in less economically developed countries Over the last few decades, several multinational corporations have received intense criticism centred on the working conditions of their employees, or the employees of their suppliers, in poorer countries. Among the most emblematic cases is that of the sportswear manufacturer Nike, which was criticised in the early 1990s because of the plight of its workers in East Asian countries including Indonesia. As John Ruggie records, ‘the issue was low wages and abusive working conditions— 19 cents (U.S.) an hour, according to workers interviewed on a CBS news report’. Next, ‘[c]hild labor was added to the list of particulars when a photograph of a twelve-year-old Pakistani boy stitching Nike soccer balls appeared in Life magazine’. And, later in the decade, ‘Nike suppliers in Vietnam were found to be using an adhesive containing a chemical known to cause respiratory illness, in doses that exceeded even weak Vietnamese standards’.16 The features of a case like this one raise a number of distinct moral issues—though they tend to be bundled together under the label “sweatshop conditions”. Richard DeGeorge has summed up the connotations of the term “sweatshop” as follows: “Sweatshops” is a term that is broadly used to include a variety of poor working conditions. Typically sweatshops are in old buildings, with poor or little ventilation; poor sanitary facilities; and unsafe, unhealthy, and crowded working conditions. They pay very low wages for long hours of work, and the workers have no rights within them. They receive no benefits, and are often subject to physical and verbal abuse and sexual harassment or worse. How many of these conditions need to be present to make a workplace a sweatshop is vague, but in general the term refers to extremely poor working conditions. Migrant farmworkers are sometimes also referred to as working in sweatshop conditions, even though they do not work in factories but on the land.17 Let’s proceed cautiously, separating out the multitude of sins covered by the word “sweatshop” and considering the central ones individually. We will come to the issues of abuse in the workplace, child labour, and the relationship between M.N.C. and supplier, shortly. But we can begin by considering what is perhaps the most distinctively international ethical question raised by cases like the Nike case: Is it morally permissible for M.N.C.s to subject their employees in richer countries and their employees in L.E.D.C.s to different working conditions, and in particular to different levels of workplace safety? It will be constructive to consider this issue in conjunction with another issue which has raised controversy:18 whether it is morally permissible for M.N.C.s to operate with different product safety standards when selling to consumers in richer countries from those it operates with when selling to consumers in L.E.D.C.s. Double standards It could seem obvious that it is morally impermissible for an M.N.C. to provide its customers Chapter 14 · Global business ethics · 285 and employees in one country with a lower level of safety (product safety in the one case, workplace safety in the other) than it provides to its customers and employees in another country. After all, they are all humans. What could the M.N.C. possibly appeal to in defence of its practice, apart from a dubious moral relativism—whose flaws you are familiar with from the section of Chapter 2 entitled ‘What is moral relativism and why do most philosophers think it is incorrect?’—or a repellent imperialist attitude, by whose lights in some parts of the world “life is cheap”? But we should not be too quick to jump to conclusions. In Chapter 7, it was argued that product safety regulations should be fair, and should model the informed autonomous choices consumers make in other areas of their lives. More specifically, product safety standards must be justifiable to the people put most at risk of harm by a product, and they must mirror the choices which the relevant consumers actually make for themselves about risk in situations where they are familiar with the risks in question. Is there any reason to expect that those put most at risk by dangerous products in poorer countries would trade that risk off against value at a different rate from those put most at risk by dangerous products in richer countries? The answer, surely, is, “Yes.” As we noted in Chapter 7, richer people are generally willing to spend more to avoid a given risk than poorer people are. Indeed, richer people are generally willing to spend more on just about anything than poorer people are—they have more to spend. So, when the population of one country is substantially poorer than the population of another country, it is to be expected that the value of preventing a fatality (V.P.F.) which consumers in the former country operate with will be much lower than the V.P.F. operated with by consumers in the latter country. (You will recall from Chapter 7 that the V.P.F. is the notional amount of money an individual would take for a 100 per cent chance of dying, extrapolated from risk-value trade-offs they make at much lower levels of risk.) Of course, you might think that it is unjust that the populations of some countries are massively richer than the populations of other countries. After all—you might reason—what country you happen to be born in surely counts as a factor which is, using the Rawlsian phrase introduced in Chapter 5, “arbitrary from a moral point of view”. So isn’t it unacceptable that such a morally arbitrary factor should have such a great impact on people’s outcomes in life? Many political philosophers would say, “Yes;” though others would insist that the demands of distributive justice only apply within a society which is already bound together politically as a state. We can’t go into the details of that debate now. But we should note that simply insisting the same product safety standards should apply worldwide is a measure which—far from benefiting—could actually reduce the welfare of people in poorer countries. Making products safer generally costs extra money; and manufacturers raise that extra money by charging higher prices to consumers. Consequently, while present inequalities stand, it may well be to the advantage of the less well-off to be able to purchase cheap—albeit more dangerous—products, if the alternative is to be “protected” in a way which puts risky—but nonetheless beneficial—products outside their budget. M.N.C.s thus have a reply to the charge that operating with lower product safety standards when selling to consumers in poorer countries is exploitative. They can reply that operating with different product safety standards in different countries, far from being exploitative, respects the different rates at which people in richer countries and people in poorer countries trade off value against risk. It does this by mirroring these different patterns of decision-making about risk in an area where individuals’ decisions will inevitably be under-informed, or even 286 · BUSINESS ETHICS & OTHER PARADOXES irrational. They can give essentially the same reply to the charge that operating with different workplace safety standards in different countries is exploitative. We know from Chapter 11 that an employee’s decision to take a particular job with a particular set of workplace risks attached to it typically cannot be counted on to have been fully informed or truly voluntary. That is why we concluded that in most cases workplace safety standards should be set using the same “refined” form of risk cost-benefit analysis as can be used to set product safety standards. Here again the goal is for the regulator to take decisions about standards in a way which models—by trading off risk against value at the same rate as—individuals’ fully autonomous decisionmaking about risk in situations where the risks are familiar to them. Here again it is to be expected that lower safety standards would be settled on in L.E.D.C.s, because—as we noted in Chapter 7—poorer people tend to be willing to settle for more risk for a given amount of value than richer people. In the best case scenario, the government of an L.E.D.C. in which M.N.C.s sell products or employ workers will have set—or appointed a regulator to set—minimum product and workplace safety standards based on the V.P.F. relevant to that country’s population. If there is no official safety regulation, or the official safety standards are clearly too low, then the M.N.C. ought to set its own safety standards for its operations in that country, based on either an empirically derived V.P.F.—arrived at using methods of the kind roughly outlined in Chapter 7—or a reliable estimate. The foregoing indicates that we should not automatically regard it as problematic when an M.N.C. operates with different safety standards in different countries. However, what has been said so far is by no means the end of the story on this issue. One could in some cases still criticise an M.N.C. for the safety standards it operates with in an L.E.D.C., even if those safety standards are fair by the lights of refined R.C.B.A. In Chapter 7 and Chapter 11 the concept of negligence was discussed. There, we saw that there are cases in which a business can rightly be criticised for imposing a risk of harm on customers or employees, even though levels of product and workplace safety are in accordance with refined R.C.B.A. This is so when the risk of harm can be attributed to culpable negligence on the business’s part. As you will recall, the thought about negligence was that businesses, just like individuals, have a general background “duty of care” to individuals with whom they interact. Because of this “duty of care”, a business is morally at fault if it knowingly fails to implement a risk-reducing measure which it easily could have introduced—and this can be true even though its overall product or workplace safety levels are in accordance with what refined R.C.B.A would prescribe. As we have noted, the concept of negligence is less sharply defined than, for example, the potential deliverances of R.C.B.A. calculations. Nonetheless, the concept makes it possible to articulate why certain business practices intuitively seem wrong to us. For example, at the time when the poor working conditions of Nike employees in L.E.D.C.s were coming to light, many people pointed to the fact that ‘Michael Jordan received $20 million a year for endorsing the product’.19 Richard DeGeorge puts that in perspective by pointing out that Nike could have doubled the wages of all of its ‘80,000 Indonesian factory workers’ at a cost of less than ‘the amount that Nike paid Michael Jordan for promoting its products’.20 Given these figures, it is hard to avoid concluding that Nike could very easily have improved the working conditions of its employees in L.E.D.C.s, at a cost to itself which was not unreasonable, but omitted to do so. Chapter 14 · Global business ethics · 287 So, although there is not a problem with operating with different safety standards in different countries per se, an M.N.C.’s safety standards should be justifiable according to refined R.C.B.A., and—beyond that—M.N.C.s must avoid negligent omissions to introduce improvements. We saw in Chapter 11 that collective bargaining between employers and empowered, representative trade unions can be a good forum in which to work out what would count as negligence regarding working conditions in a given case. But where trade unions do not exist, or are not sufficiently protected by the law, M.N.C.s themselves must be more proactive in avoiding negligence. Workplace abuse The question whether it is morally permissible for the employees of M.N.C.s and their suppliers to be abused, verbally, physically and sexually, in the workplace is much easier to answer. Whereas—as we saw in Chapter 11—the risks involved in inherently dangerous work can be justified by the value that work has, it is hard to imagine a plausible case for thinking that violent abuse or sexual abuse in the workplace could be a source of value either for employer or employee. On the contrary, these are likely to leave employees demoralised, sick, unenthusiastic and relatively unproductive. Verbal abuse, especially when it is consistent and clearly reflects an underlying attitude of disrespect and contempt, can be expected to have a similar effect. More importantly, violence (except in self-defence) and sexual abuse are fundamentally disrespectful ways of behaving towards a person; and a sexual component adds, on top of this, all the moral problems associated with a serious infringement on privacy which we encountered in the section of Chapter 11 entitled ‘Workplace privacy’. So verbal, violent and sexual abuse of the employees of M.N.C.s and their suppliers (as of all businesses) is something we can unequivocally condemn. Child labour The phrase “child labour” provokes as much outrage as the phrases “physical abuse” and “sexual abuse”, when rattled off in a list of the horrors of sweatshops. But some critical reflection is in order here. “Labour” is virtually synonymous with “work”, and we know from Chapter 9 what a wide-ranging, and rather elusive, term that is. When it comes down to it, much that could be called “child labour” is arguably not morally problematic in the slightest. For example, it was mentioned in Chapter 9 that, in the U.K., the unpaid work of a mother in the home is worth on average 30,000 pounds per year. There is surely nothing wrong with parents making their children share in some of that unpaid work—washing dishes, weeding the garden, vacuuming, cleaning the bathroom, and so on. Indeed, there is surely nothing wrong with making some of that “child labour” paid work: giving a child extra pocket money for an afternoon’s work in the garden, for instance. Most people would also agree there is nothing wrong with a child doing a newspaper round, or working as a babysitter, for a small wage. Almost everyone would agree that there is nothing morally problematic about children doing school work either. And if an enterprising child spent some of their free time at the weekend editing a family newspaper, or programing computer games to sell to their classmates, or working with friends as a troupe of party entertainers for younger children, which parent could regard this as a morally bad thing, rather than encouraging their child’s initiatives? Farmers have traditionally relied on their children to do tasks around the farm—which is usually also their home. We encountered an example of this in Chapter 9, in the shape of “Rob”’s experience of working on his family’s chicken farm at the age of 10. Many family farms would 288 · BUSINESS ETHICS & OTHER PARADOXES not be economically viable without the labour of the children of the family. Equally, many families in L.E.D.C.s whose children are sent out to work in factories would be in dire straits without the income flowing from their children’s work. It seems impossible to condemn the practice of sending children to work in a factory per se without being inconsistent. We have reviewed examples of children doing paid work, unpaid work, work for their parents, work for strangers, necessary work, and work which was superfluous to their family’s needs, all of which seemed morally unproblematic. It is hard to see how the mere fact they were working in a factory, rather than, say, on a farm, or on the streets as a newspaper deliveryman, or in a school building, could make the difference between morally right and morally wrong child labour. The foregoing points suggest we should be wary of condemning the very idea of child labour, or even child factory labour, as morally wrong. In view of this, let’s shift our perspective and ask what kinds of child labour would be morally problematic. Our discussion of equality of opportunity in Chapter 10 should alert us to one moral problem to which child labour could give rise. As outlined there, the ideal of substantial equality of opportunity says that no one should face any social barrier preventing them from becoming qualified for whatever job or office they aspire to. If children have to work long hours in a factory, on a farm, or in another type of workplace, and consequently do not have time or are too exhausted to make progress in their education, then this clearly puts them at a disadvantage relative to their peers who do not have to do such work. Consequently, it is an injustice for children to be made to do work which significantly interferes with their education, because it violates equal opportunities. It’s worth saying that “education” should not be understood too narrowly here. If children are to grow into talented, healthy, well-rounded adults, they must not be slaving away at work or school all day, every day. Rather, in order to develop as individuals, they also need time to play and have fun. If the work they were made to do interfered too much with this aspect of a good education (in the broadest sense), then it would also put children at a disadvantage and thus count as unjust. Much child labour would not count as unjust in this way. Recall that the work Rob did on his family’s chicken farm was on Saturdays—not a school day. And the “marketing campaign” which was part of his work itself involved imaginative play. However, much child labour, including much child factory labour, would count as unjust, because it would be likely to leave the children who took part in it less able to become qualified for the job or office they aspired to in their adult life. Child labour can also be morally problematic when it is too dangerous. It should not be assumed that the workplace safety standards which are right for adults are also right for children. For one thing, children are generally more susceptible to illness and injury than adults. For another, as we have already discussed at length, workplace safety regulations should aim to model the autonomous decision-making about risks in which employees engage in other areas of their lives. But children are arguably not yet fully competent and autonomous as decisionmakers, so the yardstick for a correct level of safety is absent or at least not as well defined in their case. In many cases this problem can be circumvented by allowing parents to take decisions on behalf of their children. However, we should be aware that parents who are very dependent on the income their children bring in may be unable to avoid letting this dependence cloud their judgement about what is best for their children. Furthermore, trade unions are unlikely to represent the interests of children workers adequately in negotiations with employers, since Chapter 14 · Global business ethics · 289 children are likely to be less articulate in voicing their interests, and their interests will often differ quite substantially from those of the adult workforce. All these points would support the view that if children do take part in work, it ought to be work which poses at most minimal risks of injury. There is much more to say about the highly contentious issue of child labour: we cannot do anything near full justice to it here. What has been said so far should, though, be enough to show that the mere fact that an M.N.C. employs children is not, on its own, grounds for moral condemnation. We need first to ask what kinds of work it employs children to do. But we have also shown that, if an M.N.C. is employing children full-time in dangerous jobs, which allow them little time for either school work or play, then that is unjust and exploitative. Clearly, there is room for a middle way: part-time employment, after school or at weekends, doing safe and— as far as possible—fun tasks, for example. The issue of child labour needs to be approached in a realistic spirit, with sensitivity to local realities. In many regions, if an M.N.C. or its suppliers flatly refuse to employ children, this will not mean the children go to school and grow up happy and healthy instead. There may not be a school in their area, for one thing, and, for another, their parents may be in such a desperate financial condition that they end up making their children do very dangerous, very badly paid work in the informal sector instead. A more constructive approach would in some cases be for the M.N.C. or its supplier to employ the children part-time, and to include in-house basic education and training among its benefits for child employees. We must beware of knee-jerk condemnations of child labour across the board, while thinking of practicable ways to eradicate the injustice and other moral wrongs to which child labour most certainly can give rise. Suppliers’ standards In many of the cases of poor working conditions in L.E.D.C.s which have aroused controversy and outrage, the workers in question were not employed directly by an M.N.C., but rather by a business which was contracted to supply the M.N.C in question. If abuses of workers are perpetrated, not by the M.N.C., but by another business, then that will almost always reduce the M.N.C.’s moral responsibility for those abuses—though often not by much. A limiting case is the case where an M.N.C. is in a position of power and authority over another business (perhaps because it is that other business’s sole owner), and instructs that other business to perpetrate abuses. In a case of this kind, the M.N.C. would be just as morally responsible for the abuses perpetrated as the business which perpetrated them. More commonly, the M.N.C. will not have instructed its supplier to perpetrate abuses, but will be aware that it does. In a case like this, though the M.N.C.’s moral responsibility is not equal to that of the abusive supplier, the M.N.C. should nonetheless either intervene and pressure the supplier to cease abusive practices immediately or cut off its business relationship with that supplier. If the M.N.C. knowingly puts itself in a position where it is directly benefiting from the fruits of workplace abuse, then it is tacitly condoning and materially encouraging such practices. It ought to avoid doing either of these things—just as, in our individual lives, we should avoid giving tacit and material encouragement to thieves by buying stolen goods. Sometimes an M.N.C. will be unaware of the abuses perpetrated by its suppliers. This sometimes, but not always, absolves the M.N.C. of moral responsibility for the abuses. Ignorance absolves the M.N.C. of moral responsibility if it is non-culpable ignorance—in other words, ignorance which does not result from the M.N.C.’s omission to do something it ought 290 · BUSINESS ETHICS & OTHER PARADOXES to have done, such as carry out a review or gather some information about its supplier. But some ignorance is culpable ignorance. If an M.N.C. knows that certain abuses are relatively widespread in a region, and can quite easily check whether they take place in a business which supplies it, then a decision not to check this will result in the M.N.C. being culpably ignorant of any abuses taking place—i.e. the M.N.C. will in this case not be absolved of moral responsibility. When an M.N.C. contracts a particular task out to a supplier, it will be normal for it to gather information about the supplier business, including its capacity, number of employees and so on. It would normally be very easy for an M.N.C. to gather information about whether workplace abuses take place at the supplier’s facilities at the same time as it gathers the other information. It can also add to an M.N.C.’s moral responsibility if a supplier has subjected its employees to unacceptable workplace conditions as a result of pressure put on it by the M.N.C. to cut costs. This could seem an unreasonable thing to say, since such pressure is of course what secures productive efficiency in the free enterprise system. However, consider a case in which an M.N.C. is already being supplied with goods at very low cost, and in which the government of the country where the supplier is based has not put a set of workplace safety regulations in place, or does not ensure compliance with them if it has. If an M.N.C. knows all this, and knows that abusive workplace conditions are not uncommon in the region, then it will have good reason to believe that applying pressure on the supplier to reduce costs further could lead the supplier to impose inadequate levels of safety, or worse, on its employees. This surely counts at least as a case of culpable negligence on the M.N.C.’s part—a failure to discharge its “duty of care” to workers, the fruits of whose efforts the M.N.C. will ultimately enjoy. But we should not forget that to say that the M.N.C. will enjoy the fruits of this labour is really to say that the M.N.C.’s investors will enjoy them. And its investors will only enjoy those fruits because the M.N.C.’s customers also enjoy them. So the pressure for suppliers in L.E.D.C.s to reduce costs ultimately comes from individual members of the public, often largely living in richer countries. In the section of Chapter 11 entitled ‘Collective bargaining’ we saw how these individuals’ bargaining power as consumers and as investors is aggregated and concentrated to impressive—though often disconcerting—effect by M.N.C.s such as Walmart and pension funds or other investment funds. As it becomes increasingly easy for individual members of the public—especially in richer countries—to inform themselves of the conditions for workers in L.E.D.C.s, the fruits of whose labour they enjoy, some of the points made above about moral responsibility increasingly apply—though of course on a smaller scale—to the individuals who share in the success of M.N.C.s as customers or investors. There are investment funds which take this responsibility seriously. John Ruggie elaborates with a couple of examples: The $525-billion Norwegian Government Pension Fund has divested from companies, including Walmart, for not respecting human rights; for similar reasons the Dutch civil service pension fund has divested from PetroChina. Socially responsible investment funds screen companies for evidence that they respect human rights.21 A similar approach could be taken by retail outlets with regard to which clothing companies’ products they stock. Given how responsive all companies have to be to the preferences of their investors and their customers, it is unrealistic to expect that M.N.C.s will live up to their moral responsibilities of their own accord, unless the individuals who invest in them and buy from them do the same. Chapter 14 · Global business ethics · 291 The duty of rescue Earlier in this chapter we noted that one prominent feature of globalisation is the rise in power of multinational corporations. We also noted that some people have urged M.N.C.s to use their increasing power and influence in the world in order to bring about change for the better. In this section we will consider in what sorts of situation an M.N.C. would have a duty to give aid to a group of people in difficulties. It will soon become clear that such actions by M.N.C.s are often controversial, and we will need to consider the reasons for this, as well as what can be done to address them. We can begin by placing this section’s topic within the framework of a universal duty of rescue. It is relatively uncontroversial to claim that there are circumstances in which any one of us could have the duty to come to the aid of somebody in trouble. For example, imagine that you were walking along the road, and you saw a child drowning in a paddling pool in a garden separated from the road by a low fence. If no one else was present, or was making any visible attempt to save the child’s life, then surely it is clear that you would have a duty to climb over the fence and save the child from drowning. There is no reason to think that the duty of rescue which explains your duty to save the child in the example would apply only to individual human beings. Our default assumption should be that it applies also to the various institutions (including corporations) capable of collective decision-making which individual human beings can constitute through their joint efforts. Indeed, the idea of a universal duty of rescue echoes the idea of a background “duty of care”, which we earlier found so crucial in making sense of businesses’ obligations to their customers and employees. In both cases the idea is that, even when one party has not entered into contractual or personal relations with another party, both parties can have a standing duty to take reasonable care to ensure that the other party is not harmed. The British philosopher Bernard Williams has formulated what he calls ‘the moral principle of rescue’ as follows: (1) If X is in peril and (2) Y is saliently related to X’s peril and (3) Y can hope to offer effective aid to X (4) at a cost to Y, which is not unreasonably high, Y ought to help X.22 We can see how the moral principle of rescue makes sense of your duty to save the drowning child, in the example given just now. The child is drowning—so certainly in danger, or peril, as specified in condition (1). You are related to the danger the child is in, in a relevant, or salient, way, because you are in the vicinity, and can see the child is drowning, so condition (2) is satisfied as well. It is also the case that you can offer effective aid to the child, as specified in condition (3), because all you need to do is climb the low fence and pull the child out of the water. Given that this is a matter of life or death, the cost of at most a tear in your trousers or a few splashes of water is negligible, so condition (4) is also satisfied. It seems certain that M.N.C.s, particularly those that operate in L.E.D.C.s, will quite often find themselves in situations where all four conditions of the moral principle of rescue apply. Groups of people in L.E.D.C.s can find themselves in danger because of natural disasters, famine, epidemics, state repression, and the destructive effects of poverty, among other causes— satisfying condition (1). Given the financial power and the influence of M.N.C.s, it will quite often be possible for an M.N.C. to give effective aid to these groups at a cost which is not at all 292 · BUSINESS ETHICS & OTHER PARADOXES detrimental, and often negligible, to the M.N.C.—satisfying conditions (3) and (4). It remains to consider the ways in which M.N.C.s may be relevantly related to the danger or hardship suffered by groups of people in L.E.D.C.s. One way in which they may be is essentially the same as in our example of the drowning child: proximity. An M.N.C. which operates in an L.E.D.C. is related by proximity to the suffering of groups of people in that country in a way that a business operating on the other side of the globe is not. For example, in 2008 there was an earthquake in Western China. It was principally corporations operating in China which donated funds and equipment to help with the rescue and recovery efforts.23 Their proximity to the suffering caused by the earthquake made them saliently related to the plight of the earthquake victims in a way that corporations operating in other countries were not. Another way in which M.N.C.s may be relevantly related to groups in peril in L.E.D.C.s is when their activities are partly the cause of the plight of those groups. It is important to note that this holds even when the M.N.C. is not morally to blame for the suffering of the group in question. This point is familiar from other areas of life. For example, imagine a lorry driver who, through no fault of his own, runs over a child—perhaps the child was not visible, and quite unexpectedly ran out into the road. In this case, even though the driver is not morally to blame for the child’s injury, nonetheless it is particularly incumbent on him—more than it is on other vehicle-drivers in the vicinity—to rush to the aid of the child immediately. Imagine how outraged you would be if this lorry driver said, “There are plenty of other people around to help, so I will drive on.” Rather, because of his causal relation to the injury of the child, even if he is not morally blameworthy, he should be the first to rush to assist the child. Royal Dutch Shell’s activities in the Rivers State of Nigeria since the 1950s demonstrate how an M.N.C.’s causal relation to the suffering of a group can make it particularly incumbent on the M.N.C. to come to that group’s aid. Shell’s oil exploration and production activities in the area had harmful environmental and social effects: for example, ‘[l]and and water pollution from spills undermined livelihoods that depended on farming and fishing’.24 It could well be that Shell was morally to blame for the harm to people’s livelihoods resulting from its activities. If so, it would owe redress to those people. But that is not the point we need to focus on here. The crucial point here is that, even if Shell was not morally to blame for this harm, the plight of people in the Rivers State was undoubtedly caused—at least in part—by Shell’s activities. This causal relationship means that Shell had a particularly weighty duty to come to the aid of people whose livelihoods had been adversely affected—a duty which was not shared by other actors in the vicinity whose activities had not contributed to the plight of these people. A further factor which can mean M.N.C.s are relevantly related to the suffering of groups in an L.E.D.C. where they operate is the fact that—as was explored in some depth in Chapter 6— the local community of a business can be regarded as a stakeholder in that business. The contribution made by the local community to a business’s success was discussed in Chapter 6, and the point was made there that this can ground a special obligation on the part of the business to serve the interests of the local community—just as employees’, creditors’ and investors’ contributions also ground such an obligation on the part of the business. To the extent that the group of people in peril in an L.E.D.C. can be regarded as a stakeholder in an M.N.C., this is a further reason to count the M.N.C. as saliently related to that group’s plight, and as having a weightier duty to come to its assistance. The weight of the duty will depend on the extent of the group’s contribution to the M.N.C.’s continued operations and success. So far we have not mentioned the involvement of national governments in instances where a group of people is in danger or difficulties. Often, of course, the national government will be Chapter 14 · Global business ethics · 293 only too happy for M.N.C.s to contribute to rescue efforts—such as in the case of the West China earthquake. The national government may often work in co-operation with an M.N.C. to provide relief or assistance. But sometimes the government will not take kindly to efforts by an M.N.C. to assist a group of its citizens. The most obvious type of scenario where this will be true is when the suffering of a group is the government’s direct intention, and a result of the government’s action. This type of case raises a tricky question: Is it morally permissible for an M.N.C. to come to the assistance of a group of people suffering in an L.E.D.C. in a way which undermines the country’s government? A case in point is South Africa during the era of apartheid. The residents of South Africa whom the National Party government classified as “non-white” were suffering, not principally because of the environment or the actions of M.N.C.s, but because of the unjust actions of the South African state itself. They were not allowed to vote, or live in particular areas, and were excluded from certain jobs and from places in privileged educational institutions. In addition, the police and the army were involved in unjust and brutal operations against the residents of townships. Many M.N.C.s had operations in the country and had “non-white” employees, so for the reasons (discussed above) of proximity and stakeholdership they could be counted as saliently related to the repression suffered by “non-whites”. Furthermore, their presence in the country tacitly gave credibility to the white supremacist government, and their economic activities provided it with material support. Consequently, they could also be regarded as—albeit in a relatively small way—causally related to the continuation of the repression of “non-whites”. Following what came to be known as the “Sullivan Principles” (named after the Reverend Leon Sullivan, a Baptist minister from Philadelphia, who also sat on the General Motors board of directors), by the 1980s about one half of U.S.-owned M.N.C.s were refusing to follow the South African government’s laws about racial segregation in the workplace—so called “petty apartheid”. Recall from Chapter 2 that legal standards are not equivalent to ethical standards. When a law is blatantly unjust and discriminatory, we are not obliged to follow it, and may even have a duty to break it. Consequently, it can be justifiable for a business to break unjust laws—such as South Africa’s segregation laws—in the same way as civil disobedience by individual citizens can be justifiable. Furthermore, M.N.C.s in South Africa during apartheid made use of the corporate power of transnational withdrawal in order to pressure the National Party government to make changes. Indeed, they ultimately proved that this was no idle threat, by withdrawing their operations from the country in droves in the late 1980s. However, one can’t help wondering whether M.N.C.s in South Africa during the white supremacist era oughtn’t to have done much more to bring about change. When Leon Sullivan visited South Africa in 1975, ‘he heard pleas from blacks in South Africa that MNEs use their resources to bring change from within the country rather than withdrawing’.25 We have mentioned a couple of ways in which M.N.C.s did put some pressure on the South African government; and they also did so by campaigning ‘for the right of black workers to form unions’.26 But by the 1980s, a concentrated military struggle against the National Party government was being co-ordinated by the African National Congress (A.N.C.) and Pan Africanist Congress (P.A.C.) in exile, and by the United Democratic Front (U.D.F.) within the country’s borders. This is now widely accepted to have been a just military struggle (though of course that is not to deny that individual atrocities were committed during it). Shouldn’t 294 · BUSINESS ETHICS & OTHER PARADOXES M.N.C.s have harnessed their resources to support this just military struggle against an unquestionably unjust and brutally repressive regime? There certainly were ways in which M.N.C.s could have helped. They could have supplied the A.N.C.’s armed wing, Umkhonto we Sizwe (M.K.), with vehicles, navigation systems and intelligence, for example. Furthermore, they could—as the U.S.S.R. did—have offered training and education sessions for participants in the struggle, making them aware of the workings and vulnerabilities of government and the economy, and preparing them for eventual political leadership. It might be objected that M.N.C.s couldn’t know for sure whether intervening in the struggle in this way wouldn’t ultimately cause more harm than good. But exactly the same could be said of the individual South Africans who volunteered their services—and often lost their lives—in the military struggle. They chose to take a risk for the sake of justice and emancipation, rather than comply with an egregiously unjust system. In such circumstances there can never be certainty about outcomes. Rather than pursuing the details of when a freedom struggle is just, we will at this point turn to a moral problem with supportive actions by M.N.C.s which applies even if a cause is clearly just, and the M.N.C. can clearly make a constructive contribution to it. In other words, even if there could be certainty that an M.N.C.’s contribution to an armed struggle would be for the good, and even if it was crystal clear that the armed struggle was just, there is still a reason why it can be objectionable for an M.N.C. to take part in such actions. Pinpointing this reason will take us to a problem at the heart of globalisation itself. Legitimacy The question of whether the actions of a body—such as a business or a state—are morally right or just is distinct from the question of whether they are legitimate. When a body takes and implements decisions about a range of matters, we can ask, in the first place, about the content of those decisions—i.e. whether the decisions taken were correct, prudent, fair or morally right. In the second place, though, we can ask something different: we can ask whether that body has the right to be taking and implementing decisions about the range of matters in question in the first place. If it does have the right, then it has legitimacy—it has, as we also say, the authority to take decisions on those matters. If it does not have the right, then it is illegitimate—it is not authorised to take decisions on the range of matters in question. A couple of examples can make the distinction clearer. First, consider the case of a mob of concerned citizens which takes the law into its own hands and decides to stone a criminal to death in the street. Particularly if the crimes the criminal committed were horrific, you might well think they got the punishment they deserved. In other words, you might well have no quarrel with the content of the mob’s decision: it was just. But you might nonetheless think that the mob’s decision lacked legitimacy. You might insist that concerned citizens do not have the authority to dispense justice spontaneously in the street. Rather, dispensing justice is the preserve of the police force appointed by the democratically elected government of the country, and the courts functioning in accordance with the constitution. This shows how decisions can be just but nonetheless lack legitimacy. Next, consider the case of a democratically elected government. You might not have voted in the last general election for the political party which is now in government, and you might think that many of its decisions while in government have been not just mistaken, but immoral. Chapter 14 · Global business ethics · 295 In other words, you might think that the content of the government’s decisions has been unjust. But it is likely that you recognise, despite all that, that the government has legitimacy. Because the government was democratically elected, it has authorisation to take decisions about things such as taxation, public education, national security and foreign policy, and to implement those decisions. This shows how decisions can be unjust but nonetheless legitimate. We will come back to the topic of M.N.C.s’ activities in a moment. First, though, we should admit that many governments do not have legitimacy. Many people would claim that a government can only be legitimate if it has been democratically elected in a general election with universal franchise. The vast majority of shareholders in many multinational corporations would be appalled if the government in their country announced it was not going to hold elections any longer. They would take the view that this rendered the government illegitimate. Almost everyone would agree that if a government both has not been democratically elected and clearly governs in a way which neither serves the interests of its citizens nor furthers justice, then that government is illegitimate. This means that it does not have the authority to carry on taking and implementing decisions about national security, public spending and so on. For example, the National Party government in South Africa during apartheid was illegitimate, because it extended the franchise only to white citizens and it unjustly oppressed the majority of the population. This illegitimacy is a key reason for regarding the military struggle against that government as just, and for the world to be grateful to the U.S.S.R. for the extensive funding, training and other support which it provided to the A.N.C. in exile.27 It would have been a key part of the justification for support for the military struggle by M.N.C.s, if they had offered such support—as discussed in the previous section. But the circumstances of globalisation mean we must also turn our attention to M.N.C.s themselves, and ask, not just whether their activities are good and just, but also whether, in acting as they do, M.N.C.s have legitimacy. This question has become more pressing as M.N.C.s have increasingly acquired powers which in the recent past were only possessed by states. We saw earlier that the trend of privatisation has meant M.N.C.s now provide many services—ranging from utilities such as water and electricity, through public transport, to the postal service and telecommunications— which previously were almost always provided by the state. Many people see this as cause for celebration, and it is certainly true that privatisation has sometimes led to efficiency gains. However, with many services efficiency is not all that matters. Consider a service which is still particularly closely identified with the state: law and order—in other words, the dispensing of justice, and managing of a military and a police force. As was made clear in the mob justice example, this is an area where legitimacy matters. But this is also an area which is increasingly coming under the control of corporations. We saw earlier that states are increasingly employing private security guards—i.e. mercenaries—in time of war, instead of their own soldiers. M.N.C.s have also funded and trained forces of law and order in L.E.D.C.s. For example, oil companies operating in Nigeria have often paid the salaries of local military and police forces directly, in order to encourage them to clamp down on protests by local people.28 Without exaggerating the extent to which M.N.C.s have already appropriated state-like powers, we should be aware that there is currently a strong trend in this direction—especially in L.E.D.C.s. This trend raises the same sorts of concerns as were voiced in previous phases of history when companies acquired such powers. For example, when the Dutch Vereenigde Oostindische Compagnie reached agreements with Indonesian princes in the 17th century, it insisted not just on monopoly trading rights in 296 · BUSINESS ETHICS & OTHER PARADOXES the region concerned, but also on having the right to try, in its own courts, both Dutch nationals and Indonesians who were involved in disputes with the V.O.C.29 Similarly, the British East India Company’s charter granted it ‘a whole series of special rights, including the right to mint coin in its overseas subsidiaries, to exercise justice in its settlements and, crucially, the right to wage war’.30 In the eastern hemisphere, where they principally operated, the V.O.C. and the E.I.C. acted to a great extent like states, despite the fact that they were really only limited liability companies. At the time, people were disturbed by the actions of the V.O.C. and E.I.C., because they wondered with what authority they acted in these ways—i.e. they doubted that they had legitimacy. Today, people have very similar concerns and ask similar questions about the actions of M.N.C.s—even if it has not got to the point where M.N.C.s literally wage war. Concerns about legitimacy often tend not to be at their most pressing in cases where a natural disaster or other emergency requires immediate action. When an unexpected crisis presents itself—the Western China earthquake mentioned in the last section, for instance— people are understandably grateful for whatever help and assistance they can get, and would rather not look a gift horse in the mouth. It is when M.N.C.s take over the day-to-day administration, over a long time period, of services which were once the preserve of the state, that questions of legitimacy force themselves upon us. For example, in the 1990s ExxonMobil pursued oil exploration and production in Chad costing over 3.5 billion dollars. Due to concerns that the corrupt and undemocratic government of Chad would not use the oil revenues—of more than 100 million dollars per year—to benefit Chad’s citizenry, ExxonMobil and the World Bank persuaded the government of Chad to let the World Bank, ExxonMobil and representatives of local and international N.G.O.s take the decisions about how these revenues were to be spent. The agreement promised ‘sufficient MNE profits to justify the investment while allocating most resultant public revenues under an established formula to address major educational, health and development needs of the population’.31 What is relevant here about this example is not whether the formula for public spending of oil revenues was just. (As it happens, according to John Kline, ‘this new model failed in its attempt to assure a resource allocation that would reduce poverty’.)32 Rather, the point we need to highlight is that representatives from the three types of organisation emblematic of globalisation—an M.N.C., a supranational regulatory body, several N.G.O.s—were effectively dictating to the national government of Chad how it should spend national revenues. Certainly the argument could be made that the government of Chad did not have legitimacy to take decisions on these matters. But we could just as well question the legitimacy of the M.N.C., the supranational regulatory body and the N.G.O.s to do so. It should be clear from this example that the M.N.C. is not the only type of organisation to face a crisis of legitimacy in the post-Westphalian setting. Though legitimacy is a contested philosophical topic in its own right, in modern times a broad consensus has emerged that an organisation attains legitimacy by being accountable to the people on whose lives its activities impact. In this context, “accountable” means that the organisation is required to justify its activities to the people in question, and that those people have the power either to reaffirm or to revoke the organisation’s authority to act, based on its actions and justifications. A central case of this sort of accountability is that of the government in a democratic country. In a democracy the government is accountable to its citizens, because it is required to justify its actions publicly to them, and the citizens have the power periodically either to vote Chapter 14 · Global business ethics · 297 the government into office for another term or to vote it out of office. While democratic governments are themselves directly accountable to citizens, they also open the way to an indirect form of accountability. Organisations in a country may not be directly accountable to the people whose lives they affect, but they still may be accountable to a democratically elected government—for instance, because it decides whether to issue them with a license, or decides on the framework of rules within which they operate. This gives them an indirect form of legitimacy, via the elected government—at least if the people whose lives they affect are among those to whom the government is accountable. But too often, not just M.N.C.s, but also N.G.O.s and supranational regulators, are neither directly nor indirectly accountable to the people on whose lives their activities impact. There is a general crisis of legitimacy in our era of globalisation, because the bodies which do have legitimacy—especially democratic states—are becoming weaker and so less able to hold other organisations to account, while the bodies which are theoretically accountable to states— M.N.C.s, N.G.O.s, supranational regulators—are increasingly in effect accountable to no one, or else accountable only to a tiny minority of the people on whose lives their activities impact. When an M.N.C. operates in an L.E.D.C., it is rare that it is truly accountable to the country’s government. This is because, for all the reasons discussed earlier in the chapter, it often has the power to make the government agree to terms which are favourable to the M.N.C. In fact, it is currently quite normal for M.N.C.s which begin operations in an L.E.D.C. to be granted immunity by the country’s government from any new laws which might be introduced during their operations. When the U.N. Secretary-General’s Special Representative for Business and Human Rights, John Ruggie, examined recent confidential agreements between M.N.C.s and L.E.D.C. governments, he uncovered the following: [T]he most sweeping stabilization provisions were found in contracts signed with Sub-Saharan African countries, where seven of the eleven contracts to which I had access specified exemptions from or compensation for the effect of all new laws for the duration of the project— a half-century in one case—irrespective of their relevance to protecting human rights or any other public interest.33 The confidential agreements to which Ruggie had access state unequivocally what public pronouncements can easily gloss over: M.N.C.s’ power and influence over the governments of poorer countries often enables them to bypass democratic accountability entirely. M.N.C.s are not unaccountable, though. There is a group of people to whom M.N.C.s must justify their activities in great detail, and who have the power to put them out of action at a moment’s notice: their investors. However, when an M.N.C. is operating in an L.E.D.C., few or none of its investors are among those in the L.E.D.C. who are directly affected on a daily basis by the M.N.C.’s operations. So if today an M.N.C. takes charge of supplying drinking water in an L.E.D.C., or runs its police force, or decides how national funds are to be allocated—as ExxonMobil did in Chad—the likelihood is that this M.N.C. will be accountable for its decisions, not to the democratically elected government of the L.E.D.C., still less to the people in the L.E.D.C. on whom those decisions impact most, but to a group of shareholders, most of whom live on the other side of the planet. It should not surprise us if locals ask by what right an M.N.C. is meddling with their affairs. How can the legitimacy deficit of M.N.C.s be addressed? This is a key question for business in the contemporary globalised economy. No comprehensive answer can be offered to it here. However, what has been said so far suggests 298 · BUSINESS ETHICS & OTHER PARADOXES that, if M.N.C.s are to acquire legitimacy, they must become accountable to communities affected by their operations. And, in line with our discussion above, it would seem there are two general ways in which this accountability could be achieved, because accountability can either be indirect or direct. The first, indirect, way for M.N.C.s to acquire greater legitimacy would be through external oversight by a body which was itself directly democratically accountable. If an M.N.C. is truly accountable to a body which is itself democratically accountable, then that M.N.C. is indirectly accountable to those whose lives it affects. If we accept that national governments tend today to be too weak relative to M.N.C.s for indirect accountability to flow via them, then the obvious conclusion is that supranational regulators and other authorities, such as the European Commission, the U.N., the African Union and the W.T.O. should become bodies which are able to hold M.N.C.s to account. If this route was pursued, the aim would be to halt the trend of M.N.C.s accumulating more discretionary power to behave like states themselves, and place them firmly within a regulatory jurisdiction. This first way of achieving accountability for M.N.C.s faces two significant obstacles. In the first place, though supranational bodies already have the power to make laws and regulations, they generally do not have the power to police these laws and regulations, ensuring compliance and punishing non-compliance. Either they are reliant on national governments to do this for them, or else the regulations they introduce take the form of voluntary codes of conduct. Much more power would thus have to be placed in the hands of supranational bodies if they were to play this role. In the second place, supranational bodies such as the E.U. and the U.N. face their own crisis of legitimacy. So these supranational bodies could not be conduits of indirect accountability for M.N.C.s unless they were first made truly accountable to the people whose lives they themselves affect. The second, direct, way for M.N.C.s to acquire greater legitimacy would be through internal restructuring to achieve direct accountability. This would entail M.N.C.s transforming their internal structures so that they were truly democratically accountable, not just to investors, but to all stakeholders, including the communities in which they operate. Of course, this would involve not a few mere operational changes, but a downright revolution in the way corporations are structured. Admittedly, corporations do already make changes to their ownership and control structures to make themselves less vulnerable to hostile takeover bids,34 and some significant structural changes have resulted from new ways of thinking about corporate governance (for example, companies listed on South Africa’s stock exchange have in recent years been applying the King Code of Governance). But the changes involved in making corporations directly accountable to the people whose lives they affect would go much further, in effect relegating investors to a relatively minor role. Indeed, it is not clear how investors could be persuaded to stick around voluntarily, if such a restructuring were undertaken. Still, we should not dismiss out of hand the option of M.N.C.s achieving direct accountability through internal restructuring. The current situation with regard to legitimacy is unstable, so significant changes will be required in some part of the system. It is also worth recalling that, for a long period of time, the accountability structure of democratic states looked much the same as that of M.N.C.s today. In Jonathan Wolff’s words, [i]t was generally assumed, until relatively recently, that the only people entitled to vote were those with some property stake in the country. Those without property could not be trusted to use their votes ‘responsibly’.35 Chapter 14 · Global business ethics · 299 During that time, it did not occur even to many of the most progressive democrats that the franchise needed to be extended beyond property-holders. For example, when Mary Wollstonecraft, the advocate of votes for women, wrote in her 1792 book A Vindication of the Rights of Woman about the emancipated female citizen’s domestic servants, ‘the idea that such servants should also have the vote is something which Wollstonecraft seems simply to have ignored’.36 This is a reminder of how quickly it is possible for both attitudes and accountability structures to shift. Conclusion In this chapter we explored some of the issues raised for the ethics of business by globalisation. We have concentrated on the moral questions at the heart of recent controversies about the actions of multinational corporations. While some of the answers to these questions—for example, about child labour, and operating with different safety standards in different countries—were not as black-and-white as is often assumed, we also found tricky moral questions lurking in unexpected places: in particular the problem of legitimacy. It should be clear that the legitimacy deficit of globalisation cannot be solved simply through the employees of M.N.C.s acting more ethically. If the institutions which are taking the nation state’s place of predominance are to acquire full legitimacy, then their structure must be changed to make them more accountable to the people whose lives they affect. 300 · BUSINESS ETHICS & OTHER PARADOXES CONTENT QUESTIONS (1) Which one of the following is not typical of globalisation: (a) the African Union’s plans for economic and monetary union of African countries, (b) nationalisation of mines in Zimbabwe, (c) the World Bank’s influence on national government policy, (d) privatisation of the water supply in South Africa? (2) Give two examples of law-making or regulatory bodies operating above the level of the nation state. (3) Name two ways in which multinational corporations (M.N.C.s) can exert pressure or influence on national governments. (4) What is “culpable ignorance”? (5) Name two factors which could make an M.N.C. relevantly related to the suffering of a group in a less economically developed country (L.E.D.C.) in a way which would strengthen the M.N.C.’s duty to come to that group’s aid. CRITICAL ANALYSIS QUESTIONS (6) Outline three ways in which, in the “post-Westphalian setting”, nation states have become weaker than they once were. (7) Explain in general terms (using examples if you wish) the difference between the justice and the legitimacy of a decision-making body. DISCUSSION QUESTIONS (8) Can it ever be justifiable for multinational corporations (M.N.C.s) to operate with lower product and workplace safety standards in L.E.D.C.s than those they operate with in richer countries? Discuss arguments for and against the view that this practice can be justifiable in the course of your answer. (9) “Whenever an M.N.C. can intervene to improve the lives of the citizens of an L.E.D.C., without making too much of a loss itself, it should do so—regardless of whether the L.E.D.C.’s government approves.” Do you agree or disagree with this statement? Explain why. Chapter 14 · Global business ethics · 301 CHAPTER FOURTEEN NOTES AND REFERENCES 1 Andrew Crane & Dirk Matten, Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization (Oxford: Oxford University Press, 2010), p. 516. 2 Ulrich Beck, What Is Globalization? (trans. Patrick Camiller, Cambridge: Polity Press, 2000), p. 10. 3 www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf. 4 Peter Davies, ‘Private Military—New Rules of Engagement’ (www.ethicalcorp.com/content/privatemilitary-%E2%80%93-new-rules-engagement), 6 October 2008. 5 John M. Kline, Ethics for International Business: Decision Making in a Global Political Economy (New York & London: Routledge, 2010), p. 47. 6 Robert Reich, Supercapitalism: The Battle for Democracy in an Age of Big Business (London: Icon Books, 2009), p. 222. 7 Sampie Terreblanche, Lost in Transformation: South Africa’s Search for a New Future since 1986 (Johannesburg: KMM Review Publishing Company, 2012), p. 72. 8 Supercapitalism: The Battle for Democracy in an Age of Big Business, p. 169. 9 Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization, p. 519. Crane and Matten are citing from an edited volume by Beck called Politik der Globalisierung. 10 George Monbiot, Captive State: The Corporate Takeover of Britain (London: Pan Books, 2000), p. 321. 11 Supercapitalism: The Battle for Democracy in an Age of Big Business, p. 148. 12 Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization, p. 505. 13 John Perkins, Confessions of an Economic Hit Man (London: Ebury, 2006), p. 236. 14 Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization, p. 540. 15 Martin Plaut & Paul Holden, Who Rules South Africa? (London: Biteback Publishing, 2012), p. 108. 16 John Gerard Ruggie, Just Business: Multinational Corporations and Human Rights (New York: Norton, 2013), p. 4. 17 Richard T. DeGeorge, Business Ethics: Seventh Edition (International Edition) (Upper Saddle River: Pearson, 2013), p. 409. 18 See, for example, Lynne Peeples, ‘Lead Paint, Other Toxic Products Banned in U.S. Still Exported to Unsuspecting Customers Abroad’ (www.huffingtonpost.com/2013/03/25/lead-paint-exportspesticides_n_2949694.html), 25 March 2013. 19 Just Business: Multinational Corporations and Human Rights, p. 4. 20 Business Ethics: Seventh Edition (International Edition), p. 406. 21 Just Business: Multinational Corporations and Human Rights, p. 93. 22 Bernard Williams, ‘Humanitarianism and the Right to Intervene’, in his In the Beginning Was the Deed: Realism and Moralism in Political Argument, ed. Geoffrey Hawthorn (Princeton: Princeton University Press, 2005), pp. 146-147. 23 Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization, p. 56. 24 Just Business: Multinational Corporations and Human Rights, p. 10. 25 Ethics for International Business: Decision Making in a Global Political Economy, p. 54. 26 Op. cit., p. 55. 27 See Irina Filatova & Apollon Davidson, The Hidden Thread: Russia and South Africa in the Soviet Era (Johannesburg & Cape Town: Jonathan Ball, 2013), especially chapters 12, 13 & 14. 28 Douglas Farah, ‘Nigeria’s Oil Exploitation Leaves Delta Poisoned, Poor’ (www.highbeam.com/doc/1P2-413680.html), 18 March 2001. 29 C.R. Boxer, The Dutch Seaborne Empire: 1600-1800 (London: Hutchinson, 1965), p. 103. 30 Nick Robins, The Corporation That Changed the World: How the East India Company Shaped the Modern Multinational (Second Edition) (London: Pluto Press, 2012), p. 31. 31 Ethics for International Business: Decision Making in a Global Political Economy, p. 74. 32 Op. cit., p. 75. 33 Just Business: Multinational Corporations and Human Rights, p. 136. 34 Colin Mayer, Firm Commitment: Why the Corporation Is Failing Us and How to Restore Trust in It (Oxford: Oxford University Press, 2013), pp. 105-111. 35 Jonathan Wolff, An Introduction to Political Philosophy (Revised Edition) (Oxford: Oxford University 302 · BUSINESS ETHICS & OTHER PARADOXES Press, 2006), p. 85. Loc. cit. 36 Section A FOUNDATIONS OF BUSINESS ETHICS Section E BU
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