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Article Excerpt
A social system is a set of moral-political-economic principles embodied in a society's laws, institutions, and government, which determine the relationships, the terms of association, among the men living in a given geographical area ... Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned. -Ayn Rand, "What is Capitalism?" Capitalism: The Unknown Ideal
I. Introduction
We are probably all familiar with the hackneyed remark: "'Business ethics,' there's an oxymoron for you." Sometimes it is even said that 'profit' is a four-letter word. Indeed, much of what passes for business ethics today is really a case of business bashing. (1) But does business ethics have to be business bashing? We think not. Yet, to see how this is possible we need to realize that many of the criticisms of business activity that we find in our culture (and in the business ethics literature) are not criticisms of particular persons and firms for conduct that violates basic canons of morality. They are not, for example, criticisms of cases in which people lie or cheat; give up on personal integrity, or any personal responsibility; or simply forgo the pursuit of excellence in any form. Rather, these criticisms are systemic in nature--that is, they aim to analyze the very institutions that define and sanction business activity. (2) We find here criticisms of such institutions as private property, the sanctity of contracts, free exchange, and the pursuit of profit.
There is, of course, nothing sacrosanct about these institutions. They can and ought to be examined. Yet, the point is that once this sort of analysis begins, it should be recognized that one is engaging in a critique that is not so much concerned with the particular practices of persons and firms but with the system itself. It is a critique that, properly speaking, belongs to the realm of political philosophy.
Now, this may seem a trivial observation, because it is quite common for business ethics texts to include discussions of questions of justice and some selections from representative views of justice--for example, selections from Rawls, Nozick, and usually some communitarian or socialist-leaning thinker. Furthermore, there is usually some discussion of basic approaches to questions of normative ethics in which we find consequentialist, deontological, and sometimes virtue-ethics approaches outlined. However, the problem here is that generally some important differences are being ignored. Particularly, it is seldom noted whether one is talking of justice for persons or for institutions. Moreover, hardly ever is there any consideration of what kinds of institutions are involved and how that might be important to not only the answers that are offered but to determining the questions that need to be asked. Indeed, texts generally fail to discuss the differences between justifying and evaluating the political/legal institutions that define and sanction business activity and justifying and evaluating the conduct of the people and organizations that work within their orbit. (3)
II. If one is to properly assess the morality or ethics of business activity, then one needs to understand and appreciate the ethical basis of the political/legal institutions in which they function.
We do not regard this thesis as particularly controversial, but we do think that what it involves has not been fully appreciated by either the critics or the defenders of business activity. To appreciate the importance of this thesis, it must be made clear what is meant by that most abused word, "capitalism." To begin with, we understand it to refer to an economic and social system that is defined in terms of the institutions of private property, sanctity of contract, free exchange, and the pursuit of profit. Yet, there is more to understanding capitalism than this--one needs to consider the particular sort of ethical norm that underlies and supports these institutions. We will illustrate with three examples.
A. Even though there might be a large demand for this service and thus a great opportunity for profit, "Murder Incorporated" is not regarded in a capitalistic system as a legitimate business firm. It is considered criminal and not allowed to operate legally.
B. The term "profit" does not mean merely a return on an exchange that is over costs. It involves a free exchange. The gunman's offer, "Your money or your life" is not considered a free exchange--even though most of us would prefer remaining alive to losing our money. Making such offers is regarded as criminal and legally prohibited.
C. If Mary obtains William's property through an exchange but knowingly and willingly plans or refuses to fulfill the terms of the exchange, then Mary's possession of William's property is a taking of William's property without William's consent, because Mary possesses William's property on terms other than those to which William agreed. Such actions on Mary's part are viewed as criminal fraud and legally prohibited.
Clearly, Murder Incorporated, the gunman, and Mary are behaving not only in a morally wrong manner, but they are also engaging in activities that fail to qualify as examples of capitalist activities. They fail to represent what Nozick called "capitalist acts between consenting adults" (Nozick, 1974, p.163). But even more, they are engaging in activities that destroy the very institutions that define a capitalist socio-economic system.
There is, then, an ethical dimension to understanding capitalism as the particular type of socio-economic system it is. Moreover, it is an ethical dimension that gives paramount and fundamental importance to the legal protection of the institutions of private property, free exchange, sanctity of contract, and the pursuit of profit. The most powerful way to express this ethical dimension is to say that the activities of Murder Incorporated, the gunman, and Mary are violating the rights of the persons with whom they are involved. Rights define and sanction the central institutions of capitalism. For the purposes of this essay, we will say, then, that ideally speaking the ethical norm that defines what kind of activities may legally function in a capitalist socio-economic system is individual rights. (4)
The concept of individual rights is complex, but it can be expressed as follows. Individual human beings have a basic, negative, moral right to liberty. 'Right' is used here to refer to a claim or entitlement that individuals have on how others will treat them. 'Moral' means that this treatment ought to exist but not necessarily does exist. 'Negative' refers to the type of treatment that others owe individuals--that is, they may not use individuals without their consent. Specifically, persons are prohibited from initiating, or threatening to initiate, physical force in any or all its forms against other persons. This...
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