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Oh, the morality: why ethics matters in economics

“Morally bankrupt” is how a recently departing Goldman Sachs executive described the culture of the investment bank. As noted in Business Day, this view “is common among the bank’s critics, many of whom…

Can we afford to be laissez faire about amoral economic behaviour? Carrie Sloan

“Morally bankrupt” is how a recently departing Goldman Sachs executive described the culture of the investment bank. As noted in Business Day, this view “is common among the bank’s critics, many of whom see the firm as a symbol of Wall street’s excesses and a culture of greed which has wreaked havoc on US business and global economy”.

Margin Call is a new movie that depicts these tensions between economic interests and ethics. Movie fans may also recall the oft-quoted line in Wall Street when the infamous Gordon Gekko asserts that “greed is good”. Proponents of extreme capitalism have long argued that its economic dynamism does not need – and can be impeded by – the intrusion of ethical considerations into business behaviour. According to this view, greed drives the pursuit of profit, and the market is the arbiter of outcomes that increase society’s wealth and economic opportunities.

Writing four decades ago and seeking to give some respectability to this ideological perspective, the right-wing US economist Milton Friedman posited that “the social responsibility of business is to increase its profits". "Maximising shareholder value” is how it would be described today.

It should be patently evident, however, that this is not a reliable route to a good society. Five big problems bedevil the strategy: instability, insecurity, inequality, monopoly power and unsustainability.

The problem of economic instability is all too obvious in the wake of the global financial crisis. Economic institutions pursuing profit without social responsibility gave us the most sharply pronounced financial crash since the Great Depression began in 1929. The business practices of sundry mortgage-providers, investment banks and ratings agencies compounded into a maelstrom of business failures, unemployment and economic losses for superannuants and self-funded retirees. The root problem was – and still remains – structural, but the amoral economic behaviour of key participants became part of the destabilising processes.

Along with instability comes economic insecurity. Being constantly vulnerable to market forces beyond one’s control is a recipe for personal anxiety. It is not conducive to increasing productivity and investment in skills, which require a more long-term perspective.

Businesses that value the services and loyalty of their employees know that it is ultimately counterproductive to treat workers only as items to be hired and fired according to changing market conditions. There is a human need for security as well as freedom – although it is always an uneasy dualism. Economic security is recurrently violated, however, where the emphasis is exclusively on market freedoms without social responsibility

The tendency towards monopoly exacerbates these socioeconomic problems. Where there are pronounced concentrations of economic power, the effect is to violate freedom as well as security. This is commonly the product of market arrangements, as the big businesses gain power relative to the small ones. The dominance of Woolworths and Coles in Australian retail grocery is an obvious case in point.

Milton Friedman (left) and Arnold Harberger: the forefathers of economic neoliberalism. DonkeyHotey

Milton Friedman argued that competition between big businesses suffices to safeguard the public interest, but in practice it is almost always insufficient, especially where there is collusion among the players to safeguard their market dominance – and their political influence. Legislation to limit monopoly and prevent restrictive trade practices is invariably needed to safeguard public interests.

Economic inequalities also predictably widen where self-interested market behaviours dominate. Capital makes capital, while those without capital often remain consigned to poverty. Certainly, the very rich have become notably much wealthier during the last three decades while neoliberal ideologies and policies have been dominant. In the absence of strong unions and governments committed to some degree of egalitarian redistribution, the unequalising tendency is inexorable. The result is predictably unhappier societies that experience a higher incidence of social problems, as empirical research complied by Richard Wilkinson and Kate Pickett clearly demonstrates.

Ultimately, the short-term self-interested economic arrangements are not sustainable anyway. As the US economist Kenneth Boulding once said: “Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist”. Free-market economists have an unwarranted faith in the capacity of price adjustments to produce technological changes in production and patterns of consumer demand. Their theories imply that the price system has infinite capacity to shape sustainable outcomes. Current carbon tax initiatives tend to share this faith to some degree. But if the self-interested market behaviours continue to seek an unchanged goal – more personal incomes with which to purchase more material goods – ultimately they cannot be fulfilled. Husbanding our collective environmental wealth and maximising personal economic wealth are incompatible goals.

Something has to give. An economic system that rewards amoral self-interest creates economic instability, fractures economic insecurity, fosters concentrations of economic power, exacerbates economic inequality and violates ecological sustainability. So much for the self-regulating market economy!

Could a “layering-on” of socially responsible personal behaviour, particularly in business, produce the necessary reconciliation? In my opinion, this is doubtful, notwithstanding the worthy intent. Already some businesses practice a degree of philanthropy. However, this often seems to be part of a process of corporate image management. In aggregate, its effects are minor, especially in Australia, which lacks the stronger philanthropic tradition of the USA.

There is currently much talk of “social responsibility” in business and of “triple bottom line accounting” that emphasises the use of social and environmental criteria, as well as a financial criterion, in assessing business performance. This is welcome. Indeed, businesses developing reputations for responsible behaviours may reap benefits in the form of worker and customer loyalty. But unless and until ethical behaviours become integral to how markets function – by directly affecting ‘shareholder value’, for example – it is hard to see the overall effect as much more than window dressing for “business as usual”.

The necessary changes must ultimately be structural, such that it ceases to be profitable to act in ways that cause the anti-social and anti-ecological fallout described in this article. Directing the next generation of economics students in our universities to address these concerns wouldn’t be a bad start. The standard economics curriculum is currently dominated by neoclassical theories that purport to show how self-interested behaviours produce economically optimal outcomes (market equilibrium; efficient resource allocation; sustained growth). Instead, students could more usefully study the competing currents of heterodox political economic thought, which more explicitly consider the tensions and contradictions in the capitalist economic system.

A reformed economics education would expose the fallacious nature of Friedman’s reasoning. It could also help to show this systemic character of the behaviours exhibited by financial institutions such as Goldman Sachs. Economists might then stop being apologists for the current economic arrangements and become explicitly concerned with how ethical issues necessarily intervene between economic means and social ends.

Join the conversation

49 Comments sorted by

  1. Jake Lynch

    Director, Centre for Peace & Conflict Studies at University of Sydney

    Timely article. There are glimmerings, finally, from Canberra, of an understanding of the potential to change things. The Gillard government scaled down the mining tax but at least it was pushed through. It should not surely be too difficult to win political backing for more of the same - redistributionists here are blessed with cartoonish representatives of irresponsible capitalism in the Rinehardts and Palmers. And the current scions of the clans Murdoch and Packer are walking adverts for the theory that talent skips a generation. C'mon, Swanny, next stop, a national mortgage lending bank!

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  2. Peter Ormonde
    Peter Ormonde is a Friend of The Conversation.

    Farmer

    How refreshing to read a piece that restores the political to the discussion of economics. The debate over the last two decades has been reduced to the squabbling of accountants - a managerial quibbling over details and technicalities as if economics had iron rules like physics that bind us all. As if "there is no alternative".

    After socialism - narcissism. A frenzy of conspicuous consumption best captured by the Palmers,, Rineharts and Forrests. And we should coddle and nurture them - as if it is the ticks that give us the cattle.

    This will take some shifting.

    But I'd be wary of using words like neo-liberalism, Frank. Nothing liberal and free market is happening here ... nothing free market about the bail outs for banks, car companies and aluminium plants. This is socialism for capitalists. They have captured the state - socialising problems and costs and privatising benefits. The rhetoric is not the reality.

    I'll be feeling optimistic all day now.

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    1. Michael Croft

      logged in via LinkedIn

      In reply to Peter Ormonde

      Great stuff Peter, I am a farmer too and would be interested in your take on ag. and food policy issues. Get in touch if interested.

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  3. Byron Smith
    Byron Smith is a Friend of The Conversation.

    Ministry assistant, ecologcal ethicist and PhD candidate at University of Edinburgh

    Excellent article - thanks!

    Professor Stilwell, of the five problems you outline, do you see some kind of scale of importance ordering them? How radical do the solutions need to be to address the issues you've outlined? You've mentioned the training of future generations of economists; what are the main options in the short to medium term for responding to these ills?

    Feel free to direct me to your published work if you've already addressed these questions at length.

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  4. Michael Croft

    logged in via LinkedIn

    One observation about corporate philanthropy and corporate social responsibility (CSR). For a corporation to practise CSR, it requires the perpetuation of the system, because CSR can only take place after profit maximization has occurred.

    A systemic overhaul of economics and financial institutions requires the digging out of root causes, anything less (like CSR) is treating symptoms and merely playing with the margins (pun intended).

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  5. Michael Shand

    Software Tester

    Brilliant Article, Thank you very much for posting!!

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  6. Dave Smith

    Energy Consultant

    Frank,

    I think you are missing the point. Or, at least, not addressing the point that most interests me. Clearly, governments should regulate capitalism to prevent instability, monopoly and so on. The question is whether capitalists themselves have any ethical obligation to prevent these things. So long as they don't break the law, and don't use their money and power to unduly influence lawmaking or regulation, do business managers have any ethical obligations beyond maximising shareholder value?

    You give examples where acting "ethically" will actually increase shareholder value, but surely it is situations where these are in conflict that are more interesting.

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    1. Sandra Kwa

      Grad Cert Ethics and Legal Studies, CSU

      In reply to Dave Smith

      As Frank Stilwell has pointed out, capitalism increases inequality.

      Inequality as an inexorable trend is unethical. The goal of maximising profits is inherently exploitative. The widening gap is legally, but not morally, acceptable. Wealth concentration means there is no level playing field. Hard work is not justly compensated for the growing "working poor" class. Under-privilege is entrenched. Trade, in an unequal economy, is neither fair nor free.

      My textbook (Shaw and Barry, 2010) says…

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    2. Andrew Hack

      IT Project Manager

      In reply to Sandra Kwa

      Socialists and Marxists, clinging on to the demented view of equating justice to being equal distribution of created wealth, would much prefer that everyone is poorer so as to curb the 'gap'. As Margaret Thatcher described "Socialists prefer the poor were poorer, provided the rich were less rich".

      The reality is that if you decide to (forcefully) distribute all the goodies through government intervention, the incentive for actually working is completely removed. No-one does any actual work and everyone is impoverished accordingly.

      Marxism is the ideology of envy.

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    3. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to Andrew Hack

      Jings Andrew...

      I would have thought an obvious go-getter like yourself would be a strong advocate of envy and greed. The idea is that one looks at Gina or Clive and one says - strewth I want a bit of that... that could be me... if only I worked harder.

      But it doesn't and it isn't.

      How do Gina and Clive "create wealth"... through hard work? Not bloody likely... the only time they work up a sweat is when they are instructing their solicitors. They in no more create wealth than the tick…

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    4. Andrew Hack

      IT Project Manager

      In reply to Peter Ormonde

      Wealth is not always created through manual labour. Many Marxists may argue otherwise, but it is completely illogical. Consider that a man may build a dam using a shovel and pickaxe. Or he may use machines such as earth-movers, in order to be more efficient. In my current job I don't work up a sweat either. When I am managing projects or designing and documenting systems changes. Does that mean I am not creating wealth?

      In terms of Margaret Thatcher, I'm not entirely sure why Lefties insist she…

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    5. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to Andrew Hack

      Andrew,

      When you are at your desk "creating wealth"... how do you actually do that? What do you make? What do you sell? Or do you just manage the work of others... make phone calls, sign off and review stuff. That's all OK but don't pretend you're creating anything.

      Where did the capital come from that increases our "productivity" and efficiency? How is capital made? By whom?

      It's obvious that you are not concerned with wealth inequality - indeed it is necessary for a capitalist system…

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    6. Andrew Hack

      IT Project Manager

      In reply to Peter Ormonde

      Have you ever worked in the business world? Many of the academics I encounter in these comments threads have not. As such I do often have difficulty explaining business concepts. Much like you are having trouble understanding how the various business units come together as a team in order to succeed. Do you expect an IT business to function when it's entire staff lists consist of only engineers and technicians?

      I find a lot of what Friedman discusses is useful, but on the whole I prefer the Austrian school over the Chicago. Friedman wasn't nearly enough critical of central banking.

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    7. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to Andrew Hack

      Strewth ...I'm not an academic!

      Did spend a few years as a business analyst/consultant in Sydney. Really boring.

      Yes I've heard of this team business. MacDonalds has teams doesn't it?

      It's about creating wealth Andrew ... actually making something that wasn't there this morning. That can be a length of steel or a car or maybe even a bit of software. But the characters who sell it, who run the call centres, who carry it on a truck - did not create anything. They make their living…

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    8. Andrew Hack

      IT Project Manager

      In reply to Peter Ormonde

      Let me know when you've progressed past personal attacks on my career choices and have something legitimate to say other than blatant straw-man arguments. Then I might consider continuing the conversation.

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    9. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to Andrew Hack

      Aw come on Andrew ... I'm sorry iof I have offended you but don't be too precious.

      If you are going to cite characters like Hayek Thatcher et al as philosophical beacons then you should be tough enough to both dish it out and take it. These are rough and tumble ideas you are advocating here mate - ask the Chileans. Ask the Scots. Ask the unemployed miners. The end justifies the means. Just like Stalin. "We must all make sacrifices. And I'm sacrificing you."

      See Andrew I do have issues…

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    10. Andrew Hack

      IT Project Manager

      In reply to Peter Ormonde

      The problem is that you know nothing about my career choices. A BA in finance is very different to a BA in IT. Very different.

      As for law, do you now how many people complete law degrees and actually go on to become lawyers these days?

      The 'gap' means nothing when the systems designed to reduce the gap mean that the poorest end up with less in absolute terms. At least Rawls accepted this when he posited the "Difference Principle" as an alternative theory to egalitarianism.

      As for Friedman…

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    11. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to Andrew Hack

      No Andrew, I am not taking Friedman, Hayek and the like "out of context". I am putting them in context - , real people, real countries, real actual live government. Economics isn't about theories. It is about practice.

      Context for political economists is not found in books or lectures. It is found in real world application. And everywhere these "neoliberal" ideas have been applied they have resulted in increasing inequality and brutal results often imposed most brutally.

      The notion that…

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    12. Andrew Hack

      IT Project Manager

      In reply to Peter Ormonde

      Again, you reference equality. And again I question, what good is equality when the poorest members of society are worse off in absolute terms. What good was it to the ordinary citizens under the Soviet bloc, that they were all equally able to join a long queue in order to receive basic services?

      Although it is true under these sorts of regimes that some are more 'equal' than others. That being, that these systems reward those with the political connections.

      I'm immediately skeptical of those…

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    13. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to Andrew Hack

      Andrew,

      I read the snippet you cited about trickling economics from the "libertarian" blog-site. I hope your reading goes a bit deeper than that. History would be a good start. Particularly the history of Friedmanite economics... and the sorts of outcomes it delivered and the means by which they were imposed.

      Friedman and Hayek were creatures of the Cold War - their economic models were predicated on fighting the good fight for freedom (though not necessarily democracy, as we have seen…

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    14. Andrew Hack

      IT Project Manager

      In reply to Peter Ormonde

      Friedman had a small bit of influence but Hayek influential? Puhlease! Seriously. I think you're making the same mistakes Frank (original author) is making. I suggest reading my comment I posted the other day which talks about how the financial crisis, commonly blamed on capitalism by Marxists et al, is not a product of free-market capitalism. As much as you keep referring to 'the real world' I'm just not exactly sure what this world is. I think you have a pretty warped sense of reality if you think…

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    15. Andrew Hack

      IT Project Manager

      In reply to Andrew Hack

      "Isn’t there something rather discreditable about being generous with other people’s money? I have told the story before of how MEPs reacted to the Indian Ocean tsunami. Speaker after speaker rose to propose gazillions in aid. But when one old boy, a sweet-natured Italian Catholic, rose to suggest that we make a personal gesture by donating a single day’s attendance allowance, the warmth drained from the room. Those who had been promising vast sums on behalf of their constituents glowered sullenly at the poor fellow. His proposal was icily dismissed and the meeting moved on."

      http://blogs.telegraph.co.uk/news/danielhannan/100131209/capitalism-isnt-immoral-its-the-most-virtuous-system-on-the-market/

      If you read the whole article, it sums up pretty well my thoughts on the subject.

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    16. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to Andrew Hack

      Andrew,

      I think you were rabbiting on about Maggie Thatcher earlier. Hayek was her guru when it came to matters economic... especially the Road to Serfdom. And, whether you have read him on not, what you are spouting is pure unadulterated Hayek... doyen of the Austrian School of which you purport to be a follower.

      I agree neither Hayek nor Friedman have much influence in economic policy nowadays having been totally discredited in the real world. It appears they still have some influence…

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    17. Andrew Hack

      IT Project Manager

      In reply to Peter Ormonde

      I'm not entirely sure when Friedman was Head of the Reserve, but he did advise Reagan although he was one of a few people. I did say that what Reagan preached in his election campaign and also when he campaigned on behalf of Barry Goldwater, was different to what happened under his administration once elected to the White House. Republicans are generally fiscally conservative only when in opposition.

      You haven't given me a single point on why you think it is 'totally discredited'. All you do is point to numbers that suggest there is wealth inequality. Yet you haven't been able to explain why wealth equality is more important than increasing the wealth of the poorest members of society.

      I would hardly call your charade of ad hom attacks as trying to effect 'productive discussion'.

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    18. Hugo Freeman

      Student

      In reply to Andrew Hack

      Andrew,

      In regards to your baker analogy and without loss of generality I think the social problem here arises not when the baker makes too much bread and thus drives his own price down and feeds everyone. The problem with said example is when he/she is the only baker in town hence contrives supply of bread to drive price up and maximise profits. The obvious social consequence is when the baker leaves a certain percent of the population hungry/starving.

      Big fan of capitalism as it is incredibly convenient to study yet there are inherent social problems that come with it. The real question is whether the economy(i.e. population at large) cares or not. It's easy to say you care but how economic agents act and react under certain conditions reveals their real ethical beliefs. Of course by economic agents I mean basically everyone.

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    19. Andrew Hack

      IT Project Manager

      In reply to Hugo Freeman

      In your first paragraph you are referring to monopolies, which largely occur due to government intervention. In a free-market system there is always the possibility that another operator - another baker - can move into the market and sell at a lower price.

      Can you give me some examples of the 'inherent social problems' caused by capitalism?

      Free-marketeers don't purport the system to fix every ill society faces.

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    20. Hugo Freeman

      Student

      In reply to Andrew Hack

      You'll find in a naturally occurring monopoly that it is government intervention that attempts to destroy the existence of the monopoly not the other way around. A naturally occurring monopoly being a market that is feasible only for one firm. To your point of another baker moving in - of course this is a possibility, but only if the entry costs are lower than the perceived benefit of entering the market. Perhaps the baker is not such a good example for a high entry cost market. Think about the privatisation…

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  7. Chris Baulman

    logged in via Twitter

    I agree with Michael - what Frank points to is a real problem, but treating the symptoms will only prolong the damage.

    Our economic system is grounded in private property, land in particular. Most of us are heavily invested in this system, are doing rather nicely out of it and are ambitious for more. How do you bring in ethical behaviour when our basic security over our food and housing is mortgaged to the bank for the next 20years ... when we are tied to unquestioning attachment to this model…

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  8. Roger Simpson

    logged in via LinkedIn

    Thank you Frank for giving me something I can show my friends/colleagues and say "see, look someone else agrees with me". Yes, the whole notion of economic individualism is a fallacy given our context of social and environmental relationships. These fallacious neo-liberal agruments have annoyed me for some time as being thinly veilled deluded attempts to justify greed.

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  9. Joseph Bernard

    Director

    "Share Holder Value"?

    Now there is a concept.. the “value” should have been the retirees and superannuation institutions.

    However, It seems that company directors and management have taken over the lion's share of profits, bonuses and value. and it is financial institutions that seem to be the worse offenders with reported bonuses in the 10s of millions and beyond.

    In Australia there is a movement towards shareholder activism that is challenging this corporate raiding of profits.. And with super that is in the interest of all of us.

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    1. Andrew Hack

      IT Project Manager

      In reply to Joseph Bernard

      I am in strong support of any movement that attempts to put control of the business back in the hands of the business owners; in the situation of publicly listed companies, the shareholders.

      Unfortunately the CSR (Corporate Social Responsibility) movement attempts to do the opposite, by promoting philanthropic executives and directors at the behest of the shareholders.

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    2. Hugo Freeman

      Student

      In reply to Andrew Hack

      This is a very valid point given that the demise of investment banks such as Bear Stearns and Lehman was fundamentally due to the disconnection of responsibility and power. I believe it was back in the late 70's to mid 80's when there was a big trend toward listing banks on the exchange.

      Those in power, i.e. directors and so on had no real responsibility from this point to fulfil their purpose as shareholder wealth maximisers in the long run, other than to keep their job. Sometimes that is not incentive enough when there are reasons in the short term to be irresponsible. Make it their own money and there would most likely be a different story. Simple game theory really.

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  10. Peter Redshaw

    Retired

    To expect that the market system will operate according in an ethical way is an oxymoron. Markets will always operate according to what they see as their own self-interest. It does not necessarily mean that in the long-term their actions are actually in their own self-interest, but that is another debate. Knowing that, the role and responsibility of government is far more important.

    What we have seen from the Global Financial Crisis (GFC) along with the problem of allowing corporations to be…

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  11. John Harland

    bicycle technician

    Does "Triple Bottom Line" accounting" actually have any rigour?

    The only example I have seen might have been a poor ones, but the social and environmental aspects seemed to be no more than nice-sounding guesses without any real quantification.

    Is it actually anything more to it or is it just Greenwash?

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  12. Kevin Cox

    logged in via LinkedIn

    The sentence "Capital makes capital, while those without capital often remain consigned to poverty" gives the hint to a mechanism to a more equal division of capital. The sentence could be "Credit makes capital, while those without credit often remain consigned to poverty". When assets are created funds have to be spent. Most funds for asset creation come via credit and only those with assets can get credit.

    If we set up systems where everyone in society has equal access to credit and where…

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    1. Michael Shand

      Software Tester

      In reply to Kevin Cox

      I think the problem here Kevin is that you dont address any of the real concerns in the system, your proposal just makes it easier for people to get into debt.

      I mean do we really have a problem with banks not lending enough? or do we have a system that encourages banks to over lead and over extend themselves making them to big to fail?

      It seems like you have a novel idea but it doesnt seem to address any real concerns that anyone has raised

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    2. Kevin Cox

      logged in via LinkedIn

      In reply to Michael Shand

      Michael,

      The proposals are built on a few simple premises. First there is no interest on interest. Second there is no cost to use money tokens (there is still interest but no charge for using the tokens in the same way there is no charge for using coins or paper currency), and third is that the loans are all contingent loans. That is, the loans are only repaid when the asset earns more than it costs to operate. (this is easy to do with public infrastructure). When we consider the whole of society any loans that don't get repaid are more than compensated by the loans that earn more than invested.

      People get into debt but the debt is repayable and it does not compound.

      The current loans system has exponential growth components. Any system with exponential growth must be unstable. Remove exponential growth and the system will stabilise.

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    3. Andrew Hack

      IT Project Manager

      In reply to Kevin Cox

      How do you determine which projects are worth funding and which projects aren't?

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    4. Andrew Hack

      IT Project Manager

      In reply to Kevin Cox

      So it favours political self-interest over economic self-interest. I'm not sure how that is somehow more noble.

      "That is, the loans are only repaid when the asset earns more than it costs to operate. (this is easy to do with public infrastructure)."

      What when the project fails? The problem is that we want resources to be allocated efficiently, so as to not waste. By privatizing capital it means that good investments are rewarded and bad investments punished through either a higher or lower rate of return respectively.

      It means that investors will do their research beforehand and be more likely to invest wisely, given it is their own money at stake.

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    5. Kevin Cox
      Kevin Cox is a Friend of The Conversation.

      Adjunct Associate Professor at University of Canberra

      In reply to Peter Ormonde

      Peter,

      I am not suggesting existing capital is redistributed. What is suggested is that credit be widely distributed in ways that will create new capital. Currently only people who have capital have access to credit. That is economically inefficient as people with little tend to be more careful and use credit more effectively and produce more wealth with less.

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    6. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to Kevin Cox

      Oh no no no Kevin... that's what Andrew doesn't like. He knoes exactly what you are proposing mate - and he won't like that at all.

      You said it yourself above: "Capital makes capital, while those without capital often remain consigned to poverty".

      Now we people with capital need to have people without capital... the poor as you might say. They make the stuff. Poorer the better actually. Slavery was good ... a bloke could really get ahead.

      But if everyone has got capital why they'd be demanding more money to make our stuff... they'd rather go fishing... they'd go off and employ someone themselves. Simply won't do. Won't do at all.

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  13. David Arthur

    resistance gnome

    I understand this article as arguing that competitive capitalism necessarily leads, in many industries, to fewer and fewer ever-larger corporations, to oligopolistic and ultimately monopolistic dominance of a given industry by these corporations.

    My understanding is that these corporations, once large and sufficiently dominant in their industries, can influence government policy to their own ends. From time to time this influence results in government making decisions to the general detriment…

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  14. Andrew Hack

    IT Project Manager

    Frank,

    It is not the amoral behaviour of market forces that caused the crash. It is the immoral behaviour of government involvement with the large financials creating the system whereby profits and privatized and losses are socialized. Here are a few examples of the government intervention at play, which Marxists always find convenient to ignore:

    * Federal Reserve (part owned by Goldman Sachs) creating cheap credit through near-zero interest rates
    * Federal Reserve creating trillions of dollars…

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    1. Hugo Freeman

      Student

      In reply to Andrew Hack

      Hello again Andrew,

      Regarding your first paragraph. You will find that there is a very good possibility that the actions taken by the government in this situation were desperate measures to avoid a crisis that in retrospect was bound to happen, but not the cause of the crisis itself.

      The root of the problem was unarguably irresponsible lending in the form of mortgages to unsuitable debtors. What followed from that was a very complicated transference of liability. The action taken by the government to bail out the private banks was probably the biggest plunder they made in reaction to the crisis, but they could no way be blamed for it occurring.

      Your argument relies on the fact that the government 'privatised profit and socialised losses', but maybe you should look at this as an affect of the crisis, not a cause of it.

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  15. Roger Simpson

    logged in via LinkedIn

    I think an important aspect of this discussion on ethics is whether we appropriately identify the observable costs of an economic venture. For example; the current mining boom has siginificant social and environmental costs that are externalised to be paid by local communities, other Australian industries and future generations. I wonder how viable this mining boom would be for our governments and mining execs if we built those costs into such activities.

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