Free-Market Capitalism Unethical
In the walls of the Rana Plaza building – a Bangladeshi factory complex – dangerous cracks had been discovered, but the staff had been instructed to continue working and to produce clothes for lucrative export to the West. Now over 900 people have died in the ruins of the collapsing building. In the past eight years alone, more than 1,000 workers died in similar incidents due to factory owners negligence. The Bangladeshi government has failed to regulate the apparel industry by enforcing adequate safety standards.
In light of this tragedy, we might wonder if unregulated free market capitalism is a good thing. How can his revocations be correct when they say that the profit motive, property rights, division of labor, and competition actually lead to prosperity for all? Is it really true that market regulation reduces the entrepreneurial spirit?
Free market advocates believe that self-interested individuals would most often engage in win-win transactions: Self-interest is a natural and useful precondition for unhindered free markets to function well.
“The most important central fact about a free market is that no exchange takes place unless the two parties benefit.”
The pursuit of profits by competing in the market economy, self-interested companies should benefit even the poorest: An unintended consequence of individual gain is thus wealth for all.
If the biblical message that love of money is at the root of all evil is true, then maximizing profits may be undesirable. You can let yourself be carried away by free competition to earn money. In nineteenth-century America, many people opposed the prohibition of child labor because it would violate the foundations of a free-market economy.
The capitalism of the free market leads to big differences in wealth. For example, according to Ha-Joon Chang:
“The top 10 percent of the US population received 91 percent of their income growth between 1989 and 2006, the top 1 percent 59 percent.”
One of the most obvious recent social trends in Britain has been the huge and widening gap between rich and poor. One may wonder whether, even if free market capitalism reduces absolute poverty in one country, the gross inequality of relative poverty could lead to a divided society and not to a coherent society.
Almost three centuries ago, the spiritual philosopher Emanuel Swedenborg wrote that it was not ethically wrong to make a profit. How else can you care for yourself and your family? Today, as in the past, any business that focuses on non-profit sales does not survive.
However, according to Swedenborg, there is an important difference between generating profits by providing a commercial service and using customers to maximize profits.
For example, the ethical cobbler calculates his customers what he considers fair and reasonable, and not necessarily the higher price the market would pay. He has to cover his expenses and care for the needs of himself and his family, but his focus is on helping his community.
There is a central spiritual principle here. It is that all spiritual life is the life of wanting the useful. In other words, the inner experience of deep happiness and contentment is not based on material gain, but on serving others and enjoying their fellowship.
If you work for yourself, you can adopt your own rules. However, economies of scale in production mean that large companies operate in large markets that are impersonal and traders operate anonymously. For example, one might wonder how a manager is hired by salespeople who do not get the best price by charging only a fair price, rather than the highest possible price they can get away with. Companies have codes of ethics, but we might be wondering if the ethical problem of non-exploitation – something that may go beyond common business practice – could be defined by companies whose investors expect to maximize profits.
In some parts of the world, the seizure of limited resources through greedy exploitation of the weak and illiterate is believed to leave many hungry and homeless.
“There is enough for everyone’s needs, but not for the greed of all” (Gandhi)
Moderation of the free market economy
Here are some suggestions that come to my mind.
Restricting the privatization of natural monopolies (eg water supply) to promote the ownership of the served population or strengthening the powers of regulators such as Ofgas, Ofgen etc. in the UK
Ensure free competition by limiting the price increase that occurs when companies try to dominate the market through the formation of cartels and restrictions on takeovers (eg in the UK by the Monopolies Commission)
Reduction of the size and thus the locality of savings banks in the sense of the previous mutual societies, before they could become private banks.
Encouraging local markets where business people earn money from activities they can personally participate in. Granted, in the modern global networked world, the ability to do so is limited.
Further development of markets for “Fair Trade” products.
Create opportunities for business participation. For example, the John Lewis Partnership, which owns a chain of department stores and supermarkets, seems to have a good scheme; The Company is, on behalf of all employees, in possession of a trust – the so-called Partners – who are involved in the management of the Company and receive a portion of the annual profit, which generally represents a significant increase in their salary.
While the desires reflected in the markets remain largely materialistic, I believe it will be difficult to develop an alternative economic pattern. Therefore, the best ethical solution seems to be that the government does not de-control the markets, but continues to exercise health and safety control, prevent monopolies, and ensure fair competition.