Ethics and Religious Studies | Business and Economic Ethics

Business and Economic Ethics: Making Money the Right Way

Hello there! Welcome to the exciting world of Business and Economic Ethics. This might sound complicated, but it's really about things we see every day: how companies make money, why some people are rich while others are poor, and whether that TV ad is telling you the whole truth.

In this chapter, we'll explore the big questions about what is 'right' and 'wrong' in the world of money, business, and work. Understanding this is super important because one day you'll be a worker, a consumer, and a citizen who makes choices that affect the economy. Let's get started!

1. Justice, Fairness, and Equality in the Economy

At the heart of economic ethics are three big ideas: Justice, Fairness, and Equality. They're related, but slightly different. Don't worry, we'll break them down.

So, what do these words actually mean?

Think of it like sharing a pizza with your friends:

• Equality: This means everyone gets the exact same size slice. Simple!
• Fairness (or Equity): This means everyone gets the slice they need. Maybe your friend who hasn't eaten all day gets a slightly bigger slice, while your friend who just had a big lunch gets a smaller one. It's not equal, but it's fair because it considers everyone's situation.
• Justice: This is about making sure the rules for sharing the pizza are fair in the first place. Who gets to decide how the pizza is cut? Is the person cutting it being honest? Justice is about fixing the system to ensure fairness for everyone in the long run.

Quick Review Box
Equality = Everyone gets the same.
Fairness = Everyone gets what they need based on their situation.
Justice = The rules and systems are fair for everyone.

Seeing Fairness in Action: Tax and Social Welfare

Governments use policies like taxes and social welfare to try and make society more fair.

Taxes: Think of tax as everyone chipping in money to a big pot. This money is then used to pay for things we all share, like hospitals, roads, schools, and parks. A common way to apply 'fairness' here is with a progressive tax system.

How it works: People who earn more money pay a higher percentage of their income as tax. Someone earning $500,000 a year might pay 17%, while someone earning $50,000 might only pay 2%. The idea is that those who have more can afford to contribute more to society. This is an example of fairness, not equality.

Social Welfare: This is how the government uses the money from the "big pot" (taxes) to help people in need. It includes things like unemployment benefits for those who lose their jobs, financial assistance for the elderly and disabled, and public housing. This is a way to create a 'safety net' and promote equality by making sure everyone has access to basic necessities.

Real-World Ethical Issues from a Justice Perspective

Let's look at some real-life situations where fairness and justice are tested.

Fair Trade

When you buy a coffee, do you ever wonder how much the farmer who grew the beans actually got paid? Often, it's a very tiny amount. Fair Trade is a movement that tries to fix this. It ensures that farmers and workers in developing countries get paid a fair price for their products. When you buy a product with a Fair Trade label, you know you are supporting a more just system for the producers.

Syndicated Loan

This sounds tricky, but the idea is simple. A syndicated loan is when a group of banks team up to lend a huge amount of money to a single borrower (like a massive company building a new airport).

The ethical issue: What if the company they're lending to is known for polluting rivers or using child labour? The banks have an ethical duty to consider the impact of their loan. Are they helping a company do good things, or are they funding something harmful just to make a profit? This is a question of justice and social responsibility.

Corruption

Corruption is the abuse of power for personal gain. A classic example is bribery, like a construction company paying a government official to win a contract, even if their building plan is unsafe. Corruption is a major injustice because it means decisions are based on greed, not on what's best for the public. It breaks the rules of a fair system.

Industrial Action

This is when workers take action to protest against their employer, for example, by going on strike (refusing to work).

The ethical conflict: On one hand, workers have a right to demand fair pay and safe working conditions. On the other hand, a strike can harm the company and inconvenience the public (imagine a bus driver strike!). The ethical challenge is to balance the workers' right to justice with the company's need to operate and the community's need for services.

Key Takeaway for Section 1:
Economic ethics is all about applying the principles of justice, fairness, and equality to the real world. This can be seen in government policies like tax and in complex issues like fair trade and corruption, where we have to balance different people's rights and needs.

2. The Challenge of Poverty

Poverty isn't just about not having money. It's about a lack of opportunities, education, and basic necessities. Let's explore its roots and causes.

The Origin of Poverty

There's no single cause of poverty. It's a complex web of factors, including:

• Individual factors: Such as illness, lack of education, or making poor life choices.
• Social and structural factors: Such as discrimination, lack of jobs in an area, or a weak social welfare system.
• Historical factors: Such as the long-term effects of war or colonialism.

It's important to remember that poverty is often a result of the 'system' being unjust, not just an individual's fault.

Causes of Poverty in a Globalized World

Globalization means our world is more connected than ever. The phone you use might be designed in America, made with parts from Korea, and assembled in China. While this can create jobs, it can also contribute to poverty.

• Unequal Trade: Rich countries often set trade rules that benefit them, making it hard for poorer countries to sell their products for a fair price.
• Exploitation of Labour: Some big multinational companies move their factories to poor countries to take advantage of low wages and weak worker protection laws. People work long hours in poor conditions for very little pay.
• Brain Drain: Talented and educated people (like doctors and engineers) from poor countries often move to richer countries for better opportunities, leaving their home countries with a shortage of skilled workers.

What are the solutions?

Solving global poverty is a huge task, but some solutions include:

• Promoting Fair Trade to ensure producers get a just wage.
• Providing foreign aid and investment focused on education and healthcare.
• Cancelling the debts of the poorest nations.
• Supporting microfinance (giving small loans to people in developing countries to start their own businesses).

Key Takeaway for Section 2:
Poverty is a complex problem with deep roots. In our connected world, the actions of rich countries and large companies can have a huge impact on poverty in poorer nations. The solutions must be about creating a more just and fair global economic system.

3. The Ethics of Advertising

Advertisements are everywhere! They are designed to persuade us to buy things. But do they always play fair?

How Ads Transmit Messages and Values

Ads do more than just show you a product. They sell a lifestyle, an emotion, or an idea. They transmit values by:

• Creating a need: Making you feel like you're missing something without their product. (e.g., "You'll never be popular without these cool sneakers!")
• Using emotional appeal: Connecting their product to feelings of happiness, family, love, or success. (e.g., a soft drink ad showing a group of happy friends.)
• Promoting role models: Using celebrities or attractive people to make you want to be like them (and buy what they're using).

The main value guiding most ads is, of course, profit. The goal is to sell more products.

Positive and Negative Effects of Advertising

Advertising isn't all bad or all good. It has both positive and negative sides.

Positive Effects

• It informs consumers about new products and services.
• It promotes competition between companies, which can lead to better products and lower prices.
• It funds media, like TV shows, websites, and newspapers, making them free or cheaper for us.

Negative Effects

• It can be deceptive or misleading, making false promises about a product.
• It promotes materialism – the idea that happiness comes from owning things.
• It can create and reinforce harmful stereotypes (e.g., showing only women doing housework).
• It often targets vulnerable groups, like children, who can't easily tell the difference between a show and a commercial.

Did you know? Many countries have laws about advertising to children. For example, an ad can't directly tell a child "Ask your parents to buy this for you!" This is an ethical rule to protect those who are most vulnerable to persuasion.

Key Takeaway for Section 3:
Advertising is a powerful tool that shapes our values and desires. Ethically, advertisers have a responsibility to be truthful and to consider the negative impacts their messages might have on society, especially on vulnerable people.

4. Social Responsibility of Corporations

Does a company like Apple or McDonald's have any duty other than making as much money as possible? This is the core question of Corporate Social Responsibility (CSR).

Profit Motive vs. Social Responsibility

The profit motive is the basic idea that a business exists to make money for its owners. For a long time, this was seen as a company's only goal.

However, the idea of social responsibility argues that businesses also have a duty to act ethically and contribute positively to society. This is because their actions affect many people and the environment. The challenge is balancing the need to be profitable with the need to be responsible.

Who Does a Company Answer To? Meet the Stakeholders

A stakeholder is any person or group who is affected by a company's actions. A company has ethical obligations to all of its stakeholders, not just its owners.

Analogy: Think of a school. The stakeholders aren't just the principal (the owner). They include the students, teachers, parents, and even the people living in the neighbourhood around the school. Everyone has a "stake" in how the school is run.

The main stakeholders for a company are:

Shareholders

These are the people who own the company. The company's main obligation to them is to be profitable and provide a good return on their investment.

Consumers

These are the customers who buy the products. A company's obligations include providing safe, reliable products, charging fair prices, and being honest in its advertising.

The Community

This includes the local community where the company operates and society as a whole. A company's obligations include providing jobs, avoiding pollution, paying taxes, and being a good "corporate citizen" (e.g., by supporting local charities).

Ethical Considerations in the Production Process and Outcomes

A company's responsibility covers its entire operation, from start to finish.

• Ethical Production Process: This is about how a product is made. Are the factory workers paid a fair wage? Are their working conditions safe? Is the company minimizing pollution and using sustainable resources? Using child labour would be a major ethical failure in the production process.
• Ethical Outcomes: This is about the product itself and its impact. Is the product safe to use? Is it beneficial to society, or is it harmful (e.g., cigarettes or weapons)? Does the company dispose of its waste products responsibly?

Common Mistake to Avoid: Thinking that CSR is just about donating money to charity. While charity is good, true CSR is about integrating ethical behaviour into every part of the business, from how it treats its workers to the impact of its products.

Key Takeaway for Section 4:
Modern businesses are expected to do more than just chase profits. They have a social responsibility to a wide range of stakeholders—including their shareholders, consumers, and the community—and must consider the ethical implications of both their production process and their final products.