The collapse of communism in the late 1980s represented the final discrediting of the command economy model, precisely because it was a collapse from within. That had considerable political impact in Western Europe, Latin America and Africa, where there had been a significant faith in the possibility that socialism apparently offered of transcending the market economy. Accordingly, prior to 1989, the Left tended to dismiss business ethics as mere “tinkering with the system”, when what was needed was to abolish it. The Left assumed (a) that one could make an intelli- gible judgement to the effect that the capitalist system was inherently immoral, and (b) that it could be replaced by a system that was more efficient, more egalitarian, and non-capitalist. From the 1980s onwards, as it gradually came to be accepted (a process not yet complete) that both assumptions were false and that private property and the market are here to stay, there was a surge of interest in business ethics. To- day, not merely as an economic system, but as a political movement with widespread appeal, socialism is quite dead.
The same could not be said of anti-capitalist populism, expressed in the anti- globalization movement and the recent emergence of populist leaders in various Latin American countries. The fact that populism offers no serious economic anal- ysis or policy has little effect on its moral and political appeal. Populism is a kind of moral movement; and to say so is not to approve of it, merely to describe it.
Marx and Engels contemptuously dismissed moral critiques of capitalism, in favour of “scientific” socialism. Yet it has been moral critiques of capitalism that have been the most powerful. In the late twentieth century, the impact of the mass media and information technology heightened public awareness of dishonest busi- ness practices, exploitation of peasants and labourers in the Third World and ca- sual environmental pollution. The picture painted was often wide, undiscriminating, sometimes simplistic and with a tendency to see it as the good guys (the little people, the great mass of humanity) vs the bad guys (powerful corporations, accountable to
120 J.G. Murphy nobody). Familiar instances of such portraits of big business include such films as Silkwood (1983), The Insider (1999), and The Corporation (2003). The critique is simplistic; but that is beside the point. At showings of The Corporation, a no-holds- barred all-out attack on big business, audiences have clapped loud and long. So, even though no serious analyst considers it possible to have a non-market economy, pri- vate enterprise and big business have an image problem. That may have significant political implications, leading to a “legitimation” crisis for business.
In the late 1920s and the early 1930s, capitalism’s legitimation crisis in Europe was so severe that support for free market economics declined dramatically. It en- couraged the rise of anti-capitalist, anti-liberal, and anti-democratic movements on both left and right, in the form of communism, fascism, and the various forms of authoritarian or quasi-military regimes that took over most European countries in those years, excluding only the Nordic and Benelux countries, Britain, Ireland, France and Czechoslovakia. Christian Democracy, a remarkably successful political force in post-1945 Germany and Italy and elsewhere, was strongly influenced by the idea that the capitalist system was tolerable only when subjected to a major social mortgage. The Christian Democrats were clear that while they were not socialists, they definitely were not free market liberals either.
While at present, a liberal free market model is accepted (and remember, I am referring here to political acceptance, not just acceptance among economists), it is accepted with some reluctance among the public. When politicians propose the liberalization of markets, privatization of public companies and the like, the public is rarely enthusiastic. Times change, and the kind of anti-business politics of the early twentieth century could well rise again. The economic irrationality of a populist approach carries little weight in the face of a serious popular anti-business reaction.
It follows that business, particularly transnational business, needs legitimacy.2 It always needs legitimacy because of the power it actually has to affect peoples’ lives, because of the public perception that it wields great power and is focused on profit, and because of the resultant suspicion that there are no ethical limits to the ways it will use people in order to make bigger profits.
Some businesspeople may protest and say it should not be like that, business provides a very valuable service, it delivers the goods like never before, and it should not have to be concerned about “social legitimacy” – whatever that is. The protest is idle; it is reminiscent of King Canute commanding the waves to go back. Busi- nesspeople pride themselves, often correctly, on their hardheadedness about what it takes to make a business work, in contrast to the na¨ıvely do-good ideas in some quarters about business, ideas that would ruin a business in short order. They need a parallel hardheadedness about the fact that social context influences and delimits the scope of business, and deal with it realistically, not trying to pretend it is not there. This is not just a public relations (PR) problem or a political problem. It is also (and perhaps fundamentally) an ethical problem, one of the points where doing business is tied, willy-nilly, to being ethical. Unethical businesses eventually have bad PR and political problems, and may even be shut down.
What counts as unethical business is determined, not solely by business itself but in part by the social context (including regulatory agencies, the legislature, various
People in Business 121 non-governmental organizations (NGOs) like unions and churches, etc.). Political upheaval, social unrest and expropriation are often the price to be paid for ignoring popular feeling. Getting serious about business ethics is one way business could take out what could be called “legitimacy insurance.”
Another objection to the idea that business needs “social legitimacy” comes from Milton Friedman’s claim that a business’s only social responsibility is to increase its profits, and that it should not waste the owners’ or investors’ money in funding char- ities or community projects. It has some merit. However, accepting it implies that the responsibility for building civil society and funding social projects lies elsewhere, presumably with the state. That actually militates in favour of heavier taxation of business to provide the money for social projects: business will pay, one way or another. Second, Friedman’s thesis also provides an argument for reduction of the scope for self-regulation by business and strictly limiting its role in influencing and lobbying legislators, on the grounds that (according to Friedman) business cannot legitimately have any concern for the common good or the public weal and will
“regulate” itself and lobby the government for narrow sectoral interest alone. The Friedman thesis opens the way to a more intrusive state and a more regulated busi- ness sector. Clearly, the world of business has some choices to make here. To avoid that outcome, the Friedman thesis would need to be accompanied by a theory in political philosophy arguing that the state should not seek to build civil society or fund social projects, let alone tax or regulate anybody to achieve such goals, so that such goals are appropriate only to private charity. To argue that one would be far tougher, and it is not apparent that it has any merit at all.
Finally, even if a company did accept the Friedman thesis, it would be well ad- vised to regard it as dealing solely with a moral demand or what is absolutely re- quired by justice. In other words, while a business is not morally required to support non-business social projects, in specific contexts it may be politically inadvisable, bad for the business’s PR image, to fail to do so.3Ethics is not just about what is required or morally mandatory, but also about what would be morally desirable or ethically admirable.
A third important contextual factor is religion. This may seem an odd factor to in- clude, since the influence of organized religion seems weak and declining in Europe.
However, its influence is stronger elsewhere and likely to remain so, for instance, in Latin America. It is probably increasing, in Africa, the Muslim countries and the USA. The European phenomenon of progressive secularization, accompanying industrialization and dramatic improvement in living standards is not a global phe- nomenon. Organized religion influences the political context within which business operates, thereby affecting business. It is, even in secularized societies, an important way in which values are transmitted between generations. It would be surprising if such moral upbringing did not play some role in shaping the policies adopted and decisions made by businesspeople and financiers.
While the great religions accept the necessity of lifting people out of poverty and accept the role of private property in bringing that about, they also cast a wary eye on business, and on the attachment to wealth and material goods that it generates.
It is important that businesspeople do not dismiss that concern out of hand – if for
122 J.G. Murphy no other reason than that it is counterproductive to try doing so. It is true that eco- nomic analysis connected to religion’s critique of business tends to be ill-informed on economics. But the accuracy of the economic analysis is not what matters. The role of religious groups, their “expertise”, lies in the moral impact of their speaking up for the underdog. As Adam Smith would have emphasized, the economic system of private property and the market (like any economic system) always needs moral critique.
In a now bygone era, business people could have dismissed such moral critique on the grounds that it amounted to calling for an end to private property and the market. But we no longer live in an era of a crude and somewhat simplistic clash of systems, capitalism vs socialism. Not just socialists but also some capitalists need to catch up with the implications of that development. Catholic social thought endorses the market and profit, private property and the right, even the duty, of economic initiative. To imagine today that critique of the way the capitalist system works in a given context is always tantamount to rejection of the system per se is irrational, and may be perceived as deliberately evasive of criticism.
The final contextual factor to which I draw attention is the impact of ecology: un- der that heading I include both the global physical and biological environment with its changing constraints, and, at the social level, the environmentalist movement, both academic and activist. There have always been some physical environmental constraints on human activity. But there has been a major change. Once upon a time, Mother Nature was powerful and we were weak, due to lack of tools and vulnerability to diseases and the elements, and we had to fight in order to survive.
Today, we are powerful and Nature is weak, and we are slowly awakening to the fact that we must preserve it in order to survive. Environmental degradation, arising from human impact on the eco-system, cannot but be a major contextual factor for a modern business. It applies even when business has not been directly responsible for particular instances of ecological degradation or disaster. The importance of this factor will increase in extent and intensity in the coming decades.