Macro-ethics

Module 3

1
Overview
 Macro-ethics is the study and evaluation of the
social, economic, political, environmental and
cultural contexts that shape our practices.
 These contexts constrain and enable individual and
group behaviour.
 We shall confine ourselves to looking at:
 The capitalist system in which business operates.
 Some conceptions of distributive justice that either
supports this system or that can be employed to critically
evaluate capitalism.

2
Introduction
 Capitalism is an empirical fact of today’s world.
 But of concern to ethicists are the values upon which capitalism
is premised, and the social issues that capitalism gives rise to.
 I.e. we are interested in examining capitalism as a normative,
rather than descriptive system.
 The strengths and weaknesses of capitalism.
 Strengths
 Capitalism has led to many advances in society.
 Incentivising development and innovation in fields such as science,
technology, transportation and medicine.
 Increasing choices between available products and services.
 Facilitating the development of global trade and finance community.
 And has increased the general wealth of society.
 Weaknesses
 Capitalism has contributed to the steady increase in socio-
economic inequality.
3
Introduction
 Capitalism is premised on the homo economicus view of
the human, which is grounded in the assumptions that we
are rational human beings who seek to maximise both
monetary and non-monetary utility.
 This view accounts for the self-interested dimension of
human nature and translates into a description of human
beings as acquisitive, materialistic and individualistic.
 Golden rule of capitalism → one needs to invest money
in order to make money.
 The poor are unlikely to benefit from a system that advances
the wealthy and rewards self-interested behaviour.
 South Africa has extreme income inequality – its 2015
Gini coefficient was 0.6%
4
Introduction
 The capitalist system raises some very important
questions concerning distributive justice.
 Questions regarding distributive justice focus on the
criteria and principles according to which societal benefits
and burdens should be distributed.
 Some of the commonly mentioned criteria include effort, merit,
need and social contribution.
 The problems is that many of these criteria are also
incompatible.
 E.g. One cannot simultaneously claim that resources should be
distributed on the basis of superior effort and need, since those in
need often have not had the opportunity to undertake extensive
training or study in order to secure an economically advantaged
position in society.
 Distributive justice hinges on the question of what would
constitute a fair allocation and division of benefits and burdens.

5
Introduction
 The fact that capitalism makes such inequalities possible
necessitates that we critically evaluate our current
economic system.
 Given the recent financial crisis and near-global recession
that followed, it is imperative that we undertake this task,
to promote the creation of a more sustainable form of
capitalism.

6
The rise of capitalism
 Capitalism versus statism
 Capitalism
 Capitalism operates on the basis of a market system in which
production and distribution is privatised.
 Its purest form is laissez faire capitalism which loosely translates
from French as ‘let do’ or ‘let things alone’, espoused by Adam
Smith.
 According to Smith’s pro-free market argument:
 The market will be more efficient if we allow the market mechanism
to function with minimal interference from the state.
 The notion of an “invisible hand” directing / guiding participants in
the market to promote the wellbeing of society as a whole (the
mechanism through which the market is regulated).
 Capitalism also brings about division of labour and specialisation,
promoting efficiency.
 Smith’s pin-manufacturing example.

7
The rise of capitalism
 Capitalism versus statism (continued…).
 Statism
 The antipole of capitalism.
 The most significant example is market socialism.
 Socialism is characterised by the public ownership of property
and a state-controlled economy.
 The father of the doctrine is Karl Marx.
 Marx’ s critique of capitalism:
 It centres on capitalism’s exploitation of the workforce, and the
sense of alienation that the workforce experiences.
 The capitalists (bourgeoisie) pay the working class (proletariat) a
subsistence wage, and not a wage that is equal to the value of what
they produce – the working class have no bargaining power.
 This produces a surplus value for the capitalist, i.e. the difference
between what it costs to employ the worker and what he can
produce (increases inequality since the worker becomes poorer the
more wealth he produces).
8
The rise of capitalism
 Capitalism versus statism (continued…).
 Statism (continued…).
 Not only is the worker exploited through forced labour, but he is also
alienated from his labour.
 Because work is a person’s essence, and the worker’s essence is now
being used against him.
 Back to Smith’s pin-manufacturing example – Imagine the
dehumanising effects of dedicating one’s life to performing one
repetitive action that forms part of that process.
 The inevitable outcome of the capitalist system – The working class
will overthrow the system through a workers’ revolt, and the working
class will then manage the economy collectively, for the benefit of
the majority.
 History belies Marx’s predictions:
 A revolution never took place and socialism as such has failed to prove a
worthy alternative to capitalism.
 But most economies now sit somewhere between laissez faire capitalism
and statism.

9
The rise of capitalism
 The dynamic nature of capitalism
 Western economic systems are characterised by market-
orientated capitalism; while China practices state capitalism.
 Western models
 The Anglo-American (UK and US) model.
 Geared towards a shareholder model which is characterised by a single-
tiered board of directors that gives primacy to shareholder interests.
 Little or no industrial policy involving corporations cooperating with
government.
 The European model
 Characterised by a stakeholder model – two-tiered board of directors,
with stakeholder representation.
 Industrial policies are used to regulate the business environment.
 Regarding the provision of a social safety net; the UK and
European countries have a much more extensive safety net than
the US.

10
The rise of capitalism
 The dynamic nature of capitalism (continued…).
 And South Africa?
 Board structure and the role played by financial markets and
banks like the Anglo-American model.
 The evidence regarding industrial policy is mixed (e.g. fair
amount of government intervention – Employment Equity Act
and Broad-based Black Economic Empowerment Act).
 An extensive social safety net given the size of the economy.
 Not only do we see different degrees of state intervention
in the economy in different countries, but also in different
time periods.
 2012 World Economic Forum meeting
 Unions: The economic crisis is the fault of powerful
corporations.
 Corporates: No, governments are to blame.
11
Key features of capitalism
 Many theorists attempt to define capitalism in terms
of key features. William Shaw argues that the
following key features are especially significant in
understanding the core of capitalism:
 The rise of the corporation
 Private property
 The profit motive
 Competition.
 Key feature #1: Corporations
 Refers to the incorporation of a group of people who act
as a single entity in pursuing a common objective.
 Allows a group of investors to share the risk and potential
reward of their business activities.

12
Key features of capitalism
 Key feature #1: The corporation (continued…)
 Modern-day corporations have three outstanding
features:
 A (theoretically) perpetual lifetime i.e. the corporation can
continue to exist beyond the lifespan of its individual members.
 Legal identity (personality).
 Limited liability for shareholders.

13
Key features of capitalism
 Key feature #2: Private property
 Private property consists of both:
 Tangible assets
 Factories, offices, computers, ground and other physical resources
 Intangible assets
 Shares, bonds, warrants and futures
 Private property is both an indication of our present
wealth and of our future potential for generating wealth.
 Key feature #3: The profit motive
 The incentivising force behind capitalism, since without it
entrepreneurs would have little reason to risk their time
and money on new ideas and businesses.

14
Key features of capitalism
 Key feature #4: Competition
 Economy is profit driven but is regulated by competition
(invisible hand of the market).
 Back to Smith’s argument:
 Suppliers are driven by self-interest, but their actions are guided
by the invisible hand of the market mechanism.
 The beauty of the invisible hand of the market is that it directs
private self-interested behaviour in a way that benefits society
as a whole.
 But Smith’s theory is based on perfect competition.
 While the reality is that there is monopoly formation, which
enables price manipulation.
 Hence capitalism does not always promote the welfare of
society as a whole.

15
Theories of justice
 Introduction
 Issues pertaining to justice inevitably arise in a world
dominated by an economic system which results in certain
individuals having more opportunities in life to advance their
station [and] more resources at their disposal for realising their
dreams and more socio-economic power to facilitate the
achievement of their goals.
 These issues concern the fair acquisition, distribution, and use
of limited resources.
 Three influential theories on distributive justice:
 Utilitarianism.
 Egalitarianism.
 Libertarianism.

16
Theories of justice
 Theory #1: Utilitarianism
 Utilitarians use the greatest happiness principle to
determine the morality of an action.
 Associated with John Stuart Mill.
 Per Mill:
 Distributive justice should be based on the principle of social
utility.
 So an action would be deemed just if it promotes overall
societal welfare.
 Problem: Can be used to justify rights infringements.

17
Theories of justice
 Theory #2: Egalitarianism
 John Rawls in A Theory of Justice
 Justice should be understood in terms of fairness.
 He proposed a thought experiment whereby a person has to
choose a fair system from behind a ‘veil of ignorance’ (meaning
that he/she has no knowledge of his own social status or
abilities, so he/she cannot make self-serving choices).
 Such a person, if rational, would opt for a system that has the
following features:
 Basic liberties.
 Social and economic inequalities will only be justified if they benefit the
worst-off in society (the whole boat must be lifted) and are attached to
positions and offices open to all (there must be no arbitrary
discrimination).

18
Theories of justice
 Theory #3: Libertarianism
 Freedom or liberty is the highest value.
 Supports a philosophy of personal freedom, in which
individuals can exercise their own choices on the
condition that they do not interfere with other people’s
freedom.
 Argues for minimal state interference.
 The state should only enforce contracts and protect citizens
from arbitrary infringements of their freedoms.

19
Theories of justice
 Theory #3: Libertarianism (continued…)
 But this argument raises questions regarding the basis for
resource allocation in society.
 Robert Nozick:
 The resource allocation must be the outcome of a voluntary
exchange.
 Once you have legitimately acquired your property, you are entitled
to do with it whatever you want.
 And you can legitimately acquire property through original acquisition or
valid transfer.
 Criticism of Nozick’s argument: He over-emphasises property
rights as something which precedes all social relationships, and
that we therefore cannot regulate or manage through law.

20
Conclusion
 Capitalism inevitably gives rise to questions
regarding distributive justice.
 The theories on distributive justice help us better to
formulate and systematise our own views on the
matter.
 Those who benefit from the current system probably
prefer libertarianism; those who are more aware of socio-
economic inequalities may prefer a more egalitarian
theory.

21
 CASE 7: THE MANAGER’S WHISKY

You have to use the company pool vehicle to fetch some

22
QUESTIONS:
1. What are the ethics challenges in this case?
2. What will be your course of action? Justify your decision
by using a combination of decision-making tools that
were provided in Chapters 13 and 15.
3. Interpret your decision in terms of your perception of the
possible ethical culture that prevails in the company.
4. Would it change your decision if the policy states that no
alcohol may be brought onto the company’s premises?
5. What is your opinion on the manager’s behaviour?

23