Sunday, 29 April 2012

Ethical Question of Economic Competition

I read an article by Jonathan Wolff in an applied ethics textbook. There, he tackles the 'seldom asked' question of the ethical difficulties created by having economic competition, the hallmark of free market capitalism. Why is it OK to intentionally inflict economic harm by opening a shop next to your rival’s, but not OK to steal?

Wolff ponders the idea that when we act as consumers, we might be exploiting producers. We only want them to compete to provide the side effect of lower prices and better quality. It’s a competition we want no one to win (as monopolies affect our own interests).

He rejects the defence that producers are voluntarily taking part in the competition; exploitation often includes some sort of willingness. He doesn’t think that it’s a defence to say producers also act as consumers. He only sees a defence in the idea that we, as consumers, don’t sufficiently disregard producer interests to make us exploiters. The welfare state and bankruptcy laws support those producers (business owners and employees) who fail or flounder.

He then goes on to say that we, as consumers, do exploit those producers who, for reasons of their own domestic situation (read: live in developing countries), don’t have sufficient safety nets. Those are the people whose lives we sufficiently disregard as we pursue our own ends.

I hope Wolff is right when he says the questions he tackles are usually unasked, otherwise I have a bit more reading to do before I can comment on his article. But here are my thoughts.

First, is that the ethical side to capitalism is not always ignored. Wolff recognises that socialists and Marxists do consider it, and they consider it well – see G.A. Cohen for an exemplary piece about how fear and jealousy are the driving capitalist emotions.  Second, I don’t think he deals well enough with the idea that the exploited employees and the exploiting consumers are the same people. How can a society all be exploiting itself? Maybe this criticism works less well in his true exploitation scenario. My third criticism would be that Wolff starts off thinking about the ethics of competition generally, a big and interesting topic, and moves to say that we exploit third world producers, a point that, however well made here, has been made many times before. My fourth criticism is that he’s a tiny bit wrong when he says we don’t want anyone to win the competition. Current competition law (in theory and practice) has no problem with monopolies per se. This leads to the fifth problem. Competition rules are to try to benefit society, and he doesn’t  really engage on what is the better option. Are minimum wages really enough to salve our consciences? There is still, on his account, a degree of exploitation. My sixth (and a very minor) issue is that he never makes explicit why stealing is worse than competition (there are no or few beneficial side effects of letting people steal).

But more importantly, I think, is where he places the blame. If me buying a shirt from Fyodor Ltd is part of a global system of capitalism whereby Mr. Droog in another country loses out, why am I to blame? If Mr Droog is Fyodor’s employee, then surely the primary exploiter is the one who is paying under-the-odds for labour so as to make profit for themselves. And if Mr. Droog works for Dostoyevsky Ltd, and they go bust in some other country because I bought a shirt from their rivals, are there not sufficient other actors to blame before going to consumers? Directors at Dostoyevsky for failing to take the best decisions? Directors at Fyodor for gaining an unfair advantage by undercutting or being anti-competitive? The civilians and politicians of the other country for failing to provide the safety net? The international political community for failing to find globally applicable minimum standards that are enforced?

I think the problem is his focus on exploitation. He explicitly recognises that it is the competitors who do harm to each either, and we encourage it. But it is that encouragement that is exploitation as he defines it. The initial harm doesn’t fit the exploitation definition that he’s discussing.

Business ethics are a tricky field, and it’s not a bad thing for consumers to remember the knock-on impact of their choices. But to focus on them, and forgetting the other actors, seems to me to be focussing on the addicts, not the dealers. 

(Discussion of 'Economic Competition: Should We Care about the Losers?', Wolff, in Hugh LaFolette (ed) Ethics in Practice, 3rd Ed.)

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