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Business Ethics

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Business Ethics ­MGT610
VU
LESSON 32
John Rawls, on the other hand, argues that though it is unjust to impose heavy burdens on
present generations for the sake of the future, it is also unjust for present generations to leave
nothing for the future. We should ask ourselves what we can reasonably expect they might
want and, putting ourselves in their place, leave what we would like them to have left for us.
Justice, in short, requires that we hand over to our children a world in no worse condition than
the one we received ourselves.
The ethics of care support conservation policies similar to the ones Rawls advocates. Utilitarian
reasoning, too, supports Rawls' conclusions. Some utilitarians posit that the ethical thing to do
is to discount future consequences based on their uncertainty and distance from the future. We
are therefore clearly obligated not to take actions that will almost certainly harm tomorrow's
generations. However, since we can be less certain what the effects of our actions will be on far
distant generations, our responsibility towards them is somewhat diminished.
We cannot rely on market mechanisms to ensure adequate conservation for future generations,
however. The needs of future generations are so heavily discounted by markets that they hardly
affect prices at all.
Six reasons conspire to bring this about:
1. Multiple access - If several separate extractors can use a resource, then the shared access
will invariably lead the resource to be depleted too fast. As with several people with straws
in one milkshake, each owner's private interest is in taking it out as fast as possible.
2. Time preferences and myopia - Firms often have short time horizons under the stress of
commercial competition. This may under-represent the legitimate interests of future
generations.
3. Inadequate forecasting - Present users may simply fail to foresee future developments. This
may reflect a lack of sufficient research interest and ability to discern future changes.
4. Special influences - Specific taxes and other incentive devices may encourage overly rapid
use of resources.
5. External effects - There are important externalities in the uses of many resources, so that
private users ignore major degrees of pollution and other external costs.
6. Distribution - Finally, private market decisions are based on the existing pattern of
distribution of wealth and income. As resource users vote with their dollars, market demand
will more strongly reflect the interests and preferences of the wealthy.
Many observers believe that conservation measures are falling short of what is needed. Some
even maintain that future generations will have a quality of life much lower than our own.
Industrialized nations will need to convert from growth-oriented technologies to more labor-
intensive ones. In fact, our entire economic system may have to abandon the goal of steadily
increasing production: continual economic growth promises to degrade the quality of life for
future generations. This is because demand for depletable resources will continue to rise until
the resources simply run out. Then, living standards will decline sharply.
One group, the Club of Rome, predicted that a catastrophic collapse of goods and services will
result at some point in the middle of this century; by 2100 the world's population may even
drop below 1900 levels. More recently, the World watch Institute has concluded that even if the
Club of Rome's timetables were off, their conclusions were substantially correct.
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Business Ethics ­MGT610
VU
As our supplies of energy diminish, other moral concerns are raised. Though the U.S. has only
6% of the world's population, we consume 25% of its energy; 50% of the people of the world
get along with only 8%. Some seriously question whether high-consuming nations like ours can
be justified in using for its own sake the nonrenewable resources of the world that others are
too weak or frugal to use themselves.
In 1999, the price of petrol is the lowest it has been for over two decades, with large reserves of
oil stored by governments and corporations. Many other commodity prices are also at very low
levels. These present-day facts are all very different from the warnings issued in the early
1970s about a world-wide environment crisis and shortages of resources.
One of the best known warning voices was contained in the book "Limits to Growth",
published in 1972. It sold twelve million copies in 37 languages. Whilst the book did not
predict what precisely would happen, it stated that if the world's consumption patterns and
population growth continued at the same high rates of the time, the earth would strike its limits
within a century. The message was that this outcome was not inevitable. People could change
their policies - and the sooner the better.
The book was very controversial. Its note of warning jarred with the sense of optimism that
existed at that time. The 1950s and 1960s had been a period of immense economic growth in
both the Western and Communist worlds, both of which had a very low rate of unemployment.
There was a general belief in the Western world that another 1930s-type Depression could be
avoided as a result of government intervention in the economy. Additionally, it was assumed
that there was a standard (Western) formula for economic growth that could apply throughout
the Third World. All the West had to do was to win the Cold War and the future for the entire
world was assured.
Very little attention had been paid to the environmental consequences of economic growth.
Indeed, both capitalists and communists were convinced that there could not be much of an
environmental crisis. For capitalists, the market would solve any environmental problem (for
example, if resources were used too rapidly, then prices would go up and so usage would be
forced down), and Marxist dogma assured Communists that technology could solve all
problems.
Both political systems regarded criticism of their respective systems on environmental grounds
as nonsense. Each said that "Limits to Growth" was alarmist and the book was branded as
pessimistic and a threat to stable government. Although "Limits to Growth" sold well around
the world, government policy-makers ignored much of the essence of the warning. It is true that
the first ministries of the environment were established at this time and there were tougher
environmental laws introduced. But both political systems remained committed to the overall
idea that growth was good and that the environmental consequences could be solved by
administrative, legal and technological measures.
The Club of Rome
"Limits to Growth" was commissioned by The Club of Rome, a think-tank of scientists,
economists, businesspeople, international civil servants, and politicians from the five
continents. The Club began in an informal way at the behest of Aurelio Peccei, an Italian
businessperson based in Rome. In 1965, Peccei gave a speech on the dramatic changes taking
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Business Ethics ­MGT610
VU
place in the world, especially relating to science and technology. The speech attracted
considerable attention.
Alexander King, who had not previously known Peccei, received a copy of the speech. King
was a British scientist, who had been a scientific adviser to the British Government, and who
was then at the Paris-based Organization for Economic Co-operation and Development
(OECD), the organization of rich Western countries. King had similar concerns to Peccei about
the commonly-held veneration for growth that allowed little thought for any long-term
consequences, and decided to meet Peccei to see how these ideas could be followed up.
Peccei and King were not confident that either the market or technology could function as a
way of solving environmental problems. After calling together groups of economists and
scientists to discuss problems facing the world, they asked a group of computer experts at MIT
in the US to examine what would happen if people continued to consume such a high amount
of resources. This study became the basis of the "Limits to Growth" book.
The study had some obvious limitations, most of which stemmed from the use of computer
modeling. This was the first time that computer modeling had been used for such an ambitious
exercise. The success of such modeling depends on both the quality of data and the capabilities
of the computer. In 1970, methods of data collection were still rudimentary. Many countries,
for example, did not know the true size of their populations. There have been many
improvements in national data collection but, even today, we are still far from getting all the
data we need to produce accurate models. For example, there is debate in many countries on
how to work out the exact numbers of unemployed people, with official statistics usually being
lower than those of non-governmental organizations that work with unemployed people.
In addition, the quality of the model used was limited by the available computer technology and
could only use a low number of equations in its construction. Computer modeling has now
become more sophisticated with the far greater computer power that is available meaning that
models have become more complex. However, computer modeling still leaves a great deal to
be desired, as is evident with the failure of government finance departments to predict the size
of economic growth in the coming years.
Leaving aside the details of the projections, there is the question of the essence of the warning:
is the earth approaching its "Limits to Growth"?
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Table of Contents:
  1. INTRODUCTION:Business Issues
  2. INTRODUCTION (CONTD.)
  3. THEORY OF ETHICAL RELATIVISM
  4. MORAL DEVELOPMENTS AND MORAL REASONING
  5. MORAL REASONING:Arguments For and Against Business Ethics
  6. MORAL RESPONSIBILITY AND BLAME
  7. UTILITARIANISM:Utilitarianism: Weighing Social Costs and Benefits
  8. UTILITARIANISM (CONTD.):rule utilitarianism, Rights and Duties
  9. UNIVERSALIZABILITY & REVERSIBILITY:Justice and Fairness
  10. EGALITARIANS’ VIEW
  11. JOHN RAWLS' THEORY OF JUSTICE:The Ethics of Care
  12. THE ETHICS OF CARE:Integrating Utility, Rights, Justice, and Caring
  13. THE ETHICS OF CARE (CONTD.):Morality in International Contexts
  14. MORALITY IN INTERNATIONAL CONTEXTS:Free Markets and Rights: John Locke
  15. FREE MARKET & PLANNED ECONOMY:FREE TRADE THEORIES
  16. LAW OF NATURE:Theory of Absolute Advantage, Comparative Advantage
  17. FREE MARKETS AND UTILITY: ADAM SMITH:Free Trade and Utility: David Ricardo
  18. RICARDO & GLOBALIZATION:Ricardo’s Assumptions, Conclusion
  19. FREE MARKET ECONOMY:Mixed Economy, Bottom Line for Business
  20. COMPETITION AND THE MARKET:Perfect Competition
  21. PERFECT COMPETITION
  22. MONOPOLY COMPETITION:Oligopolistic Competition
  23. OLIGOPOLISTIC COMPETITION:Crowded and Mature Market
  24. OLIGOPOLIES AND PUBLIC POLICY:Ethic & Environment, Ozone depletion
  25. WORLDWATCH FIGURES:Population Year, Agriculture, Food and Land Use
  26. FORESTS AND BIODIVERSITY:The Ethics of Pollution Control
  27. THE ETHICS OF POLLUTION CONTROL:Toxic Chemicals in Teflon
  28. THE ETHICS OF POLLUTION CONTROL
  29. THE ETHICS OF POLLUTION CONTROL:Recommendations to Managers
  30. COST AND BENEFITS:Basis of social audit, Objectives of social audit
  31. COST AND BENEFITS:The Ethics of Conserving Depletable Resources
  32. COST AND BENEFITS:The Club of Rome
  33. THE ETHICS OF CONSUMER PRODUCTION AND MARKETING:DSA Comments
  34. THE ETHICS OF CONSUMER PRODUCTION AND MARKETING:Should Consumers Bear More Responsibility?
  35. THE CONTRACT VIEW OF BUSINESS' DUTIES TO CONSUMERS
  36. THE CONTRACT VIEW OF BUSINESS' DUTIES TO CONSUMERS:The Due Care Theory
  37. THE SOCIAL COSTS VIEW OF THE MANUFACTURER’S DUTIES
  38. ADVERTISING ETHICS:The Benefits of Advertising, The harm done by advertising
  39. ADVERTISING ETHICS:Basic Principles, Evidence, Remedies, Puffery
  40. ADVERTISING IN TODAY’S SOCIETY:Psychological tricks
  41. ADVERTISING IN TODAY’S SOCIETY:Criticism of Galbraith's Work
  42. ADVERTISING IN TODAY’S SOCIETY:Medal of Freedom
  43. ADVERTISING IN TODAY’S SOCIETY:GENERAL RULES, Substantiation
  44. ADVERTISING IN TODAY’S SOCIETY:Consumer Privacy, Accuracy
  45. THE ETHICS OF JOB DISCRIMINATION:Job Discrimination: Its Nature