IV
The Global Village Has Ghettos and Slums

Money Has No Morality in
The Global Economy

A sense of ethics and morality is crucial to a well functioning society. Providing a moral foundation for society used to be the responsibility of organized religion. More recently, we have placed the burden of defining moral behaviour onto the individual. A personal morality though, must withstand the daily pressures of popular culture and our economically driven society.

The modern integration into larger and larger political and economic clubs has tended to undermine our efforts to maintain moral standards. The larger the organization, the further away from personal morality and responsibility we become. The responsibility is ceded to the larger organization. Today we find ourselves integrating into the global economy, only beginning to realize that there is no organization willing to take on this burden of responsibility.

The Façade of Money

We use money without giving it a second thought. Its worth is tacked on everything around us. It provides a convenient medium of exchange not weighed down by concerns of equity or fairness. We earn it, save it, borrow it, spend it, lend it, covet it. But what is it?

Money represents value, deferred payment in goods and services. It is also an abstraction of worth. We use a numeric figure to denote the relative worth of people in an organization, and in society. At least it’s supposed to represent the economic worth of people, so that someone making twice as much money as another is twice as worthy to the economy.

As usual with the economy, there are all sort of distortions and imbalances that are introduced and become enshrined over long periods of time. With money value, the relationship between quantity of money possessed and worth to the economy, and certainly to society, is tenuous at best.

By dealing with value abstractly using money, we can avoid having to make conscious decisions regarding the appropriateness of its origin, and of its use. It also makes it easy to admire the accumulation of money, and to equate money and societal worth. People are supposed to be important and worthy of respect because they possess lots of money, and conversely, those that don’t are often treated with contempt. By measuring people using money, we eliminate consideration of the qualitative aspects of their worth.

Money is a good and essential medium of exchange for the economy, it’s just a lousy indicator of people. If anything, the use of money encourages a downplaying of the human aspects of our economy and society. When the economy’s performance is measured by money it is conveniently decoupled from consideration of the well-being of the society.

A-morality Pay

One of the unsettling things you learn after having worked for a while in a large company is the general absence of morality. More amoral than immoral. This is true not only for the public or external effects of the company, but also in many cases for its internal operations.

Back in the times before money was the definition of the economy (yes, there was such a time), people were apt to consider others in their daily struggle for material and spiritual sustenance. Partly this was the moral thing to do, and partly it was borne out of mutual reliance. People could observe the effects of the way they treated others, their interaction was direct and personal, and consideration of the other’s condition was immediate.

When money became the medium of exchange of labour and goods, some of this morality was lost in the resulting depersonalization of the transaction. The consequences of people’s actions were no longer observable, as the effects on others became indirect. Consideration of cause and effect became difficult.

Even in this day when money is the undisputed regulator of events, small tends to be moralmorality is likely to play an important role in small business, as day to day direct encounters with others and their situations is inevitable. This is also true of small communities, where the effects of support for local enterprise is directly felt.

It’s easy to see the effect of shopping in the neighbouring town, much less so for the cross-border shoppers from Toronto.

But personal morality is lost in large tends to be amorallarge organizations. Morality in general does not produce quantifiable profits, and is therefore not a factor in the decisions made by large organizations. The often heard statement ‘that’s what pays your salary’ is used an an excuse to suppress questioning that may stray into consideration of morality, or even common sense. We act as if by accepting a salary, employees have traded their moral rights and obligations along with their labourthat's what pays your salary.

When people own and run businesses directly, their morality tends to pervade the organization. Now that corporate ownership is widely exercised through the intermediary of the stock market, where owners may never even see their company, the personal morality of the owners is largely irrelevant.

The growing power of pension mutual funds is no beacon for moral decision making either. Often regarded as the new source of corporate governing wisdom, their legislated fiduciary responsibility means these fund managers have to consider value alone, excluding non-monetary factors from influencing their decisions. Mutual funds in general present another level of abstraction, where the owners are usually unaware of their specific holdings. So we take our amorality pay and shovel it into amoral mutual funds.

Reconnecting Money to Society

This lack of morality-based decision making has been compensated for to a great extent by effective governmental and societal constraints on the operations of companies. Taxes, are a fundamental compensating factor, essentially skimming off some of the amoral profits fund social programsamoral profit to be used for the public good. Labour, human rights, and more recently environmental laws are other compensating tactics, designed to inject consideration of the employees, the public, and the environment into the corporate decision making systems.

In an economic system where the markets determine the behaviour of the economic actors, government taxes and regulation are used as a way of reintroducing morality as a factor in society. The markets are explicitly designed not to consider morality, so the governments try to. Unfortunately, with globalization now dominating the economic agenda, these tactics of governments are now threatened by the mobility of companies. Most attempts to satisfy the societal morality are based on the redistribution of money and the prohibition of behaviour. With the easy ability of companies to move to different jurisdictions goes much of this ability to reconsider morality.

With the increasing deregulation of capital flows, we have seen that money has no money has no loyaltyloyalty either. What are called multi-national corporations should more rightly be regarded as a-national corporations. These corporations, aided by pliant governments, have begun to move factors of production around the globe with little regard for their nominal country of origin. In the quest for profits, they seek the advantages of low wages, taxes, employment and environmental standards, which become major criteria used for locating production. What they leave behind is of no concern.

The Money is the Message

It should be easy enough to extend the compensating tactics of national governments to the international realm. International taxation and regulation could be just as effective in injecting societal goals and morality into the global marketplace. Except that isn’t what’s happening. The international economic system has been designed to prevent this.

Trading Our Morality

Through various trade initiatives since the Second World War the world’s economies have begun to operate more like a global economy. But this hasn’t turned out to be the much vaunted global village, but rather more like a global city, complete with ghettos and slums.

Our beliefs about the worth of people, of basic human dignity and the ideal that everyone should have opportunity, only operate well within the confines of our shared community. Once outside this realm we are unlikely to apply our values to the situation of others we will never know. It is no longer our concern. But whose then?

In our the global society doesn't existglobalizing society, who is responsible for the effects of our dealings with the outside world? This is not a simple question and is basically being ignored by our business and political leaders. Within a community of shared values, the community itself ensures that their dealings are moral. In what is casually referred to as the global society, there is no real sense of shared values and responsibility. This society doesn’t really exist, it is merely the illusion of coherence you get when people appear to think and act alike. So far, the idea of the global citizenship is meaninglessglobal citizen is empty, without something as powerful as nationality or ethnicity to bind the people to one another. Without this, there is neither the will nor the means to self police our actions as they affect others in distant places.

Companies are shipping toxic waste to third world sites to avoid strict environmental safeguards.

The global marketplacethe global marketplace operates now is developing within a framework of laissez-faire capitalism, to an extent that doesn’t really exist in any of the participating states. The regulation of international trade has been devised to provide the least possible interference from governments. Much less so than internal regulation. Except where clear notions of national security exist, governments are expected not to intervene in trade matters (and certainly not their citizens). International trade has taken on a quasi-independent status, almost beyond the scope of regulation in the normal sense. The only regulation to which it submits is that which furthers its cause, reinforces its power, broadens its reach.

So regulation of international trade for the sake of people, or the environment or other indirect matters is circumscribed. This has been put in place by our governments in cooperation, to facilitate the broadest possible trading system. Our governments have taken themselves out of the picture, limited their jurisdiction to intervene on behalf of the people. Who is left then to fend for the morality of our collective and external actions?

The Downward Spiral

Because our corporations are operated on the single premise of shareholder value, the use of money in our economy has become detached from the requirements of our society. What have our leaders done to compensate?

We hear that our governments want to attract the good corporate citizensgood corporate citizens to their jurisdiction. But what does this mean, especially in the light of our integration into the global economy? We have local companies that employ more workers and pay more taxes outside the country than they do within. They also distribute large proportions of their dividends to foreign investors.

We have companies that pull up stakes and move their jobs elsewhere, with no thought about the community. Companies try to give their actions a patina of respectability by arguing that all taxes are a ‘killer of jobs’, that they are trying to employ people and the government is thwarting them.

One argument goes that companies don’t really pay taxes, the consumers of their products do, in the form of higher prices. This is an interesting argument. Why is it not extended to include all spending by companies? Companies after all pass through all their costs to either the consumer through prices or the government through tax deductions (in today’s highly liquid capital environment, short of going bankrupt, they can’t pass the costs through to their shareholders). Yes those palatial offices, generous pensions, and manipulative advertisements are all paid for by you and me. In effect we pay to be convinced to buy their products.

What incentives do we give companies to invest or continue operation in our area, and what are we expecting them to do when the incentives run out? Governments, often within the same state, outbid each other with subsidy concessions to prospective businesses, including getting out of the way of businessforgone taxes, lax regulations, and outright grants. All this is on the assumption that the business will employ people in that area, giving the government a return on its investment through personal taxes and reduced income support payments. By engaging in this sort of competition, governments as a whole trade away their moral responsibility, giving overall control back to the amoral corporations. They essentially bid down the moral price of business with a reverse auction. What we are left with is lowest common moralitylowest common morality.

Not only are our governments willing to abandon responsibility for our corporations international activities, they have ignored questionable individual behaviour as well. Why is it perfectly legitimate for our citizens to flout our laws and standards by seeking lower standards in another jurisdiction, while continuing to benefit from our advantages?

It is considered normal and legitimate to register boats in Panama or Liberia to avoid safety and labour standards, to move profits to the Bahamas to avoid tax, to hide money in Switzerland to avoid scrutiny, or to shift production around the globe in search of lax environmental and labour standards.

Using the excuse of international trade, our governments withdraw from responsibility for our actions abroad, and from regulating other’s actions back home.

Biggest is the Only Goal

An iron doctrine of our capitalism is, bigger is betterbigger is better, growth is imperative, biggest is the goal, and there is no such thing as enough.

Companies must expand to survive, and now combine to be able to compete in the global economy. Competition is no longer mandatory within a country, as fears about global economic forces lead politicians to cheer our internal mega-companies to combine to defeat the dreaded global competition.

The bigger is better desire is what animates business. Market share must be increased. More must be produced and sold. This same desire results in a definition of economic performance that stresses increased output as the overarching goal (remember the GNP).

Once again, the problem with largeness is that individual and local perspectives are submerged under the overall goal of the mega-organization. Unless specific measures are taken to ensure that these concerns are taken into account, they will be overwhelmed by the dictates of global competition.

Small Means Business

In the desire to become bigger, many businesses fail because they have overexpanded, that is, got bigger too fast. They find they can’t scale up the success as simply as cloning what they have. And some businesses are successful precisely because they are small. Expansion kills the original reason for success, which may relate to personal attention or unique character.

We hear over and over that small businesses are the engine of growth, especially job growth. This is what leads governments to give favourable tax rates and regulatory environments to smaller companies. As the businesses grow, acquire and merge, the societal goals of as businesses grow, jobs declineemployment start to be compromised.

As businesses expand, the needs of individual employees and local communities become relatively less important. Production starts to be moved to other locations. Economies of scale are applied and workers are shed. Since the drive is for efficiency, to remain competitive with the rest of the world, keeping people employed is not a business concern. The social policy concern of giving people meaningful lives through employment is not taken into account.

Any yet, most small businesses benefit little or not at all from free trade agreements and globalization. Nor do they thrive during a local recession. The drive for globalization not only caused a shedding of jobs from large businesses forced to compete, it also produced a subsequent dampening effect on smaller businesses, leading to further economic trouble.

The Loss of Being Large

There are many implications of producing in the large versus the small. Economists regularly refer to economies of scaleeconomies of scale which simply means that a producer can benefit from several advantages of producing on a larger scale. Traditionally this includes volume purchase discounts for production inputs and spreading fixed production costs such as equipment and payroll over more units of output. More recently, the opening of global markets has made it advantageous for large businesses that can maintain a presence around the world.

By scaling up production, the need to reduce the component cost becomes an imperative, as is the need to reduce the number and variation of components. All variation in inputs implies complexity in production and increased cost, and thus lower profit.

Take electronics as an example. A large producer of say, radios, has an incentive to reduce components to a minimum and to limit their variations. Eliminating one component from the design, can add up to millions in profit. Reducing component variation leads to faster production, and also to higher profits. In this example, the electronics manufacturer has probably produced a better radio, one that will need fewer repairs. But in many areas bigger means worse, lower quality, less effective.

The input cost for a large producer is more closely guarded than for small producers. If I bake a pie and sell it, the difference in cost of butter vs. partially hydrogenated palm and/or coconut oil is unimportant. To a large food conglomeratemaximizing your share of the pie making millions of pies, the few pennies saved on each pie add up to substantial extra profit. Questions of nutrition and taste are largely unimportant. If it tastes roughly like a pie that will do. Over time people forget what pies used to taste like.

Ironically, to combat the loss in quality as a result of large scale and remote production and the resulting altered consumption habits, businesses sometimes go to extreme lengths.

After driving down the price and reducing the quality (taste) of tomatoes by concentrating production is places like California, agricultural conglomerates have spent millions to genetically engineer a tomato that could be picked later and rot less during transportation.

Large also dictates a necessity for consistent and timely delivery of input. This means less variation or a standardization of input. Forget local delicacies, this watch for flying truck tiresscale means deliveries by the train load and on specific dates. And because of the need to run a huge production facility to eek out the last drops of profit, the output is dispersed to a wide area, lowering regional variation. Again for food, this also necessitates the adding of preservatives to give the appearance of freshness.

Large scale retailing has a similar effect on local and small scale production. Because these producers cannot deliver either in the quantities or timeliness dictated by concentrated marketing campaigns, they are frozen out of the market. Niche and specialty markets are all that remain open.

Commodification

Perhaps the best of all possible markets in capitalism is a commodity market. Commodities are indistinguishable one from the other, causing their price to tend to just above the production cost of the least cost supplier. This is the ultimate result of economies of scale and free trade, twin pillars of Western economies.

Notice the measurement of a commodity is only taken of the direct and desired output, all factors of production and byproducts can be safely ignored.

They’re All The Same

A commodity represents no nationality, no culture, no environment. It is accepted that we need not concern ourselves with how it came to be. This attitude has allowed the process of globalization to move so rapidly, and with so little comment. After all, who can argue with obtaining a commodity at its lowest price, they’re all the same, why should we pay any more?

But the processes of creating a commodity can be quite different in their effect on people and the environment. The commodity pricewhy should we pay any more? will rarely reflect human and environmental costs above a bare minimum, because producers that take these into account will not be able to compete on price alone. Safety standards in mines and nebulous qualities like protecting bioregions and endangered species are all external factors that we hear are killing our industries as they try to compete with the rest of the world. This was the reasoning behind the effort to add labour and environmental standards to the NAFTA. Unless all potential producers are subject to the same environmental and labour standards there will be downward pressure put on governments to reduce theirs.

Once the society has bought into the idea that commodities should be freely traded, the next step has been to apply the same lowest price reasoning to any other good or service. As we concentrate on price, we will forget about any external effects of the production and consumption of goods.

People Are the Ultimate Commodity

This same attitude is applied with shocking regularity in regard to people. As corporations exercise their ability to shift production around the world we find them treating their workers as just another input cost. people are the ultimate commodity in the global economyPeople are the ultimate commodity in the global economy. After all, they’re all the same, why should we pay any more?

Local employment is no longer a concern of local business as they become world players. They begin to play employees in one location off those in another. The effect of this kind of pressure on people is not appreciated. Any consideration of maintaining local employment is viewed as nationalistic silliness, something to be dismissed in the tough world of global competition.

By expanding our economic goals from personal sustenance, to local prosperity, to regional and national advantage against foreign competitors, we have abstracted out the needs of the people involved. They have become mere factors of production, inputs, unit labour costs, production resources. Through this process we have downplayed the human aspects of commerce.

Maybe our notions of community and citizenship are just fantasies, maybe we should be viewing this with a dispassionate business attitude. At least, that’s the way things are going.

It Doesn’t Just Happen

Money has become our excuse for acting without regard for others. We’ve disconnected the movement of money from its representation of human effort. It’s not just a medium of exchange it’s a means of abstraction. With this abstraction has come the sense of irresponsibility, it’s my money, I’ll spend it the way I like. If we had to do directly what our money does on our behalf, we would probably have a more compassionate and caring world.

We need to consider how to reestablish ethics and morality as important elements in society, especially in a globalizing world. But the concentration on international economic organization has tended to exclude consideration of political questions. Treating economic blocks as economic-only pacts has allowed the discussion regarding their impact to be disconnected from the practical effects on the people.

If you view NAFTA and the like as an economic arrangement, and the economy as just something that’s supposed to create wealth, you deftly exclude questions about how these international economic systems affect people’s lives. It becomes a question of national balance sheets, trade flows, interest and exchange rates, and economic deregulation. Economic dialog occurs only on the level of macro behaviour of economies and abstract micro effects. Yet none of these has been defined in relation to citizens. Citizens are not part of the economy, consumers are, workers are. We are thus reduced to our unconnected roles.

If citizens do try to exert some control over the economic system through political action, this is condemned as government meddling. But governments are supposed to represent our overall interests, to compensate for the money focus of the economy. As long as we allow the view to predominate that governments minimize governmentshouldn’t participate in economic policy, and that government should be minimized, we leave our social, cultural as well as economic fate to the dictates of competition and the global economy. Where the real live people are not to be considered.

>> V You Can’t Stop Progress
Progress Begat Globalization


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Corporate Goals, Restructuring and The Jobless Recovery


© 1995, 1997 Mark Nairn Hume