Keith Chrostowski at the Kansas City Star provides a good summary of the arguments for fiscal restraint during this economic disaster while calling for extension of unemployment benefits. I find the arguments for such restraint to be ridiculous. Chrostowski only summarizes these arguments and I have no problem with his views but the arguments for fiscal restraint during this crisis border on the bizarre.
Where were all those people when the Bush tax cuts were put in place? Where were all these people when during a period of massive public approval and unity, George Bush asked for no tax to finance the war? Where were all these people when Congress approved an enormous expansion in Medicaid? Is it only when the crisis concerns the basic middle class American that we discover we are in a crisis?
Where were all these economists when the estate tax (fortunately only for a while) was repealed? Where were all these formerly employed politicians (Alan Simpson, are you reading this?) now shouting “fiscal restraint?”
It is hard to describe my anger at these “born again” budgeteers. My students suffer. The people I know suffer. This economy is damaging lives and destroying the hopes and dreams of tens of millions of Americans. And now, only now, do these cowardly wretches find the fortitude to challenge spending. It seems you can make wars, cut taxes and do every kind of strange appropriation until the American people are hurting and then and only then, must we become “tough minded” and fiscally concerned.
We exercise fiscal restraint according to Keynes when the economy is healthy. This one isn’t. We labor under intense levels of unemployment, a little under 10%. If we count those who have simply given up looking for work, the number climbs toward 16% which is roughly the same as in the great depression. I tell you with conviction that this recession is becoming and may already be a depression and our leaders are unable and unwilling to meet that challenge.
We are rapidly moving toward desperate times. Each day I drive to work and see businesses closing. Each day I see nothing to give me hope for my students and confidence in the economy. Each day I wait and hope and pray that the leadership of this country will do the simple and basic things necessary to employ the great and good American people. This people who have astonished the world with their achievements and can do so once again if only given the opportunity.
But I know this is not going to happen. This people do not appear to be worth a second glance. When fiscal pain must in the eyes of these unsought comedians, these fact distant fools, be felt, it is only when the great mass of Americans are enduring the pain and suffering of evil economic times brought on by the rapacious stupidity of the financial elite.
When I was in law school we were taught that when a business had to decide whether or not to break the law, if the penalty was a simple fine, you would just decide which was least expensive and pay that cost. So, if the fine were cheaper than your profits, break the law and pay the fine. I was always troubled by that, the assumption that a fine was just a part of doing business.
My perception is that this is major current of thought in modern business. Profit makes right, not as catchy as might makes right, but still probably what a great many businessmen have been taught, believe and put into action.
What does this have to do with my title? Excellent question. According to the research of Lawrence Kohlberg, children at around the age of ten progress to a higher level of moral understanding moving from consequence thinking to considering the intent behind the action. I quote: At approximately the same time–10 or 11 years–children’s moral thinking undergoes other shifts. In particular, younger children base their moral judgments more on consequences, whereas older children base their judgments on intentions. When, for example, the young child hears about one boy who broke 15 cups trying to help his mother and another boy who broke only one cup trying to steal cookies, the young child thinks that the first boy did worse. The child primarily considers the amount of damage–the consequences–whereas the older child is more likely to judge wrongness in terms of the motives underlying the act (Piaget, 1932, p. 137).
So, catch my thought? When a businessman considers the costs of performing illegal or unethical acts only in the sense of money, he is reverting to the very first stage of moral development, that of less than a 10 year old child.
Now, there are six stages in Kohlberg’s theory:
1) Obedience and Punishment Orientation
2) Individualism and Exchange
3) Good Interpersonal Relationships
4) Maintaining the Social Order
5) Social Contract and Individual Rights
6) Universal Principles Now, you could make a good argument that this kind of business thought (Milton Friedman, etc) actually falls into the second level where self interest and avoidance of punishment become primary concerns. However, making moral decisions at the second level of Kohlberg’s six stages is just about as insulting as reasoning at the first.
My second point is when business is considered only as a money making endeavor, all the other levels of moral development don’t just become irrelevant, they become a block and a hazard to making maximum profit.
People who hold values from the other four stages might very well have difficulty succeeding in a corporation.
Let’s look at level 3, Good Interpersonal Relationships.
They believe that people should live up to the expectations of the family and community and behave in “good” ways. Good behavior means having good motives and interpersonal feelings such as love, empathy, trust, and concern for others.
It might be difficult to evade taxes, shift jobs overseas, to fire employees who are too old, if you try to live up to these expectations. Now, that generally that is not much of a problem, because if you want to do these things, you can get people (once again, Milton Friedman) to tell you that what you are doing is right and true. Not only is doing these things not wrong, they are in the long term good for everybody and in the long term will contribute to a more successful and happier society.
Now, as someone who professes and teaches ethics, I might point out that using wrong doing and “ends justify the means” thinking is more likely to produce more wrong doing and “ends justify the means thinking” than it is to produce a “good” or “successful” society.
Level 4 thinking means a person begins to consider “society as whole” as a factor in moral decision making. Breaking the law, damaging the environment, treating people badly, acting in the interest of a foreign government or corporation or trading partner to the detriment of your own country, etc. are acts that damage society as a whole. A businessman willing to maximize profit at all costs with this level of moral development has to believe that the long term benefits of illegal and unethical actions will produce in the long term a better society or embrace simple villainy as a way of life.
At level 5, you are essentially talking a language modern business on the Friedman model may have serious difficulty understanding. A “good society” might very well be one where real people with real influence might seriously believe that it is easier for a camel to pass through the eye of a needle than for a rich man to enter the kingdom of heaven. What makes for a good society might in some people’s minds to be things other than money. If the “free market” solves all societal problems in the long term, other thought is just childish rubbish that must be tossed aside as part of the debris of history.
One of the reasons for the absence and continuing decline of moral values in American business is the lack in this society of individuals at the 6th level of moral development. Nothing could be more detrimental to the profit model of societal success than the proposition that there are universal principles by which a society should function. I read a lot and I promise you that the great thinkers, leaders and holy men of history have not been friendly to profit as a primary goal of the good society.
Kohlberg’s six levels of moral development give us insight into how we might consider thinking about ethical problems. Presumably it is better to think at a higher level than a lower one. If you accept that thought than an alarm bell should go off anytime a belief system calls for ignoring higher values and using the earlier ones.
(The quotes for this article are from W.C. Crain. (1985). Theories of Development. Prentice-Hall. pp. 118-136.) With my grateful thanks!
Loren Steffy has a poll up – How long will Hayward remain as head of British Petroleum? I’d get on his site and vote if I were you. Stffey’s previous column speculates on whether or not Libya will acquire British Petroleum.
Alain Sherter at BNET writes about the likelihood of a Chinese real estate crash. My Chinese students have been saying things to me along the same lines.
Loren Steffy wonders if British Petroleum naming a drilling rig, Crazy Horse (not the smartest move), decided to misrepresent to the tribes in Colorado the amount of oil it was getting out of the ground.
Jon Talton explains how the loss of manufacturing jobs makes the recovery more difficult and may cause long term damage as our position as a manufacturer deteriorates as opposed to other powers such as China.
Keith Chrostowski writes about creative capitalism.
Jay Hancock discusses the importance in the electronics field of an excellent knowledgeable sales force (particularly if you fired the ones you had).
Edward Lotterman discusses “external costs” and “imperfect information.” These are important and basic economic concepts. He discusses them accurately, simply and in a straightforward manner. If you read any of these pieces, read this one.
David Moon explains scientific research into where in the brain investment decisions are made and why we like to agree with others.
Alain Sherter’s work appears on BNET. He is a great writer and thinker whose work often points in original directions. His outrage over the ethical shortcomings of American business mirrors my own.
Banks that foreclose on a home must first prove they own the mortgage. So affirmed the top Massachusetts court today in ruling against U.S. Bancorp (USB) and Wells Fargo (WFC) in a decision could boost homeowners fighting foreclosure and end up costing banks billions.
One financial expert told Bloomberg the ruling could “open the floodgates” to similar suits in the state and bolster cases around the nation. Financial pundit Barry Ritholtz also called the ruling a victory for the rule of law and property rights, noting in a related post discussing the case:
This is more than a technical issue; at risk is whether we, as a nation, are going to allow corporate entities to violate existing law, or even worse, attempt to create their own, extra-legal, non democratic policies.
Certainly investors seem worried. U.S. Bancorp and Wells shares immediately dipped on the news, with broader bank stocks also tumbling. It’s no secret why. As the “robo-signing” furor has shown, banks for years have flouted legal requirements to document their right to seize homes. Foreclosure affidavits were rubber-stamped or even faked. Local laws regarding property transfers were ignored. Financial firms eager to mince mortgages up into securities violated rules intended to establish a clear chain of title in foreclosure cases.
Alain Sherter’s regular column, Financial Folly, is an invaluable guide to the shenanigans of the financial world. I recommend him to you.
I had the misfortune and the opportunity to think over the long break. The misfortune was due to my trip to Tulsa. I have a dramatic allergy response to the city either the phosphorous laden Arkansas River or the emissions of the oil refineries or both. I was down and in a lot of pain for several days. But on a larger note, I thought. I am 53 years old and I am not sure what happens next. Gail Sheehy called my age, the age of mastery. I don’t feel like a master of my career or much of anything else.
So, I thought. I apologize for the lack of posts. I wanted to clarify what it was I was trying to do. I wanted to clarify to myself my purpose and to set some goals for this savage year. Yes, savage year. I predict a rough year for me and, more particularly my students. They have come seeking new lives and all this economy has to offer them is pain. They seek an American dream that barely exists.
Why should I write this when so few read it? I wrote my previous blog for more than a year and never gained an audience. I finally deleted it feeling it was of no significance. This one is different. It is different because I am using it as a tool to seek kindred souls and develop my thought.
I want to talk about ethics seriously and without backing away in educational jargon from confronting the evils of our time. Of particular concern are two issues. One is the total lack of protections for our internet communications. We as a people are entitled to some kind of protection for our e-mail and other posts. The second is privatization in the state of Arkansas, my home. I sense something in motion. I worry about the assets of the people of this state being turned over to private interests for their unjust and cruel enrichment.
Sometimes, I would fold my tent and walk away. I could read, listen to music, play my games and let the sweet things of life escape me away from the tedium of the continuing struggle for significance, for the struggle against evil, for that action that says I stand and while I live I will try to do what’s right. Let me quote Tennyson:
Tho’ much is taken, much abides; and tho’
We are not now that strength which in old days
Moved earth and heaven; that which we are, we are;
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.
Not a great post, but my post. A new year. Continued struggle. 2o10
The Greatest Book Ever Dealing With Corporate Crime
In 1908, Gustavus Myers, published History of the Great American Fortunes. It’s a very large work but much of what it has to say is as relevant now as it was then. For instance, he talks about the transfer of the public domain to private interests as quick way to personal riches. That has not changed.
Project Gutenberg has the complete work unfortunately mistitled Great Fortunes From Railroads. If you’re serious about the study of business ethics, you need to read it, all 712 pages of it.
When I was in law school we were taught that when a business had to decide whether or not to break the law, if the penalty was a simple fine, you would just decide which was least expensive and pay that cost. So, if the fine were cheaper than your profits, break the law and pay the fine. I was always troubled by that, the assumption that a fine was just a part of doing business.
My perception is that this is major current of thought in modern business. Profit makes right, not as catchy as might makes right, but still probably what a great many businessmen have been taught, believe and put into action.
What does this have to do with my title? Excellent question. According to the research of Lawrence Kohlberg, children at around the age of ten progress to a higher level of moral understanding moving from consequence thinking to considering the intent behind the action. I quote:
So, catch my thought? When a businessman considers the costs of performing illegal or unethical acts only in the sense of money, he is reverting to the very first stage of moral development, that of less than a 10 year old child.
Now, there are six stages in Kohlberg’s theory:
1) Obedience and Punishment Orientation
2) Individualism and Exchange
3) Good Interpersonal Relationships
4) Maintaining the Social Order
5) Social Contract and Individual Rights
6) Universal Principles
Now, you could make a good argument that this kind of business thought (Milton Friedman, etc) actually falls into the second level where self interest and avoidance of punishment become primary concerns. However, making moral decisions at the second level of Kohlberg’s six stages is just about as insulting as reasoning at the first.
My second point is when business is considered only as a money making endeavor, all the other levels of moral development don’t just become irrelevant, they become a block and a hazard to making maximum profit.
People who hold values from the other four stages might very well have difficulty succeeding in a corporation.
Let’s look at level 3, Good Interpersonal Relationships.
It might be difficult to evade taxes, shift jobs overseas, to fire employees who are too old, if you try to live up to these expectations. Now, that generally that is not much of a problem, because if you want to do these things, you can get people (once again, Milton Friedman) to tell you that what you are doing is right and true. Not only is doing these things not wrong, they are in the long term good for everybody and in the long term will contribute to a more successful and happier society.
Now, as someone who professes and teaches ethics, I might point out that using wrong doing and “ends justify the means” thinking is more likely to produce more wrong doing and “ends justify the means thinking” than it is to produce a “good” or “successful” society.
Level 4 thinking means a person begins to consider “society as whole” as a factor in moral decision making. Breaking the law, damaging the environment, treating people badly, acting in the interest of a foreign government or corporation or trading partner to the detriment of your own country, etc. are acts that damage society as a whole. A businessman willing to maximize profit at all costs with this level of moral development has to believe that the long term benefits of illegal and unethical actions will produce in the long term a better society or embrace simple villainy as a way of life.
At level 5, you are essentially talking a language modern business on the Friedman model may have serious difficulty understanding. A “good society” might very well be one where real people with real influence might seriously believe that it is easier for a camel to pass through the eye of a needle than for a rich man to enter the kingdom of heaven. What makes for a good society might in some people’s minds to be things other than money. If the “free market” solves all societal problems in the long term, other thought is just childish rubbish that must be tossed aside as part of the debris of history.
One of the reasons for the absence and continuing decline of moral values in American business is the lack in this society of individuals at the 6th level of moral development. Nothing could be more detrimental to the profit model of societal success than the proposition that there are universal principles by which a society should function. I read a lot and I promise you that the great thinkers, leaders and holy men of history have not been friendly to profit as a primary goal of the good society.
Kohlberg’s six levels of moral development give us insight into how we might consider thinking about ethical problems. Presumably it is better to think at a higher level than a lower one. If you accept that thought than an alarm bell should go off anytime a belief system calls for ignoring higher values and using the earlier ones.
(The quotes for this article are from W.C. Crain. (1985). Theories of Development. Prentice-Hall. pp. 118-136.) With my grateful thanks!
This is a clear situation where ethics and morality have a role to play. Okay, now, ask yourself, can you ethically sell chickens contaminated with bacteria? Let’s be clear about the consquences. We are talking about food poisoning. Let me quote from wikipedia:
So, we are talking about dead people and serious illness for thousands of others and since food poisoning can mimic other diseases like the flu, the numbers reported are too low.
Now, back to our moral dilemma. The bacteria from your chicken will kill some people often the elderly or the very young. On the other hand, you are participating in busines worth billion of dollars a year. (Tyson sold 26 billion dollars worth of food in 2005.) If your competitors do not act to fix the problem, they can sell chicken for less than you. You will lose market share and thousands of people might lose their jobs.
Now, you might say, “James, you have to draw the line here, we are talking about people’s lives.” I agree that lives are at stake, but I can’t help but point out that it doesn’t look like anybody is drawing a line.
Should we wait for industry to act? A study two years ago showed 80 percent of all chicken contaminated with bacteria. We’ve gone from 80 percent to 2/3 of all chicken sold. Isn’t that movement in the right direction? Don’t you know that incremental change is the responsible way to accomplish these kinds of goals? If you were to impose radical changes on the industry, everyone in American would have to pay a lot more for chicken. Don’t you want even the poorest in this country to have access to meat and the nutritional benefits it brings?
So, we come down to the usual questions. What are you willing to do as an employee of such a company? Where do you draw the line? What’s worth losing your job for? What’s the “right” thing to do?
Futher, as a society, what social costs are we willing to incur for low levels of bacteria in chicken: loss of jobs, increases in foreign competition and a greater price at the supermarket? What’s the social value of cheap chicken?
My conclusion is the following.
Selling chicken which you know to be contaminated with bacteria when you have the technology to eliminate some or all the bacteria is murder. I’m sorry about all the jobs. I’m sorry about the lost profits and danger of competition from foreigners but I just get upset about dead people, a personal weakness of mine, perhaps.
Since, it does not appear any chicken selling company is willing to make the first move to eliminate bacteria and endanger its bottom line, the government will have to mandate new standards.
Now, I realize that given time the free market will solve this problem. After all companies that sell chicken that kill will undoubtedly lose market share. Or will they? Reported levels of 80% didn’t stop people from continuing to buy chicken. On the other hand, this information does not appear to be common knowledge. It appears that the free market doesn’t function well when the consumers do not all have the same information. If death from chicken were certain instead of sporadic it would be easier for the public to make a good decision but food poisoning takes as long as a week to manifest itself. It’s hard to figure out what you ate over a seven day period and of course you might think it’s the flu. What do you think? Could this be an example of the free market yielding illogical or tragic results? Does the free market unfettered by government interference solve all problems?
I have strongly professed such beliefs in my teachings on ethics. I strongly believe that the moral stance we have in place is the main factor in what we decided when the ethical dilemma arrives. It is obvious to me, that we create our ethics continuously, and the destruction of our ethical framework takes place in small daily increments. This is why traditional business ethics teaching has little effect. What the more foolish call the “real world” eats it up. The real world is the kind of person you are as opposed to the crawling maggot the world would prefer you become.
Keith Chrostowski at the Kansas City Star provides a good summary of the arguments for fiscal restraint during this economic disaster while calling for extension of unemployment benefits. I find the arguments for such restraint to be ridiculous. Chrostowski only summarizes these arguments and I have no problem with his views but the arguments for fiscal restraint during this crisis border on the bizarre. 
Pilant's Business Ethics Blog 
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