Philosophy 360: Business Ethics

Chapter 9

Four major ethical issues in international trade

• Unequal distribution of wealth: there is no system for redistributing wealth and redressing economic disadvantages among nations the way that there is among individuals in most nations.

• There is an absence of effective “background institutions” in many international contexts.

• Capital flows freely across national borders, but labor does not.

• There are a number of specific customs and laws that are in themselves ethically justifiable. Which should international business follow?

Globalization

• It is often unclear precisely what globalization is, or if it is acceptable or not. The WTO, fairly or unfairly, has been the poster institution of globalization, and criticisms have tended to be one of the following:– WTO policy does not benefit poorer nations– WTO policy harms poorer nations– WTO governance is not transparent or democratic

Multinational Corporations (MNCs)

• As the primary agents of international business, MNCs stand in line for moral criticisms, the most prominent of which are:– MNCs exploit workers and natural resources in

LDCs, profiting hugely– MNCs compete unfairly in LDCs– MNC activity in LDCs has the effect of

impoverishing them and fomenting unrest.

Exploitation:

• The mere existence of wage disparity is not enough to warrant a charge of exploitation. A charge of exploitation needs the absence of the following:– Minimum wage laws or policies– Welfare programs as an alternative to having to accept

any wage at all to survive– Legitimate consideration of the cost of living in an area – Freedom in negotiating employment conditions

Contradictory demands:

• Sometimes, MNCs pay what other local employers pay. If this is an exploitative wage, then the local employers are just as guilty of exploitation as the MNC.

• Sometimes MNCs are criticized for offering a higher wage than local employers are capable of offering, thus taking all of the best employees and harming the competitiveness of the local operations.

Mitigating factors:

• Some factors which have worked to decrease exploitation of MNCs abroad include:– Domestic public opinion– UN guidelines– LDC laws– Competition from other MNCs– International labor organizations

Impoverishment:• The charge that MNCs have impoverished LDCs has several

elements:– Cultural impoverishment: the wholesale importing of western

values and practices without consideration for local practices and values

– Relative impoverishment: by bettering the lot of some of the world’s poor, the plight of the rest of the world’s poor is more stark.

– Population growth due to new technology (especially medicine)– Agricultural policy: domestic subsidies, import tariffs,

purchase/use of most productive LDC farmland creates famines.

Monetizing hidden costs:

• One example of the problems caused by a lack of background institutions is the monetizing of hidden costs.– Examples: environmental regulations monetize

environmental costs– Labor unions and organizations monetize costs to

worker well-being– Lawsuits, strict liability, safety laws, and consumer

organizations monetize dangers to consumers

Norms for multinational operation:

• (Minimum) do no intentional direct harm.• Any business operations are to be of mutual

benefit (to the people of a country, not to its corrupt leaders)

• Respect human rights in all operations• Promote (at least do not oppose) formation of

background institutions• Follow local laws so long as such laws are in

themselves ethical.

Accountability for sucontractors and subsidiaries

• Wherever a multinational corporation contacts out business or forms other business relationships, they are responsible for any rights violations or ethical abuses of their chosen subsidiaries or subcontractors.

International pluralism

• There are indefinitely many ways of organizing societies and governments that do not violate human rights, and are otherwise ethically defensible.

• It is unreasonable to expect that all systems should be the same, but there must be at least some minimum standard.

Some further reading suggestions

A History of Money• By Jack Weatherford• An anthropological

treatment of money and of human behaviors toward it through history.

The Ascent of Money• By Niall Ferguson• An examination of the social

benefits (and abuses) of financiers.