What is Ethical Capitalism?

Ethical capitalism is a recent term used by people who believe in the capitalist system, but who believe that the system has been twisted by greed and political interest. It’s importance in countries such as Britain, has been recent, but the growth of movements such as “The 99″ in America, suggest it may spread across the globe.

EC 300x129 What is Ethical Capitalism?

Discussion of the issue has developed over the last 3-4 years, but documentaries by people like Michael Moore have discussed the issue for two decades or more. Public anger and resentment in Britain and the rise of the 99 in America are a direct result of the policies of large corporations and banks.

These actions have been discussed on numerous other sites, blogs, books and banker dressed evil saint.n 300x224 What is Ethical Capitalism?documentaries. In short then, the banks loaned out huge amounts of money to projects that would not produce a return let alone a profit. These same banks then charged their regular customers for using their services and handed out massive bonuses to their top workers (well, top executives as that’s not necessarily the same thing).

The banks in America that ran mortgages then jacked the rates up and when people fell behind, repossessed the houses. Thus the people were turfed out of their homes. Most homes have not been filled since except by real estate vultures. Banks were bailed out by tax payers money (the same people who paid the fees) and then refused to loan money to small businesses.

stock photo layoffs and recession newspaper headlines documenting deep job cuts 24000538 300x212 What is Ethical Capitalism?Jobs have been cut. Wages have stagnated at the bottom. Top execs continue to get bank busting bonuses. The public sector’s wages have gone out of control, but bizarrely the lower workers were also being fired. Also, the cost of everything has risen massively. Needless to say, this has angered a lot of low level workers.

In his passionate defense of capitalism, Daniel Hannan, blames not the economic system, but human fallibility instead. This has to be a core element of ethical capitalism and how our economic system can be saved. The problems of the current economic system, therefore, are purely human.

The chief fault that corrupts capitalism is greed. This is the chief fault of most economic and social systems. That and a lust for power (megalomania et kleptomania). Yes, socialism and capitalism were riddled with those faults too. As some feminists have pointed out, this will always be the problem so long as men are left in charge (but that is greed 300x247 What is Ethical Capitalism?another story).

Greed is the chief reason why those at the top pool the money for themselves while not giving money to those at the bottom. This is why a chief executive is given a bonus for making a loss, while workers are fired for making a profit. This is why wages are a key element of reducing costs in order to maximize profits. This is also why safety measures are ignored in order to save money or goods are made to a lower quality. This is why it costs 20p to make a big mac, but you pay a lot more to eat it.

Ethical capitalism is a nebulous movement or aspiration to make capitalism better. The problem with the term “ethical capitalism,” however is it being a term coined or championed by politicians. Automatically such terms are considered to be gimmicks or slogans banded around to win favour with those who listen to soundbites, but do not examine the deeper issues.

If ethical capitalism or cuddly capitalism or whatever you want to call it, truly existed, it would have to contend with the pillars of capitalism’s problems. These problems are the the faces of capitalism1 229x300 What is Ethical Capitalism?drivers of greed. These include the sanctity of the profit motive, the separation of executives from the general workforce, the power and ethics of shareholders, general society’s views on opulence and finally the total disregard of the rights of customers.

That is a pretty hefty list of problems. And there are probably more. The early policy announcements regarding ethical capitalism concentrate on failed policies limiting banker bonuses and possibly rewarding companies that offer shares to their staff. Where Ed Millipede stands is unknown, possibly against rip-off Britain (companies charging too much for stuff). They could do more, but it begs the question, how much should governments do?

The role of the government is to provide a framework for people to live, to protect the nation from outside threats and to look after those who cannot look after themselves. Sadly, especially with Labour policies, it has also become a means to co-opting people into voting for them. There is much that can be done to improve measures. While I’m at it, some things must remain government owned like healthcare (yes Republican Americans,piggybank 300x226 What is Ethical Capitalism? nationalized healthcare is a must for all societies), defense, policing, fire fighting and education.

For the rest, there needs to be a framework that tells businesses and individuals what the limits of acceptable behaviour are. Here are a few ideas.

Pay Ratios: Laws could limit the ratio of pay between the top and bottom of a company. Ratios can be set on an hourly rate and should be a max of 5 to 1.

Bonuses: All workers should be eligible for equal bonuses (and equal severance packages for that matter). First, only companies that make a profit should be eligible for a bonus. Second, the size of the bonus pool should be limited by a company’s debts, the level of government investment and the infrastructure needs of the company (especially for railway companies). Finally, each worker should be eligible to the same bonus based on the number of hours they have worked not their salary.

BM Alliances 282x300 What is Ethical Capitalism?Tax Breaks for Co-operatives: Michael Moore’s “Capitalism: A Love Story” highlights a co-operative business where all the workers are equal owners. These kinds of businesses offer a chance for people to work and run the company. It’s a good equal system which puts the benefits of all first.

Enforce New Banking Rules: Perhaps make banks charge as much money for going into the red as they give people for being in the black. Reduce bank charges and punish banks for getting creative with their charges. Ensure there are flexible mortgages aimed at helping people who might lose a job or take maternity leave etc…

I could go on and on. The roles of hedge funds needs looking at, there’s also rules on fair pricing, tax rates for people and companies, and a lot more. As the Independent says, the role of shareholders needs re-examining too.

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