British Free Market System: A Case Review - Iloka Benneth Chiemelie

QUESTION 1.1

From the case study, the whole debate was a result of Ed Miliband's argument that reforming capitalism should be the bases of economic development. The Labour party also made two claims that; they are best positioned to reform the economy and that the Tories should be disqualified from contributing in debate as they are the party of the capital. 

In return, Prime Minister David Cameron refuted the claims by arguing that the labour is to be blamed for the excess of recent years. He went on to point out that he argued three years ago that the government's turbo-capitalism didn't keep a watchful eye on corporate excess and his party is believe in responsible capitalism and will ensure that such becomes a reality.

David Cameron went on to support his argument by saying that the Labour government claimed to have gotten rid of the past boom and bust economy, while in reality they allowed a debt fuelled boom to get out of control. Thus, this resulted in series of imbalance in the UK economy between the poor and the rich, the manufacturing and financial institutions and between the south and the north.

Overall, the Prime Minister concluded by alleging that the past UK government promoted economics of socialism, where government steps back, loosens all hole and let capitalism rip at the expense of the general populace. Thus, he believes that his government is best positioned to reform the economy as the Tories understand their fallings and have been past records or promotion responsible capitalism a such as when Edmund Burke insisted on public accountability for the East Indian Company.

In order to begin examining the content above, we must first define what a capitalist economy entails. A free market economy commonly known as capitalism, is such economy in which the government excessive little interference in the buying and selling activities. Without regulation on the mode of transaction, free market economy encourages a bases of understanding which yield an agreement between the buyer and seller to undertake a business dealing (Herrera, 2002).

From the case, it can be argued that the pseudo-capitalism approach adopted by previous government is not clearly the reason behind excesses as capitalism is such an economy which permeates a mode of understanding between business partners and less government intervention on business dealings. A Donaldson and Dunfee (1999) in their view of international social contract theory argued that corporations are ethical responsible for setting wage rate and living conditions that are perfect for their workforce; should appropriately participate in business systems that rest on graft or nepotism; and host their country of operation in area of environmental protection (Dunfee and Warren 2001, Donaldson and Dunfee 1994, Donaldson 1989, Dunfee, et al., 1999).

In recent years, free market economy has also been on debate table for its unethical practices as business are more focused on ways to increase their profit lather than the general welfare of the society they operate in. combining this arguments with David Cameron's speech, it can easily be seen that his claims that the previous government under Tony Blair and Gordon Brown stepped back and let capitalism rip is probably right. This is because in a free market economy, the government has few control of the business and thus the capitalist market will eventually rip the full benefit by enacting a system that favors their greedy business approach. 

However, the question as to whether free market corrodes moral character is still not clear and it will be answered on a plausibility level. Free market economy corrodes certain aspects of morale character and enhances other aspects as well (John, 2011). Overall, the answer depends on one's definition of good life, and whether it is believed that other economic system can do better than the free market economy.

John (2011) went on to argue that historical views are essential because it helps us to see that economic systems are animate in nature. In real time, free markets rarely work according to standards and models set by economists. There are booms and bubbles, busts and crashes, and the idea of self-regulating market only work in textbooks. Under such background, the relationship between economics and ethics are easily illustrated, and such traits most rewarded by free market are entrepreneurial boldness, the desire to gamble and speculate, and the ability to create or seize an opportunity.

It is also important to avoid thinking in terms of idealistic models that entails "no government control", as free market is not entirely an absence of government. Markets depend on the system of law to decide what can be traded and not traded as commodity, and also how these commodities can be traded. Thus, the past UK government had full power to ensure that the economic excesses exerted by corporations and also the debt-fuelled boom were eliminated. Thus, their inability to oversee such is not in weakness of free market economy, but in weaknesses of the past government which David Cameron argued about.

Thus, Prime Minster David Cameron was right in his argument by stating that the past government sat back and let capitalism rip as they could have undertaken strict measure to ensure a more sustainable economy. Standing on the line of defense for David Cameron's allegations, it can be recommended that the past governments under Tony Blair and Gordon Brown were incompetent and should have implemented strict laws that encouraged an open market and free enterprise, but such where no party is left at the mercy of the over.

This would have encouraged moral practices amongst corporations, as those who fail to undertake businesses built on morality will face both the dealt of the government under the law and the overall society who will perceive them as irresponsible citizen, in turn resulting on business downfall.

QUESTION 1.2

Generally, corporate social responsibility is viewed as the way firms integrate social, environmental and economic issues into their values, culture, decision making process, strategy and operations in an accountable and transparent ways, and thus establishing better practices within the firm, creating wealth and improving the society (Paul, 2007).

Freidman Milton (1970), viewed corporate social responsible as different with organizational practices and that the social responsible of any organization is to maximize profit. This idea was also supported by another Neo-classist Norman Bowie (1982), who states that the corporation should make as much profits as they want, so long as they don't do any harm to the society. He defined the act of not doing any harm to the society as honoring the moral minimum of the environment they operate in and respecting individual perspectives. 

As the question requires, evaluating the system can easily illustrates that these corporations were doing exactly what Freidman stated. They considered the business of their corporation as business, and cared less on the impact their corporate excess had on the overall UK economy as well as it citizen.

However, they ignored Norman's idea that while the business of every business is business, the corporation should not rip profit at the expenses of the society. Thus, they should operate their business activities in such a way that the society is not left at the mercy of their business dealings. Norman Bowie (1982), was right with his statement as these society are also determinants of either the success of failure or every corporation that exits within their environment. They are the people who make the purchases, work tireless hours to ensure increased productivity, thus, not harming them should be an important element of every business operations.

Kant (1990), under his deontology theories on business ethics which is nowadays referred to as Kantianism, proposed two main theories for evaluating business ethics. The first is self-defeating nature of immoral actions which states that businesses should considered what will happen if their principle maxim is a universal law, and the second theory is treating stakeholders as persons where he argued that since humans have free will and are able to act from laws required by reason, it is believed that they have dignity or value beyond price. Therefore, one human cannot use the supply of other people to satisfy his or her own interest.

Kant's theory of business ethics together with Bowie's definition of corporate social responsibility supports Miliband's argument that the government should reform capitalism with set rules to regulate business dealings. David Cameron is also of the opinion of regulated business dealings where he argued that no real conservative will be so naïve as to let sit back and let capitalism rip. However, his argument was not consistent as he continued to say that free and open market can promote responsibility on its own where it is properly implemented. In this statement, he is also supporting the ideas of the past government by saying that the government should sit back and let capitalism implement responsibility on its own.

Thus, these confusing arguments is probably the reason why capitalism has been ripping for years as both government seems to be lacking with exact actions needed to control debt fuelled booms. Unfortunately, corporations will continue their business dealings with profit in their mind even if it is at the expense of the general public as profit is at the heart of any business formation. It is doubtful as seen from past years that any of these corporations will single out corporate social responsibility which is doing business in such a way that it doesn't harm the society as its core business values.

These limitations are behind the recommendation that the UK government should adopt a pseudo-capitalism that promotes entrepreneurship, creation of business opportunities and economic growth but with fully integrated regulated system that monitors business performances in relation to their contribution to the society. For instance, such laws should require an audit of business's financial account and statement certain percentage all business much input into development of social welfare from their profits. Through this means, corporations will be more willing to regulate their business dealings, reduce excess in corporate production as they will be held accountable for every business actions.

BIBLIOGRAPHY

Donaldson, T. (1989). The Ethics of International Business, New York: Oxford University Press.

Donaldson, T., & Dunfee, T. W. (1994). Toward a Unified Conception of Business Ethics. New York: Oxford University Press.

Donaldson, T., & Dunfee, T. W. (1999). Ties That Bind: A Social Contracts Approach to Business Ethics. Boston: Harvard Business School Press.

Dunfee, T., & Warren, D. (2001). Is guanxi ethical? a normative analysis of doing business in China. Journal of Business Ethics, 32, 191-204.

Dunfee, T. Smith, Craig N. and Ross, Jr. W. (1999) Social Contracts and Marketing Ethics

Friedman, M. (1970), "The social responsibility of business is to increase its profits", The New York Times Magazine, September 13.

Herrera, L.O. (2002) in Lefort, F. and Schmidt-Hebbel, K. (Eds), "Indexation, inflationary inertia and the sacrifice coefficient", Indexation, Inflation and Monetary Policy, Central Bank of Chile, Santiago.

John, G. (2011), "Does the free market corrode moral character? It depends." Available at: http://www.templeton.org/market/PDF/Gray.pdf [Accesssed on: 08-04-2012].

Kant, I. 1990: Foundations of the Metaphysics of Morals (1785). Trans. by Lewis White Beck. New York: Macmillan Publishing Company.

Norman, B. (1982), "Business Ethics".  Englewood Cliffs, N.J.: Prentice Hall Inc.

Paul, H. (2007), "Corporate Social Responsibility An Implementation Guide for Business", International Institute for Sustainable Development. Available at: http://www.iisd.org/pdf/2007/csr_guide.pdf [Accessed on: 08-04-2012]..