Recently I ran across an article in The New York Times on business ethics. Business and ethics? Isn’t that an oxymoron?
The author, Jesse Eisinger, suggested that banks and investors will routinely “forgive rotten ethics for good returns.” Not the most elegantly turned phrase, but, excuse me, doesn’t “rotten ethics” mean no ethics at all? Furthermore, isn’t an enterprise without ethics by definition criminal?
But how could the most significant collective activity we all engage in every day, economic production and exchange, be essentially criminal? We all need food, clothing, shelter and (some of us) iPhones, and we go about making and consuming these products on a daily basis. It’s called survival. Sure, there’s a certain amount of fraud involved in it. Caveat emptor, the Romans used to say — let the buyer beware. But if our daily exchanges weren’t fundamentally honest, how could we keep them up? Wouldn’t we all have to become Robinson Crusoes, producing and consuming for ourselves alone? How would that work for the young, the ill and the aged?
The answer to these questions lies in the distinction between the satisfaction of human needs, which is indeed accomplished through a myriad of interpersonal exchanges every day, and the modern market system grafted onto it, which is capitalism. The suggestion here is that it isn’t economic activity that is inherently fraudulent (though some fraud would occur in any exchange system); what’s fraudulent is the very peculiar way in which modern societies structure it.
The idea behind capitalism is that it isn’t the usefulness of an economic activity — its satisfaction of an actual human need — that is critical, but only its commodification, that is, its transformation into something that is profitable when exchanged. Profit is, of course, a very old market mechanism whose efficacy has been repeatedly demonstrated and which medieval thinkers incorporated into their idea of a just price for goods and services. But capitalism deforms profit. Instead of being one stimulus among many to economic activity and a reward for its successful performance, capitalism makes profit an end in itself, indeed the sole determinant and ultimate end of economic activity as such. What turns a profit gets made and done; what doesn’t turn a profit, doesn’t. It thus becomes rational to let people freeze, starve and even (as in the case of our for-profit medical system) die if sufficient profit can’t be made from feeding, clothing, sheltering and healing them. This is what, in fact, occurs when major depressions occur. These are not accidents of the system but the inevitable product of it. In fact, they are the only reliable product of it.
Mitt Romney complained during the last presidential campaign that his Democratic opponent, Barack Obama, wanted to turn profit into a crime. (Hardly. Banks and corporations have never had so good a friend as the current president.) The fact is, however, that profit is a crime in our present system.
Let me explain what I mean. When we think of organized crime, we think of something that is parasitic to honest enterprise, for example, shakedown operations in which money is extorted from businesses to “protect” them from their blackmailers. We may also think of syndicates that engage in prohibited activities or peddle harmful, adulterated or even lethal products.
Modern capitalist enterprise does all these things. When companies threaten to relocate their businesses elsewhere, local governments rush in with tax rebates and incentives — protection money — to keep them where they are. Conversely, such governments will offer similar inducements — bribes — to steal businesses away from other places. This is an $80 billion annual racket in the U.S. ($19 billion in Texas alone). Of course, it doesn’t keep corporations from demanding that the ante be periodically upped or welshing on their deals and moving out anyway, leaving behind abandoned factories, devastated communities, and, often enough, ground and water contaminants to poison generations yet unborn.
We haven’t yet legalized narcotics or prostitution in most places, but gambling, formerly an unlawful practice, is now not only respectable but, in the form of lotteries, a government-sponsored activity in the process of privatization. The biggest pill-pushers, of course, aren’t the Mexican drug cartels but pharmaceutical houses that have made us the most overmedicated society in the world while creating strategic shortages of actually useful medicines. Also, duly note that cocaine won’t cause cancer, organ failure or elevated risk of strokes. Plenty of prescription medicines will, though.
Crooks aren’t concerned about health and safety issues; they just want the money. So does Wal-Mart, which with its $447 billion in annual revenue last year declared with a straight face that it is “not financially feasible” to provide safety upgrades for factory suppliers in Bangladesh and Pakistan, where 400 workers have recently died in fires. In the U.S., Massey Energy has been indicted for “criminal conspiracy” in concealing the buildup of gases that killed 29 workers in the Upper Big Branch mine disaster in 2010.
Of course, the very heart of corporate crime is the banks, where unchecked mergers have left them not only too big to fail but, in the words of a recent discussion of London’s HSBC bank — a major player in a colossal loan-rigging scandal — “too big to indict” and thus effectively beyond regulation, let alone punishment. With 43 percent of all corporate profit now flowing into the so-called financial sector in the U.S. (versus 16 percent only three decades ago), “the financial guys,” as Paul Krugman of The New York Times wrote, “are making out like bandits — in part because, as we now know, some of them are bandits.”
Some of them? Surely, Paul, you jest.
The argument is made that banks and corporations have gone into fraud because of deregulation — the repeal or silent nonprosecution of New Deal-era laws set up to prevent a recurrence of the Crash of 1929. But what do you call enterprises that, as soon as controls are removed on their activities, immediately revert to the same practices that collapsed the world economy, with exactly the same result?
You call them criminal, with one caveat: Even crooks know when they’ve taken enough. That’s how the banksters differ from the gangsters. For the former, there’s no such thing as enough.
This isn’t a flaw in capitalism; it is its essential nature. As things stand, there’s little hope of controlling it and none of changing it. Worse, the reckless spoliation of the planet in pursuit of profit has exposed us to a looming ecological disaster that threatens civilization itself.
Business before pleasure, if you will, but not before survival.
Robert Zaller is a professor of history at Drexel University. He can be contacted at firstname.lastname@example.org.