A yardstick for justice and ethical evaluation of economic organizations.

INTRODUCTION

Parts of the business community have lost the public's confidence. It is not only the traditional used car sales people or the fly-by-night Acme mail order houses, but the public's mistrust is also found well into the established business community; in institutions traditionally regarded as pillars of society. Examples include banks and the major financial intermediaries, as well as some of the major industrial corporations. We meet a conflict between the public's perception of what is good and decent behavior and the behavior exhibited by some economic actors in both the public and the private spheres. It has been brought to the public's attention through the age of the yuppies, the private and public handling of the bank crisis and various stories like the Barbarians at the Gate (Burrough and Helyar, 1990), the saga of Simplicity or the greed and power exhibited in connection with the destruction of Eastern Airlines (Bernstein, 1991). Much of what the economic actors were doing, was perceived as marginal behavior, if not unethical - by the population at large. "There should have been a law against that ...." This is the "lynch and bum 'em" perception of some of those who make economic decisions. The bad guys seem to be lining their own pockets, while making the lives of innocent stakeholders miserable. Major business decisions are perceived to have favorable effects on those who make them, and at times serious negative effects on their firms, their employees, on customers - and on other stake holders. There seems to be a gap between what the culture regards as acceptable behavior and the behavior exhibited by some of the economic actors. The "need-greed" gap is not a new dilemma - it is described in the Bible and through history. (See, for example, Langholm, 1992). In a general sense, it can be said that the labor movement, the consumer movement and the environmental movement are reactions to decisions made by those who own and manage economic organizations. Some of their conduct was perceived to be wrong, unfair or perhaps immoral.

We have seen reactions in the business press where journalists comment on and seek to harness some of the more unethical forces operating in the market. Fortune, Wall Street Journal, Harvard Business Review, The Economist, and Business Week are among the concerned along with the Securities and Exchange Commission.

There seems to be a built in conflict between the general perception of ethics in our culture and the values associated with the workings of some of the institutions of the market economy. Each country has its own set of values (national cultural values) that it sees as preferential; American values versus Japanese values versus Scandinavian values etc. We prefer the values of our own culture and believe that our values are superior to those of other cultures; we are all ethnocentric. The different values are also reflected in different political and economic institutions from one country to the next.

Then, there is a set of economic values that constitute the underpinning's of the market economy. These values are typically based on a combination of liberalism, utilitarianism, and neoclassical individualism. These may, or may not, match the local cultural values, and we need to ask if the markets operate the way we want them to based on our cultural values. If not, should we: (1) change our cultural values - our notion of ethics; or (2) should we change the institutions that govern the way in which economic organizations are allowed to operate?

This is complicated by the fact that the cultural values or institutions present in the United States cannot be regarded as universal. Cultural values change from one place to the next, as well as over time. Therefore, a discussion of ethics must include an element of a universal ethic valid across time and place. A yardstick for ethics based in a single culture at one time is by definition unstable and insufficient to evaluate conduct with consequences far beyond the decision maker in geography and in time. Therefore, it is necessary to seek a set of universal values, a universal ethic, that could trump some of the local cultural values and also perhaps trump some of the values associated with the way our economy works.

The current cultural values as represented in our laws and regulations, seem incapable of stimulating the kind of economic behavior beneficial across time and space. Massive starvation, malnutrition and suffering coexists with unprecedented wealth and affluence. We must ask if there is an alternate set of values that can guide law makers, regulators and economic actors alike.

In the following, we will: (a) discuss the functioning of cultural values. Since cultural values change over time and space; (b) discuss the notion of a possible universal ethic which might trump local cultural values; and (c) look at how such a conception of a universal ethic might challenge some of the current economic institutions.

National Cultural Values and Our Moral Compass

Through geography (location and natural resources), history, basic ideals, and philosophy, a set of values (institutions) are developed that are unique to each culture. These institutions have proven themselves as a useful "set of survival tools." Some cultures have not survived, either because they were confronted with other cultures that were mightier - had better weapons - or they disappeared because the values they had, led to their demise. For the United States, American values include among other things:

1. Competition with a strong sense of fair play; 2. Equality of opportunity; 3. Freedom for the individual; 4. A developed sense of caring and sharing; 5. The sanctity of the family; and 6. Meritocracy.

As with most things, there is often a considerable difference between the ideal and the real. However, the ideals do give direction for our moral compasses, even if reality leaves something to be desired. The Japanese and the Scandinavians may list slightly different values as part of their cultural ethic. (see e.g., Geert Hofstede, 1984a).

The cultural values are programmed into us at a very young age. "Culture is the collective programming of the mind" (Hofstede 1984b). The physical or genetic heritage (hardware) is rather useless without the cultural and social programming (software). This programming is systematic and almost biologically anchored in our brain's neuron system. When something happens outside us, we take the information in to our heads, process it and react to it. The reactions are often spontaneous and elicit feelings of approval, anger, irritation, happiness, helplessness, ambivalence, peace, love, hate, jealousy, disappointments, indignation and the like. The heart beats faster, blood rushes to the head, and the body tingles. An event outside the body has set off a physical reaction inside the body. The same external event may or may not set off an internal reaction depending on the culture to which a person belongs. Knowledge of someone's religious affiliation, race, political preference or clothing may cause different reactions in people of different cultures. Other examples include rules of etiquette such as chewing with an open mouth, burping, drawing air through ones teeth and the like. These are examples which show that our values are so well programmed into us that they elicit affective biological reactions.

Cultural values tell us what is fight and wrong. They form the basis for our moral compass which in turn informs us of what is immoral behavior and what is moral, what is expected and what is unexpected what is polite and impolite etc. Within each culture, we define behavior on a continuum from one extreme to another. At one extreme, church- and witch-burning is considered "devilish" behavior, followed by plain "illegal behavior" (non reporting of income to the IRS). Then we have "bad and perhaps illegal behavior" (creative design and use of loopholes), followed by that which is legal but nevertheless "marginal behavior" (abandonment of responsibilities). Then there is "good and honest behavior" (heading the local march of dimes committee) all the way to "altruistic and saintly behavior" exemplified by Mother Teresa. When we say that "parts of the business community have lost the public's confidence," we are saying that we evaluate the character or the behavior associated with some practice, as "marginal" if not "illegal" on this continuum. The institutional arrangement is such that it permits behavior which is seen as unethical.

The fact that a group of people share the same values makes it possible to interact in a relatively smooth manner within a culture. Our moral compasses are programmed into us and constitute our consciences or our sense of ethics. Sometimes, our conscience brings us to the same conclusion as would our logical reasoning - and some times the two seem at odds with one another. What makes a nation or a culture, is a minimum agreement on a shared set of values.

Cultural values and the political process: It would not be correct to say that all members of a culture share the exact same set of values and are programmed exactly the same way. There is obviously a difference among members of one culture - reflected in for example political parties. However, it is believed that the differences within a culture may be smaller than the differences between cultures, say between the U.S. culture and the Japanese culture. Thus, we get a relatively homogeneous set of values inside a culture. There is often a correlation between cultural groups and jurisdictions - so that the local cultural values are reflected in the regulations and laws of a piece of geography, for example the nation state. Nation states that contain two or more different cultures (different sets of values) are often plagued by conflicts; see for example Yugoslavia, South Africa, China, India, and Canada.

In democracies, we elect our law makers based on the degree to which they are able to cater to our sense of right and wrong (and to our wallet). The law makers and the regulators see to it that laws and regulations are passed which reflect values of the local culture. Thus in a democracy, there is a link between the local values and the formal (and informal) institutional arrangement; in, for example, customs, laws, and regulations (Recent events in Rumania and Iran have illustrated what happens if the link between the cultural values and the rulers are weak). As a part of these institutions (laws and regulations) are the incentives, the sticks and carrots that regulate (stimulate and discourage) certain kinds of economic behavior. And as we can expect, laws and regulations affecting economic organizations differ from one country to the next. The WTO, NAFTA, and EU. negotiations remind us of this as do the frequent discussions in the Triad (United States, EU, and Japan). Thus, the formal and informal institutions that regulate the behavior of economic actors are a function of the predominant set of values or ethic in the local culture.

Culture and Ethical Relativism

The problem here is that the definition of "right and wrong" is associated with a place (United States) and a time (1996). If we move to another place - like France, Serbia, Pakistan, Mexico, Norway, or Japan - we get a different definition of right and wrong. Muslim, Hindu, and Christian cultures have different moral compasses, as have Latin, Anglo, Germanic, or Chinese cultures. The world gets to be complicated if we were to have one ethic at home in the family, another ethic in the office, and then multiple ethics when we travel abroad.

Likewise, if we travel in time - we can see similar differences. A major change in this respect can happen within a person's life as with the British slave captain John Newton, who regretted his ways, and sought to fight slavery - and wrote the song Amazing Grace ("..that saved a wretch like me..."). Over the past two hundred years, we have gradually become more, and more aware of various kinds of discrimination. Our values have gradually changed over time regarding the moral status of women, different ethnic groups, disabled persons, the young, and the old. Some of the values, and the laws of yesteryear are by today's standards quite immoral, as are probably many of today' s values, and laws by the standards of generations yet unborn.

As we have seen, we can easily move across a few cultural borders or a few generations back in order to see how temporal our institutions really are. It is therefore necessary to view the current local values, and institutions with some humility, and with less conviction, and certainty. What is considered right, and prudent behavior today, may not be right, and prudent when seen in the light of a larger perspective - be it with the hindsight of future generations or with the view point of another culture today.

There are indeed fairly large differences to be discovered with such an imaginary travel through time and place. "When in Rome, do like the Romans do..."? Feeding Christians to the lions is not right, …