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Is Ethical Capitalism Possible?

In response to the current ecological and financial crises, the call for a more sustainable and fairer globalization is gaining momentum. Building this alternative must begin with a spiritual, moral and ethical understanding of our society and economy

Kamran Mofid

We live in a time of transition, a time when all is changing and being challenged - weather systems, ecosystems, our interaction with nature, our understanding of other beings. We now understand that we are all interconnected and interdependent. Somewhere along the line, our actions as human beings have created enormous instability to the planet and the millions of species who reside here.

Much of which is familiar to us and deemed the ‘norm' is no longer working and is being challenged. Sometimes change brings with it destruction. Sometimes destruction is beneficial. It can alert us to practices that do not work. With destruction also comes new birth, and new avenues open wide to be explored. There are many choices as to which route to take; the issue is which route is the one that will provide life for all. The golden opportunity presented by the current ongoing crises is to make the right choices that will affect the long term future for us, our descendants and our planet.

There is no denying the fact that we are in a serious state of crises, a crises of our own making, all of us and not the bankers alone. They responded to what we wanted: cheap, available, unregulated money and loads of it.

They in turn were responding to the neo-liberal agenda of the so-called Washington Consensus: Privatisation, deregulation, market forces, liberalisation, low taxation, free trade, and one glove fits all policies and more. No regards, no respect for different cultures, civilisations, religions and history. What is good for America and the West, then, must also be good for everybody else, regardless of all other factors, we were told again and again.

The tragedy is that we have now discovered that what we were pushing on others, which we thought was good for us - the so-called market-forces driven Anglo-Saxon model of capitalism - was nothing but a huge cancerous cell which at the end brought the house of cards down. The emperor has no clothes, so to say.

What to Do Now?

The current global economic crisis is deeply complex and perplexing. Many world politicians, business people, academics, activists, and civil society representatives, as well as religious and spiritual leaders, have called for a new kind of "ethical capitalism" - a moral, spiritual and virtuous economy. People everywhere are calling for an international framework of standards for an equitable and sustainable global economy to replace the current economic system of unbridled growth and increasing ecological degradation. While some look for quick short-term solutions that would perpetuate the current economic model, others see the need for more fundamental changes of the model itself. Our challenge is great. In a time of continuing crisis and polarizing viewpoints, can the world agree on an ethical approach to the global economy?

I propose a comprehensive examination of the major attempts to integrate economics with ethics and spirituality, along with an exploration of the theoretical underpinnings of these activities. In considering the need for bold economic initiatives, we must keep in mind the deeper questions that rarely find their way into political debate or public discourse.

We should explore the emerging economic issues as well matters that are deeply ethical and spiritual:

  • What is the source of true happiness and well-being? What is the good life?
  • What is the purpose of economic life? What does it mean to be a human being living on a spaceship with finite resources?
  • How can the global financial system become more responsive and just?
  • How can the world make the global trade system more equitable and sustainable?
  • What paths can be recommended to shift the current destructive global political-economic order from one of unrestrained economic growth, profit maximisation and cost minimisation, to one that embraces material wealth creation, yet also preserves and enhances social and ecological well-being and increases human happiness and contentment?
  • How can society overcome poverty and scarcity with limited natural resources?
  • How should we deal with individual and institutionalized greed?
  • What are the requirements of a virtuous economy?
  • What religious or spiritual variables should be considered in economic/business ethics and economic behaviour?
  • How are these components to be integrated with economic theories and decisions?
  • What role should universities play in building an integrity-based model of business education?
  • What should be the role of the youth?
  • How might the training of young executives be directed with the intention of supplying insights into the nature of globalisation from its economic, technological and spiritual perspectives, to build supporting relationships among the participants that will lead toward action for the common good within their chosen careers?
  • Indeed, is ethical, profitable, efficient and sustainable capitalism possible?

These questions and more need to be reflected upon, debated, and ultimately, answered and put into policy formation, guiding us to a more humane globalisation.

A concrete framework for understanding what has gone wrong and possible remedies, including both broad perspectives on policies and specific recommendations, must include not only an economic perspective, but also a spiritual, moral and ethical understanding.

Steps can be taken towards a sustainable economy, to turn the current crisis of casino capitalism into an opportunity for a successful, sustainable and everlasting change, where all people, wherever they may be, can live  fulfilling, healthy, and yet more ecologically compatible lives.

Here are the steps I suggest:

1. Begin a Journey to Wisdom

Economics and business are all about human well-being in society and cannot be separated from moral, ethical and spiritual considerations. The idea of an economics which is value-free is totally false. Nothing in life is morally neutral. In the end, economics cannot be separated from a vision of what it is to be a human being in society.

In order to arrive at such understanding, my first recommendation  must surely be for us to begin a journey to wisdom, by embodying the core values of the Golden Rule (Ethic of Reciprocity): "Do unto others as you would have them to do to you". This in turn will prompt us on a journey of discovery, giving life to what many consider to be the most consistent moral teaching throughout history.

It should be noted that the Golden Rule can be found in many religions, ethical systems, spiritual traditions, indigenous cultures and secular philosophies. Applying this universal principle can provide an enabling mechanism for the dialogue and development essential to resolving the challenges we face globally, nationally, and locally.

2. Now is the Time for a Revolution in Economic Thought

"An economist who is only an economist cannot be a good economist". Therefore, the focus of economics should be on the benefit and bounty that the economy produces, how to let this bounty increase, and how to share the benefits justly among the people for the common good.

Moreover, economic investigation should be accompanied by research into subjects such as anthropology, philosophy, politics and most importantly, theology, to give insight into our own human mystery, as no economic theory or no economist can say who we are, where have we come from or where we are going to. Humankind must be respected as the centre of creation and not relegated to short-term economic interests, as has been the case for the past few centuries.


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3. Don't Repair the Economy, Change It

The current financial meltdown is the result of under-regulated markets built on an ideology of free market capitalism and unlimited economic growth. The fundamental problem is that the underlying assumptions of this ideology are not consistent with what we now know about the real state of the world. The financial world is, in essence, a set of markers for goods, services, and risks in the real world and when those markers are allowed to deviate too far from reality, "adjustments" must ultimately follow and crisis and panic can ensue.

To solve this and future financial crises requires that we reconnect the markers with reality. What are our real assets and how valuable are they? To undertake this readjustment requires both a new vision of what the economy is and what it is for, proper and comprehensive accounting of real assets, and new institutions that use the market in its proper role as servant rather than master.  We have to first remember that the goal of the economy is to sustainably improve human well-being and quality of life, not the promotion of materialism, consumerism and "shop till you drop" values - especially when they are done with borrowed money!

Ultimately we have to create a new model of the economy and development that acknowledges this holistic context and vision. This new model of development would be based clearly on the goal of sustainable human well-being. It would use measures of progress that clearly acknowledge this goal. It would acknowledge the importance of ecological sustainability, social fairness and real economic efficiency.

Ecological sustainability implies recognising that natural and social capital are not infinitely substitutable for built and human capital, and that real biophysical limits exist to the expansion of the market economy.

Social fairness implies recognising that the distribution of wealth is an important determinant of social capital and quality of life. The conventional model has bought into the assumption that the best way to improve welfare is through growth in marketed consumption as measured by GDP. This focus on growth has not improved overall societal welfare, which is why explicit attention to distribution issues is sorely needed.

4. Recognise That the Economy Is Part of the Biosphere

A comprehensive economic plan must be based on the scientific fact that the global economy is a subsidiary of the natural order. Economic policies should be attuned to the limited capacity of Earth's biosphere to provide for humans and other life and to assimilate their waste. Photosynthesis and sunlight are as essential to the framework for economic budgets and expenditures as the laws of supply and demand.

5. Acknowledge That We Need New Institutions

An economic renewal tailored to the 21st century would establish institutions committed to fitting the human economy to Earth's limited life-support capacity.  We need something like the central reserve banks which will look after shares of the Earth's ecological capacity, not just interest rates and the money supply. Money should be recognised as a social licence for using part of Earth's life-support capacity. Some functions of governance will have to operate at a global level through a federation modelled perhaps on the European Union, with enforceable laws designed to assure that individual nations don't overrun Earth's limits. The rules for the developed countries that are responsible for the current ecological crisis should be different from those of developing ones.

6. Fairness Matters

A "right" human-Earth relationship would recognise humans as part of an interdependent web of life on a finite planet. The economy must recognise the rights of the human poor and of millions of other species to their place in the sun. In a world awash in money, addressing poverty only with growth reflects a tragic lack of moral imagination. Indeed, in pushing for more "free" trade as it is currently understood, we would entrench an ongoing addiction to consumption, pursued in a manner that often ravages the bio-productivity of developing countries.

7. Expand the Discussion

The new knowledge that will forever mark this period in human history is the overwhelming scientific evidence that we are over-consuming the planet and accelerating toward ecological catastrophe. The short-term approaches of most ministers of finance and professional economists don't account for how the planet works, or even that the economy exists on a finite planet. Scientists morally committed to protecting the global commons and researching ecological limits to the global economy need more funding and influence in policy-making.

8. Look beyond Neoliberal Education and Short-Term Fixes

We must begin a serious debate on the role of education and what education is all about. We must greatly increase investment in educational and civic institutions that teach that we are not "consumers," but citizens of the Earth and guardians of life's prospects on a small, beautiful and finite planet. In today's largely decadent, money-driven world, the teaching of virtue and building of character is no longer part of the curriculum at many of our universities around the world. The pursuit of virtue has been replaced by moral neutrality - the idea that anything goes. For centuries it had been considered that universities were responsible for the moral and social development of students and for bringing together diverse groups for the common good.

Given the above, it is clear that we need a new economic model, enabling us to deal with new challenges, rather that rescuing and bailing out a discredited and bankrupt model, philosophy and theory.

The long-term solution to the financial crisis is therefore to move beyond the "growth at all costs" economic model to a model that recognises the real costs and benefits of growth. We can break our addiction to fossil fuels, over-consumption, and the current economic model and create a more sustainable and desirable future that focuses on quality of life rather than merely quantity of consumption.

It will not be easy; it will require a new vision, new measures, and new institutions. It will require a redesign of our entire society. But it is not a sacrifice of quality of life to break this addiction. Quite the contrary, it is a sacrifice not to.

Kamran Mofid is the Founder of the Globalisation for the Common Good Initiative (Oxford, 2002), Co- founder/Editor of Journal of Globalisation for the Common Good and a member of the International Coordinating Committee of the World Public Forum, Dialogue of Civilisations.

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