Do We Need An Economic Bill of Rights?

The Harvard Business Review Advisory Council Forum initiated an online discussion for members to respond to the general question: "How would you advise Obama on his business agenda priorities." I participated in a thread in response to the question: "Do we need an economic Bill of Rights?"

Given that individuals already have moral rights that governments can neither legitimately grant nor take away, I hold to the position that we have economic rights as a corollary of the rights we each possess as rational human beings. If an "Economic Bill of Rights" is a reiteration of universal moral rights, the purpose of which is to reinforce these already existing rights, then I'm all for the creation of an Economic Bill of Rights. But if an "Economic Bill of Rights" requires the repudiation of universal moral rights through the legitimization of the initiation of the use of force by some to gain unearned/un-permissioned access to the property and wealth of others, then I'm against it. As should be all civilized people. 

My take on the context by which the question was framed is that an Obama-led Economic Bill of Rights is one about repudiating the concept of individual rights and implementing a government-led initiative of wealth redistribution in support of the Marxist slogan: from each according to his ability; to each according to his need.

Here are the pertinent parts of my contribution to the thread and to the comments by others.

KM: November 18, 2008: 

We need to examine the meaning of work and the ethics regarding operating a business. Investment in the economic backbone is paramount and should be simplified and anchored on key principals of character, responsibility and accountability. It needs to start with an examination of fiscal fundamentals of supply-demand, resource availability and domestic and global integration and protections as well as currency management.

Linetsky: November 18, 2008:

Peter Drucker wrote that the purpose of a business is to create customers. To do that requires an entrepreneur to organize resources in a manner that can create more value than the sum of the parts as determined by consumers. That's where any economic bill of rights has to start. Those who are able to win customers in a free market acquire wealth and earn the right to continue to control capital. Those that fail lose wealth, go out of business, and capital is transferred to others who think they can do a better job at satisfying consumers. Those with the foresight, ability, or luck to work for value-creators and contribute to satisfying consumers are gainfully employed. Those who work for companies that create products or services customers do not desire lose their jobs. Beyond abiding by economic laws of the marketplace, I'm not sure what other economic rights there are to talk about, unless you mean the right to produce things people don't want and still get rewarded for it. But that can only be achieved through unethical government intervention in the free market. Please explain what kind of ethical economic bill of rights you are considering.

AP: November 19, 2008:

In response to linetsky, I would suggest that you are not actually talking about rights. A company's ability to capture customers by providing them with what they value is one of the determinants of company success in a market economy. Unfortunately, there can be other determinants (at least temporarily): contracts, government favourtism/unregulated lobbying/corruption, manipulating perception of risk, exploiting supply chains... Basing the economic system merely on criteria of monetary success leaves the system vulnerable to practices that promote individual success at the cost of systemic sustainability. If we believe in a society built on mutual dependence and progress (as opposed to the law of the jungle), then we need to recognise that businesses have acquired a role beyond profit generation. In a capitalist democracy, businesses are one of the fundamental units that channel our social interaction, our effort to form and realise aspirations and our sense of place in society.

How we choose to regulate and value the operation of a business has fundamental implications for the society we wish to live in. Whether an economic bill of rights is the best way to progress or not, a serious reflection on these questions is a damn good idea.

Linetsky: November 20, 2008:

Antony and I come together and agree to build widgets that cost us five dollars to make.

We find a buyer who is thrilled about our Widgets and she agrees to pay us $20 per Widget if we can provide 1,000 of a specified quality by a specified date.

With a sale pending, we form a business.

We hire Antony's friend who agrees to help us for a specified wage.

We fulfill the order as promised and get paid as promised. We pay our employee and share a portion of the profits as we agreed when forming the company.

We get another order and then another.

What I don't understand, which Antony implies in his comment, is how (or why he thinks that) he and I, by the fact that we have come together and voluntarily created a business and pooled our thinking and our efforts to create new wealth, have somehow "acquired a role beyond profit generation." Why have we acquired a role that doesn't exist for every other member of society? I don't understand what "role we have acquired by virtue of our serving customers. I don't understand who "we" is in the assertion "how we choose to regulate and value the operation of a business has fundamental implications for the society we wish to live in." I don't see why, in this case, Antony, me, his friend, and the customer needs a "we" to regulate our voluntary interaction. Clearly the regulation would not be voluntary.

Why is this a matter of rights? Because I am asserting that Antony and I have the right to engage in the use of our property in the way I described because we have the right to own property and transact with that property without the permission of some "higher" authority.

A right is a moral principle that protects the freedom of each individual from the interference of others. Rights are a moral sanction that prohibits the initiation of the use of force (or fraud) by one person against another. The legitimate role of government is to protect each citizen's rights, not to arbitrarily deny individual rights by substituting coercive "legal" rights, which is all a government created "economic" bill of rights could amount to.

If someone else has the right to decide how we must use our property, or to determine what is proper or improper use of our property (whether or not we have permission to make Widgets, how many we are allowed to make, how much we must charge for them, how many employees we have to hire and where they must live, etc.), then we are deluding ourselves to think that the capital we bring to the business - including our own independent thinking - belongs to those who bring it forward. By right, it must belong to the regulators, in this case disguised as "we."

An "economic bill of rights" must result in the property of some being looted to serve the needs of others. An "economic bill of rights" must, by definition, enshrine injustice as a moral virtue.

If this is not what we are talking about when we are seriously talking about "economic" rights, then what is it we are talking about?

ID: November 20, 2008:

An economic Bill of Rights is a very important initiative for the new legislature to consider for implementation given the current economic downturn and rescue bailouts that are in consideration. We can take a lesson from healthcare who has operated with a patient bill of rights for a very long time. A bill of rights offers guidance and establishes the expectations of conducting business and meeting the needs of the consumer. It is very unfortunate that the lack of oversight on the operations of many of the firms who declared bankruptcy, have led the country into a recession. This is mostly attributed to a lack of ethical business behavior. An economic bill of rights would provide the framework and guidance that is required to establish and allow ethical business behavior to occur. In addition, the leadership will be able to identify the boundaries of ethical business operations.

Linetsky: November 21, 2008:

I would argue, as other have, that it is government interference in the market - let's call it a policy of interventionism rather than socialism - both in terms of regulation, veiled political threats by congressmen and senators, and monetary policy including fractional reserve banking, that has led to this crisis. It has a lot to do with a lack of ethical political behavior that attempts to deny the fundamental laws and principles of sound ethics and economics. It has almost nothing to do with "a lack of ethical behavior."

To paraphrase Idiaz2, what is needed is a citizen's bill of rights that would provide the framework and guidance that is required to establish and allow ethical business behavior to occur without the unethical injection of political interference in the economy and intervention in free trade among consenting adults. If that happened, business leaders everywhere will be able to identify the boundaries of ethical business operations and not have to worry about unjustifiable political interference for the benefit of some at the expense of others.

There's nothing ethical in [business leaders] begging politicians to confiscate the income of other people [for the purpose of giving] it to them. Even if you call it a wealth transfer, it is still looting, and is the very opposite of justice. I would like to see an "Economic Bill of Rights" that is consistent with the basic moral principle of justice. If it can't be done, then you must decide whether the principle of justice is worth giving up, and what principle you are substituting in its place.

As business people, let's get focused on real issues of freedom and the creation of wealth to improve society instead of rehashed Marxist rhetoric and psychological envy. As business leaders, let's not on the one hand talk as if we believe that being "market-focused" is a good thing because businesses can only succeed if they fulfill a market demand, and on the other hand advocate moral and political principles that encourage the destruction of the very concept of a market.

POSTSCRIPT (December 2008):

I'm happy to note that I was able to elicit at least one response in my favour. One participant wrote in part: "In the end we need to make money, and I would propose an Ethical Bill of Rights over an Economic Bill of Rights. We have enough government regulations in business already from EPA, to Human Resources, so why add another wrinkle into the overall process?"

An "ethical bill of rights"...I like the ring to that. It can start with Ayn Rand's credo spoken by the character John Galt in her novel Atlas Shrugged: "I swear by my life and my love of it that I will never live for the sake of another man, nor ask another man to live for mine."

An Economic Bill of Rights, on the other hand, would likely be appropriately prefaced with another of Rand's credos, this one from her dystopian novel Anthem. Rand's protagonist, Equality 7-2521 speaks: "Over the Palace of the World council, there are words cut in the marble, which we repeat to ourselves whenever we are tempted. 'We are one in all and all in one. There are no men but the great WE, One, indivisible and forever.'"

If you had to choose one of the two credo's as the basis for the principles by which to live your life, which credo would you choose?

Which do you think President-elect Obama would choose to guide an "Economic Bill of Rights"? 

What Is 'Business Ethics'?

Copyright © 2008, Barry L. Linetsky, All Rights Reserved

There is a lot of confusion amongst those who write about business ethics about what the topic subsumes beyond the obvious fact that business ethics has to do with business and ethics. Given how many people speak and write about the topic, you’d think that there would be clarity about what it is they are talking about. Yet it is rare to find a definition of business ethics by those who talk about it and even write books about it! They just assume that when they talk about business ethics, everybody knows what they are talking about. Authors that provide a definition of business ethics are rare. I contend that this is because most of them aren’t really talking about business ethics in the first place.

So, what then is business ethics? Let me put my stake in the ground.

What Is Business?

“Business” can be one of two things, depending on whether it is used as a noun or a verb. It can be an entity or an activity.

As an entity, a business is an organization of people and resources organized to engage in commerce or trade through buying and selling or providing a service or services as an ongoing concern to derive a profit. As an activity, it is the engagement in commerce or trade by means of organized people and resources buying and selling or providing a service or services as an ongoing concern to derive a profit.

Thus, whether “business” refers to the organization or to the actions performed by its people, each is inherent in and inseparable from the other. (See my earlier blog “What Is Business? It’s Not Obvious To Many” .)

If an organization does not fit this definition, then it’s unlikely to be a business. By this definition, hobbies, not-for-profits, and governments and their agencies are not businesses, although they may engage in and manage very delineated operations using the methodologies of business. Organizations under private ownership but operating under government protection from competition (airlines or media companies in Canada, for example) or under regulation that ensures profitability (most utilities) would fit the definition.

A business serves a specific purpose; it has a specific function. Its purpose is to create something that is perceived by consumers to be of value for which they will pay a price that exceeds its cost. In a free market, businesses compete with each other to win sales from customers. As a general rule, they compete to provide the most value at the lowest production cost to achieve that value, and to sell at a price that achieves a desired level of total profit.

So, this is what a business is and what a business does.

There are two ways to judge business: from outside or from inside this context.

To reject business from the outside is to assert that the institution of business is illegitimate or evil. As irrational as it is, this viewpoint is very common today. Karl Marx is alive and well amongst business critics who proclaim that all profits are illegitimate; that profit by definition entails exploitation of consumers by charging them more than is justified. Others criticize profit not from an ideological perspective or from ignorance of economic laws, but rather from a particular perspective on human nature and man’s natural proclivity for greed, power-lust, and stupidity. These people hold that producers have unlimited power over consumers and thereby scheme to bamboozle and rip people off so as to get rich quick by any means possible. The only way to intervene against this proclivity of human nature is to remove the profit motive. And the only way to do this is through government intervention in the economy and the elimination of the free market. Under these kinds of schemes, the government will regulate all industry through a planned economy. This demand for governmental (political) control over the means of production and the peaceful voluntary trade between people is known by various names, including the mixed economy, market socialism, central planning, or just plain socialism or communism. This is primarily a political rather than an ethical perspective, having to do more with the proper role of government and the use of political means to guide social behaviour.

To judge business from the inside is first and foremost to accept the function of business as legitimate, and then ask whether businesses are being managed in ways consistent with their function. It is this concern with normative judgments of individuals that leads us to the issue of ethics. Ethics asks how man should act and seeks universal answers that apply to everybody.

What Is Ethics?

Ethics doesn’t consist of the opinions of what people like and don’t like about human behaviour. Ethics is the branch of philosophy that studies and defines a code of values to guide the choices and actions of people in the pursuit of life. Ethics seeks to identify and clarify the proper principles of conduct to guide the actions of man towards the good and away from evil. (See my earlier blog, “What Is Ethics? It’s Not Obvious To Most” .)

Ethics begins with observations of reality combined with logical reasoning to provide prescriptive guidance for sovereign man to achieve goals and ends appropriate to his nature as man. In essence, ethics or morality provides us as individuals with an intellectual roadmap or compass to help us determine, at the highest level, what’s for us and against us as living beings in our perpetual struggle with nature to live our lives successfully. That which can be shown in principle to support successful and prosperous human life is ‘the good’ and that which can be demonstrated to be harmful to human life represents ‘evil.’

The standard of value in ethics needs to be defined and defended. If ethics is to be meaningful at all, the standard of ethical value can be neither arbitrary nor subjective. Man’s life as the standard of value provides an objective basis for ethics that is reality-based. It is objective because it is defined by the nature of human life and verifiable facts about the world we live in.

(For a more detailed discussion about why human beings require ethics and how and why ethics is objectively grounded in reality, see my two earlier blogs on Ayn Rand’s Revolutionary Ethics, Part 1 and Part 2.)

What Is Business Ethics?

With this background, we can now gain some clarity on what business ethics is. When you put the prefix “business” in front of “ethics” the standard of ethical value doesn’t change. It remains man’s life. What changes is the context within which one considers the application of ethical principles. The context narrows from man’s actions in all realms, to consideration of a specific subset of human behaviour, namely that pertaining to the realm of business.

If business is the process of organizing people and resources to create value through voluntary exchange as an ongoing concern to derive a profit, and ethics is the identification of moral principles and a proper code of conduct to guide human action in the pursuit of life and individual happiness and well-being, then business ethics can refer to nothing more than the identification and application of ethical principles to promote and achieve the proper purpose of business.

Business ethics, then, pertains to discovering and defining the proper application of general ethical principles to guide the choices and actions of individuals engaged in business and the creation of value through voluntary trade and commerce. It is through this gateway that ethics melds with and shapes all aspects of business.

Because ethical human behaviour is ethical in all contexts, including business, it follows that there is not one valid code of conduct that excludes business and another that applies to business. In this way, the notion of a “business ethics” is misleading. Business ethics is not a distinctive, delineated code of guiding behaviour that exists apart from the wider and more general principles of morality. Rather, the notion of business ethics is a means of identifying a narrower context in which to discuss and study the application of the same universal ethic.