The foreclosure Crisis has Raised the Issue of Ethical Capitalism

Posted on November 20, 2009
Filed Under Foreclosure Crisis | 2 Comments

The recent devastating foreclosure crisis has raised the issue of ethical capitalism. Capitalism has slipped in morality. Since the eruption of the catastrophe the palliatives have concentrated on capital, restructure of the system and equity. These have to be addressed – there is no doubt about that. But it is much more important that the dearth in morality and humanity should be probed into as these are the basic faults that led to the crisis. Without remedying these defects the country is doomed to see a rerun of the same problems. Sound ethics has to be applied to economic behaviour.

In the last couple of years economics has ignored or forgotten that finance is the ruled and not the ruler The modern day morality on the other hand has allowed the market to rule; it is the market that is permitted to take the decisions. We have become one with the market and forgotten that its real reason for existence is to share the blessings of this earth with a wide community. The money makers created credit out of zero negating the role of the creator.

There is no doubt that capitalism is the best route to improvement of the living standards of the common man. It is exactly for this reason that it is the duty to create wealth. George Osborne, the shadow chancellor of Britain has stressed on the fact that business enterprises must be encouraged and supported so that the entire society benefits. But the condition is that individual business must be based on widely accepted human values.

This was very well understood by Adam Smith. Smith has erroneously been depicted as a rabid advocate of tooth and claw competition. He believed that no economy could function smoothly without being based on ethics. He did not think that people should go about their work completely disregarding each other’s welfare.

Why has this happened in business? How is it that ethics no longer holds any place in it? Basically the short term gains from globalization have blinded the policy makers and doers. One has lost sight of long-term benefits. It is the people that make up the market and the global market is not outside this rule.

Society in general is the omnipresent partner in all business ventures – including financial dealings. To ignore it is to insult to mankind. Yet this is exactly what has been allowed to happen. Capitalism must be yoked again to its moral moorings.

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