The Business Ethics Blog

Sometimes regulations aimed at helping the poor end up hurting them. That doesn’t mean we should eschew regulation, but it does imply reason for caution.

Housing provides one example. The Portland Tribune recently carried an interesting piece on the way that building codes and other regulations keep the price of housing high, and reduce the availability of truly affordable housing for the working poor. Requirements that all bedrooms have a certain number of electrical outlets, for example, or that all bathrooms be disabled-accessible, raise costs not just for builders but for tenants. And in some places, builders who receive public subsidies to build low-cost housing are forced to pay union wages — even when paying slightly lower wages would let them build housing that is more affordable to those in need.

Another long-discussed example is automobile safety. Every advance in automobile safety has reduced fatalities and improved crash survivability, but has also raised the price of automobiles. I’m glad to drive a car that has seatbelts and anti-lock brakes and plenty of airbags. But then, I have a good job and can afford those things. Of course, I can’t afford the level of safety provided by, say, a full-sized Mercedes sedan. But there are plenty of people who can’t even afford a reasonably-safe compact car like mine, and for some of them the difference between affordable and unaffordable lies in a litany of safety features. The problem is even more pronounced in developing countries. A recent story out of India offered speculation that in that country, those who can’t afford cars with government-mandated safety features will have to opt for even less safe, 2-wheeled forms of transportation.

A final example comes from the realm of labour regulations. Here in North America, we have the luxury of a wide range of on-the-job health and safety protections. Other places — including for example Bangladesh — are not so lucky. There, the problem is not that the regulations don’t exist. There are in fact plenty of regulations in Bangladesh. The problem is that Bangladeshis literally cannot afford higher standards. Higher standards would price much of that country out of a job. And so, for that matter, would voluntary efforts by employers to improve safety conditions at their factories.

None of this means that we shouldn’t worry about safety standards when employing or making products for the poor. But every safety feature has a cost, and every cost represents money that could have been spent on something else, some alternative way in which we could have made the world a better place including by making the world’s poor better off.

A colleague of mine, a fellow philosopher from the US, once suggested the following thought experiment: Imagine you owned a garment factory in Bangladesh, a factory that pays 1,000 Bangladeshi women the lowest wage allowable by law to make clothes for Canadians and Americans. Imagine you ended up with a million dollars in profits, and needed to figure out how to spend it. And imagine that you really, really wanted to use the money to do some good for the community in which your factory is located, to make it a better place. What should you do? Spend it on higher wagers? On improving workplace health and safety? “You know what I would do?” asked my colleague. “I would use that million dollars to build another factory, to give another thousand people jobs.”

(Or: “It’s still capitalism, dummy!”)

A fascinating piece appeared recently in the New York Times, about efforts in Greece to (re)vitalize the so-called ‘social’ economy. The main feature of the movement, as described in the Times piece, is an attempt to eliminate or at least minimize the role of middlemen by reconnecting producers and consumers. “The movement seeks to cut out wholesalers, shop managers, state bureaucrats or anyone else between producers and consumers who once took a share of profits and added to the costs of goods.” Oddly, the piece characterizes this movement as an “attack” on “modern profit-driven capitalism.” Odd, because as far as I can tell the Greek movement still involves private ownership of the means of production, freedom of contract, and the determination of economic activity by the forces of supply and demand. It is innovation within a capitalist system, something that strikes me as not just capitalist, but an example of capitalism at its vibrant and innovative best.

The notion of casting this Greek movement as “anti-capitalist” is reminiscent of a big theme in the 2006 documentary, The Take, which was directed by Avi Lewis & written by Naomi Klein. The Take is about a group of workers at an Argentinian auto-parts factory who, rather than accept unemployment when the factory’s owner shuts it down, instead decide to occupy the factory, re-start the machines, and run it themselves. Lewis and Klein — no frends of global capitalism — portray the workers as revolutionaries, sticking it to the man by doing an end-run around the evils of modern business. But of course, when the machines are restarted by the workers’ cooperative, the inputs are still being bought on the open market, and the products that result are still being sold to the highest bidder, and so on. All that’s really different after the workers’ little coup is the management structure. But even that is not all that innovative. Plenty of solid members of the modern business community are already worker cooperatives.

The problem in both cases lies in seeing capitalism as embodied in a particular, narrow set of practices, or in the behaviour of a handful of monolithic multinational corporations. So thinking of a particular shift within the system as “anti-capitalist” makes about as much sense as thinking that the discrediting of a particular scientist or the fall of a particular scientific theory amounts to the downfall of Science, as a whole.

Both the Greek anti-middleman movement and the Argentinian factory workers provide interesting examples of the ingenuity and passion with which people respond to hardship and injustice. But they are are off-target as examples of critiques of capitalism. To think that these are somehow examples of alternatives to capitalism just demonstrates a misunderstanding of what capitalism is. It’s like arguing against ‘corporate personhood’ or claiming that Barack Obama is a ‘socialist:’ all you’re doing is demonstrating to the world that you don’t know what the words you’re using really mean.

Chris MacDonald is Director of the Jim Pattison Ethical Leadership Education & Research Program at the Ted Rogers School of Management.

The business community can, and should, follow AT&T’s lead in speaking out in solidarity with the LGBT community. On February 4th, the company’s Consumer Blog featured an entry entitled, A Time for Pride and Equality. “We support LGBT equality globally and we condemn violence, discrimination and harassment targeted against LGBT individuals everywhere. Russia’s law is harmful to LGBT individuals and families, and it’s harmful to a diverse society.”

Russia’s anti-gay laws and attitudes are repugnant. Russian President Vladimiar Putin clearly wants hosting the Olympics to signal that Russia is a proud and globally-significant nation once again. But what it’s really doing is making the country look like an oversized banana republic, with values that don’t befit a serious world power. Putin is a man of the times alright — as long as the times you’re thinking of are the 19th century.

We’ve long known that discrimination is bad business. Discriminating against talented employees or paying customers just because of their sexual orientation is plain stupidity. And every decent person knows in their heart of hearts that such discrimination is immoral. This is not something where reasonable people can agree to disagree. There simply is no argument in favour of holding someone’s sexual orientation against them, let alone subjecting them to violence.

I wrote previously that I think the International Olympic Committee and corporate sponsors are in a no-win situation. These organizations clearly can’t condone Russia’s brutish stance on homosexuality. But a boycott isn’t necessarily in anyone’s interests either: it is arguably better to allow Russia a moment in the limelight, precisely because some of that light will shine into the dark corner that is Russia’s treatment of its gay citizens.

But every corporation has a voice. Olympic sponsors and non-sponsors alike have enormous capacity to get its message out. Some of them might lose business over taking a stand on what is for some, regrettably, a hot-button issue. But the obligation to pursue profits has limits. And I detect one of them here. Some have speculated that AT&T’s decision to take a stand is, whatever motivated it, a smart marketing. And that may be. If a company happens to benefit from doing the right thing, we should note the benefit, but admire the good deed.