Ethics in a free market economic system - Essay Example

The Ethical Advantages and Disadvantages of a Free Market Economic System In order to understand the ethical dilemma that characterizes the free market; consider a third world country in Africa in an open market arrangement with an industrial powerhouse like China; the former buys cheap electronics from the later since they are not taxed on entry. One of the proposed solutions to unemployment in the third world country is boosting its manufacturing sector, however, owing to insufficient funds and capital-intensivetechniques the electronics they manufacture are of lower quality and highly priced than the imports. As a result, China keeps profiting from them and rechanneling the profits back home and the status quo is maintained with the poor country being rendered incapable of producing their own products and becoming dependent on the imports. This is just hypothetical but it demonstrates the relationship between numerous countries world over as a result of open trade agreements. Another scenario is when big corporates like Walmart take over the roles of departmental stores and thousands of shops in continental America. It is axiomatic that for such corporates to be as successful as they have become small business will be run aground considering this one is forced to ask; is the free market a moral or immoral construct? This question has been the cause of controversy for centuries and even in modern day though opposing sides proposes numerous and even compelling arguments, the question has no definite answer. The chart below is used to demonstrate the various positions held by different people on the subject with some insisting it is ethical and moral while others vehemently oppose it. Fig 1. Dispute on the suitability of the free market: Adapted from http://www.worldpublicopinion.org/pipa/images/nov09/BBC_BerlinWall_Nov09_graph2.jpg This is partly be the concept of a free market in inextricably tied to capitalism which is an equally if not more abrasive topic. Essentially, “natural” market forces, and individual innovation as well as the underlying notion that hard work and ingenuity are rewarded by success drive a free market economy(Boatright, 2000). The reason for the existence of businesses is to make profit, ergo, successful business in the free market are bound to make the most profits irrespective of what they are dealing in or its effect on the community or even other business. The free market promoted competition which in turn provides the best possible products to customer’s at the most affordable price. Ideally when a new product is launched, it starts off at a high price and then as competitors copy it the cost eventually reduces until it stabilizes or new and similar goods emerge. While this paper does not offer an answer to the age old question of the ethics of the free market economy; it will examine the various arguments that have been put forward supporting or disproving the assertion that the free market is an ethical and moral paradigm. A market can only be as ethical as the participants that ran it, ultimately it cannot exist in a vacuum and it is in most cases a reflection of a specific cultural environment. Far too little attention has been afforded to the connection between the free market and the totality of culture, in most discourse on the subject, the fact that the market economy is depended a framework of ethical presupposition is rarely ever addressed. In their attempts at its definition, economist have frequently, albeit inadvertently contributed to the pervasion in understand of the construct, in addition at times free markets are assumed to be capable of intrinsically legitimizing themselves (Foldvary, 1978). One of the major ethical disadvantages of the free market is increase in unemployment, poverty and inequality in the society, employers are free to use whatever legal means to reduce cost and maximize output. To this end they will keep innovating new technology such as Robotics with the intention of phasing our as much human staff as possible. In Das Capita Karl Marx extrapolates on the Marxist theory by arguing that the rich can only prosper at the expense of the poor the free market is seen as an epitome of his reasoning (Negishi, 1999). A Worker may have worked in a company and specialized in some of the tasks for decades, however when their jobs become replaceable, they are simply bundled out irrespective of the fact that they may have dependents. Evidently, the free market makes its considerably easy for corporates to exploit and misuse staff who they can as easily dispose all in the interest of increasing the bottom line (Kindleberger, 1981). An indirect consequence of the unemployment is an increase in the crime rate; the many unemployed resorting to crime are to some extent the products of chain reactions sparked off by the machinations of the free market. One of the most serious threats to human existence today is environmentaldegradation which has resulted in seriousconsequences including climate change and myriad pollution related challenges. As a result of unrestricted trade without or with minimal tariffs, firms produce the maximum they can so as to make the highest profits possible. They will engage in local andinternational competition rarely giving a thought to the effects on the environment (Ollman, 1999). The free market has been used by many countries such as Indian and Singapore to rise to developing and industrialized status, however the down side is that these nations host hundreds of foreign manufacturing firms which produce tons of greenhouse gases every year (Baker, 2005). Opponents of the free market argue than for instance the smog that fills the air as a result of numerous motor vehicles is a result of free market manufacturing policies and had they not existed, the vehicle manufactures would be made to pay for the cost resulting from pollution. As long as manufacturing firms get to enjoy the full benefits of free market economy, the environmental problems will keep mounting and to a significant extent, the free market should be blamed for much of the environmental pollution in the country. The fact that a market is free essentially means that it does not have to deal with government interference and as long as their activities are legal, they have a free reign (Kindleberger, 1981). While this appears a good idea from a capitalist point of view, there are often serious social-economic and political consequences. For example the free market economy has contributed to the loss of thousands of jobs in the US as many firms outsourced to Asia where they could get cheaper labor and possibly be closer to the raw materials. This begs the question, is it really ethical for a firm to dismiss its employees simply because they can get others at a cheaper price and they cannot legally lower the present wages? One of the most common points of opposition for the free market is that it allows society to invest in what they believe will make the most profit rather than what is most needed(David, 1980). For example, today, many private companies in the US carry out research worth billions of dollars each year so as to boost the quality and ultimately sale of their products. However when it comes to health care, many people have to depend on the government because the private firms either are too expensive or mostly sell luxurious and expensive goods. Evidently the free market is based on the principle that one should invest in what is most profitable for them irrespective of the social economic system at play. This is why some firms may spend billions developing new brands of scotch or whiskey, while the government struggles to provide basic facilities for its services. At the end of the day, in a free market economy the wants and needs of the few often eclipsing those of the new even if they could be more urgent and important. Supporters of the free market on the other hand cite its advantages which are based on the primary argument that the market is amoral and its ethicsof lack of whereof are determined by the people involved. Free markets, simply acts as a marketplace whose movement is determined by rules of completion, supply and demand without the regulation or restriction of the state. From an individual’s point of view according to Schotter(2008), the free market can be viewed as ethical since it allows consumers to choose through market forces what they would like to buy. As a result of stiff competition which is a result of the free market, customers get a chance to access the best goods and services. Schotter posits that should manufactures make goods that are either poor standard or overpriced, the customers will get a chance to choose from what they deem best for them without interference. The argument presentedpreviously that employment is reduced by free market economics is rebutted herein by the claim that to some extent it actually increase the employment rates more so for graduates. For example, the free market makes it possible for people to sell their services without the restrictions of a trade union since one can opt to join or not join one. Sometimes employers may choose to reduce the number of staff if the demands of the unions are very high, nonetheless, although workers are normally expected to join a union, they don’t have to and one can bargain on a personal level with their employer so they can sell labor at a cost convenient for both parties. Consequently, the demand right to works is converted into the individual right to work, it is suggested that under the free market workers are forced to enhance their skills so as to live up to the wage rate given that employers are free to hire employers at the lowest price. Since the free market is essentially one that is free from any form of coercion, it stands to logic that it must be logical; without coercion, from societies view point, there can be no moral wrong. Therefore, if people for example do not like the allocation and distribution of goods in the market, they are at liberty to express or practice their personal ethics and beliefs. Nevertheless, they cannot impose the same opinion of other people and even if they are the majority, opponents of the free market have no moral authority to impose a different economic system any more than they have a right to force others to adhere to their religious or cultural beliefs. Ultimately, a free market is not only ethical, but superior, in the moral sense to any other economic arrangement that involves any form of coercion. One several occasions, the argument that the free market is gives some members of society the right to starve have been put forward by those opposed to the construct. However, it should be abundantly clear that the free market and indeed capitalist production has actually lead to a significant increase in the living standards of most people and societies (Friedman, 2009). Under the free market, production comes first and the freedom and competition allows people to produce in the most efficient and cost effective way possible. The opposite of the free market is a situation where the state controls the distribution of wealth so as to create a sense of equality, nevertheless it is worth noticing that intervention may bring about distribution but never production. The argument popular among socialist minded is that a free market results to exploitation of one group by the other through the government (Weeks, 2011). This arguments makes little sense given that a society that has allowed its government to interfere in its market activities implies by so doing that they are incapable of morally regulating themselves but they are can vote for a government that is morally and ethically superior to them. At the end of the day, the only ethical way poverty and inequalities in society can be addressed in the long run is through the free market since government interference simply implies forcing some members of the society to give up their right to maximum production so as to offer “charity” to the needy classes. At the end of the day, the free market, irrespective of its advantages and disadvantages remains an ethical challenge since while admitting people should be morally allowed to pursue their interests the issue of inequalities stemming from it cannot be ignored. It is however worth noting that as aforementioned the market is simply a reflection of the ethical beliefs held by a people and in the same way they are free to pursue their best interests irrespective of the consequences, they can without governmentinterference chose to be “charitable”. Such inside the market regulations are normally evinced when companies take part in social corporate responsibility through which they try to improve the conditions of others without necessarily having to. References Baker, R. W. (2005). Capitalism's Achilles heel: Dirty money and how to renew the free-market system. New Jersey: John Wiley & Sons. Boatright, J. R. (2000). Ethics and The Conduct of Business, 6/e. New Jersey: Pearson Education. David, W. B. (1980). The Quaker Enterprise, Friends in Business, London: Frederick Muller Limited. Foldvary, F.E. (1978). Is the Free Market Ethical? Fee.org.Retrieved from http://www.fee.org/the_freeman/detail/is-the-free-market-ethical Friedman, M. (2009). Capitalism and freedom. Chicago: University of Chicago press. Kindleberger, C. P. (1981). Dominance and leadership in the international economy: exploitation, public goods, and free rides. International studies quarterly, 242-254. Negishi, T. (1999). Unequal exchange and exploitation. Japanese Economic Review, 50(2), 113-121. Ollman, B. 1999. Market Economy: Advantages and Disadvantages. Dialectical Marxism. Retrieved from https://www.nyu.edu/projects/ollman/docs/china_speech2.php Schotter, A. (2008). The economic theory of social institutions. Cambridge: Cambridge Books. Weeks, J. (2011). Capital, exploitation and economic crisis. London: Taylor & Francis. Read More