“RUIN YOUR NEIGHBOR”

Morality in the Economy

Economic ethicist Karl Homann says many have not understood the market economy after 200 years. Is competition good or bad?

[This interview published in: die tagezeitung 7/7/2008 is translated from the German on the World Wide Web, www.taz.de/nc/1/zukunft/1wirtschaft/artikel/1/ruinieren-sie-ihren-naechsten&src=PR.]

[Karl Homann, 65, researches and teaches as a professor of philosophy and economic ethics at the University of Munich. He had degrees in both philosophy and economics and was one of the first scholars who connected the two disciplines.]

Taz: Mr. Homann, a poll has shown for the first time that a majority of German citizens do not support the social market economy. Are big corporations responsible for this development?

Karl Homann: Yes. People ask about justice. Emphasizing economic efficiency is not enough for them. Rather that kind of answer insults them. That the number of unemployed in Germany has fallen by a million has not increased acceptance of our economic system.

What are businesses doing wrong?

We face a very fundamental problem. Our ethical ideas like sharing, compassion and solidarity come from the pre-modern society, from the time before capitalism. Today, on the other hand, we live under the conditions of the market and pursuit of profit. For many people, this reality stands in intuitive opposition to the command of solidarity.

The Catholic Church may see it that way. But haven’t we all accepted the philosophy of the liberal thinker Adam Smith that the market economy automatically serves everyone’s well-being if everyone only follows his egoism?

Competition is a central element of the market economy. Competition can dramatically improve the situation of people when the political framework is right. However it is hard to understand intuitively that competition should be a moral imperative, that you may or should drive your neighbor into ruin. And on Sundays you sit together with him in the church pews. Then you go your different ways.

You say: People aren’t accustomed to reality after 200 years of experience with the market economy. Are we simply too sluggish?

Practically speaking, most people succeed in coping in this life. But many do not understand the market economy theoretically and normatively. Therefore a new responsibility, a communication responsibility, comes to the economy. The top managers of businesses must enter offensively in the discussion of social values. Unfortunately our economic elite in their training have not learned to argue normatively. People are not given the moral answers that they expect. They feel alone and withdraw their legitimation from the market economy.

In the corruption at Siemens and VW and the spying at Telecom, did the corporations only inadequately explain their policy while doing nothing wrong?

These corporations should obviously be criticized for mistakes. Mistakes are made everywhere. That is not the point. I advise boards of directors to be more concerned about their moral “license to operate.” They must fight for their acceptance in society.

For years a business like Siemens practiced systematic corruption in the billions and considered this normal business practice. Isn’t primal trust in the market economy lacking when the population begins to doubt the system and its elites?

Corruption brings us to a very critical point. Corruption represents an organizational breakdown, not an individual failure. My thesis is that an ethic of organizations is lacking.

Can one say that the conscience of organizations is weaker than the conscience of individuals?

Only natural persons really have a “conscience.” The question is what corresponds to conscience in an organization. In every case, the equivalent of a conscience must be synthetically established and activated through organizational measures. Firms only act in a morally acceptable way when they have a catalogue of basic values, a leadership cadre that supports these basic values and functioning mechanisms enforcing these values every day.

All big businesses have nice-sounding ethical guidelines. Isn’t the real problem in control and practical conversion?

Managers must recognize that business morality is a production factor, not a cost factor. Siemens could have saved around 5 billion euro in expenses for payoffs, fines and legal costs by ending corruption. In view of this dimension, investments n the whistleblower system would have been rewarding.

How can businesses protect themselves from corruption?

Whistleblowers are persons who sound a warning whistle. Whistleblowers include anonymous persons giving tips and employees in firms who have learned of illegal practices. The firm must protect workers from reprisals of their colleagues and bosses so they can publicize their information.

Shouldn’t boards of directors worry about being betrayed themselves?

That is what I mean by organizational ethics. Irrespective of the leading individuals, the business as a whole must be able to maintain its moral standards. Establishing protective mechanisms is in the vital interest of the business.

Should politics prescribe these things to businesses?

I am very reserved about that. The behavior of many politicians is outrageous. How can a minister declare he will throw away his Nokla-cell phone because the firm shifts jobs abroad? That is sheer populism. The expertise of politics seems lost. The unions and the churches have not taken any ethical leadership role in these questions. Therefore I tell businesses: Do it yourself, be clever and offensive and enter the social discourse.