Markets and Morality
In the contemporary society, the association between morality and the market is increasingly becoming apparent. This is because of the increase in events such as corporate corruption, exploitation of employees in developing countries and unethical animal testing which have become frequent news items. The recovery of the international economy from the economic and social shock was encouraged by the global financial crisis. However, there is always recap of the devastating experiences that can happen when unreliable fiscal decisions, in the form of incentives, overrun logical and ethical decisions.
Morality in the free market
From a historical perspective, the scenery of the concept of the relationship between the market and morality has not changed as evidenced in the contemporary movie The Wolf of Wall Street that epitomizes the years preceding the global financial crises. The film depicts a period of irresponsible behavior, blatant disregard, and thoughtless risk initiatives. The level of corporate greed in this film can be compared to the corporate scandal in Enron Company in early 2000s, which are evidence of the undesirable impacts of illegal commercial voracity. From a collective approach, these instances assist in understanding the assertion that the market plays a role in undermining moral values. However, is this actually the case?
The concept of free markets implies a structure constructed on the foundation of egotism, which corrode morals. The increasingly fierce levels of competition in the market can stimulate cost reduction attitudes, which are manifested in immoral behavior. Information asymmetries, which arise from liberalized businesses, can facilitate the reduction of incentives for businesses to make decisions, which are in conflict with the interests of the larger society. Moreover, negative externalities are a reflection of companies protecting themselves from dangers by externalizing costs on third parties. This explains why markets in the contemporary societies have a tendency of rewarding and perpetuating self-interest from normative perspective. This is evidenced when self-interested behavior can be equated with higher profits. In such situations, socially desirable attributes such as selflessness and kindness are positioned lowly and less desirable in the society compared to self-interest and greed (Velthuis 184).
Furthermore, it is possible to argue that when individuals are making moral decisions in the marketplace setting they make decisions that it would be impossible for them to make in other platforms. For instance, when consumers in the developed world are buying clothing factory-made in abusive environment in third world countries, they often legitimize these decisions with assertions that their payments are acts that validate their noble intentions irrespective of how cheap they acquire these clothing. Companies that are popular for paying workers the least acceptable wage with the objective of maximizing and privatizing the benefits they derive from their employees. This happens while the companies are also socializing the cost onto the government in the form of prosperity packages with the objective of supplementing the income of these employees. These can be considered as immoral decisions whose ascription can be based on the self-centered motivations that are nurtured in the market and this facilitates the creation of a powerful relationship between the market and immorality (Gourevitch 86-89).
Inasmuch as it is possible to assert that markets are contributors to erosion of ethical standards, the existing reality is that the association between morality and the market is more complex. The complexity arises from that the contention that the marketplace emasculates ethical standards from an implicit perspective assumes that the marketplace can be perceived as the main cause of corrupt consequences. This in turn implies that there are vital flaws in the market. Nevertheless, the market is a number of establishments charged with the responsbility of coordinating and facilitating trade. If the undertakings of commercial players end in immoral and negative consequences, the explanations for such behavior should be found in the societal settings and institutions underpinning the marketplace instead of finding reasons in the market. The fundamental ethical norms and values of actors in these markets are fashioned by peripheral cultural, political, and social variables. Consumers involved in the purchase of counterfeit and cheap brands from explored children and employees in developing countries, often do so with the objective of conforming to the trends in their markets. This does not only replicate effectively on the market but it is also a reflection of the wider social variable of consumerism, which shapes the ethical primacies of economic actors (Velthuis 184-185).
The arguments on consumerism assert that the imperfection in the market arise from the imperfections and impetuses of the economic players instead of the design of the market. The market is not the creator or the cause of self-centeredness but rather a structure that is developed with the objective of reinforcing selfish enticements. This implies that it is impossible for morality and the market to mutually exist considering the intense illustrations of dishonesty in the marketplace such as the Enron scandal are only representative of a segment of economic actors in the market. Despite representing minority of players in the market, actions of the management and the board of directors at Enron are instances of intrinsic greed. By allowing illegal activities, the leadership orchestrated the collapse of the company and ineffective policymaking had a poor reflection on the company and not on the market. For most players in the market, the incentives cultivated cannot be considered as domineering to supersede their moral reasoning. There are numerous samples of authentic companies seeking to realize a middle ground between their role of satisfying their self-centered intentions and guaranteeing the presence of a correspondence between societal values and their economic activities. For companies that embrace social responsibility, their motives that surround their proliferation into environmentally, and socially friendly activities are likely to be self-interest. However, these companies are also represents the rising trends among stakeholders in the direction of corporate social responsbility. Their involvements in activities of corporate social responsbility are indications that undertakings and results in the market are intensely entrenched in the socio-economic circumstances that are constantly evolving (Velthuis 186-187).
The morality of price
Price of commodities in the market plays a critical role in defining the moral dimensions that characterize any market. This is based on the understanding that pricing of consumer goods is a complex phenomenon than what is expressed in economic theory. This is because the price set for commodities imply a cognitive meaning especially when there is high uncertainty about the quality of goods. According to consumer research, price plays an informative role especially when consumers are making brand choices. In most cases consumers use price when understanding differences in product quality. This is often exercised when consumers have limited knowledge on the product (Velthuis 209). For such consumers, commodities that are allocated high prices are assumed to be of high quality compared to similar products or brands selling similar products are relatively lower prices.
The market is populate by varieties of products aimed attracting customers with diverse interest the price of these commodities communicate both economic and non-economic values. Prices are economic mediums that communicate stories that are not only about money but also about issues related to aesthetics. Price mechanisms especially in art market do not decrease but always adjust themselves automatically through the impersonal forces of demand and supply (Velthuis 190). Immorality of pricing in the art market arises in the ability of artists to manipulate the emotive elements in their customers with the objective of asserting relevance in their artwork. The success of these artists in supporting the ever-increasing prices of artwork can be understood through an observation of their activities when marketing art. Prices of different prices of work communicate elaborate and highly creative stories on the caring role that the artists want to enact while expressing the artistic value of their work. This attribute of manipulation results in success in their ability to twist and turn prices in varieties of ways that make economic sense to the customers (Velthuis 192).
Other than the works of art, when setting prices in the market, the prevailing elements of demand and supply will determine the level of pricing adopted by the actors in these markets. To this extent, it is possible to assert that the resulting price of any commodity in the markets a product of compromises and conflict of interests which results from power and assemblages. This is an indication that price can be perceived as an expression of struggles in the market between economic units that are relatively autonomous. Pricing to this extent is a socially derived activity considering that in most cases bidders are often unaware of the economic value of commodities on sale (Gourevitch 93). This explains why in most cases they base their price estimates on collective opinions that are subject to modification. Consequently, prices are not a reflection of a simple composite of individual evacuations but a consequent of collective and complex evaluations that are subject to intragroup influences. This means that the prevailing forces in the market have the authority of setting and determining prices of commodities at the expense of the interest of the customers. These economic actors when setting prices often fail to consider the desires of their customers and their ability to pay for commodities especially when these forces monopolize the market (Velthuis 209).
The role of NGOs in upholding morality in the market
Despite existing laws that govern operations in the market, there are often tendencies among companies to act in ways that are considered contrary to the expectations of the society in terms of their ability to abide by the existing regulations. Organic foods just as products that are believed to have followed the proper and legal procedure in the production process often attract large numbers of customers hence ensuring increased sales for the producing companies. Customers are often willing to acquire such products at high prices because in most cases the attributes that enhance adherence to ethical standards in the production process add the cost of production. The challenge however is in the techniques that customers embrace in determining the extent to which an ethically made product is worth he higher cost. The desire among customers to enhance their desires towards ethical consumption generates questions about the determination of commodity prices through construction of value. Ethical consumption in different markets encompasses the process of product production in relation to the extent to which that process contributes to environmental pollution, exploitation of women and children employees, and unnecessary injuries on animals or consumes too much energy (Gourevitch 86).
For consumers these are considered essential aspect that determines the value of the product. However, since they cannot ascertain the vital feature of the production process that cannot be observed through direct inspection of the products, the consumers seek the assistance of non-governmental organizations (NGOs) which play the role of evaluating the production processes. Through their assessments, the NGOs provide consumers with platforms of learning about products that fit their norms. In 2006, one of the articles in the New York Times reported that more than 50% of the wild salmon sold in upmarket diners in the United States were raised in farms. Media reports have also featured unsafe products from China that could be detrimental to the health status of the consumers. These include the toys sold by Mattel, which were coated with lead that was considered unsafe if ingested by children (Gourevitch 86-87).
The effectiveness of NGOs in monitoring the degree to which the market abides to the existing ethical regulations in the society emanates from their limited association with governments since they are nongovernmental. Furthermore, these organizations are perceived to be reliable because they are beyond the self-interest attribute, which is a problem of profit seekers. NGOs assess private and public companies either because of the inability of these companies to address policy related issues or if the government introduces laws that it cannot sustain or enforce. From the consumers’ perspective, NGOs are effective custodians of moral standards in the market because they help them in monitoring the extent to which companies comply with the ethical production norms. These NGOs also contribute to the development of acceptable standards of production and signal or direct consumers towards commodities whose production complies with them. Most NGOs provide labels such as “Fairtrade” which act as shorthand information cues for conveying reliability (Gourevitch 87).
Despite roles that these NGOs play in promoting ethical consumption, the monitoring techniques developed by these organizations generate questions on the extent to which these processes can be considered effective or accurate. This is because the prevailing situation in the market, especially global competition and the desire among companies to establish a competitive advantage, forces these companies to squeeze their suppliers who in turn force evasion of production norms and regulations. Skeptic of the role of NGOs in ensuring the existence of effective and ethical production systems argue that the accuracy of the monitoring processes is only one of the elements used in the social determination of price in the market (Gourevitch 87). However, proponents of the effectiveness of the monitoring process in enhancing ethical practices in the market argue that the consumers can use numerous indicators in assuring themselves on the accuracy of the monitoring mechanisms. They can assess NGO incentives, which include the features of the organization, its autonomy of the NGOs from the firms being monitored and the funding sources, which provide some level of independence between NGOs and the firms being monitored. Additional indicators such as professionalism of NGO employees and the level of transparency in the monitoring processes and procedures are necessary (Gourevitch 87-88).
The confusion arising from the authenticity and reliability claims by NGOs in their ability to monitor the ethical standards embraced by different organizations emanates from their association with the state. The government has been considered as an unreliable entity in enhancing the protection of consumers yet NGOs operate on the legal stipulations of the government. The government, NGOs, and the firms need each other for normalization of operations in the market. Companies need NGOs to sanction and legitimize their behavior while verifying their compliance with ethical standards (Gourevitch 91). The NGOs need these companies for the sustainability of their operations through financial resources, visibility, and cooperation. Organizations and NGOs need the government to develop policies and legislations and a structure for their implementation. This relationship implies that the monitoring processes initiated by NGOs are dependent on along chain of trust among different parties. The ethical consumption and production systems provide an essential platform the social constructions that affect the level of morality in the market. There are a myriad of social influences such as price, quality of product and the nature of competition in the market that influence and shape the definition of that which is ethically acceptable. This is because the process of developing an understanding of value formation and price in the ethical consumption field requires breaking down numerous diagnostic barriers associated with the needs of the consumers and the objectives of companies in profit maximization and improved market value (Gourevitch 92).
For corporates, their performance in the market is considered crucial in enhancing their ability to attract more customers and improving on their market share. This means that variables such as reactivity play a role in limiting the shelf life of measures used in the evaluation of organizations in terms of their ability to abide the existing ethical standards in setting prices or in the production process (Espeland and Sauder 7). In any business entity, the main challenge in managing reactivity is less towards protecting the purity of the measures than in the protection of their usefulness as incentives. Firms are complex business entities and the assessments features used in monitoring their level of adherence to ethical values in the market can never capture all the essential aspects in of performance (Espeland and Sauder 34).
Overtime organizations learn the techniques of manipulating measures and their simplification and narrowness can be self-defeating from an organizations perspective. The decline of the value of measures it becomes necessary for the organizations to change them with the objective of capturing other aspects in the market. The Vox Wagon scandal was an example of the need by the company to alter its operations with the aim of reestablishing customer trust and improving on its sales. Just like all the other attributes that are necessary in enhancing performance a firm must be developed to operate as moving targets (Espeland and Sauder 36).
The increasingly fierce levels of competition in the market can engender cost-cutting mentalities, which are manifested in immoral behavior. Information asymmetries, which arise from deregulated industries, can facilitate the reduction of incentives for businesses to make decisions, which are in conflict with the interests of the larger society. It is important to note that these to maintain ethical standards, firms through monitoring by NGOs must make policy changes, which may face resistance from those benefiting from ineffective measures that can be easily manipulated. For organizations, it is important to enhance and promote their reputation in the market by creating incentive systems that will redefine their status and reinforce their position.
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Gourevitch, Peter. The Value of Ethics: Monitoring Normative Compliance in Ethical
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Velthuis, Olav. Symbolic meanings of prices: Constructing the value of contemporary art in
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