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Ethics: a Bridge between Entrepreneurship and Economics Ethics: a Bridge between Entrepreneurship and Economics
by Dr. Emanuel Paparella
2013-10-13 12:02:29
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Ethics: a Bridge between Entrepreneurship and Economics
in David McClelland’s The Achieving Society
and Hugh LaFollette’s Ethics in Practice


The Achieving Society by David McClelland (1961)       


Ethics in Practice edited by Hugh LaFollette (2006)

In the last decade or so we have seen the publication of a plethora of books on entrepreneurship and economics. Sadly, this  cultural phenomenon has not been accompanied by an equal attention to the ethics of entrepreneurship. As is generally known, ethics vis a vis economics deals with complex moral problems related to basic fairness, social justice, personnel and relationships, distribution dilemmas and other challenges. What unfortunately seems to have happened after the industrial revolution is a decoupling of the nexus between ethics and economic considerations which mirrors to a certain extent the decoupling between politics and ethics.

I teach a course on Ethics at Barry University titled “Contemporary Problems in Ethics” which utilizes a text titled Ethics in Practice edited by Hugh LaFollette, a professor of Ethics at the University of South Florida. The book is divided in five sections: part 1: Ethical Theory, part 2: Life and Death, part 3: The Personal Life, part 4: Liberty and Equality, part 5: Justice. Each section is further subdivided into three or four chapters containing a half a dozen readings each, for a total of 67 readings. For example part five on Justice is further subdivided into the following chapters: Punishment, Economic Justice, World Hunger, Environment, War and Terrorism. This section contains twenty readings (pp. 505-744).

As the reader will perhaps appreciate by this brief description of the content of the text, this is a very competently and thoroughly organized text (spanning some 744 pages)  dealing with the entire span of contemporary ethical problems. However, try as one may, one will not find one single reading on Ethics in Entrepreneurship, although the topic is covered indirectly and in a general way in the readings under Section V and the chapter on Economic Justice which contains readings by John Rawls, Robert Nozick, Iris Marion Young and Jonathan Wolff, especially relevant is reading 55 by Jonathan Wolff titled “Economic Competition: Should We Care about the Losers?” In an attempt to remedy this situation I will assign the reading of one or two Papal encyclicals dealing with social justice and distributive justice.

In any case, in order to begin to understand the role of ethics in entrepreneurship, students need first to understand the concept of ethics in life which is dealt in said text in the very first section titled “Ethical Theory.” There they are instructed that basically the term ethics refers to what used to be called moral philosophy. That section is further subdivided in readings on Consequentialism, Deontology, and Virtue Theory.

The questions naturally arise: How should we live? Shall we aim at happiness or at knowledge, virtue or the creation of beautiful objects? If we choose happiness or the flourishing life (as Aristotle suggests), will it be our own or the happiness of all as Plato suggests in The Republic? Shall we opt for Mill’s pragmatic ethical utilitarianism or Kant’s ideal deontologism? And what of the more particular questions that face us. Is it right to be dishonest in a good cause? Does the good end justify the bad means? Does a wrong cancel another wrong? Can we justify living in opulence while elsewhere in the world people are starving? If conscripted to fight in a war we do not support, should we disobey the law? What are our obligations to the other creatures with whom we share this planet and to the generations of humans who will come after us?

Ethics deals with such thorny questions at all levels. Its subject consists of the fundamental issues of practical decision-making and its major concerns include the nature of ultimate value and the standards by which human actions can be judged right or wrong. Normative ethics is primarily concerned with establishing standards or norms for conduct and is commonly associated with general theories about how one ought to live. Perhaps the most striking development in our study of ethics during the second half of the 20th century has been the growing interest among philosophers in applied ethics. Emmanuel Levinas’  whole philosophical scaffolding is based on ethics. Such moral issues as racial and sexual equality, human rights and justice have become quite prominent in the last fifty years or so, as have questions about the value of human life as raised by controversies over abortion and euthanasia.

Related to the latter are the ethical implications of various developments in medicine and the biological sciences, as in-vitro fertilization (test tube babies), sperm banks, and gene manipulation. This field of applied ethics (known as bioethics) covering areas of business and entrepreneurship, frequently involve inter-disciplinary work requiring the cooperative efforts of philosophers, physicians, scientists, lawyers, theologians and the social /political leaders. Since the days of classical Greece, entrepreneurs have been praised for their important contributions to common life. Yet many have also been strongly criticized for significant ethical lapses. It is indeed a very mixed record.

The Achieving Society is a book by David McClelland which was among the first among contemporary scholarly academic efforts to explore serious ethical questions about entrepreneurship and then issue a call for more study. The mythical entrepreneur Hermes is depicted there as a skilled inventor and merchant, but he is dishonest and proud of his cleverness, described as an unethical trickster and thief, concerned only with his own interest and gain. Likewise, today’s entrepreneurs are generally admired, but many of them are perceived as willing to do almost anything to succeed financially. McClelland observes in his book that "We do not know at the present time what makes an entrepreneur more or less ethical in his dealings but obviously there are few problems of greater importance for future research." Alas, some fifty years later the call has not been fully heeded. The emphasis in the study of entrepreneurship continues to be on the practical “how” while the metaphysical “why” is all but neglected.  

In such a book four of its ten chapters are dedicated to entrepreneurship: chapter 3: “Achieving Societies in the Modern World: Entrepreneurship in Political Cultures,” chapter 6: “Entrepreneurial Behavior,” chapter 7: “Characteristics of Entrepreneurs,” chapter 8: “The Spirit of Hermes.” It remains the only book which transcends bloodless economic and business paradigms and looks at the human type involved in entrepreneurship.  

Undoubtedly, entrepreneurs today encounter uniquely challenging ethical problems. They typically operate in stressful business environments and they often struggle to find time and perspective for focused ethical reflections. They make choices and take actions that affect many, usually without the moral guidance available in well established organizations. Their decisions can strengthen or seriously weaken a firm's future business viability. The cases of Enron, WorldCom, Anderson and other giants of USA are shining examples of results of unethical decisions by key personnel. Entrepreneurs aspire to succeed and speak the pragmatic language of entrepreneurship and economics.

But it remains important that this business language be accompanied by that of an ethics based on universal reason, containing no dogmatic religious pronouncements as a distracting cover up, for indeed the capital that we use to build our business depletes, but the capital of our character outlasts all material resources and as a spiritual phenomenon it is much more important than money in the bank, often misguidedly interpreted as a symbol of success. More ominously, this material success will at times parade under the guise of spirituality, when genuine spirituality ought to transcend mere utilitarian and crass material concerns.

In any case, McClelland points out the ineluctable fact that self-interest and self-preservation more often than not tend to compromise ethics. Indeed, today's strife-filled economic environment thrusts the entrepreneurs into a survival mentality, otherwise known as social Darwinism, which, beginning with Herbert Spencer and continuing with Ayn Rand boldly and misguidedly proclaims that power makes right, that the strong and the fit naturally survive and the weak and vulnerable naturally perish. The theory parades as an ethics of sort but the fact remains that any genuine business ethics always stands as a vital bridge between entrepreneurship and economics. In fact, if ethics does not stand as the primary pillar of the house (firms and companies or private businesses); the house will inevitably fall under the weight of its own corruption.  

Ethics is ultimately an internally self imposed limitation for entrepreneurial success. It does not guarantee material success, but it can carve a straight path. No one can force a person to be honest and upright in dealing with others. These internal traits comprise a person's character. Government and captains of industry can impose laws and a code of conduct but these are not intended for persons who do right according to characters of integrity. Rather, they are intended for those who tend to violate them.

Adam Smith rightfully wrote, "When the law does not enforce the performance of contracts, it puts all borrowers near upon the same footing with bankrupts or people of doubtful credit" (Wealth of Nations). That is, those who tend to cut corners in their business dealings drag others down with them unless a legal code  prevents it. This, in turn, leads to the disintegration of free markets. Plato who was no entrepreneurial capitalist, said it even better more than two thousand years ago when he quipped that “overextension is the beginning of corruption,” by which he meant, I suppose, that on the other hand, doing one thing at a time and doing it well for its own sake may be the beginning of virtue.

What does this Platonic-Aristotelian principle of virtue look like in daily business affairs? Simply this: that the entrepreneur must lead by example in upholding the highest regard for ethics in a company. A business leader, as a service provider, must hold ethics in high regard and exhibit integrity. Regard for ethics is an internal quality that says that one values the governing principles that apply universally to all persons for the good of society, because such value is integral part of one’s personhood and must be respected in one’s fellow humans because they are equal in human dignity. It conforms to Kant’s moral categorical imperative which acknowledges the orderliness of the stars above and the moral law within.

Attempting to cut corners in business (i.e., what Plato calls overextension) under pressure to meet the numbers, or failure to deliver according to agreements, lead only to hurt the entrepreneur and those served. As these practices work their way out among all business, they cause great harm to a free democratic society and the free market and lead to greater external imposition on all business. It will then be futile, and in fact devious and unethical to cover that kind of smelly moral garbage with the perfume of spirituality, be it that of Christianity, or that of Buddhism or that of Taoism or Islam. On the other hand, as Kant has well taught us in his Critique of Practical Reason, an internal universal set of ethics based on freedom, good intentions and good will, promote greater freedom and grant genuine success, the one not measured by mere financial criteria.

In conclusion it can be affirmed that doing the right thing works from an internal core and thus forms an upright reliable character. External codes and laws can force people to do right but that is ethics based on necessity rather than freedom and thus it will fail to change the internal core of one's character. To be ethical because of external coercion is to engage in a slave morality. One may ask: and what pray is the right thing? Aside from studying ethics which can be very helpful and should continue to be widely promoted in schools, we all know intuitively about integrity, promise keeping, commitment, and truthfulness. We know virtue and its opposite vice when we see it. We learned these traits from childhood. So, an important question arises for those who operate in the business world: do I consistently practice integrity or do I have it imposed on me from an external coercing punishing force? If the latter is the case, then one ought to entertain the notion that one may well be a failure as a human being, despite the superficial external trappings proclaiming one’s success story, for as Socrates, who was poor in capital but rich in virtue, aptly rendered it some 24 centuries ago: “the unexamined life is not worth living.”


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Leah Sellers2013-10-13 14:48:48
You Need a Universal Hug of Thank you ! Can't wait to read this book !

francesco tampoa2013-10-15 19:27:26
Dear Emanuel and al.

Compliments for your Symposium, I enjoyed it. Among the other essays, all of which deserving of praise, let me pay attention to the Emanuel’s one, and express in full my agreement with his presentation in search of a renewal of Western Culture. Within scholarship the Levinasian ethics is under debate. Alain Badiou is notable for having rejected the Levinasian ethics of the other with which Derrida is habitually identified, on the grounds that the respect for alterity slides all too easily into a sentimental indulgence of the other’s hubris (Badiou 2001, 24–5). Other points are in discussion, for example the privileging respect for the inviolable other to the point of tacitly authorising a regime of non-intervention, and investing everything in a purely formal respect of the other, and so forth.
Once more, compliments for your work.
As ever Francesco

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