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Recovery: Justice and Moral Hazards

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By TMFRoZany
March 11, 2009

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Do we have to separate justice and success?
In the beginning for this post, I was responding to Chucks comment on his thread,"Why the economy isn't getting better soon." http://boards.fool.com/Message.asp?mid=27491461

My response kept growing (now to 2 parts) so I am starting a new thread starting with a quote from Chuck's comment to me.

There is always a consequence for failure. The question is, who should bear the brunt of that consequence? And if the answer is "we all should", then at what point does the burden of carrying the load become too large for those who played by the rules, caused no harm, and are now being ordered to pay for the sins of others?

The implications in Chucks comment are pertinent to where we are today and heavy with a direction toward looking at behavior and responsibility. To me, this is very serious business and deserves a bit of follow-up in the arena of ethics and morals.

Great call, Chuck. You picked the right word ‘sin' because we should play fair:
1. "the type of behavior or mindset may not be a crime prohibited by rules or regulation, but instinctively we recognize it for what it is-an offense against moral order.
2. " The sense of "right" and "wrong" at the heart of ethics, resonates the public's perception of an intrinsic "unfairness" with various aspects of the economic crisis and its consequences."
3. "This is about making wrong choices, misusing human freedom and a denial of the demands of a moral order that "modernity" had presumed to cast off. (Prof. Ray Kinsella)

What can be said of ethic's in society? It's that relationship thing, how do we relate to each other and in groups making decisions? Ethical stances determine whether a society is functional, frictional, falls apart, and all that is in between. For example, ethics reaches into corporations, health care, environment, journalism and more. Stakeholders are citizens, communities, corporations/business owners, customers, policy makers and now global entities.

It is is this ethics domain where I assess corporate behavior - management and boards. Not just the written word but their actions over time related reports, not just the framework of ‘socially responsible' investing touted today. Social ethics is not something that I split from the field of ethics that is nothing more than the good life tempered by proper conduct. Play fair.

Patriotism vs. Favoritism
One topic duJour today on CNBC (I know, shudder) is a very pertinent topic related to an ethical dilemma and the H-1B program (foreign workers). Do we have a moral obligation to protect American jobs in the US?

Wall Street, Government, and Opinions
Two US Senators have introduced amendments to the economic stimulus bill, which if passed would prevent US companies receiving the federal bailout money, from hiring H-1B visa holders. The amendment if approved by the Senate would have an immediate impact on Indian software professionals, as it is they who are the major beneficiary of the H-1B visa program.

Dealing with the Masters of Wall Street is no easy matter. They are at times very powerful and very cranky and in some cases ethical behavior has been tossed to the wind.

Will Rogers once said that "we have the best Congress money can buy," so part of our ‘sin' is allowing some corporations through lobbyists to arrange contributions for elections, junkets (now frowned on), and the actual writing of bills presented in Congress. Repealing the Glass-Steagall Act turned out not to be a very good thing.

The whole story on regulation, enough or too little, is relative to power: government and corporate.

Chuck noted we have a difference of opinion and asked who should bear the burden of folly. Most likely my difference is rooted in my taking a handle in an ethical framework for ethical decision making.

Scandal and illusion
In recent decades the financial markets have gained immense power, leading to a great inequity. "They have built a huge casino which the regulatory authorities have let run - or even encouraged. And now it's the citizens who have to pay for the losses. That is a scandal.

"This crisis confirms the fear - or rather illusion - that pension schemes could in large part be funded by market performance. The dangers are immense." (Uhlrich Thieleman a Swiss business ethicist,2008)

Thielman sees one of the main causes of the crisis as bonuses; banks sold financial "poison" to each other or to investors and both sides pocketed tidy bonuses. He sees the deeper crisis as faith in the market.

This seems consistent with what Warren Buffett expressed this morning on CNBC, that the economic Pearl Harbor is what happens when extreme leverage is done, another illusion. The economy "has fallen off a cliff" and the World Bank predicted a global contraction.

"I think that economy will be fine in five years, but I wish we'd get there faster."
http://www.cnbc.com/id/29596955

And to me, that expresses much of the angst we are experiencing. Toffler in Future Shock spoke about Tang creating the illusion that there are instant answers. This was aided by TV programs that solved the most multifaceted, difficult problems in one hour.

We want instant answers!

Patience is a virtue that has faded in our expectations. The often sighter prayer, Lord give me patience and give it to me right now.

Anger, fairness, and moral rules
We have a lot of class anger about propping up dysfunctional Wall Street and rescuing tycoons on the one hand or propping up citizens who made poor mortgage decisions or those who have lost jobs, money, health insurance, and those who are now living in tent cities (the shelters are full).

Two levels of analysis come to mind: intellectual and emotional. Washington Post, says, "There is evidence that unreasonable anger against those who harm the common good is deeply embedded in human DNA-and has probably helped us survive."

Redistributing money through taxes is the crux of the discussion/verbal battles on TV. It's the Goldilocks story: too much, too little, just right. Spittle is flying in all directions with words of passion defending or tearing down plans or strategy or alternatives that attempt to hold up some of the flailing institutions that corruption, ineptness, and shear stupidity created for us--a crisis.

We ask: Where are the priorities? Where is the plan? Where is the end of the ‘black hole where we are throwing our money?'

Trust is waning. We have a largely unequal society waiting for answers.

Doctrine of Fairness
The Constitution implies the Doctrine of Fairness. There is no guarantee of substantive fairness, just a process to determine it. "Our attempt to identify the process that is due is an attempt to determine the meaning of fairness in this context. We will find, as we have before that fairness is keyed to a person's ability to exercise autonomy at the same time that it generally presumes that she is able to do so." (Stacked Deck. Lawrence E. Mitchell, p.75.)

Presumption of ability is key to autonomy, here we must remember that we are not all wired right, some come up short with abilities.

The bottom line is how justice (being fair, moral rightness) can be played out in an ethically corrupt situation. What role does autonomy-free choice, beneficence-doing what is best, nonmaleficence-do no harm, play, e.g., in applied ethics?

The scenarios are discussed in the books of the Bible morals (theology) related to sin and in the writings on philosophic morals.

Rules
Moses gave us commandments (moral rules, right and wrong) defining relationships - three with God and seven for each other, even to the point of saying slaves should be released every seven years.

But the Israelites continued with disobedience tied to idols such as the golden bull or other Egyptian, Roman, and Greek gods just as some of us continue to worship tangible idols such as money, cars, mansions, and yachts. We continue to flirt with idolatry intangibly as well.

Moral philosophy is the area of philosophy concerned with theories of ethics, with how we ought to live our lives. Applied ethics is the most down to earth area of moral philosophy, thorny stuff like abortion, stem cells, right to die, animal rights, and capital punishment. We need a moral sense/compass of what is right and wrong and what is truth. So we all line up and take sides just as we have throughout history as we live and apply rules.

Today we ask: Who should we save? How? When? For how much? Why save the banks, much less the brokerage firms and lending institutions, the auto companies, and the oafs who could not hold up their part of a questionable terms mortgage agreement?
Options, risks, rewards and more questions to start with ,to find answers, not in ideology but with facts that are not always easily determined. Careful not to jump to conclusions too early.

Situations can fall into a morally and ethically corrupt problems effecting society. Money wasn't moving eventually making it to a global problem. It is never easy to deal with cost-benefits of a problem in a society, national health insurance of sorts has been batted around since Harry Truman was president, some say longer. Public power threatens individual liberty so ambivalence about government has been offered as an explanation for why Americans refused national health insurance long after the rest of the industrialized world had secured it.

Ethical Decision Making
Ethics is ethics. The principles remain the same across professions derived from ethical theory. Ethics is a system of moral principles and human conduct. Right now, why is Bernie Madoff allowed to live at home? Any cocaine addict caught with the goods would be held in jail. Simple, prosecutors want information he has on those involved, horse trading is going on, not the legal term of course.

Ethics is simply the standards that tell us what we ought to do. The discrepancy arises when the is's of the world are not compliant with the oughts of the world. And some argue that this comparison is passé.

OTOH, ethics is not the same as feelings, it is not following the law, it is not following culturally accepted norms, and it is not a science. In fact there are those who argue that ethics is ‘larger' than law.

Sources for ethical alternative approaches are found in the utilitarian approach, the moral rights approach, the fairness or justice approach, the common good approach, the virtue approach. (There are others but this is fairly simple breakdown, see reference for more details if interested)

Why are the folks in the fiscally irresponsible financial institutions, for the most part, still holding their jobs while others, who were forced to leave related to mergers, were able to pick up generous bonuses? It appears someone was not doing their job, who is accountable?

Dealing with ethical decision-making is not easy nor is there an easy agreement because it deals with dilemmas. Consensus building, not compromise is the approach for teams. Making decisions that are ethical requires the ability to make distinctions between competing choices. Considering all the sources for ethical standards above, which of the options is the right or best thing to do?

An ethical decision model, approaching ethical decisions (The Potter Box):

  • Define the ethical situation (who is involved, views besides your own, find the dilemma, this may have to be reworked several times, no conclusions allowed)

  • Identify your values, standards of choice, (compassion, confidentiality, fidelity, honesty, golden rule, integrity, privacy, respect, rights and duties). Call to mind alternatives and determine consequences. Identify the ethical principles and values that support each course of action

  • Choose your loyalties, (who gets hurt and who benefits, you may have competing loyalties to yourself, your family, your friends, your boss, your company, your professional colleagues, your audience, news sources and to society at large.)

  • Identify the principles that apply to the situation:
----------Justice, moral rightness, being fair
----------Autonomy, free to make own decisions
----------Beneficence, doing what is best
----------Non-maleficence, do no harm.
  • Rank order ethical principles and values according to you. Choose the best course of action, discuss benefits and risks to your choice.

Moral philosophy from the ages hopefully will impart wisdom and guide decision-making as we go forward.

It has been said: Why should I have to ‘bailout' people who made careless decisions? Bailout rewards executives, companies and people that made poor choices. In a bailout the government tries to redistribute wealth from rich people to poor people. Bailouts encourage reckless behavior by recipients and impose an immoral burden on those that behaved responsibly. I played by the rules this is not justice.

Continued in Part 2

Regards,
Ro

Selected References:
The Law of Unintended Consequences: 20th Century and Beyond
http://seekingalpha.com/article/113162-the-law-of-unintended-consequences-20th-century-and-beyond

The Banking Crisis is Scandalous
http://www.swissinfo.org/eng/specials/finance_crisis/The_banking_crisis_is_scandalous.html?siteSect=23451&sid=9822370&cKey=1226919441000&ty=st

A Framework for Thinking Ethically. http://www.scu.edu/ethics/practicing/decision/framework.html

Philosophy: Morality / Ethics
http://www.spaceandmotion.com/Philosophy-Morality-Ethics.htm

The Rational Underpinnings of an Irrational Anger http://mobile.washingtonpost.com/news.jsp?key=356632&rc=sc_na

Mad as Hell: Anger and the Economy (Anger management because anger is not good for you. I share because of my background in mental health)
Part 1 http://psychcentral.com/blog/archives/2009/02/27/mad-as-hell-anger-and-the-economy/