Ethical Capitalism: Advent of an old Economic Paradigm

Ped Salvador MARHS Batch 71 January 5, 2011

Greedy Capitalism
Milton Friedman, the noted and famous American economist before a live interview in a television show had mentioned that Capitalism as an economic system will never succeed unless this will be based from a foundation of greed. He also emphasized that other forms including socialism, communism, and fascism were all together based on the fundamentals of greed. Mr. Friedman who died in 2006, unfortunately did not see and experienced the decline of the so- called Capitalism based on greed as the world is now experiencing a global economic crisis which may continue in the coming more years. This bad economic scenario incidentally, further aggravated with the collapse of housing and automotive industries in the late 2000s that created havoc on the life of not only ordinary American individual but also affected countless middle class families in the United States. The boom and bust of Dot Com companies in the United States in the late 1990s has provided already some symptoms of this malady and further became more pronounced with the collapse of Enron, WorldCom and Andersen Consulting among others at the start of 21st century. Many financial analysts believed that the Philippines was spared from the effects of this financial crisis, mainly, the reason being is that the financial systems and controls of domestic capital were more stringent and tight compared with that of the American systems. Many international economists also, believed that the effect of 911 disaster in 2001in New York City has triggered the American financial system to be more lenient for borrowers that catapulted the economic disaster. Greed as a motivator for capitalist to accumulate exceedingly wealth in the form of profit can be very devastating , specifically when fruits are not equitably distributed to everyone who labored. When a worker has run-out of savings and disposable income became nil, he will live and survive on a subsistence level effecting a very slow growth on the economy due to low consumption creating a population inequity and poverty thus resulting to widespread social problems. The Philippine society is filled with so much social problems, primary of which is poverty both urban and rural, which borne out of due to lack of economic resources not only because of unemployment and underemployment, but more of due to exploitative nature of labor-management relations provided by socially irresponsible capitalists and top managers.

Labor contracting is very predominant to countries, Philippines in particular, where there are more supply of labor than demand. When just wages are given to workers and employees and salary adjustments are based on merits, the salary gap between labor and management will be manageable. However this scenario is being defeated when management implement the 5- months contract and renew it after two weeks using the same old wages and salary offer. Direct labor cost which is a variable cost then became fixed cost since the cost of labor will be the same forever unless there is an intervention from the government House of Congress. Unless a good portion of profit generated will be invested to human capital, working condition and facility improvement including safety, and business expansion to generate employment we can say that this accumulation of so much profit on a continuous basis is the worst form of the so called greed.

Ethical Capitalism
I believe that Capitalism can be ethical. Let's have an analogy. In sports like Tennis, Badminton, Bowling, Basketball, Boxing, etc spectators will be fully satisfied only if the players are well prepared both mentally and physically and created so much excitement during the process of competition. However, if the rules of the game are inadequate or not fully defined or not fully implemented, there are chances that results are not coherent with the spectators' expectations resulting to dissatisfaction and later non- patronage to the sport. For sure there will be loser and winner, but it is the competitive process usually the one that will remain in the hearts and minds of the spectators. To quote " It is not winning or losing the game ,it is how did you play the game". In this light they will be willing to go back again and again to patronize the sport because they were fully satisfied especially for those players which will always display their never- say- die efforts in the game. If the players will continue their best efforts to become world-class, more and more fans will be encouraged to watch the sport. This definitely will be a high gain to players, spectators, producers and the economy in general. Ethical capitalism focuses more on quality service for total consumer/customer/client satisfaction. Business players will prepare themselves by reducing their production cost and eliminate all wastes and inefficiencies in their operations. The efforts are geared towards lowering the price after the elimination of the wastes. Profit is not compromised and low -priced high quality products and services will be patronized thus increasing and maximizing market share. If the Business players are ethical and continue to display this concept, more and more high quality products and services will be available in the marketplace for customers to enjoy and mass consumers will thus be more satisfied and very willing to continuously spend money to get these products. Economy growth will then continuously evolves

without recession, provide employment, reduce poverty and improve the quality of life of everyone. Inside the company , when top leaders are ethical, employees and workers will be greatly motivated to do more since just management principles are predominating the working atmosphere. Bayanihan or helping each other will be the primary norm making the labormanagement relations more bonded and stronger. Profit will be utilized wisely and improve the quality of work life of everyone. This is the true essence of ethical capitalism.