Free Markets Perspective Examine the Ethics and Essay

  • Length: 11 pages
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  • Subject: Economics
  • Type: Essay
  • Paper: #66424351

Excerpt from Essay :

free markets perspective, examine the ethics and morality of 'let capitalism rip' allegation made by British Prime Minister David Cameron. (Guide: 750 words)

The competence or incompetence of free markets and the implications of resource allotment to agents in an economy continues to be a passionately debated topic within economic and political circles. "In reality, markets are prone to inefficiencies when a number of factors arise" (Mendes, n.d.). A key principle of the free market philosophy is that businesses should focus exclusively on maximising shareholder value and not allow other considerations, apart from compliance with the law, to intrude on their business activities. This is what governments over the past 30 years have lived by. And that's what still protects big business from having to pay for its own excesses. The speculative banks, the oil companies, the private equity and hedge funds, all steal from the tax payer with total impunity. Occasionally, there's a coincidence of events hitting the headlines together, shouting out the criminal injustice of what is permitted to go on (Pearson, 2010).

Free-market economists have sufficiently established and documented the fact that free enterprise is the most proficient and industrious way to supply for people's economic needs and wants. The easy but powerful logic of supply and demand is indisputable, and even the critics of the free market recognize that the unseen hand of self-interest can produce and dole out goods and services without any necessitate for central planning and control. Yet, the persistent critics and opponents have succeeded in compelling much of the globe that there is something menacing or corrupt about the free market and private enterprise. Even when they recognize its efficiency, they claim that free enterprise is in some way unjust or intrinsically exploitive. Even when they concur that the free market is prolific, they dispute that it produces the wrong goods, like too much advertising or too many lavish goods, and not enough public goods like education (Foldvary, 2011).

Adversaries of free markets frequently condemn the disparities of wealth that may consequence from it. One principle which they will generally agree with is the moral fairness of man, that all human beings are equivalent in human rights. Moral equality means that no one may assert to be morally better to others, and that no one may compel their beliefs, values, and desires on another, for those of one person have equal position with those of anyone else. This means that if one person thinks that certain goods should be fashioned, he has no moral right to force another to obey with this personal belief. "Each person has his own unique personality and his own needs and desires, and moral equality implies that each person has the equal right to decide how he should live, including how he will work and what he shall buy and sell" (Foldvary, 2011).

Consequently, the fundamental moral principle well-suited with moral equality is that no one may compel their personal will on another. One may use force only in self-protection. Otherwise, compulsion is morally wrong, and that implies that people have the right to do whatever does not coercively hurt others. Actions which do not compel others are morally right, or at least not incorrect, from society's point-of-view. "For example, if someone sells cigarettes, he could be accused of selling something harmful to health, but since their purchase is voluntary, it is not coercive and thus not wrong" (Foldvary, 2011).

Of the numerous issues that often separate economists, the one which is probably most contested is the degree of government intervention in the economy, as seen through its numerous manifestations, such as the extent of public spending as a percentage of gross domestic product (GDP), the amount of labor and financial market regulation, the configuration and level of taxation (direct and indirect taxes). "The degree of government intervention in an economy is usually measured in terms of public expenditure as percentage of GDP. In the OECD, in 2009, this degree ranged from 34% (Korea) to 56% (Sweden). Yet, government intervention can also take the form of legislation and regulations, not illustrated by the size of its expenditure" (Lombard, n.d.).

The view has been, over many years, that considerable government intervention is harmful to economic growth, and therefore to overall standard of living. Unlike developing countries, where defence is typically the major appearance of government expenditure, for most developed countries, the greatest share of government spending is allocated to social welfare measures like cash social services including unemployment and sickness benefits, pensions and family allowances, education, health, and low-rent accommodation. This focus on equity deliberations needs to be funded by taxation, which is then professed by free marketeers as causing inefficiencies through disincentives to work, to enterprise, or, for those who are not directly recipients of government generosity, through a decrease in their standard of living (Lombard, n.d.).

1.2 - Evaluate the system using Milton Friedman's and Norman Bowie's neo-classical models of corporate social responsibility (CSR). Make recommendations on the way forward for a more 'sustainable' market economics. (Guide 750 words)

The present financial meltdown is the consequence of under-regulated markets founded on a philosophy of free market capitalism and limitless economic growth. The fundamental trouble is that the underlying assumptions of this philosophy are not consistent with what is known about the actual state of the world. "The financial world is, in essence, a set of markers for goods, services, and risks in the real world and when those markers are allowed to deviate too far from reality, "adjustments" must ultimately follow and crisis and panic can ensue. To solve this and future financial crisis requires that we reconnect the markers with reality" (Costanza, 2009).

The conventional vision of the economy is founded on a number of assumptions that were fashioned during a period when the world was still comparatively empty of humans and their built infrastructure. In this bare world context, built capital was the restrictive issue, while natural capital and social capital were plentiful. It made sense, in that context, not to be concerned too much about environmental and social externalities since they could be assumed to be comparatively small and in the end solvable. It made sense to center on the growth of the market economy, as measured by GDP, as a main means to improve human welfare. It made sense, in that circumstance, to think of the financial system as only marketed goods and services and to think of the objective as increasing the quantity of these goods and services produced and used (Costanza, 2009).

But the world has changed considerably. It is now a world fairly full of humans and their built capital infrastructure. In this new circumstance, it is important to first remember that the objective of the economy is to sustainably advance human well-being and quality of life. One has to remember that material utilization and GDP are merely means to that end, not ends in themselves. People have to recognize, as both ancient wisdom and new psychological research reveals that material use beyond real need can in fact reduce well-being. It is important to understand what really does add to sustainable human well-being, and distinguish the considerable contributions of natural and social capital, which are now the limiting factors in a lot of countries. "We have to be able to distinguish between real poverty in terms of low quality of life, and merely low monetary income. Ultimately we have to create a new model of the economy and development that acknowledges this new full world context and vision" (Costanza, 2009).

The modern new economics movement has gathered growing momentum over the last few years and during that time, new economics principles have crystallized. They include:

methodical empowerment of people as opposed to making and keeping them dependent, as the foundation for people centered development methodical conservation of resources and environment, as the foundation for environmentally sustainable improvement progress from a wealth of nations model of economic life to a one-world model, and from today's inter-national financial system to an ecologically sustainable, decentralizing, multi-level one-world economic system reinstatement of political and ethical factors to a central place in financial life and thought admiration for qualitative values, not just quantitative values respect for feminine values, not just masculine ones.

These ideologies are pertinent to every area of economic life and thought, and to every level ranging from personal and household to global and every feature, such as lifestyle choices and organizational goals (Robertson, 2005).

An open, international economy requires a global frame-work. Values and rules which have been proven at both the national and European level within the structure of a social and market-oriented system of values and financial rules must also be applied globally. These principles set up a link between freedom and responsibility for the benefit of all. They must be enhanced, particularly in the area of the financial markets, and reinforced within the system of international trade. What is necessary is the growth of the legality,…

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