International Ethics and Globalization

Zsolt Boda,Ph.D.

Associate ProfessorBusiness Ethics CenterCorvinus University of Budapest

What is globalization?

The economy has become increasingly internationalized in the past 3-4 decades.

•International trade (5x)•FDI (15-20x)•International finances (25x)

FDI inflows: 15-20x

GlobalizationThe free movement of capital•Financial superstructure•Multinational companies

▫70% of all trade▫80% of patents▫Symbolic and political power as well

Globalization: benefits and problemsBenefits•Opportunity for (some) poor countries and

their people•Efficiency gains•Peace among nationsProblems• Inequalities are growing•Human suffering (exploitation, child labour,

dislocated people etc.). Case: Shell in Nigeria.

•Severe environmental problems

Change in financial globalization and economic growth in selected countries, 1977-2004 (IMF)

The share of the highest income decile from total income, U.S., 1917-2006

Top 1% income and median income in the U.S.

The problem of international ethicsThe potential conflict between the

universalism of modern ethics and the empirical facts of relevant communities.

The limits of moral communities.•How to deal with norm conflicts? Do we

have universal norms? •Is it possible to enforce them?

Universalism versus relativism

Universalism: there exists a set of universally binding moral precepts

Cultural relativism: no ethical view held by one culture is better than any other view held by another culture

Universalism

Where do universal norms come from?•Universal patterns in societies’s norms.•Common foundation in religious and

ethical teaching. Hans Küng•Dialogue, negotiation and agreement.

Jürgen Habermas: discourse ethics. International law.

Moral relativism

Communitarian thinking (M. Walzer, Ch. Taylor):

•Man is a communal being.•Communities carry cultures.•Morality is embedded into culture.•The limits of intercultural dialogue.

Pluralism (Donaldson and Dunfee)There exists a broad range of ethical

viewpoints that can be chosen by communities and cultures.

The possibility exists that conflicting views are equally valid.

There are, however, circumstances in which the viewpoint of a particular culture will be invalid due either to a universal norm or to the priority of the view of another culture or community.

Norm conflict no. 1

A new American firm in Russia was advised by its Russian attorneys to file a tax return that misstated income and expenses and consequently grossly underestimated actual taxes due. The firm learned, however, that most other Russian companies regarded the practice as standard operating procedure and merely a first move in a complex negotiating process with the Russian tax authority. The firm initially refused to file a fallacious return on moral grounds and submitted an "American-style" return instead. But because the resulting tax bill was many times higher than what comparable Russians were asked to pay, the firm changed policy in later years to agree with the „Russian-style".

Norm conflict no. 2• In the late 1980s a number of U.S. companies left

South Africa in response to its severe racist and segregationist laws under the Apartheid regime. The withdrawal was said to finally contributing to the democratization of the country.

• Similar events happened recently with Burma. Several businesses left the country. Levi-Strauss withdrew its textile business, noting that "it is not possible to do business in [Burma] without directly supporting the military government and its pervasive violations of human rights.“

Norm conflicts

In case of norm conflict a useful distinction is between

- welfare norms depending on the level of development (labor standards, env. law): adjustment is possible

- cultural/social/political norms: respect or reject

Donaldson’s Ethical Algorithm

•If the moral reasons underlying the host country's view that the practice is permissible refer to the host country's relative level of economic development, the practice is permissible if and only if the members of the home country would, under conditions of economic development similar to those of the host country, regard the practice as permissible.

Donaldson’s Ethical Algorithm

•If the moral reasons underlying the host country's view that the practice is permissible are are rooted in culture, the practice is permissible▫if it is not possible to conduct business

successfully in the host country without undertaking the practice,

and ▫it is not a clear violation of a

fundamental international right.

A summary

•We need universal norms to regulate inter-community interactions. Global challenges, global responsibility.

•But local cultures and identities should also be respected.

•An equilibrium is needed between universalism and relativism.

The problem of regulation

The international system is inherently anarchic, lacking any central, order-enforcing authority. Moral principles loose their validity and agents tend to follow their own self-interest. (Machiavelli, Hobbes, Morgenthau, Castells)

But: Immanuel Kant: cooperation is a duty.

The problem of regulation

•How to regulate the MNCs as powerful actors in the global economy? How to ensure that they take into account social and environmental concerns as well, beyond their self-interest?▫Cooperation of states▫Self-regulation

Self-regulation at different levels•company codes (e.g., Mattel)•sectoral codes (e.g., Code for marketing

of breast milk substitutes)•global standards (SA 8000, ISO 14001,

GRI)•governance and stewardship schemes

(MSC, FSC)•international codes of world organizations

(ILO, OECD, UN Global Compact)

UN Global Compact: Ten PrinciplesWorld business should: • (i) support and respect the protection of

international human rights within their sphere of influence;

• (ii) make sure their own corporations are not complicit in human rights abuses;

• (iii) uphold freedom of association and the effective recognition of the right to collective bargaining;

• (iv) eliminate all forms of forced and compulsory labour;

• (v) uphold the effective abolition of child labour; • (vi) eliminate any discrimination in respect of

employment and occupation; • (vii) support a precautionary approach to

environmental challenges; • (viii) undertake initiatives to promote greater

environmental responsibility; • (ix) encourage the development and diffusion of

environmental friendly technologies.• (x) fighting corruption

Self-regulation: limits and weaknesses- Soft provisions.

- However: multi-stakeholder codes!- Non-compliance is, by definition, not

(really) sanctioned.- They come after a tragedy or scandal

occured. Pressure of the civil society (NGOs, media, consumers) is essential.

The ethics of the multinational•Openness to dialogue and cooperation in

order to strengthen global governance. •Respecting some basic universal values

and norms •Respecting the norms of local

communities and stakeholders. •An enhanced responsibility of the firm

abroad. ▫Complexity (social, cultural, ecological)▫Power