Top 5 Problems Facing the Economy 1

Yesterday I promised that I would write in-depth about what I saw as the top 5 problems facing the economy.  Today I will write about what I feel is the number 1 problem: the lack of ethics on the part of society, especially in business.

The lack of ethics is cancer and it is eating away at the fabric of our culture.

There has been such an emphasis in our culture on the quantitative that the qualitative has nearly been left behind.  This manifests itself in many ways, almost too numerous to name.

One way is the tremendous dissatisfaction that people in the western world continually express with their lives, despite the fact that standards of living have been going up for decades.  The problem, unfortunately, is that standards of living have been measured predominately in terms of wealth.  That is, numerically, or in things that are easily measured.  Imagine you and I meet up for dinner and you ask me, “How are you?” and I answer, “14.”  Most of us would think that answer bizarre.  But that’s how policy makers have done it for years.

So there is a striving for more of that measurable stuff that begins now at a very early age in our First World culture.  Here is the refrain that we begin inculcating in our children:

• You must study hard in school.  To learn valuable information that will serve you in life?  No.  You must study hard in school because you have to get good grades – that is, the quantifiable stuff.
• If you get good grades then you can get a scholarship to a good college.  Because good colleges teach lots of valuable information that will serve you in life?  No.  Because good companies providing good jobs prefer students who have gone to good schools – that is, the quantifiable stuff.  Presumably the information taught at “good schools” is secret and students at other schools are incapable of learning such secret information.  When was the last time you heard a kid who got accepted to Harvard who passed up enrollment at Harvard because she/he wanted to go to the local state school so that she/he could stay close to family and friends – the qualitative stuff?
• Why is it important that you get hired at a good company that provides a good job?  Because you have to get paid lots of money – the quantifiable stuff.
• Why do you have to get paid lots of money?  Hmmm.  Now there’s a question not often considered seriously.  Yes, we do talk about this kind of stuff, but usually only after our children fail.  Then we say something conciliatory like: “You know sweetheart, money isn’t everything.”  But is that kind of attitude present from the very beginning?  Is that kind of support present from the beginning?  As a peruse my friends’ and acquaintances’ Facebook postings many of the worries are about money and personal dissatisfaction with work.

So what is the natural consequence of emphasizing money as the goal of one’s life?  Since this is our cultural priority, it means that when we approach a gray area, one where we have to choose between making money or making an ethical choice, many of us choose the money making option.

Mind you, most of us, in my experience, do choose the ethical path in moments.  The problem is that people in business, especially the business of money (i.e. finance), have chosen professions where money making is the goal of one’s life.  Unfortunately for society they wield a disproportionate influence on the creation and allocation of resources.

Another problem with the current state of affairs, where those who hold power look the other way when an ethical choice is the best outcome for the collective, is that these folks operate in such a manner for so many years that they become numb to the problem.  In my years in business I have heard it justified over and over again with:

1. As a business manager, it is my responsibility to maximize the profit-making of the business for my shareholders.  Really?  Over what time horizon are we talking?  Over the long-term if all of society has stopped trusting the profit-makers due to their consistently unethical choices, then there are no customers for those products and ultimately no shareholders for who to earn profits.
2. If I passed up doing business this way because it is unethical then my competitor will come in and do it anyway.  Ah yes, the “race to the bottom” argument.  I heard a very trusted former co-worker say this to me during the heart of the Great Recession as a pardon for banks that had underwritten unqualified borrowers for mortgages.  I said, “Yeah, they would have lost business during the boom years, but as a shareholder, wouldn’t you like to own shares in that firm now?”
3. I will only do it this once.  The problem with this is that once a ethical boundary is crossed, if there are not immediate consequences, then the boundary becomes fuzzier and fuzzier until it doesn’t exist at all.  Think about anything in life.  When you learned to swim, were you afraid of the water?  Probably.  But each time you crossed the fear boundary you got more and more comfortable, yes?  Ultimately, you got to the point where there was no boundary.  The reason we don’t immediately jump in the pool is because we fear the consequences.  But imagine, instead of consequences, we knew there were gigantic financial rewards for jumping in?  Now imagine that the negative consequences were difficult to imagine?

All of the above is bad enough, but the ultimate problem is that capitalism, the most efficient allocator of resources known, relies upon trust.  Buyers must trust the sellers’ products.  Sellers must trust the buyers’ money.  Sans trust then there is no transaction.  No transaction means no economy.  No economy means?  That’s right: disaster.

All of the above is bad enough, but now consider the fact that the cure for a lack of ethics in our culture is a problem that took many, many decades to create.  It began when we were young with the stories that we were told about how to organize a life: get good grades, go to college, get a good job, be happy.  It began when we started telling our children romantic stories about kings, queens, princes and princesses where we intertwined royalty with romantic love or happiness.  It began when we started telling business school kids that our only concern is shareholders – the owners of capital.  It began when we started abrogating our responsibility as citizens to evaluate closely the candidates for elected leadership.  And on and on.

My point is that it will take some doing in order to undo the current state of affairs.  Here are some ideas for beginning to address this enormous problem:

1. Live your life in an ethical fashion.  As hokey as it may seem, the Golden Rule is an excellent basis for ethical choices: do unto others as you would have them do unto you.
2. Vote with your money.  If you encounter an unethical person, or an unethical business, then refuse to do business with that person or business.
3. Speak with your voice.  If you encounter an unethical person, or an unethical business, then make your voice heard to help others avoid the same person or organization.  This is one of the reasons that I started this blog and one of the reasons that I continue to write pieces about the hubris of Apple, for example, despite the fact that I love my iPod.
4. Turn off the damned TV or computer and spend some time learning something about your elected officials and the issues of the day.  What you will likely find is that things are much more complicated than they are frequently presented to you by politicians.
5. Stop making decisions based on what offends you.  This is the classic political ploy, find some issue that can galvanize the electorate to not vote for opponent, rather than vote for me because I want them to.
6. There are several power vortices in our country (business, political, military) and it behooves you to evaluate each of them.
7. Get comfortable with the idea of government regulation.  Regulations codify appropriate boundaries within which businesses are to operate because left to their own choices and devices many businesses have proven time and time again that they won’t do the right thing.  They have proven that they will blur boundaries to the detriment of their competition, compelling whole industries to follow suit.  It is okay to lose a little short-term profitability for long-term survivability.  I promise.
8. Don’t invest in companies that don’t do business the way you would like them to do business.
9. Broaden the palette of stories about life possibilities you tell yourself and your children.  Imagine happiness measured qualitatively, not quantitatively.

Folks this is a BIG deal.  Lack of Ethics is the cancer eating away at our culture and economy and deserves interest and action.

Jason