Sustainable Management Futures
Lord
Ashcroft
International
Business
School

Week 4: Justice & Economic Systems

Module Leader: Sandhya Sastry

Module Code: BB315014S
Based on De George (2010) & Des
Jardins (2007)

Moral evaluation of economic systems
2
Case of the Two Slaveholders – p 90 in key text
Slavery – used
in two senses:
Case of the two employers – p 91 in key text
1.As in the
practice of
When we in this country struggle with questions of whether slavery – a way
racial discrimination can be countered with affirmative
of treating
action as in the US or whether whistle-blowing is morally
people
defensible, or whether advertising takes unfair advantage of2.As an
children, we are:
economic
system – in
Questioning the morality of practices within a system
which the slave
relation is the
When we should actually be Questioning the system itself: fundamental
productive
Is the system basically just?
relation
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BB315014S
Two ways of evaluating economic systems
3
There are two ways of evaluating economic systems:
Structural analysis - describes the evaluation of morality of the
fundamental economic relation on which it is built, and by extension
analysing the actions that follow as a result of that relation. It looks at
the basic structures and practices of the system, seen as relations among
people and as practices that involve transactions. Are these just and
fair?
End-state approach analyses how the entire system influences the
people who are affected by it.
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BB315014S
Economic Models and Games
4
Though economics might be considered a game,
economic systems when actually implemented are not
games.
• Frequently, economics is studied as if it had nothing to
do with people, as if it was simply the study of abstract
concepts, such as supply and demand, money, price,
and profits.
• Ultimately, however, economic systems are ways in
which people are related. Their relations are mediated
by money and commodities, prices and wages, and
supply and demand.
• Economic systems are not, ultimately, morally neutral;
they should be closely examined from a moral point of
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view.
BB315014S
•
Moral evaluation of contemporary systems
5
When evaluating economic systems, it is
important not to ignore the the type of political
system they are attached to.
Different types of Capitalism exists – England,
US, South Africa, Japan etc.
Socialism in the UK is different to socialism in
China. Pure capitalism and pure socialism do
not exist in any country.
For purposes of analysis, and to help us get
conceptual clarity on some fundamental issues,
let us consider capitalism and socialism as
economic systems, floating free from any
particular system
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BB315014S
Capitalist Model
6
3 defining features of the classical capitalism
accumulation of
industrial capital
private
ownership
free-market
system
Components of the classical capitalism model:
industrialization and capital
Analytical tool, not a historical account 
the presence of capital is given.
No analysis of how the money was developed or
where it exactly comes from.
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Capitalist Model
(Accumulation of Industrial Capital)
7
Capitalism is system based on accumulated industrial Capital,
hence its name.
In a countertrade economy  there is no accumulation, goods are
traded for goods of equivalent value  no residue.
Moral considerations are raised by the questions:
How was capital initially accumulated?
How is capital increased within a system?
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Capitalist Model (Private Ownership)
8
Characteristics of capitalism:
1. Private ownership of the means of production, i.e. not
state-owned
2. The model of capitalism: means of production are only
used by some individuals,  not every one owns them.
These individuals are employed by others and work in
order to get wages. This capitalist model: wages are the
main source
of earning for the enormous majority.
3. The working individuals sell their labour and are dependent
on others for their livelihood
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Capitalist Model - Free-Market System
9
A free market is NOT controlled by the government or any other group.
1. In a free market the government is not responsible for
setting the prices of goods
setting wages
controlling the production.
2. Vital to a free market system is competition.
 Resources must be free to move within the system
in order to attain larger returns on investment
3. taking more risks to generate better ROI
http://www.youtube.com/watch?v=j3e7AYf3ydA
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Capitalism and Government
10
De George’s six models of capitalism
Laissez-faire
capitalism: No
govt role in
The
The
business; fails
Government
government
government
is
to take into
Governmental has numerous and business
the protector protectionism of diverse task work together
account the
vis-à-vis
– to protect
for the sake of
good of overall of capitalists
business  both business
businesses
society,
at the expense
open to the
from foreign
and the
counteractive
of other
society as a
competition
common
to the good of
society
whole.
interests of the
those who
members
citizens
enter into
economic
transactions
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Close to
socialism
BB315014S
Socialist Model
11
Socialism has no standard model. In history, numerous different societies are
called, socialistic.
 It is almost impossible to split socialism as an economic system from socialism
as a political system, because socialism involves government ownership.
Furthermore socialism should not be identified with communism. Although the
Soviet Union claimed that it have been developed such a communism economic
system, this kind of economic system has never been achieved.
Socialism as an economic system could be categorized by three features:
an industrial base,
social ownership of the means of production, and
centralized planning.
http://www.youtube.com/watch?v=d8ivuSUfTg4&
feature=related
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Socialist Model
12

A partial model of socialism which is restricted to
socialism as an economic system could be
characterized by three features:
 an
industrial base,
 social ownership of the means of production, and
 centralized planning.
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Which system?
13
Let us assume that neither the capitalist nor the socialist
model is inherently immoral
Both are morally acceptable
If you choose either one, it involves a choice of certain values
over others
The mixture of freedom, security and risk is very different in
the two models
From a moral point of view, which is the best mix?
Immoral practices might develop in either system. If they do,
such practices must be rooted out and avoided
Each society can and should attempt to do so and to improve
Yet, any
system,
economic or
political,
should
embody
justice to a
considerabl
e degree –
„Distributive
Justice‟
De George‟s view is “There is no one best society”.
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Economic Systems and Justice
14
Choosing an essentially immoral economic system is complex.
Distributive justice (social allocation of benefits and burdens): is
often considered to be the most significant moral element of any
economic system.
Justice in a capitalist system often means the demand for equal
opportunities; it does not mean the demand for equal results.
In the socialist system justice comprises not only equal
opportunity, it makes sure that all get some reward, but it tends to
limit the quantity of the reward anyone may receive.
http://www.youtube.com/watch?v=z754lhcX6qw
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CSR based on free-market solutions
15
Des Jardins contends that standard models of CSR assume (free)
market-based solutions as a default position
Market failures are an inescapable fact of economic life. Market
failures are irreversible as is climate change
We have strong reasons and the evidence not to trust the market,
nor consumer demand or government regulation, as they are not
free from outside influences
Herman Daly makes a convincing case for economic development
replacing economic growth
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Critique of Growth-Based Market Model:
Circular flow model of Economic Growth
16
Consumer goods and services
Wages, rents, interests, profits
BBUSINESS
Economic
Growth
HOUSEHOLD
Resources: labour, land, capital,
entrepreneurial skills
Payments
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What’s wrong with the picture?
17
1. Resources and factors of production are one and the same,
Daly says they should be different. By not differentiating
them resources are thought of as being „infinite‟.
2. Second, this model treats economic growth as a solution to
all ills and is also „boundless‟. The possibility that the
economy cannot grow indefinitely is not acknowledged by
this model. This is a major drawback.
Three challenges to this model:
a. A large percentage of people in the world live in abject
poverty
b. World population will continue to increase significantly,
especially in the poorest regions of the world
c. The only sources for all this economic activity are the natural
resources of the Earth itself
The world‟s environment is already under stress from current
economic activity, the future looks bleak unless major
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changes
take
place
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Daly’s alternative model
18
Argues that neoclassical economics with its emphasis on
economic growth approach will inevitably fail to meet these
challenges unless it recognizes that the economy is but a
subsystem with Earth’s biosphere
Economic activity has to take place within this biosphere, it
cannot expand beyond this
All the factors of production ultimately originate from the
Earth
The “Growth” model of economics will prove unstable if
resources move through this system at a rate that outpaces
the productive capacity of the Earth
Hence, Daly puts forth a system that uses resources only
at a rate that can be sustained over the long-term and
that recycles or reuses both the byproducts of the
production process and products themselves.
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Critique of Growth-Based Market Model
Sustainable flow model of Economic Development
19
SOLAR ENERGY
Consumer goods and services
BIOSPHERE
Wages, rents, interests, profits
Heat energy
Heat energy
Energy,
Natural resources
BBUSINESS
Economic
Development
HOUSEHOLD
Energy,
Natural resources
Resources: labour, land, capital,
entrepreneurial skills
Wastes
(Pollution, trash)
Payments
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Wastes
(Pollution, trash)
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20
Recap
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