1. According to the novel Saving Adam Smith, it is self interest, not greed, which helps form the basis for a free market economy and thus it is self interest which is good for society. To understand this statement it is first necessary to understand how the novel distinguishes self interest (self-love) from greed (selfishness). According to the novel, self love means “you take prudent steps to provide for your own needs and security and not be a leech on society” (pg 63)while selfishness “is an egoistic attachment to your own needs when they conflict with the legitimate rights of others” (pg 63). From this, one could interpret that the fundamental difference between these two terms is based in the subject of morality, virtue and justice.
With an understanding of how self interest differs from greed, it is now possible to further the explanation of why it is good for society and why greed is not. In the novel the character of Adam Smith states, “I showed that in looking out for oneself, others could benefit, too” (pg 64). In this statement, the character is referring to the concept of how market participants searching for profit often produce products, services, etc. that ultimately benefit society at large. This is perhaps best summarized on page 127 of the novel with the statement, “This is one of Smith's great insights: the perennial search for profit leads to unending innovation and business transformation!” When applied to the free market economy as a whole, it is this self-interest, and resulting search for profit, that underpins the concept of the “invisible hand.”
It is also important to point out that the novel reinforces the ideal this self interest must be tempered, thus avoiding selfishness or greed, to form an efficient free market economy. Asking a rhetorical question, the Adam Smith character asks on page 55, “Will people support the institutions of free markets if greed runs rampant?”
2. Adam Smith's concept of “fellow-feeling” is an important characteristic for participants in a free market economy to exhibit because it helps create a “foundation of moral conduct.”(Saving Adam Smith 26). It is this moral conduct that Adam Smith believed was vital to balancing the self interest of the free market system. The importance of a moral conscience in the market is evident throughout the novel Saving Adam Smith, but is perhaps best summarized by one of its characters, Peter Chen.
Peter Chen is a business owner, who through his actions, exemplifies Smith's views of business management. This character's management style is deeply rooted in “fellow-feeling” and moral consciousness. Perhaps the best example of this is demonstrated when the character must choose between maintaining a profitable customer relationship and employee morale. When faced with this critical business decision, Peter elects for maintain employee morale thus exhibiting a market participant that is guided by a strong moral conscience and high degree of fellow feeling. It is clear that Adam Smith is in alignment with this character's thought process from the following quote “It's an interesting experiment, and only time will tell if he's right. What he said strikes a chord in this sense: His conduct appears guided – disciplined, if you will – by a moral conscience.”
3. Insert essay here
On the issue of comparative advantage, I believe that Adam Smith was a proponent of its use while Gordon Gekko would have been opposed to its ramifications. Much like Ricardo, Adam Smith believed that a country should produce goods in which it possessed natural advantages while importing the remaining needs from countries that were better positioned to make them (Saving Adam Smith 81). Being narrowly focused on the creation of wealth at all costs, Gekko might view comparative advantage as a force that interfers with a country's absolute advantage in certain markets. Simply put, I believe Gekko's may have a difficult time understanding and submitting to losing any market in which he (or his country) possess an advantage. His point may be something to the affect of “If we can generate profit in this market, why would we want delegate some of the market size to another country.”
On the topic of free trade, I believe that both Adam Smith and Gordon Gekko would be in favor of Ricardo's inclination for free trade but for very different reasons. To begin, Adam Smith was clearly a proponent for free trade because he believed it to be the best environment to support specialization and competition. In the novel Saving Adam Smith, the following statements was made my Smith's character “No…a limited market, whether resulting from political or geographic isolation can't help but make people poor…That's why I despised the town corporations of my day. They restricted trade, insulating local producers from competition” (pg 78). While David Ricardo and Adam Smith viewed free trade as a means of inspiring specialization, competition, and ultimately wealth I believe Gekko would have favored it for a different reason. Given that Gekko was driven by greed, I believe he would have seen free trade as a means of gaining access to another market place for exploitation and profit mongering.
– Gekko might see the expanded trade base as exploiting less developed countries, Smith would
– smith in favor, countries that have monolpolies and guilds to restrain trade pg 58
– 77 – “Exchange allows for specialization, specialist does things quicker and better than a generalist
4. In an attempt to control trade volume, governments today employ a variety of different protectionist policies. Such policies include, but are not limited to, tariffs, import quotas, product subsidies, and anti-dumping legislation. The novel, The Choice, examines how the economist David Ricardo viewed the impact of each of these policies. By in large, Ricardo thought that the consequences of such practices would have a negative impact on global trade as well as on consumers.
To begin, Ricardo believed that protectionist policies and the resulting reduction on global trade would have several consequences to national economies. First, economies not engaged in free trade will lose wealth. As an economy is forced to become more self sufficient, valuable resources are being “wasted” on producing products/services that could have been more efficiently produced via the “roundabout method.” (The Choice 104). The net result is an economy whose resources are spread too thin and is unable to specialize in it activities that provide the most value-added.
In addition to affecting economies on a whole, protectionist policies have a negative impact on consumers as well. For example, policies such as these can ultimately raise the cost of goods to consumers. Tariffs for example directly raise the cost of foreign goods through the use of a tax while at the same time indirectly raising the price of the domestic equivalent as a result of the increased demand (The Choice 40). If the consumer cannot afford the resulting price, he or she will suffer a decrease in the quality of life they enjoy as not as many products are available to them in their accepted price range (The Choice 42). In addition to an increased cost of goods, consumers will also lose out product innovation. International free trade and the resulting global competition is a driving force for innovation. If companies do not have to be concerned with competition, there will be less motivation to enhance their product quality and design (The Choice 55).
5. From a Consequentialism point of view, the phrase “When in Rome, do as the Romans do” would be a suitable guide for MNCs business in developing countries. This point of view evaluates the morality of an action based solely on the consequence or outcome that an action produces. From this stance making ethical decisions based on the local culture would be acceptable if it produces a result that is favorable for the corporation. For example, if paying employees less than a living wage is acceptable locally and helps improve corporate profit, then from a consequentialistic point of view the practice would be acceptable.
However, despite Utilitarianism's roots in Consequentialism, the phrase “When in Rome, do as the Romans do” would not entirely in itself be a suitable guide for MNCs doing for business in developing countries. Unlike consequentialism, utilitarianism measures the morality of a decision based on the consequences on everyone affected; this point of view seeks to maximize the sum of the affect of everyone involved, not just the decision maker. From this stand point, MNCs would not be able to simple use local practice as a guide in matters involving ethical practices and social responsibility. Using the living wage example from above, just because paying below a living wage resulted in increased profits, doesn't by itself justify the decision. Under this school of thought, the happiness of everyone affected including the impact on the MNC, its employees, its employees families, its shareholders, etc. would need to be considered before a decision could be made. If the decision is turns out to be the alternative that best maximizes the overall happiness of the parties involved, only then could it be considered a just course of action.
6. When developing a sustainable business environment at the “Base of the Pyramid,” a multinational corporation could potentially face many ethical and economic challenges. Perhaps the largest set of economic challenges will be related to the fact that multinational corporations are so engrained in their existing business models, strategies, and culture. It is often hard for MNCs to think beyond their standard operating procedure, however applying conventional tactics at the base of the pyramid will not produce successful results. Creating a successful environment at the BoP will require organizations to step outside of their comfort zones to develop new business models that fit this untapped market (Capitalism at the Crossroads 136). This fact is perhaps best summed up by the following statement, “In short, reaching the base of the pyramid requires radical business model innovation” (Capitalism at the Crossroads 136). Even after the challenge of altering traditional business models has been addressed, corporations may still need to overcome “implementation” challenges as well. “Building commercial infrastructure for the base of the pyramid is a resource and management intensive task” (Capitalism at the Crossroads 163). As this quote indicates, there is a significant resource investment required to develop products and services that reach the BoP.
In addition to the economic challenges associated with taking the “great leap downward,” there are numerous ethical issues to consider as well. For example, while corporation might find it more cost effective to abide by lax local employment/environmental standards it should also consider the impact that such decisions would have on the market. From a deontological point of view, a corporation must ensure that its actions are just .
Perhaps the most important key to overcoming the challenges listed above is implementing the concept of “Radical Transactiveness.” Radical transactiveness is a concept that involves creating a two way dialog with non-traditional stakeholders in an effort to improve a product, processes, etc. (Capitalism at the Crossroads 177). This technique is essential to the above challenges because it helps develop a full understanding of the market. Presumably it is much easier to develop new business models for and recommend just actions for a market in which one fully understands the ideals, values, and needs of.
7. Countries that have been participated in the globalization movement have experienced both positive and negative effects. For example from a positive point of view, globalization can help reduce the price of consumer products. This principle is demonstrated in the video “Is Wal-Mart Good for America“ when Wal-Mart uses their sheer scale to force suppliers to lower product costs or risk being supplanted by an offshore provider. In countries providing these offshore services, jobs ranging from manufacturing to technology are being created thus increasing the volume and variety of jobs available. In the video “The Other Side of Outsourcing,” Friedman shows how this increase in jobs is increasing the buying power of young professionals in India.
Of course along with these positive impacts of globalization, several negative impacts can be found as well. For example, globalization can lead to a reduction in jobs in a local economy as local manufacturers struggle to compete with foreign wages, technology, etc. This is evident in the film “Is Wal-Mart Good for America” when a television manufacture is Ohio is forced to liquidate after being unable to compete with the price point set by their Asian counterparts. Another potentially negative consequence to globalization is an erosion of traditional cultural values. The film “The Other Side of Outsourcing” details the struggle India has faced in maintaining their traditional values in light of globalization and “Americanization.”