Evolution of Capitalistic Ethics 2 Ppt

8/8/2019 Evolution of Capitalistic Ethics 2 Ppt

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Evolution of Capitalistic

Ethics

Organization and Management



Outline

Introduction

Concepts and Definition

Historical Evolution of Capitalistic Ethic

± Ancient and Medieval Period ± Protestant Ethic

± Adam Smith and Laissez-Faire

± Science and technology

± Darwinism

± Karl Marx and Communism

± Keynesian Theory

± Government Role

Current Business Ideology



I. Introduction

Management theory and practices havedeveloped while influenced by its complexenvironment including technological,

political and sociocultural dimensions. The concepts and actions are affected by

value systems that are determined not

only from within organization but bysociocultural norms and ideology of thesociety.



II. Concepts and Definition

Capitalism: Economic systemcharacterized by the following: privateproperty ownership exist; individuals and

companies are allowed to compete for their own economic gain; and free marketforces determine the prices of goods andservices. (Inversterwords.com)

Capitalist: a person who supportscapitalism. A person who owns or controlsa lot of wealth and uses it to produce morewealth (Oxford)



II. Concepts and Definition (cont«)

Ethics: A system of principles based on

ideas of right and wrong, whether true or

false; rules of practice in respect to humanactions (Small Business Notes)




Values are normative proposition of whathuman being ought to desire and how one¶ssocial world ought to be structured and operated.

Thus, values are normative standards,determinants and guideline by which individualhuman beings are influenced in their choice of action.

Value is a basic framework for organizationaltheory and management practices

The goal attainment is reflected organizationalvalue; thus also social norm and ideology.




Ideologies are aggregated of the ideas,

beliefs and mode of thinking characteristic

of a group, such as nation, class, caste,profession, religious sect and political

party). Ideologies are determined by

geographical and climatic situation,

habitual activities and cultural environment.




Values determined individual decision-making,

while ideology is held by a group of people.

Roe theory: Values and ideology of a group

provides individuals with social role, and the

individuals attempt to pursuit the role and

internalize the values and norms of group.

The change of manager¶s role reflects fromvalue and ideology, and organization also

influences the social value and ideology.



III. Historical Evolution of

Capitalistic Ethic

Ancient Trade



A. Ancient History

Exchange and commercial activities asdisdained

Old Testament: Examples of commercialactivities and laws, regulations for their governance

Code of Hammurabi (B.C. 2000): Guidelines for merchants and peddlers set by Babylonian ruler

Ancient Greece: Commerce was developed, but

looked down by Greek Philosophers ³necessarybut distasteful´

Rome: Recognition of necessity of businessactivities to accomplish purpose of empire; butstill disdained



B. Medieval Period (5-15C)

Mid Age:

The dominant social systems ± Feudal system: Closed social

structure and specific definition of

roles for lord and peasant ± Catholic Church provided

ideology and value system

Usury is sin, trade is dubious,and business person is enemy

Sets the strict rules andregulations on commercialactivities



B. Medieval Period

(5-15C)Latter part

Growing commerce between local communities;increased craftspeople under guild system

Concession of church toward commercialism ± St. Thomas Aguines (13C) : Recognition of social role of

commercialism

± Just price and acceptable profit margins for wages of labor for public benefit

± Trade and commerce is necessary evil; concession becauseof human¶s weakness

± seeking wealth = Avarice = sin

± Private property is good because men work harder and lessdisputed than for common property



C. Rise of capitalistic Ethic

1. 16th Century: Urbanization, development of communities, oversea trades in Western Europe

2. Changes in religious rules and attitudes

Judaism

Primary force in development of capitalisticsystem

Jews situation in Europe: restricted fromparticipation in social activities

Judaic values: self-control, hard work, sobriety,thrift, abidance

Compatibleness with capitalism; thuscontributed to

China: Increased number of merchants andbankers over Asia



3. Changes of religious ethic

Max Weber (1864-1920) ³The

Protestant Ethic and the Spirit

of Capitalism´ (1905)

Capitalism in northern Europeevolved by the Protestant work

ethic of Calvinism



Protestant Ethic

Calvinism: John Calvin (1509-1564)French Reformist

±Occupation is given by God ±The accumulation of wealth through

work is good thing.

± Importance of work within value of frugality, thrift and industry.

± Success and prosperity is interpreted asGod¶s approval.



Protestant Ethic

Benjamin Franklin (1706-1790) : one of Founding Father of the United States.

A model of 18-century modern person withindustriousness, utilitarianism and participationin social activities.

Utilitarianism moral attitudes: Honesty,

punctuality, industry, and frugality is usefulbecause it assures credit.

³Do you see a man skilled in his work? He willserve before kings; he will not serve beforeobscure men´ (Proverb 22:29)



D. Adam Smith and Laissez-Faire1. 16-18th Century: Mercantilism

French seaport, 1638



D. Adam Smith and Laissez-Faire

2. Adam Smith (1776) ³An Inquiry into the Nature and

Causes of the Wealth of Nations´ Economic freedom allows the individual to maximizeself-interest

Individual behavior for maximize self-interest benefitthe total society

³Invisible hand´ controls market and competition toallocate resources for social benefit

No need of government control = Laissez-faire

Justified the growth of industrialist



E. Science and technology

(17-18C) Common value of three forces as basis for

industrial society

± Rationality ± Empiricism

± Utilitarian mentality

± Utilization of natural resources for personal

betterment for Glory of God

± Importance of knowledge and literacy



F. Industrial Darwinism

Charles Darwin ³Origin of the Species´´ 1858 ± Evolution of organism: An organism adapted itself

successfully to its environment continually is able tosurvive =Survival of fitness

Herbert Spencer; Social Darwinism ± The most capable and resourceful people would rise to

the top of social hierarchy as natural order

± Natural selection for poor and rich

Formation of Classical capitalistic ethic withProtestant ethic and Laissez-faire



G. Oppositions of capitalistic

ideology1. Karl Marx (1818-1883)

³Communist Manifesto´, 1848, withFrederic Engels and ³Das Kapital´ in1867

Capitalist break down natural socialorder (feudal, patriarchal and idyllicrelations that tied man and naturalsuperiors)

Proletarian Revolution to breakcapitalistic order, and establishcommunism in a society achievedmaturity of capitalism



Communism

A social structure in which classes are

abolished and property is commonly

controlled.

A final stage of society that would be

achieved by a proletarian (laborers)

revolution after achieving capitalistic

advancement, described by Karl Marx.



H. Antisocial action of

industrialists and government

intervention1. Laissez-faire and oligopoly/monopoly of

large industrial organization

Emergence of large companies and factories Summit in the evolution of traditional capitalistic

ethic

U.S. federal government action was favorable to

business system e.g. tariff laws, legal forms of corporate, transportation

Public dissatisfaction against antisocial action of industrialists in late 1800s



2. Demand for government regulations

Popular uprising against monopolisticpower of railroad (Grange movement)

Regulations on commercial activities

± Interstate Commerce Act (1887): regulationson railroad

± Sherman Antitrust Act (1890): restricted

monopolistic practices

± Pure Food and Drug Act (1906): ensuredquality of food and drug



Labor Movements

± Knights of labor (1897): advocated social reform with

agrarian group

± American Federation of Labor (AFL) (1886): To gainmore share of benefits of economic system for

laborers, but within capitalistic framework

± Socialist Labor Party

± Industrial Workers of the World (IWW): Militantindustrial unions

± Represented violent reactions to Industrial Darwinism



I. The great Depression and

Keynesian Theory

1. Great Depression in 1929 and doubtagainst protestant ethic

Crash of stock market in US

Massive economic collapse and cause of large number of unemployment

Challenge against traditional capitalistic

ideology: individual effort cannot controlthe external forces



2. John Maynard Keynes

³General Theory of Employment, Interest andMoney´ 1936

Protestant ethic, saving, withheld fromconsumption and lead dislocation andunderutilization of economic resources

Market mechanism under Laissez-faire does notassure the effective allocation of human andother resources Need of balancing mechanism

There is no self-adjustment system withinmarket

External force is necessary to provide balancingmechanism- government role



J. Expansion of government

activities

Government intervention and controlbecame stronger due to the wars

Fair Employment Act 1946: Federalgovernment had prime responsibility for maintenance of full employment and fullutilization of economic resources

Defense, nuclear energy and spaceprograms

Government expenditure in nondefensesector was increased



Emergence of various factors

affecting managerial values

Technological changeInternationalization:

adaptation to cultural values of different

societies

Voices from other social groups:Environmentalists, women activities, consumer

protection, minority, lobbying group

Limited resources: Oil crisis in 1970s

± Doubt on the growth concept of ideology

Self-fulfillment



K. Current Business Ideologies

1. Ethical pluralism on businessorganizations

Calvinistic ethic: Profit maximization

Judio-Christian ethic: Broader social role

2. Recent views

Business organization must satisfy the

interests of stakeholders in order toretain their cooperation and participationin the organization activities



3. Industrial policy

Industrial policy is a long-term strategy that is

designed to maximize the nation¶s economicgrowth and well-being in the face of internationalcompetition

Robert Reich (1982): Industrial policy is analternative strategy to Supply-side economics asa means to stimulate industrial development andgrowth. It focuses on the most productive patternof investment (infrastructure, skilled work force,subsidy, tariffs, tax breaks) while it balances

regional growth and assists allocation of labor resources

Comprehensive Industrial policy was effectivelyimplemented in Germany, France and Japan



Conclusion

Capitalistic ethic has evolved through forces of the changes in sociocultural norms andideologies

Current capitalistic ethics have been influencedfrom various complex forces; resulting to ethicalpluralism

Management theory and concepts have been

changed from these historical evolution of sociocultural value system and other environmental changes.



References

Kast, F.E., and Rosenzweig, J.E., 1985,Organization and Management, A Systems andContingency Approach, Forth Edition, McGraw-Hill Book Company

www.investerwords.com www.smallbusinessnotes.com

Oxford Advanced Leaner¶s Dictionary, 2005, 7th

Edition, Oxford University Press

Calvinism, Wikipedia Benjamin Franklin, Wikipedia

Communism, Wikipedia



Thank You Very Much

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