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The ethical considerations of economic growth

There is a popular idea that an economic system is a neutral instrument and that ethical and moral considerations are relevant only in the application of the system. It is like a knife, some say, which can either be used to cut food or to kill another person. There is no morality in the knife itself.

This idea is false on historical, empirical and philosophical grounds.

Adam Smith was a moral philosopher and his ideas about capitalism are steeped in his yearning for the promotion of general welfare in which free markets play an essential role. Karl Marx wrote his major works in the context of the dehumanising effects of industrial Europe in the latter half of the 19th century. He was not promoting an amoral stance with only moral application, but provided critique of an alienating system and envisioned the eventual establishment of a classless society.

But today we have increasingly alarming empirical evidence of the ecological and social cost of both high-growth free markets and the big centrally planned economy of China. If the growth of these systems relies almost exclusively on non-renewable resources with devastating effect on the planet, serious ethical questions should be asked.

The social cost of a market system that has not been able to narrow the gap between the north and the south — nor inside many countries — and that is unable to provide food security for a quarter of the world’s population, cannot be embraced on the false notion that ”when the tide comes in, all the boats rise”.

On philosophical grounds, both capitalism and socialism (and all shades of mixed economies in between) are built on fundamental assumptions about human beings, principles of distributive justice, notions of the common good, the value of the environment and the role of the state.

These assumptions are by no means amoral or morally neutral. They shape the resulting economic system, although the assumptions themselves are rarely questioned in the practical economic activities of every day.

Let’s look at the assumed ”anthropology” of capitalism in the broad sense: Human beings are presumed to be self-interested; they are seen as consumers for whom new needs are constantly created to fuel turnover; they are employees with instrumental value in the pursuit of legitimate profit; and in chief executive-speak they are described as ”assets” and ”capital”. Without these ideas the system cannot function. They have brought us great economic advances in the past 200 years, but that does not mean the ideas themselves do not raise important ethical questions.

Let us then turn to the specific question of ethics and economic growth, and address the issue in the context of contemporary South Africa. Most people would say: ”We must vigorously pursue economic growth. It is good for our country.”

The idea that economic growth taken by itself is ethically desirable, is open to moral enquiry in a country with our specific history and socio-economic structure.

Let me put forward three ethical guidelines for economic growth in our context:

  • Economic growth is desirable when it not only increases GDP but leads to a lowering of unemployment. There are many sectors of our economy that can grow without adding a single job to the system. With official unemployment at about 25% (depending how one defines ”unemployment”) there is clearly a responsibility to ensure growth enables more people to enter the economic system. Government has the responsibility to create flexible labour laws.
  • Economic growth is desirable if the distributive effect increases the welfare of the poorest section in society in the medium term and creates a more egalitarian society in the longer term. If economic growth only increases the welfare of the middle and upper classes and leaves the poorest people worse off, the social cost in the long run is too high. This is a controversial point. But — following the social contract tradition and notions of prioritarian justice — strong ethical arguments can be made in favour of growth that is measured not in general terms, but by whether the position of the worse-off has improved. In South Africa we cannot ignore the large number of people who live on less than one or two dollars a day.
  • Economic growth is desirable when it is sustainable in the holistic sense of the word. If economic growth is only conceptualised as empirical data and not also in terms of its social and ecological effects, we will fail the moral demands of inter-generational justice. In governance discourse one could say that economic growth should be embedded in triple bottom-line thinking. The business of business is unfortunately not business alone.
  • In short: We must say yes to economic growth. But that affirmation must be an ethical one.

    A professor’s pedigree
    Prof Piet Naudé, who is nationally and internationally recognised for his expertise in business ethics, is the designate director of Nelson Mandela Metropolitan’s University’s business school in Port Elizabeth.

    Naudé is the immediate past-president of the Business Ethics Network of Africa, a newspaper columnist and last year achieved the distinction of being chosen to receive life membership from the Princeton Centre of Theological Inquiry. He is also a Fellow of Germany’s Alexander von Humboldt Foundation for top scientists.

    He has a master’s in philosophy, a doctorate in theology and is an ordained pastor. He has won countless research awards, particularly in the field of Christian theology and ethics, has published two academic books, more than 50 articles and has presented more than 100 papers at national and international conferences.

    Nelson Mandela Metropolitan University vice-chancellor Professor Derrick Swartz said that Naude’s multi-disciplinary background was ideal in enabling the university ”to produce a new generation of entrepreneurs to build a multicultural, internationalist and progressive economic landscape in South Africa”.

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    Piet Naudé
    Professor Piet Naudé is the director of the University of Stellenbosch Business School

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