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Business Ethics, Invisble Hand - Essay Example

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Adam Smith claimed that when every individual in an economy seeks self interest in a free market, this unavoidably leads to the better good, that is, the good of the society. Similarly if businesses are left to look for interest for themselves, will it benefit the society as a whole or will it be the other way around Clearly, if businesses are left to make such critical decisions about public welfare, the question of ethics arises.
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Business Ethics, Invisble Hand
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A business's biggest interest is profit maximization. All businesses, be it a small-scale or a large corporation or enterprise, seek to maximize their profitability as much as they can. After and in accordance to this, a firm aims to minimize costs. It is not hidden that when businesses attempt to achieve these aims, they crush many ethical values such as responsibility to the society in the form of, perhaps, pollution control guidelines. They leave, to the society, negative externalities only so that they can earn profits.

Under such circumstances, you cannot expect a business to care for the environment or the people around them. True, that firms satisfy our material needs and this does lead to the general good. But in providing us with these services and goods, they will do whatever it takes to get to that level of profit maximization and cost minimization. I do not think that the 'invisible hand' furthers us to greater public welfare because firms forget all about ethics when it comes to power and profits. To support this, let's take the example of California's power market.

The electricity industry was freed of regulations so that competition could be promoted and that the invisible hand could work. However, the opposite happened. They failed to provide the service; there were blackouts and prices were also very high. The sellers kept developing new ways of abusing the system until the State intervened (Shaw, W.H., 2004). My second argument is that with globalization taking its toll increasingly and hence, with competition growing immensely, it has become extremely important for firms to maintain and raise their positions in the global market.

One would think that competition increases efficiency, along with which, prices are decreased. In any case, the customer, or the society as a whole, benefits. However, this is not usually the case. Globalization emphasizes on competition, true. But as a result it creates awareness in the society, gives customer choices, makes them powerful and hence, demanding. All this put together, puts great pressure on a firm operating in the free global market. Mostly, an average customer is not going to think of buying from a firm who is socially responsible and who has value for ethical guidelines and how it treats its employees or competitors.

A customer would want to buy from a firm who provides the good or service, they don't care how, they just want the service. This leads to many businesses sacrificing their ethical values and moving towards the bigger motive of profit earning.Many businesses today in third world countries, especially, adhere to such unethical practices. An example of the water industry in Pakistan can be taken. Such filthy water is provided in the homes of people than many suffer from diseases such as hepatitis, yellow fever etc due to this.

ConclusionIn the end, it is important to note that not all firms yield to such unethical practices and not all situations demand such practices. Today, 'going green' is also a way of earning profits. However, the arguments presented above do take place and the society is exploited as a result. There are both sides to the pictures. It is only up to the business

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