Cooperatition

On the economic overreach page we identified that economic ties reach beyond those of community that can supervise them.

On the behaviour and structure page we identified that structural solutions to economic overreach are vital and overlooked.

We now look at what structures in society need to be adjusted to encourage ethical outcomes.

Cooperatition

Cooperatition describes a balancing of competition and cooperation amongst actors operating in the same sphere. This should happen in such a way that the following factors are balanced against each other in an optimal way for the social good:

• economic factors on one hand (through competition);and

• environmental and social factors on the other hand (through cooperation).

Cooperatition can occur in a variety of contexts, however most usually the context involves economic actors, for example:

• balancing competition and cooperation amongst businesses operating in the same market;

• balancing competition and cooperation amongst consumers consuming in the same market;

• balancing competition and cooperation amongst investors investing in the same market; or

• balancing competition and cooperation amongst states, for example adapting policy in order to attract investment or skilled workers.

Before we look in more detail at cooperatition we look at the range of mechanisms available to achieve ethical outcomes in those parts of the economy affected by economic overreach. These are areas where due to economic overreach there is insufficient community monitoring over economic activity.

Mechanisms to achieve ethical outcomes where economic overreach applies

Individual ethical solutions

In the previous section we identified that individual ethical solutions (such as ethical consumerism, ethical business practices or ethical investment) might countervail against capitalist influences in such areas. We mentioned competition as a critical reason why it could not do so completely.

Here we look to give a fuller account of that in order to justify why cooperatition (balancing competition with community) is fundamental to achieving ethics in the marketplace.

Competition

Individual ethical solutions are not sufficient to achieve ethical outcomes due to the dynamics of competition.

If we look at the modern free-market economy then all the players there are essentially attempting to find the best ways of operating there. For example:

• consumers seek to get a good deal (and therefore choose one product/ service instead of another);

• employees seek good remuneration from the businesses that employ them;

• investors seek good returns;

• states seek to attract investment or certain groups of workers.

These are the competitive conditions of the marketplace, yet certain ‘community’ constraints may operate, in particular regulation.

Before looking at those we distinguish between two types of situations where individual ethical solutions may to be used.

Synergy and non-synergy situations

If we are in a situation where individual ethical solutions (such as ethical consumerism, ethical business practices or ethical investment) are to be used then we find ourselves in one of two situations:

• either outcomes are both ethical and save money (‘synergy’); or

• outcomes are ethical but come with a price-tag attached (‘non-synergy’).

Synergy situations

As an example of a synergy situation, a business will find that it saves money if it implements ethical measures to save electricity by turning off lights and computers overnight in its offices.

Synergy situations are relatively straightforward: markets will naturally tend towards these positions anyway. However, individual initiative will help to achieve them quickly.

Non-synergy situations

It is non-synergy situations where the problems arise.

An example of a non-synergy situation is that of a consumer confronted with more expensive Fairtrade coffee versus cheaper ordinary coffee (ethics win, purse loses).

Another example of a non-synergy situation might be a business that currently produces harmful pollutants in a plant that it feeds into a nearby river. We may assume (as such conditions will be present often enough to require us thinking about their implications) that:

• no one involved in the business depends in any meaningful way upon the cleanliness of the river downstream;

• the business is isolated from any reputational damage caused by this pollution. For example, ethical consumerism may not be a viable constraint perhaps if the business is small, concerns a low-profile product or service, or is a small part of a big supply chain;

• competitors in the industry all, by the nature of the manufacturing processes involved, pollute in a similar way (though in different locations);

• in order to clean up the manufacturing process a financial outlay will be required (which will not be recouped), say for new technology.

So if the business chooses unilaterally to make this ethical change then its prices will go up (or its dividends/salaries etc down) and it will lose customers to all those businesses who have not made this change.

Race-to-the-bottom

In the previous example a unilateral route for a business does not work. This is an example of a race-to-the-bottom.

A race-to-the-bottom occurs when:

• a competition between actors (for example individuals, businesses or states);

• encourages negative ethical behaviour between those actors.

This will occur in non-synergy situations (where in order for an ethical improvement to be achieved economic loss will be sustained).

In the previous example, if a business were to choose to stop polluting, thereby incurring extra costs, then it would reduce its competitiveness in the market. This would also apply to any group of businesses that chose to stop polluting, when other businesses did not also stop. The businesses that did not stop would in fact benefit from the change in the market. Similar arguments would apply also to consumers, investors and states (see the examples below).

What we see here is the mechanism through which a tension arises between ethical motives in the marketplace and the reality of living alongside others in a competitive environment in a capitalist economy. To illustrate with the extreme scenarios: the choice for any given business is between:

• following the capitalist status quo and only pursuing ethical objectives that also are financially beneficial (the synergy options); and

• pursuing every ethical option regardless of cost (both synergy and non-synergy situations).

The latter is clearly untenable financially.

Examples of  the race-to-the-bottom

The race-to-the-bottom may, for example, apply to states, investors, businesses and consumers:

• states may:

• compete on trade and production by decreasing the extent of environment and social regulation;

• engage in arms races;

• investors may:

• buy and sell shares with a purely financial motive, disregarding environmental and social impacts. This is perhaps the most straightforward example of capitalistic behaviour;

• consumers may:

• buy bigger, more polluting cars in order to compete on safety  or style, at the expense of the environment or the safety of other road-users in smaller cars;

• seek bargains or good-quality products where these are (perhaps without them knowing) sold at a cost to the environment or those producing them.

Similar to this race to the bottom are the tragedy of the commons and the prisoner’s dilemma, all of which refer essentially to this same phenomenon of competition.

Cooperation

We have identified non-synergy situations as a very important class of situations that are not adequately addressed by individual ethical solutions. This is because of the dynamics of competition.

The positive alternative in non-synergy situations is for all competitors (in whatever setting – see the examples above) to act together. Community action is necessary if all the competitors are to be able to act ethically without financial loss. For example:

• a business may become more environmentally-friendly without losing market share if it has a market-wide agreement with competitors that they will do the same (note that competition law currently prohibits this in the UK – see the note 1 the bottom of this page); or

• a state may alter its regulatory climate to be more ethical if it knows that other states are bound in by a treaty.

See the page on economic underpinnings for more detail.

Cooperatition

As described at the top of this page, cooperatition is the balancing of cooperation and competition for the greater good:

• competition:

• promotes economic freedom;

• encourages individual initiative, creativity and participation; and

• allows for flexibility and detail in decision-making.

• however cooperation mechanisms are needed to oversee economic activity. This enables ethical outcomes.

We have therefore established that cooperation is vital for ethical economics. Competition is also necessary in order to promote a vibrant economy. Finding a suitable balance between the two is necessary – this balance is what we term cooperatition.

We now examine which actors (for example states, investors, businesses and individuals (see note 2) are best placed to faced to promote cooperatition. See the big society page.

 

[Note 1: The prohibition in competition law upon businesses cooperating for ethical purposes: In 2007 Sainsbury’s, Asda, Safeway, Dairy Crest, Wiseman Dairies and The Cheese Company admitted liability for price fixing in 2002-3. However, they also stated that their actions were motivated by trying to help British farmers and, indeed, retailers and dairy firms were under pressure from farmers and politicians to give a better deal to their suppliers. There is an interesting case here for such conduct to be allowed on the basis of sustainability (for further information see: OFT welcomes early resolution agreements and agrees over £116m penalties, 2 Dec 2007, http://www.oft.gov.uk/news/press/2007/170-07).]

[Note 2: community action encompassing all actors at that level need only be applied at one level in a supply chain (which may be that of consumers). All other levels of the supply chain will then be constrained by that ethical link in the chain.]

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