Vol. VII, Bulletin No. 8.                                                                        August 12,  2002

Economists Blamed for Moral Void in Education

How Business Schools Teach Enron Ethics

Some of today's top corporate leaders were studying at Harvard Business School in 1987 when that renowned institution received a large personal donation from an unusual source for an unusual purpose. The chairman of the Securities and Exchange Commission, John S.R. Shad, gave the business school $20 million to add a formal program of ethics to its curriculum. Ethics?  The proposal shocked faculty members and provoked a heated debate.

In an article in the August 4 Washington Post, Amitai Etzioni, a professor at George Washington University, offers illuminating details of that debate, which raged in the late 1980s when he was a visiting professor at Harvard Business School. At a faculty meeting, an economist argued, "We are here to teach science." Another faculty member asked: "Whose ethics, what values, are we going to teach?"  Another said that students are adults who get their ethical education at home and at church.

These kinds of reactions sidetracked the proposal, but the debate continued. "A member of the marketing department," Etzioni writes, "mused that if [ethics were integrated into all classes], his department would have to close because much of what it was teaching constituted dissembling: selling small items in large boxes, putting hot colors on packages because they encourage people to buy impulsively, and so forth."

Subsequently, the Harvard school did add an ethics course, "but it was ghettoized -- a minor requirement to be gotten out of the way as quickly as possible."  Many other business schools "have added courses that do promote values other than the maximization of investors' and managers' incomes, [but] such courses generally favor social values, and especially liberal ones, such as concern for environment or the well-being of minorities and workers in the Third World rather than traditional values, such as personal integrity, veracity, and loyalty."

Case Study of How Business Schools Undermine Moral Values of Students

The article's title, "When It comes to Ethics, B-Schools Get an F," neatly summarizes Etzioni's main point.  "The dominance of economists at business schools" is largely to blame for this trend, he says. "While there is no evidence that economists are personally less ethical than members of other disciplines, approaching the world through the dollar sign does make people more cynical."  Etzioni points out that, according to a recent Aspen Institute study of 2,000 graduates of the top 13 business schools, "B-school education not only fails to improve the moral character of the students; it actually weakens it." (See "Where Will They Lead? MBA Student Attitudes about Business & Society.")

Etzioni urges Congress to hold a hearing at which business school deans would explain how their institutions educate students in ethics. Good idea. It would show that even their most "value-free" business courses do teach a seductive brand of ethics -- Enron ethics. Students deserve better.

(For more on Etzioni's ideas and activities, check the Website of the Communitarian Network, which he directs and founded.)

Mobilizing Against Business as Usual

The AFL-CIO will hold a National Day of Action on October 19 to promote its campaign of "No More Business as Usual."  At a Wall Street rally on July 30, AFL-CIO President John J. Sweeney highlighted the purpose of that campaign:

"When corporate criminals invade our workplaces and our markets to steal our jobs and our savings, we must react every bit as decisively as when thieves enter our homes and try to bring harm to our loved ones.  And we must respond just as decisively when co-conspirators of those criminals occupy and take control of our government, our legislative bodies, and our regulatory agencies."
Sweeney's Wall Street speech is a detailed indictment of "corporate criminals wrecking the lives and retirement dreams of millions of working families and flaunting their ill-gotten gains in our faces."  For example: The October 19 Day of Action, Sweeney said, is designed "to educate and energize workers and their families and to motivate them to go to the polls and vote on November 5th."  T-shirts, placards, stickers, and other materials are available to promote the "No More Business as Usual" campaign.

(For the AFL-CIO statement "No More Business as Usual: a Corporate Accountability Agenda," see http://www.aflcio.org/news/2002/0730_nmbau_agenda.htm.)

Among other recent initiatives, the AFL-CIO has launched a new Website -- www.laidoffworkers.org -- providing information to unemployed workers and those in danger of becoming unemployed.

Judgment Day May Be Near for Nike

Are corporations legally accountable for their public misstatements about their treatment of overseas workers? Nike, with more than 700 factories around the world, is dropping that question into the lap of the U.S. Supreme Court. It will appeal a California Supreme Court's ruling that Nike could be sued for statements allegedly violating the state's false advertising law.

Anti-sweatshop activists have long criticized Nike for tolerating contradictions between its proclaimed principles and the labor practices of the contractor-owned factories that make its athletic shoes and clothes. Four years ago an environment activist decided to go further. He filed a lawsuit against Nike, charging that in a 1996-97 advertising campaign Nike made false claims about its labor record.

Thus far, the case has not come to trial because a Superior Court and then an Appeals Court agreed with Nike's contention that its ads and public statements are protected as free speech by the U.S. Constitution.  Not so, the state's Supreme Court ruled, first in May and then again on August 1.  Its majority decision said: "When a corporation, to maintain and increase its sales and profits, makes public statements defending labor practices and working conditions at factories where its products are made, those public statements are commercial speech."

On Nike's side in this dispute are the American Civil Liberties Union of Northern California, the National Association of Manufacturers, and the Chamber of Commerce. The other side includes the Sierra Club, the California attorney general, and the California AFL-CIO.

(For background on Nike and its labor problems, see an Oxfam Website in Australia, the Nike Watch Campaign.)

A Fast Track to Fast Track to...Where?

President Bush this month signed legislation that increases Presidential powers to get Congressional approval of the kind of trade agreements the White House wants.  The law took a very long time getting passed -- eight years, in all -- because there is sharp agreement in Congress, and in the country, about 1) how much power the President should have on trade matters, 2) how many issues besides trade should be covered in so-called "trade" agreements, 3) how much Congress should depart from its usual procedures to assure approval of  trade agreements negotiated by the executive branch, and 4) whether past trade agreements, such as the North American Free Trade Agreement (NAFTA), have harmed American and foreign workers.

That's quite a bundle of disagreements, and Congress agonized over them in considering the President Bush's proposal for what used to be called "fast track," now known as Trade Promotion Authority.  Who, after all, could be against Trade Promotion?  Still, the House of Representatives passed the President's bill last month by only a razor-thin margin.

It was just before midnight Friday, July 26, that a House-Senate conference committee agreed on the text of the bill.  It ran to 304 pages, merging five trade bills into one (H3009). Although most members barely had time to read just a summary of the bill, a weary House passed it at 3:28 Saturday morning by a roll-call vote of 215 to 212.  The hurried and chaotic action -- fast track for fast track -- illustrated one of the complaints made against fast-tracking trade bills: that the special procedure allowed legislators too little time to study and debate the myriad and complex changes that trade agreements make in U.S. law and global trade rules.

New Law Exempts Future Trade Agreements from Key Rules of Congress

The complaint of a Republican member, C.W. Bill Young of Florida, chairman of the Appropriations Committee,  illustrated another prominent feature of Trade Promotion Authority -- the requirement to circumvent normal House procedures. Young objected to the funding provision that had not been reviewed by his committee. A newspaper report called this a "turf battle."  Young called it an effort "to preserve the integrity of the rules of the House."  But, to grease passage through Congress, Trade Promotion Authority requires that the trade agreements negotiated by the President will by-pass almost all the committees and subcommittees that usually review proposed legislation, no matter how greatly federal and state laws are affected.

Although advertized under the label of trade, the new law has a much broader reach -- in effect, it lays down U.S. policy on globalization, with great emphasize on the global deregulation of markets and of consumer, environmental, and other public interest standards. "It has been a tawdry spectacle," says Lori Wallach of Public Citizen's Global Trade Watch, "to watch the GOP House leadership and President Bush ramming through a 'trade' bill which has as its main agenda promoting massive corporate deregulation just hours after crowing about passage of new regulations aimed at the corporate crime wave caused by the very sort of deregulation this bill promotes globally."

World Bank 'Toolkit' on Core Worker Rights

The World Bank Website now offers a useful introduction to the core labor standards promulgated by the International Labor Organization. It's called the Core Labor Standards Toolkit.  As the on-line document points out, the Bank's approach is limited:

"The World Bank does not intend to act as an enforcement body of the ILO; nevertheless in case where non-implementation of one or more core standards negatively impacts the country's prospects for development, Bank staff should address these issues in dialogue with that country and should collaborate with the International Labor Organization in such dialogue and on labor issues more broadly."
Prompted by donor governments, the Bank now includes "a diagnostic review of core labor standards" in the Country Assistance Strategy developed for client countries. The Toolkit is primarily meant for staff developing those strategies. It includes a wide range of on-line sources of information on worker rights and how they are violated around the world.

Supporting core worker rights is a new field for the Bank, one in which it is not quite comfortable. What it does with a limited mandate depends greatly on interventions from donor governments, principally the United States. In the past year or so, according to a Bank source, there have been no such interventions from the United States.

Ignoring a Key Issue Raised by Stiglitz

Controversy among economists on global policy is good, and needs to be aired publicly, not just in academic journals. That's why Economist Joseph E. Stiglitz deserves three cheers for challenging positions taken by his professional colleagues in government institutions such as the International Monetary Fund (IMF). He does so with great clarity in his new book, "Globalization and Its Discontents" (W.W.Norton), which has become a best seller in the Washington, D.C., home of the IMF.

One of the most serious charges he makes is that the IMF, departing from its charter, collaborates with Wall Street to serve the narrow special interests of bankers and other members of the financial community. That collaboration, he writes, is facilitated by the top-level personnel exchanges between the IMF and the financial community.  He cites several top officials who have gone through this revolving door -- among them Stanley Fischer, the IMF deputy managing director, who moved directly from the IMF to a vice chairmanship at the influential Wall Street firm called Citigroup.

The London-based Economist sharply disagreed with many points in Stiglitz's book, and so did Kenneth Rogoff, IMF economic counselor and director of research. Fine. Controversy is enlightening. What I found most enlightening about the Economist's and Rogoff's criticisms was what they did not say.

Last month's HRFW summary of key points in Stiglitz's book closed with a paragraph about those criticisms. (See the HRFW article "Wall Street and the IMF Arm in Arm.")  I was not satisfied with that brief paragraph, which had been written at the last minute.  There was much more to be said, and I said some of it in a letter that I emailed the Economist on July 6.  Here is the text of that letter, as edited by the Economist and published in its July 20th issue (the squared brackets indicate the major deleted portions). The heading is theirs.

Conspiracy of silence?

It is curious that although you blast Joseph Stiglitz in a review of his new book ("Bad Faith," June 8th), and then follow up with an Economic focus (July 6th) praising an anti-Stiglitz blast by Kenneth Rogoff of the IMF, both you and Mr. Rogoff completely ignore the key point that Stiglitz makes: the IMF and Wall Street work together in a partnership designed primarily to serve the interests of the financial community. [Stiglitz' critique is remarkably similar to one made by another distinguished economist and Economist contributor, Jagdish Bhagwati, in the May/June1998 Foreign Affairs, in which Bhagwati described the "Wall Street-Treasury complex" and accused it of being "unable to look much beyond the interest of Wall Street, which it equates with the good of the world."]  Is this charge so obviously true that it does not need a rebuttal, or too sensitive?

Mr. Rogoff and The Economist vigorously defend Stanley Fischer, the IMF's former number two who has now joined Wall Street, as a person of unimpeachable integrity. Again it is curious that both of you completely ignore the basic policy issue of whether the revolving-door for top officials in the relationship between Wall Street, the Treasury, and the IMF [as also documented by Professor Bhagwati] is wise and beneficial to the general interest.

Robert A. Senser
Editor, Human Rights For Workers

I was steaming when I wrote that letter, but I restrained myself.  I avoided colorful language, such as that used by  Rogoff when he charged Stiglitz with dispensing "snake oil" -- a slur that economists usually reserve for outside critics. Still, I didn't expect the Economist to publish my letter.

I let out a cry ("Hey!") when I found it in the July 20th issue, squeezed into a single page of letters. Yes, they had deleted my references to similar charges by Professor Jagdish Bhagwati, who had also named names (see "Wall Street's Self-Interest in IMF Bailouts"), but I was glad that they maintained the thrust of the letter and included my connection to HRFW.

Unfortunately, this controversy has sparked no wider controversy. The intimate IMF-Wall Street-Treasury relationship is widely taken for granted, as though institutional incest is healthy for the global economy.

Diary: The Stock Market and Me

David McNamara and I worked in adjoining offices on the same floor, so why not break up the day with a few minutes of fun?  We decided to pay a game of chess, in slow motion, you might say. We put the chessboard out on a table in the corridor outside our offices. Dave made the first move and I made mine. Then we returned to our desks. The idea was not to interrupt our work.

After a few minutes, he left his desk, made his move, and said, "Your move."  Then I came out, pondered, and made my move. Soon the time for pondering became longer and longer, and occurred not only at the chessboard but at our desks.  As I recall, the game took about two hours.

I forgot who won. That didn't matter. What mattered was that chess was interfering with our jobs. Both Dave and I realized that the game absorbed us even when we were supposedly doing our work at our desks. So our first chess game at our offices also became our last.

Many years later I decided to play in another game -- the stock market. I invested $10,000 in a USAA mutual fund, just to make some money and have a little fun on the side. Before that I never looked at the stock quotes that gray the financial pages of almost all newspapers. Now I began scrutinizing them the first thing almost every morning after I picked up the Washington Post in the driveway. During the day I couldn't consult the up-to-the-minute TV and Web market reports because they weren't born yet, but still the USAA account popped into my mind at unexpected moments. It gnawed at my attention and concerns.

Finally, I had enough. I ended my excursion in the market, and never returned.

If my little investment proved so engrossing, I wonder how I would act were I a corporate tycoon owning many millions of dollars in company stock. I'm quite sure I'd track the Dow's movements feverishly. I'd listen to creative ideas from accountants and lawyers, like that it was perfectly legal to count expenses as corporate income to improve the balance sheet, impress investors, and hike the value of my stock. But I doubt that I would let myself become so market-obsessed that it would interfere with my work and my judgment. But then who knows? The stakes would be a bit higher than in a chess game.

Human Rights for Workers: Bulletin No. VII-8, August 12, 2002
Robert A. Senser, editor
Copyright 2002
robert@senser.com. (Send e-mail)

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