12.6 Globalization and Other Ethical Issues

Let’s take a look at a few other ethical issues involved in globalization before closing this chapter.

The first is the race to the bottom, which we mentioned in chapter 11. As we said there, “race to the bottom” is the name for the increasingly significant concessions, in social and environmental protections, made by developing countries as they try to attract the attention of foreign businesses. Sometimes this attention only involves investment, as when countries offer very low transaction taxes or fees or other banking privileges for foreign investment. In chapter 11, we saw a race to the bottom concerning the environment, where countries will allow foreign companies to do business with few to none of the environmental regulations those companies would face in their country of origin.

The previous section on labor also presents us with another race to the bottom, which we also see in the Foxconn case study. In an effort to persuade companies to establish production or manufacturing facilities within its borders, a country could relax its labor protections. This would give companies access to cheap labor, and possibly even labor that would work for longer hours and more frequently than labor in other places. The more that countries relax or even eliminate labor protections, the faster they’re racing to the bottom.

As we’ve noted, foreign nations and their citizens do get meaningful benefits from hosting the production and manufacturing operations of companies from other countries. But it isn’t hard to see what the result of this race to the bottom will probably be: ever-worse pay and working conditions for the human beings who provide the actual labor.

In general, races to the bottom are problems in business ethics because, for the most part, there is little incentive to stop racing. The pressure to generate profit, along with the potential benefits lost by losing the race, create a situation of massive incentive misalignment: the country seems to need to trade the wellbeing of its citizens against those benefits. By now it ought to be clear that this misalignment most often works itself out against the interests of lower-level laborers.

While universal declarations of worker rights and other international efforts probably don’t do much harm, the solution to the ethical problem of races to the bottom is the same as the solution to labor issues for global business operations. It lies both within the country engaged in the race—there must be legitimate labor protections, protected by law; and in the company taking bids that get ever closer to the bottom. There must be standards for labor conditions that the company refuses to violate, even when doing so would open up new avenues of profit.

As we’ve noted before, such an analysis may be only a dream in certain cases. But if we aren’t making an effort to put our principles of business ethics into practice, then we’re not even trying to take a practical approach to the real issues of right and wrong that accompany any business operations.

The next ethical issue for globalization is bribery and corruption. is the payment of goods or services to individuals or organizations, in exchange for special treatment by police, the law, or other institutions. then refers to the dishonest actions of those people and institutions. Corruption is often the result of bribery, but bribery doesn’t have to be involved.

Bribery and corruption are legal wrongs, but they are also unethical: at minimum they allow people or companies to receive special privileges in exchange for money in a situation where those privileges shouldn’t be for sale. Bribery and corruption thus violate ethical principles of fairness or fair treatment under the law.

Suppose, for example, that a country sets a limit on the quantity of bananas that they can import. They set the limit to protect banana growers within their borders: those growers cannot satisfy the country’s needs, but the country can’t allow unlimited banana imports, because the imported bananas are cheaper and too many of them would drive the local growers out of business.

Now suppose that a banana exporter comes to an agreement with various members of the supply chain within this country—they bribe the inspectors at the ports to overlook the illegal quantity of bananas; they bribe the distributors to disperse the bananas throughout the country’s markets; they bribe sellers to sell the bananas as though they were grown locally. By offering bribes, the banana exporter is able to get around the legal banana limit and thus sell much more than it would otherwise be able to sell.

There are other forms of bribery and corruption relevant to global business as well. Some could work against the labor protections we were discussing earlier. Imagine a certain country has strong labor protections that government authorities actually enforce. A bribe from a foreign country to an enforcement official might persuade them to overlook violations of labor laws at a particular manufacturing facility.

One of the reasons that bribes are so tempting, both to those offering them and to those receiving, is that they often play against currency differences in international markets. A company based in the United States could offer bribes in US dollars, which might have immense purchasing power in some other country; it would therefore be easy for the company to offer a bribe. What it gives up is small in comparison to what it receives, and yet for the people receiving the bribes, the payoffs are still significant.

As we’ve said, bribery and corruption are not only illegal but unethical, at least in part because they violate principles of fairness or fair treatment. Can you think of other reasons why bribery and corruption might be unethical?

You might also consider this question in light of the next case study.

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