The Limits of Morality

At a basic level, we tend to think about morality in terms of right and wrong. However, this black and white perspective is invariably limited because it does not take into account all the shades of grey that can exist in between. By way of an initial example, morality may tell us that killing another person is wrong, but in times of war our governments will ‘revise’ this morality in terms of the enemy in order to defend the state and its population. In many other ways, morality can be subject to limits in virtually all aspects of human affairs, i.e. economic, political and social behaviours, because it conflicts with the self-interest of an individual or group. However, these individuals and groups cannot immediately be assumed to be immoral in their behaviour, although this is possible, without some consideration of the wider issues that this essay will attempt to discuss. While much of this discussion will try to focus on the present and future, rather than the past, this does not imply that there is no value in the past, far from it, as there is much that can be learnt. However, we might reasonably assume that we cannot change the past, only attempt to learn from it, before the future is written. It has also been previously argued that the future remains linked to the past by a common factor: the human condition – see Nature versus Nurture Debate for details.

Note: While the link above allows the discussion to be reviewed in full, one of the arguments of this discussion might be summarised in terms of the genetic nature of humanity versus its environmental nurture. While the genetic nature might be considered in terms of the ‘Selfish Gene’, it is clear that much of human morality might be traced to survival needs provided by man-made social constructs. In this context, morality might be explained without reference to any metaphysical entities which have no obvious empirical evidence to support their existence. Of course, historically, this position may have been described as blasphemy and may still be challenged by many in the modern world.

In another earlier discussion entitled the Evolution of Economics, some attempt was made to separate the definition of morals and ethics. While both relate to the idea of ‘right and wrong’, it was suggested that morals are possibly more orientated to the individual, while the idea of ethics may better apply to the institutions of society in the form of laws, policies and regulations. In this context, it might be argued that ‘an economy’ comprising of institutions that do not directly have any sense of morality, even though they are predicated on the actions of individuals, who might be immorally influenced by economic wealth. However, if there is an absence of personal morality, we might initially assume that laws, policies and regulations are intended to provide some equivalent form of protection against ‘wrong-doing’, although almost any historic examination of the institutions of the economy might suggest this is an overly naïve assumption.

But why is this so?

Let us initially assume that the sum total of all the laws, policies and regulations that apply to the various financial systems around the world, simply have some of the ‘grey areas’ initially suggested, which can then be subject to interpretation. For example, we might initially consider the issue of tax evasion in contrast to tax avoidance, where the former is an illegal method of concealing taxable income, while the latter covers legal methods of reducing taxable income. While this definition may appear to be relatively ‘black and white’ in scope, in practice, it leads to many perceived issues of morality. However, at this point, we possibly need to consider a more serious example of financial misconduct as described in the form of a paraphrased quote taken from the Wall Street Journal about the 2008 financial crisis.

Every crisis is different in detail, but the cause is always some variation of the same game: High rollers amass debt until they can't pay it off, and then they default, setting off a string of insolvencies that can be stopped only by putting taxpayers at risk. Systemic fraud is exposed in every crash, but little is done about it. Big business, big government and big bankers are too often from the same self-dealing clan. The most culpable among them will claim no one could have possibly seen the big crash coming, even though plenty of warnings went unheeded. Economists working for the looting class often compare the economy to the weather. They claim that unavoidable cycles cause crashes, as if the economy were a natural phenomenon, existing apart from humanity. But humans create economies, and humans cause financial disasters. Financial crimes are tolerated in the name of free-market capitalism and the comforting pretension that another economic crash could never happen again.

Despite the obvious implications of the quote, we may still need to consider the possibility that the economic system has simply become so complex that nobody really controls it and therefore nobody is morally responsible for its consequences – see Economic Model Dynamics for more details. However, while complexity is an obvious issue, it does appear that some of the problems highlighted did, at least, reflect a lack of morality, i.e. knowing what is right and wrong, on the part of some of the individuals involved, which might then be described as criminal fraud.

But why do these financial crashes keep happening?

Again, reference might be made to the idea of the ‘human condition’ , which has previously been discussed in terms of human survival instincts that tends to separate ‘winners’ from ‘losers, especially if considered in terms of financial wealth and questionable morality. If we were to ignore the issue of complexity in the financial system, then the previous quote clearly points a finger at large-scale systematic fraud, i.e. stealing, which history suggests went largely unpunished, irrespective of whatever ethical constraints, in the form of laws, policies and regulations, we might assume were in place. Therefore, we possibly need to table the next question.

Does economic wealth affect morality as much as morality might affect economics?

While the discussion wants to focus on present and future implications, we might start to consider this question by briefly outlining the historical work of Adam Smith (1723-1790), who was an economist, philosopher and author now best remembered for two classical works, the Theory of Moral Sentiments (1759) and the Wealth of Nations (1776). While the ‘Wealth of Nations’ is possibly the better-known work on economics, many of his morality ideas were developed in his earlier book on moral sentiment. Of course, we might recognize that Adam Smith’s work on morality and economics now date back some 250 years, such that we might question whether this work is still relevant today, especially as the writing style and language used differs from most modern technical writing. While this discussion is not really about these works, it might be recognised that Adam Smith was one of the first to write extensively on the issues of morality and economics, such that it might be seen as a precursor to the wider discussion of morality in economics.

  • The Theory of Moral Sentiment:
    This book consists of seven sections, i) propriety of action, ii) rewards and punishment, iii) judgments, conduct and duty, iv) acts of approbation, v) custom and fashion, vi) virtue and vii) systems of moral philosophy. Of course, even by just listing the scope of this work, it might be realized that any attempt of a summary must be very limited and essentially constrain to some key points of interest as to how Smith perceived morality and its role in the society of his day. In this context, one of the main ideas is that morality is based on a human capacity to sympathise with the plight of others, although this capacity is first explained in terms of the perspective of an ‘impartial spectator’ that possibly places abstracted limits on both sympathy and empathy. However, like many of his generation, Smith appears to conform to the belief in a benevolent and omniscient God, such that moral actions are instilled in us by God.

Note: Whether Adam Smith was really a devout Christian may be a matter of debate, although we might assume, at the very least, that his writing reflected a deference to Christian beliefs that dominated the society in which he lived. However, in a wider and later 20th century context, Maslow’s hierarchy of needs forwards an alternative suggestion that human behaviour is a reflection of survival needs, which in the case of humanity is dependent on various levels of social interactions and mutual cooperation.

So, while we will assume Smith believed that God instils a moral sense of right and wrong in us all, he also forwards the idea that humanity is subject to other forces of corruption, which then distorts our internal ‘moral compass’. Again, at this point, some further reference might be made to Maslow’s hierarchy of needs by suggesting that moral corruption might be linked to the role of ‘esteem’ in society and ‘self-actualisation’, both of which can be subject to the conformance of peer pressure and the corruption of power. For Smith also identified that people seek the approval of society in which they live in order to attain wealth and status, such that their personal morality may be affected. Of course, we might also speculate that in a world where money has increasingly played an important role, then some may simply succumb to temptation for any number of reasons, e.g. greed and avarice.

Note: Based on his writing, Smith appears to suggest that the class hierarchy of his day must also be part of God's design, although all might aspire to advance themselves in society. However, by the same token, he seems to suggest that the failure to advance might simply reflect a person’s natural place in society, as designated by God. Again, see the Nature-Nurture debate for a different take on why some people might not succeed in life.

While subject to debate, we might assume that Smith believes in some form of divine plan, which he then uses to underpin one of his most discussed ideas, i.e. the invisible hand. For Smith argues that people, including the rich, should be allowed to pursue their own self-interests because it will lead to the best outcome for all classes, although he cites some important caveats to limit self-interest. However, we possibly need to outline the scope of self-interest, especially in the case of the rich, who Smith assumes will not consume that much more than other people. If so, then any excess resources and other benefits will be indirectly distributed among those of a lower-class who work to produce these goods. This process is then described in terms of ‘an invisible hand’ by which those who pursue their own self-interests also produce an optimal level of wealth for all in a given society.

Note: Today, we might perceive a parallel with Smith’s idea of an invisible hand and the 20th century idea of ‘trickle-down economics’, which assumes that a reduction of taxes on businesses and the wealthy in society will results in a general stimulation in the economy that benefits society as a whole. Whether this idea really works for all in society is still a matter of debate.

To conclude this briefest of summaries, the ‘Theory of Moral Sentiments’ attempts to define the idea of ‘virtue’ in terms of right and wrong morality. While Smith assumes God has a key role to play in human morality, he also links this idea to a human capacity for both sympathy and empathy of another’s plight, which helps benefit society as a whole. Smith also understands that there has to be some limits placed on the self-interests of an individual, if the collective-interests of society are to be protected. In this respect, Smith is not a ‘libertarian’ in the modern sense, i.e. as somebody who rejects the imposition of government, but rather one who argues for freedom of the individual and advocates ‘jurisprudence’, such that society retains justice by the rule of law.

  • The Wealth of Nations:
    Was first published in 1776, some 7 years after the Theory of Moral Sentiment. This book is subdivided into five sections in which Smith possibly provides the first analytical assessment of what constitutes the wealth of an entire nation and why certain nations achieve more per capita wealth than others. However, we possibly need to highlight that the writing of both books took place quite early within the industrial revolution (1760-1820) and, as such, Smith may have only had a limited perspective of the changes to come. This said, the Wealth of Nations is still generally considered to be one of the most ground-breaking works in economic theory, because many of its insights still resonate in the world today.

Note: Again, how the idea of the ‘invisible hand’ might control self-interest needs further qualification. However, it is often argued that the Wealth of Nations advocated what might be called laissez-faire economics, which eventually evolved into today’s concept of a free market economics, e.g. capitalism.

In 1776, Smith was arguing against the established view of an economic philosophy known as mercantilism and introduces the concept of gross domestic product (GDP) as a measure of national wealth. He also describes the benefits accruing from a division of labour along with the mutual gain from trade to make markets more efficient by invoking the idea of an ‘invisible hand’ guiding the economy. Smith also asserts that the wealth of a nation cannot simply be quantified in terms of money or gold reserves, as both are only a means of exchange for commodities and labour. He then considers the issue of any ‘price’ paid for goods or services, which he breaks down into 3 parts:

  • Wages: amount paid to workers
  • Rent: amount paid to landowners
  • Profit: amount paid to the investors

These components then help define the price paid within the constraint of supply and demand, where profit equals price minus wages and rent. In the second section, Smith then goes on to discuss the idea of ‘stock’, which he defines as an asset divided into ‘capital’ and ‘revenue’ along with an argument for capital investment. However, despite the assumed scope of free trade today, Smith appears to have a preference for domestic trade, rather than foreign trade, as he assumes the former to be more beneficial to the national economy. The third section is a somewhat retrospective review of economic history, which is initially predicated on an agricultural economy, then develops into a manufacturing economy and later into the trade economy of the day.

Note: We might recognise at this point that much of Smith’s analysis has to be considered in the context of history, where the scope of free market capitalism was in its early infancy long before the implications of globalism on markets, and people, was really understood. In addition, it might also be argued that the full implication of industrialisation and urbanisation was not really understood in 1776, especially by those of Smith’s social class.

The fourth section then presents the main arguments against mercantilism, which was the dominant economic system at that time. This system was based on the assumption that the wealth of the nation required control of imports, while being supportive of exports, and that wealth could be quantified in terms of the nation’s gold and silver reserves. However, Smith argued that the mercantile system imposed a net cost on the nation, for a variety of reasons, and that the economy should favour domestic trade. Finally, in the fifth section, Smith turns his attention to the British colonial policy, which he considers was driven by mercantile self-interests and results in a deficit of the national budget. He also considers other aspects of government spending, i.e. monarchy and infrastructure, which he believed should be minimised in order that the system of taxation might be seen to be more fair and equitable to the population and, in so doing, he highlighted the danger of the national debt spiralling out of control in a manner that we might now consider as quite prophetic.

At this point, we are only considering the work of Adam Smith as a useful starting point for the rest of the discussion. For we might recognise that these books are describing a very different world from today, both in terms of social norms and the nature of the economy. We might also recognise that in Smith’s day it was common-place to attribute the concept of morality to a Christian God. However, from an agnostic position, the rest of this discussion will assume that morality, or any lack of it, can be explained in terms of the human condition. So, while Adam Smith’s work on morality and economics stands out as a benchmark of intellectual thinking, it is not beyond criticism, although this discussion will not pursue these details for now.

So, what of the world today?

Despite some reservations, the two brief summations of the work of Adam Smith may provide a comparative benchmark of some of the changes over the last 250 years, i.e. from the start of the industrial age through to the increasingly computerised age of the 21st century. Over this period, society has undergone an exponential increase in the complexity of the global economy accompanied by some equally obvious changes to social norms. However, if looking from the present towards the future, we might start with a relatively simple assumption that economics without any morality can and will create problems in society as a whole. However, this assumption requires us to consider how the idea of individual morality might be affected within an economic system only conceptually controlled by what might be described as ethical laws, policies and regulation. As such, we possibly need to propose a basic description of economics as the sum total of all human transactions involving an exchange of money or commodities. We might then recognise that these transactions can create wealth for both individuals and nations, which we might initially assume are pursued on the basis of self-interest, even though the interests of a nation might suggest a collective perspective. While we might aggregate some of these transactions to represent an economy, the subsequent discussion of economics does not have to make any obvious reference to morality or the idea of family, culture, health, environment or any other factor that may have value to humanity. In this context, the process of economics is amoral and only the actions of the people within this process can be judged as either moral or immoral in terms of the effects on the rest of human society.

Note: Before proceeding, we might attempt to identify a few aspects of the human condition, which might be judged as either moral or immoral behaviour. On the negative side, we might consider the notion of greed and avarice, where greed might be more understandable if driven by human need, while avarice may be more suggestive of a corruption that simply covets wealth. On the positive side, we might highlight kindness and altruism, where the former may be more of an intrinsic quality of an individual, while altruism may extend an act of kindness to improve the wellbeing of society as a whole.

The purpose of the note above is that it potentially highlights a conflicting aspect of the human condition, where human morality may depend on the individual and limited by circumstance, which institutional ethics may not always be able to control. While the examples given are only a simplistic outline of the many factors that might drive the human condition, both good and bad, it leads us to a question of interest.

How might we give value to other factors, which economics might otherwise ignore?

As the work of Adam Smith highlighted, while the invisible hand may work up to a point, self-interest can lead to problems, such that additional mechanisms are required to protect collective interests of society. Of course, looking towards the future,  we might realise that Adam Smith probably only had a limited view of the concept of ‘global collectivism’.

Note: While the conceptual goal of globalism might be seen as laudable, it needs to be questioned in terms of how collective identity is formed and maintained. If, as Adam Smith argued, economics is driven by the self-interest of an individual or collective group, then any conceptual consensus of self-interest can become fractured. For example, while we might cite certain problems, such as pollution as global concerns, the perceived solution might not be universally acceptable to all self-interests, especially if it affects the wealth of a nation.

From a historic perspective, ethical practices are typically imposed in a top-down process. Today, we might initially perceive this top-down authority in the form of a national government, but recognise that national governments are often being forced to conform to international pressure, often dominated by economic interests that are not necessarily ethical. At this point, we might be seen to be splitting the moral emphasis between economics and politics, and while both are processes defined by human activities, morality may be limited. For somewhere in the process of increasing globalisation, the self-interests of the most powerful groups can often take priority over all others. Even if we assume that the motives behind global governance are genuine, it is often impossible to define a global action that does not adversely impact somebody, somewhere. Of course, it is possibly too naïve to assume that these more powerful groups do not act in their own self-interests, such that it leads to another question.

Can individual morality or institutional ethics ever really stop the creation of winners and losers?

The idea of winners and losers has been previously discussed in many different sections of this website, primarily in the context of natural selection. However, a more recent discussion entitled Nature versus Nurture extended the debate to consider the implications of modern society as a nurturing environment, as characterised below.

“The Darwinian idea of ‘survival of the fittest’ does not simply disappear in some utopian future, if winners and losers remain a consequence of any process of change. In retrospect, we might readily recognise that the process of natural selection created evolutionary winners and losers in all lifeforms. However, probability suggests that a future, which remains subject to the human condition, will still continue to produce its own form of winners and losers brought about by technology developments of all kinds.”

It is recognised that the implications associated with this statement might appear quite negative, which many people may wish to correct by the imposition of moral and ethical standards in all aspects of human affairs, i.e. economic, political and social. It might also be assumed that these people will attempt to achieve their various goals within the developing framework of globalism. Again, while we might assume that these goals are always driven by good intentions, which is possibly too naïve, it is also questionable whether any real consensus can ever be achieved, such that we need to table another question.

Who decides what is in the ‘best interest’ for all?

We might realise the definition of ‘best interest’ is subjective and may make no reference to individual morality or ethics. We might also appreciate that the work of the ‘invisible hand’, as characterised by Adam Smith, has been obscured by the complexity of 250 years of profound social and technical change. However, possibly more worrying and difficult to predict are the potential changes to come over the next 250 years – see Brave New Worlds for more details. However, returning to the previous question, there is an inference that somebody, or more likely some small group, will be in a position to decide what is in the best interest for all, which may either lead to some futuristic utopian dream or dystopian nightmare depending on your current view of the world and position within society, i.e. are you destined to be a winner or loser.

Note: Again, we keep returning to the idea of winners and losers associated with any change to society. For while we might conceptually support the idea of equality for all, at least in law and opportunity, it is far from clear as to how all are equal in ability.

While it is recognised that the next chart might be considered politically incorrect by some, it nevertheless represents a reality of the present-day world that will not simply disappear with good intentions. For the chart shows the statistical probability of types of employment as a function of IQ. While this statistical distribution is not a guarantee of success, or failure, it is possibly naïve to assume that this probability can simply be ignored.

The most worrying thing about this chart is that the Brave New Worlds discussion raises the alarming prospect that many of the jobs, on which income is now based, will be increasingly threatened by AI-Robotic automation over the next 50 years or so. If so, then individual morality and institutional ethics will need to find some far-reaching solutions that were never envisaged in the Wealth of Nations. However, these much longer-term issues are almost impossible to predict and therefore will not be the primary focus of this discussion, although they highlight important factors as to what might be decided is in the best interest for all, or at least, by those allowed to be involved in the decision-making process.

But can a more stepwise approach to morality be considered?

In today’s world, economics is still founded on trade and transactions plus the hope, rather than conviction, that the excesses of self-interest will be controlled by the introduction of more ethical laws, policies and regulations. While the last 250 years of development has seen the introduction of a multitude of laws, policies and regulations intended to curb the excesses of self-interest, it appears that they have not prevented numerous financial crises from adversely affecting the lives of millions, if not billions.

So, is the solution to simply imposed more laws, policies and regulations?

We might possibly recognise two problems with this approach. First, is that some people may always ignore morality, i.e. basic right and wrong, especially in the field of financial economics, where the temptation of money is so obvious. Second, simply adding more laws, policies and regulations may only add more complexity to an already complex system, where ‘misdeeds’ are subject to legal interpretation and individual responsibility can be lost in the structure of corporate entities.

Note: In principle, many believed that the 2008 financial crisis should have resulted in many criminal prosecutions of the individuals involved. However, history shows that this did not occur as individual guilt was often difficult to prove in a court of law. For often, those most responsible had the legal resources to circumvent prosecution not only because of the complexity of the law and the difficulty of proving who actually did what and when, but because of those in positions of political power argued that they did not want to further destabilise the ‘workings’ of society. In this context, we might see why morality is subject to interpretation and limits.

So, while an increase in accountability may appear desirable as a deterrent, it is unclear whether it would necessarily prevent the excesses created by the pursuit of wealth by those people who lack a moral compass. Therefore, we possibly need to expand the discussion to recognise that the economy is part of a wider social and political infrastructure. For example, part of economics involves a consideration of minimum wages and social benefits, which can have impact on other factors that have value to humanity, e.g. family, health, environment etc. Today, the parents of young children often need to both work in order to survive, if not prosper, irrespective of the personal cost on their family life. While a minimum wage and social benefits may alleviate some of the worst problems in developed societies, it has to be recognised that this also invariably results in higher costs of products and services as well as increases in government taxes, both direct and indirect. So, while morality might support the idea of incurring higher prices and taxes to give the lower paid a better life, there are potential limitations in a competitive world that extends beyond national borders.

Note: Today, the idea of a universal basic income (UBI) is being considered around the world, at least, in those developed countries whose economies might afford the costs. The idea is to provide all legal residents of a country a basic income without any requirement to seek employment or be affected by their current income – see discussion of Alternative Forms of Income for more details.

However, there is a need to be cautious in simply following what appears right in terms of morality without some consideration of the economic impact on others, who may only be seeking a better quality of life themselves. Today, most people still need some form of employment in order to realise a better quality of life, as wages not only provide an income, but is often a requirement to secure any form of credit, e.g. a mortgage to purchase a family home.

Note: The issue of credit can be a two-edge sword, if it leads to excessive debt, both for individuals and nations states – see Debt Dynamics for more details. Without going into the actual details, a distinction possibly needs to be made between what might be call the financial system as opposed to the wider economy, where the former leverages debt for profit, while the latter is based on work, production, manufacturing etc. However, in the modern world, it might be a mistake to simply assume that the economy could function better without the debt leveraged by financial services. In simplistic terms, money still makes the world go around.

Again, while idealism might simply assume that the economy would be better, if based on moral virtues, such as trust, altruism, and honesty, a more practical assessment of the real world might lead to a more cautious assessment of what can be achieved in a given timescale. However, it does appear that economic theory, and practices, are not always guided by any obvious moral imperative, if free-market economics is still dominated by self-interest. If so, Adam Smith’s invisible hand will not necessarily result in the common good, even if we assume a trickle-down effect actually takes place.

Note: At this point, we might need to counterpoint the apparent criticism of free-market economics, i.e. capitalism, by making reference to economics within a centralised communist model. First, it is more than just naïve to assume that this model cannot be corrupted by self-interest, both economic and political, as history has shown that communism does not necessarily work in the interests of the general population despite its ideological rhetoric.

However, free market economics does not really attempt to address social issues, such as poverty or income disparity, although aspects of social economics does study this issue, but possibly as a somewhat academic subject. However, one of the primary arguments in support of free-market economics is that competition and innovation will drive down prices and lead to better products and services, although such competition might place limits on any ‘moral sentiment’ .

Note: While Adam Smith is often seen as an advocate of free-market economics, he also recognised that people will, in their self-interest, try to limit competition by fair means or foul. In this context, he argued that much of business law was intended to allow businesses to increase their profits at the expense of the public and went on to say that the proposal of any new law, or regulation, comes from men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even oppress the public. Of course, if the fundamental nature of the human condition has not really changed in the last 250 years, then greed and avarice will conspire together.

Based on some of the concerns outlined, we might assume that many problems still exist and will not simply disappear without some affirmative action. However, as a pragmatic first step, the goal of moderating free-market economics might simply seek to ensure fair competition and honest accounting practices, while actively exposing and shaming all those involved in unfair practices that might be considered socially immoral. As a practical example of how this might be done, the idea of ‘short-selling’, is outlined, not only as a money-making strategy, but also as a way of applying moral pressure on those who pursue economic ‘self-interest’ with little regard to the wider impacts on society.

Note: Short selling is a way to make money on stocks, if the price per share falls, which might be best outlined by a simplified example. If a short-seller believes a specific stock is overvalued, e.g. at $115 per share, they may attempt to ‘borrow’ 100 shares from a broker and then sell them at the current market price of $115. If the stocks goes down to say $100, as assumed by the short seller, the 100 shares can be repurchased at the lower price and the 100 shares returned to the broker, such that a profit of $115-$100=$15 per share or $1500 net can be realised, at least, conceptually.

This idea might be reviewed further in terms of a video that outlines some of the key issues discussed in an interview with Carson Block, who is the founder of a company called Muddy Waters that researches companies for financial irregularities. In the course of the interview, Block broadly outlines his business model and a concept that he describes as ‘short activism’.

Note: As a general description, activism may take many forms of direct or indirect action that is intended to trigger social, political, economic or environmental reform. In the context of ‘short activism’, it might be argued that the motivation is not only to make money, but to also highlight what is believed to be moral and financial corruption.

By such means, it might be possible to constrain a free-market system and possibly minimise some of the extremes of self-interest without excessive regulation by central governments. However, it is unclear whether this is an example of morality in action or simply another form of self-interest. Of course, if we accept that economics is not required to be moral, only legal, then wider issues, such as poverty and inequality, will have to be prioritised within a complex array of other pressing socio-political issues. So, while universal basic income might one-day be considered, this is not the case today and therefore we may have to accept that the main solution to avoid poverty is to secure an income from employment. Of course, even today, there is a moral recognition that some people are unable to gain employment for no fault of their own for any number of reasons. In such cases, it can be argued that some form of income is morally necessary, which we might assume is usually controlled and financed by governments services via taxation levied on the economy as a whole. However, poverty can also be caused by other ‘life-style’ causes, such as more children than a wage income will support or health problems brought about by possible excessive smoking and drinking etc. In this context, we might perceive a potential debate between the freedom of the individual to make their own life-style choices and the state’s moral responsibility to look after them when these choices do not work out.

Note: Despite the inference above, it seems reasonable to argue that social services should offer to help these individuals, especially where children are involved, because a caring society is better for all. Of course, there is still the question of cost that any given society can reasonably afford and the degree to which society expects individuals to take responsibility for their own life choices. In this respect, morality should not necessarily be extended to become a nanny-state nor should it lead to the financial hardship of others in society.

There is also the issue of inequality, which this discussion will argue on the basis of equality under the law and equality of opportunity, but not the assumption of equality of ability. This last caveat argues that some people may not gain equality of income or wealth, not because they are denied access to the opportunity of advancement, but rather they simply do not have the ability or aptitude to succeed in a competitive world. In this context, financial equality may never be possible, although it may be possible to consider additional ideas to alleviate the worst effects of debt.

Note: The idea of some form of debt jubilee has a long history, where individuals who had been reduced to slavery or debt bondage were freed, typically on some significant event or cyclic period, in order to stabilise society and its economy. In a modern context, we might describe this form of debt relief as a tax rebate that is given to the entire adult population, but with the caveat that those in debt must use the tax rebate to pay down their debts, while the rest might use the windfall to stimulate all sections of the economy. See Fiat Standards and Credit, Debt and Interest for a wider discussion of some of these issues

Some have suggested that a debt jubilee might be financed by quantitative easing (QE), but rather than giving the fiat credit to financial institutions, it would be distributed into the wider economy as described above. For it has been argued that QE given to financial institutions has a tendency to be prioritised to help deleverage their own balance sheets by investing and inflating equities, such as stocks and property, rather than stimulating the wider economy. However, in reality, we might question how governments could really afford this idea, other than simply printing more of its fiat currency, and therefore potentially increasing public debt, for unless such approach stimulated economic growth, tax revenues would only fall with GDP.

Note: At this point, we might want to question whether any of the proposals being outlined really have that much to do with morality, but rather being driven by various forms of self-interest, e.g. economic, political and social. Therefore, we possibly need to question the degree of moral sentiment in these proposals, and the reality that any form of moral action appears to need financial funding, which is primarily sourced from the national economy.

Based on the previous note, we possibly need to stop and reconsider some of the assumptions underpinning the idea and scope of ‘morality’. In the previous review of Adam Smith’s work, it appears that he describes morality in terms of a ‘moral sentiment’, such that we might try to deconstruct this phrase. As previously outlined, we might retain the basic idea that a ‘moral’  is some judgment of right or wrong of a specific human action, which we might initially assume is unambiguous. However, the definition of the word ‘sentiment’ suggests that this moral judgment may be somewhat subjective, if based on emotion rather than reason. Likewise, in the context of history, we might readily accept that the definition of ‘ right and wrong’ has changed over time and been subject to many cultural interpretations. As such, there can be no absolute definition of what is moral, if subject to an interpretation of a given culture at different times and places. So, while we might assume that each person can have their own perspective of morality, the imposition of cultural norms invariably requires some degree of conformity to these norms. Therefore, in principle, we might see why the idea of morality is limited, if subject to interpretation, which then requires us to consider the scope of what is ethical. However, if we assume that some form of ‘moral sentiment’ has existed within a nation-state, then it is reasonable to assume that it will have influenced the historic development of formal ethics, i.e. laws, policies and regulations, at least within its own borders. Therefore, while we might see the link between morality and ethics, we might have to accept the legality of ethics, in terms of laws, policies and regulations, are probably more important in governing the behaviour of powerful institutions within any society. So, having attempted to clarified some of the reasons why morality may be limited in scope, we might now return to another assumption in the previous note that any form of moral sentiment has to be primarily funded by the national economy, which can also impose limits.

So, despite practical limitations, can morality change the world?

In a widening context, the discussion might now consider some of the potential impacts that are influencing change, both on people and society, which we need to recognise has helped an increasing percentage of the human population to live better lives. Of course, such statements cannot ignore that an appreciable percentage of the world’s current population of 7.7 billion people, as of 2019, still live in poverty.

Note: It might be argued that economic growth has been the critical factor in improving the living standards now enjoyed by many, although the impact of technology within this process cannot be ignored. In countries that have been the beneficiaries of economic growth and the development of technology, we see greater life expectancy, fewer diseases, less infant mortality and malnutrition. However, it might still be highlighted that many of these basic benefits were, and can, be achieved long before a country’s per capita income reaches the levels enjoyed in today’s advanced industrialized economies.

Based on historical evidence, it seems that economic growth has also funded an increase in moral responsibility within the wealthier developed societies, if measured in terms of the broad range of social services and benefits, which are intended to help those less fortunate. Of course, it might be recognised that these moral developments have occurred in parallel to continued self-interest, which may still be a major factor driving economic growth. However, we might perceive a certain fragility in this balance, if global economic growth not only stalls, but goes into a long-term recession, such that the standard of living of many begins to fall and the economy fails to deliver a sustained tax revenue to the government to maintain its social services and benefits, irrespective of any moral imperatives of individuals or the government. In this context, some of the previous arguments have suggested that there may have to be practical limits place on positive moral action, if increasing costs exceeds the government budget.

So, could economic growth become an increasing problem in the future?

Clearly, the detailed explanation of the complexity of modern economies is impractical in a discussion of this nature, even if all the details were understood. However, it might be possible to outline some general problems, which may provide some insight as to why real economic growth might stall – see Economic Dynamics for some further details. Over the last 250 years, most developed economies of the world have embraced the idea of debt in order to fuel growth. In many respects, debt is not intrinsically bad for individuals, businesses or governments, when used to fuel genuine growth in an economy. Of course, debt not only requires the repayment of the sum borrowed, i.e. the capital sum, but also the payment of an amount associated with an interest rate. However, while the money associated with the capital existed prior to the loan, the interest essentially amounts to new money created over the period of the loan, which can lead to inflation within an economy, if the purchasing power of the fiat currency is reduced.

Note: By way of an inflationary example, $1 lent at 5% interest becomes $2 in 14 years, which suggests that the money supply might double. Historic figures appear to confirm that the money supply in the US has doubled every 14 years, since 1959, as financial services of all kinds have effectively created new money associated with interests on loans. Of course, today, there is another idea that is introducing new money into many economies called Quantitative Easing {QE).

Based on the note above, we might appreciate that increased debt and high interest rates, while good for business in financial services, may well have some negative effects on the wider economy. Initially, we might assume that everybody, i.e. individuals, businesses and governments, will hit a ‘debt ceiling’ after which they cannot responsibly borrow any more money. However, as indicated, financial services depend on debt for their interest profits and might conceive of many ways to facilitate more debt via mortgages, credit cards, student loans and pay-day loans of all types. At one level, this increasing debt is fuelling the economy as people used debt to purchase goods and services from businesses, who then provide employment to people, while both are then a source of tax revenue to the governments. Of course, if everybody must ultimately hit a debt ceiling, liquidity in the market might fall and the economy nose-dive. Historically, governments and associated institutions like central banks have attempted to manage such downturns in the economy using various combinations of monetary and fiscal policies – see Cyclic Dynamics for some more detail.

Note: Monetary policy is usually controlled by central banks by adjusting interest rates and more recently influencing the money supply in terms of QE. Fiscal policy is then used by the government to regulate tax rates and levels of government spending. Given that many now see that the balance of power tipped in the direction of monetary policy, it might be suggested that the institutions of central banks has now become the modern realisation of Adam Smith’s ‘invisible hand’, which was originally founded on the idea of free market trade.  

Within this generalisation, we might appreciate that high interest rates could be seen as a ‘good thing’ by financial services, but a ‘bad thing’ for the wider economy, if nobody can afford to take on more debt due to the cost of interest payments. Therefore, we might perceive why central banks might pursue an initial monetary policy of reducing interest rates to encourage more borrowing, which they hope will stimulate economic growth. However, history now suggests this policy is no longer effective, even when interest rates fall to zero – see Negative Interest Rates, such that we might see the motivation to try quantitative easing. At this point, we might reference back to the note about ‘debt jubilee’, where the idea of QE was criticised on the grounds that much of this new money has been given to financial institutions, who then prioritised the deleveraging of risk on their own balance sheets by investing in safe equities, such as stocks and property, rather than stimulating the wider economy. Of course, should both of these monetary policies fail to stimulate an economy, then government fiscal policy might be forced to drastically cut spending on social services and benefits, irrespective of any moral imperative. While recognising that this is a very simplistic outline of a complex array of economic mechanisms, one other issue that may limit the growth of a national economy might be outlined in the form of global exchange rates. Broadly, a fiat currency is simply an IOU backed by a national government, which has some nominal exchange rate with all the other fiat currencies around the world. If the national economy is initially perceived to be strong, then the value of the fiat currency increases in value relative to other currencies. However, this has two effects on the national economy, for while it makes imports cheaper, it makes exports more expensive against other currencies. When strong, the exchange rate may lead to a fall in exports, which might result in an increase in unemployment, if the profits of exporting businesses are adversely affected, Of course, any increase in unemployment might also imply an increasing government cost in social benefits at a time when tax revenues could be falling. On the other hand, while a weak currency might help exports, assuming this is a major component of the economy, it also implies increased import costs that can also have negative effects on a national economy.

Note: While beyond the scope of this outline, it might be realised that the ability of any national government to recover economic growth may be severely limited, if the recession is being caused by a global slowdown, which many are now arguing is happening today.

So, while recognising the limitations of this outline, we might now question whether the cyclic recessions seen in all economies around the world over the last 100 years are man-made. If so, are they simply a question of the ignorance of the complexity involved, such that nobody is controlling these events or, as suggested by the earlier Wall Street Journal quote, they are compounded by financial crimes that go unpunished. In practice, it is difficult to be absolutely judgmental on such issues, as there may be an element of truth in both perspectives. Therefore, it might be more productive to return to a wider issue.

Does the moral imperative depend on the economic wealth of the nation?

While it might be naïve to assume that improving human welfare will not require money, as some problems might be addressed by other means. Of course, this suggestion might still run into its own set of problems, when considered in terms of the human condition. For while it would be wrong to describe the human condition only in negative terms, as there is much moral compassion in the world, we also need to consider that individuals, businesses and governments often have to limit their generosity to what they can afford, while also taking into account the possibility that the consequences of any ‘moral action’ might adversely affect them personally. If so, we might perceive two effects of any moral action, i.e. cost in terms of money and the consequences to people and society. While, we might readily accept that there are many problems in the world that might be help by moral action, it might be more useful to consider a specific issue, e.g. mass migration.

Note: While many people may accept that helping others is a moral imperative, the idea of allowing mass immigration into ‘their own backyard’ can trigger an emotive sentiment, when it affects either their way of life or their standard of living. The branding of these people as racists or bigots by those often living far away from the social implications of mass immigration is not necessarily helpful or correct.

While the idea of a world without borders might appear morally attractive to some, it might be argued that it is being wilfully naïve of the political, economic and social problems it can create for the existing population with its own distinct national or cultural identity. Of course, we might readily understand why people, suffering from poverty and repression, might seek a better life in some other prosperous country, especially if the government is required to extend social services and benefits to all immigrants, irrespective of whether they enter the country legally. However, to assume that an ‘open border’ policy might provide a practical solution to this problem may be overly idealistic, when considered in terms of the potential number of economic immigrants that might enter through this open border. Of course, raising concerns about the idea of ‘open borders’ does not mean a ‘closed border’ policy is being proposed, but rather consideration of a ‘controlled border’.

Note: It might be conceptually argued that the scope of a ‘controlled border’ should be determined via a democratic majority of the people, who live within this border. However, in reality, politicians and any number of interest groups that live or operate beyond the national border may attempt to ignore the national majority for self-interests that do not align with those of the national population.

Currently, Africa’s population has grown to over 1 billion with estimates that it will double by 2050, where 40% of the current population may be living below the poverty line. A relatively new statistical method for estimating historic migration flows between countries, uses a ‘ pseudo-Bayes approach’ that shows migration is higher than previously thought and estimated to involved over 1% of the global population between 1990 to 2015, e.g. 70 million people. It was also estimated that 45% of this number may have returned to their home countries. However, a more recent UN statistic in 2018 suggested that there were over 240 million migrants living in a country other than where they were born, which was a 41% increase since year 2000, but where the potential number of migrants worldwide may exceed 700 million in future years. Whether such numbers can be peacefully accommodated in the limited number of destination countries might be debated, but it seems naïve to assume that human migration does not, will not, strain the social infrastructure and resources within many national borders. Therefore, the self-interest of the local population is a natural consequence of the human condition, which should not be ignored, or demonised as racist bigots, by those who assume the moral high-ground, but invariably never have to live with the negative consequence of their often-abstracted morality. However, as defined, a control border does not mean a closed border, such that we might consider the criteria of entry.

Note: For the purposes of this discussion we might cite four basic causes behind mass migration, i) survival, ii) persecution, iii) wars and iv) opportunity. However, while the first three might clearly involve life-or-death situations, the issue of opportunity is often economic in scope. It is believed that most of the numbers associated with mass migrations into Europe or the US fall into the category of economic immigrants.

Based on the assumption that most people involved in mass migration seek economic opportunity, then moral sentiment might give priority to the smaller number of people seeking asylum because their lives are at risk. Of course, this position does not negate the urgency that others will pursue their hope for a better life, only that this urgency has to be considered in terms of the wider social and economic implications on an existing population.

Can mass migration lead to unintended consequences?

While we might initially assume that those who argue for open borders, even to illegal immigrants, do so for the best interest of others without any self-interest of their own, this is possibly too naïve. However, irrespective of the motives, they are clearly encouraging potential immigrants to embark on a journey towards these open borders with the hope that the ‘streets will be metaphorically paved with gold’. This phrase has its origins in the King James version of the Bible, i.e. Revelation 21:21, which holds out the hope of a place where living is easy or, at least, better. Unfortunately, many who participate in illegal migrations expose themselves, and their families, to many potential dangers, including the exploitation by criminal gangs, who self-interest is obvious. Of course, there are many other unintended consequences on both illegal immigrants, and the indigenous population, should they survive all the potential dangers on-route.

Note: A clear distinction needs to be made between legal and illegal immigration. For the purposes of this discussion, we will assume that legal immigration through a controlled border can mitigate most of the unintended consequences and lead to a positive outcome, especially in terms of economic growth. See the history of US immigration for more details.

However, uncontrolled mass migration, of any type, tends to impact the population in urban cities by changing the demographics in terms of its cultural, economic and social structures. Unfortunately, many of the people in these areas are already struggling to cope with the pressures of city life and the rapid influx of immigrants with potentially very different cultural values, which compound the difficulty of integration. As a consequence, many become resentful of this change, such that communities can be fragmented into separate cultural and ethnic ghettos.

Note: It might be realised that there can be economic, as well as cultural consequences. While considerable care is required not to simply characterise the impacts as negative, as there is a positive side, many of those directly affected attribute unemployment and lower wages to mass immigration. However, without being able to cite accepted statistics, this issue will not be pursued. However, it might be generally accepted that mass immigration can put increased pressure on social services, especially education and health services.

Another unintended consequence of mass migration is that the country from which migrants are escaping often represent the brightest and best, such that it makes it increasingly difficult for these countries to build a better society. Of course, it has to be recognised that this home-grown development process might begin slowly and measured in relatively incremental improvements to food and water supplies, then education and health services, where the goal is orientated towards self-sufficiency rather than dependent charity. However, we might recognise that this process might benefit from a moral sentiment directed towards helping the economic growth of a developing national economy, which then allow other improvements to be financed.

Note: This discussion cannot really begin to discuss all the details by which a developing economy might be helped. However, we might identify many areas in Africa, Asia and South America, whose economies might benefit from a genuine moral sentiment that helps both economic growth and political stability. Without being too specific, we might recognise a need to maximise the use of any natural resources for the benefit of the local economy and not just foreign investors. Likewise, internal developments also require the local population to have access to better education and health services, which often go unfunded to make debt repayments. We might judge the debt problems by the fact that Sub-Saharan Africa receives $10 billion in aid, but pays out $14 billion in debt interest. Finally, developed economies might help exports in developing economies by reconsidering their own import tariffs towards these countries.

While the issue of political stability can be of critical importance to the sorts of developments as outlined above, what form of governance these countries should adopt may have to be a decision left to the local population and given time to develop. For while Western societies may have a moral preference for democracy, it is unclear whether this would always be a good choice, if there is no tradition or nationwide infrastructure to support the needs of the people. However, in the end, we possibly need to consider the final question:

Are ethical laws, policies and regulation better than moral sentiment?

While the title of this discussion hinted to the limits to morality, the actual discussion has suggested that morality of an individual can still be a critically important first step in the eventual drafting of ethical laws, policies and regulations. However, we might reflect on the question above by considering another issue of the time of Adam Smith.

Note: Historically, it has to be recognised that the slave trade transformed the Americas in three ways. First, a large amount of land had been seized from Native Americans, also of questionable morality, which could not be utilised by the small initial populations. Second, many Europeans were looking for new way to get a return on their investments without necessarily any consideration of morality. Third, cheap labour in the form of slavery effectively allowed the Americas to be transformed into a new booming economy. From 1500 to 1860 it is estimated that around 12 million Africans were enslaved and by the 17th century it is estimated that a slave costing £3 in the UK could be sold for £20 in the Americas. By the 1760s, annual exports from the West Indies alone to Britain were worth over £3 million, approximating to about £250 million today.

However, in 1787, just 28 years after the publication of the ‘Theory of Moral Sentiment’, twelve men of various Christian faiths assembled in a printing shop in the City of London and formed the Committee for the Abolition of the Slave Trade. This moral crusade was conducted using a multitude of publications, i.e. sermons, pamphlets, narratives, articles, reports and petitions. Within twenty years of that first meeting, the slave trade had been abolished throughout the British Empire. Then, in 1833, after the greatest mass petitioning campaign in British history, parliament abolished slavery itself in all British dominion. Five years later, in 1838, the slaves were emancipated and by the 1880s, slavery had been outlawed in the southern United States and much of the rest of the world. When the philosopher John Stuart Mill reflected on the abolition of the slave trade, he concluded that it happened not because of any significant change in financial self-interest, but by the spread of a moral conviction that slavery was simply wrong. So, in conclusion, while a moral sentiment may be both emotive and subjective, it can still have the power to initiate positive change. However, this said, we cannot necessarily depend on individual morality to ensure the collective morality of society without enforcing the legal consequences of moral wrong doing into ethical laws, policies and regulations.