Socratic Investigation of Business Ethics

I just got back from spending four days at the Aspen Institute's Socrates Society conference in Aspen, Colorado. Many luminaries were present, including Thomas Friedman, Jim Woosley, Nouriel Roubini, and Walter Isaacson. The Socrates Society conferences are unique in that they explore issues by using the Socratic method, so the entire group carries the conversation, which is moderated. My group focused on the relationship between business and government since the 2008-09 financial crisis and the discussion was moderated by Clive Crook of the Financial Times.

Some of our group discussion was devoted to cataloging the many "improbable" causes of the financial crisis, including: the ambiguous status of Fannie and Freddie; financial deregulation; incentives that encouraged risk-taking without accountabilty; financial innovation; rating agencies' relationships with financial sector; tax incentives for borrowing; a culture of debt in the United States; and the assumption that the housing bubble would continue indefinitely. Of course, I also added the global elements of high savings rates in East Asia, the huge demand for US debt in Asia, and the low interests rates that occurred as a consequence. I was surprised that another global factor didn't come up: The demand for American financial products in Europe.

The US financial reform plan was described as having three basic components: 1. new regulations for non-bank financial institutions that were acting like banks; 2. the government category of tier one or "too big to fail" banks, which will become more regulated with stricter capital requirements as well as an "early resolution authority" (the FDIC); 3. the establishment of a consumer finance protection agency, which will tighten mortgage lending. Some gaps in US reform include the lack of action on US regulatory reform complexity and a question about whether local consumer protection may be better than a central US agency. Finally, many people expressed the need for short, plain English contracts that go with loans rather than long, arduous documents with lots of fine print.

A great deal of discussion dealt with the notion of "libertarian paternalism" or soft paternalism. Basically, people were split on the morality of framing questions or "nudging" people to choose what is best for them through, for example, "opt-out" forms at the motor vehicle department. For example, is it ethical to ask people to opt-out (instead of opt-in) of organ donation or participating in 401K schemes? I took the view that framing questions like this is analogous to persuasion along the lines of commercials, public service announcements, or speeches. But some participants complained that this strategy was a "slippery slope" that could lead to abuses; one participant cited an example of a state using the "opt-out" tactic for license plate forms to fund a private party for a foreign dignitary--an example of abuse.

At the end of the three-days of Socratic investigation into business ethics, we turned to corporate social responsibility (CSR). Much of the discussion centered around whether CSR activities should help the corporate bottom line. One person suggested that CSR was OK as long as it improved a company's business. But what about the long-term effects on employee relations, marketing, brand, etc? Most of the discussion about CSR treated corporate responsibility as if it were something separate from the core business model; it seemed to be a dated perspective. To me, the most cutting-edge understanding of CSR is when companies integrate into their business models regulations that ultimately advance a broader, social interest. That's why many people say that companies that are truly responsible don't need a separate CSR department.

The whole experience was extremely rewarding. I felt my time in Aspen sharpened my mental blade and I would recommend it to anyone!

Mexico's Proposed Climate Change Green Fund

The climate negotiations in Copenhagen will need to determine how we finance adaptation and green technology for the developing world. To this end, Mexico has been floating a proposal for a World Climate Change Fund for at least a year now.

Some of the ideas and principles driving the Green Fund are outlined in a presentation on Innovative Finance Mechanisms by Carolina Fuentes. She suggests that the fund would have the following advantages:

–Increased access to financial and technical resources
–Expansion of the global mitigation scale, Developing countries will have positive incentives to widen their mitigation efforts.
–Broader participation, The governance scheme of the Fund will be open to all countries.
–A predictable and verifiable regime, activities will be subject to independent supervising.
–Not necessary to demonstrate additionality, since the Fund is not a compensatory mechanism to offset emissions.

Is it a promising sign that the U.S. embassy in Mexico City included the proposed Green Fund in a February memo?

The Tweet Heard 'Round Tehran: A New Channel of Public Diplomacy

Guest post by Jessie Daniels, a Truman National Security Project fellow:

As we watch with interest the events unfolding in Iran, one of the major stories dominating the headlines is the Twitter effect. Twitter, and other new media, have given a global voice to the angst over the elections and have made the intensity of those marching in Tehran palpable to those sitting on the couch watching halfway around the world. Most importantly, the social networking phenomenon has undermined the Iranian regime’s attempts to isolate its country from the rest of the world and has, perhaps, opened a new chapter of informal public diplomacy efforts.

Despite the regime’s efforts to prevent the outside world from witnessing the post-election ramifications, new media sites continue to provide the most up-to-date information on the events in Iran. Moreover, these sites have become forums not only for reporting but also for advocacy. For example, tweeters on Twitter have been urged to turn their avatars green in solidarity with the Iranian protesters.

The increased attention has also highlighted the complications faced by the regime as it tries to effectively counter the public reaction to the election results. The regime’s dismissive rhetoric, which often plays well when denouncing the West, has instead stoked the flames of internal dissent. After Iranian President Mahmoud Ahmadinejad compared the protests to the “passions after a soccer match,” members of the Iranian national soccer team wore green armbands during a World Cup qualifier in protest. Efforts to blame the United States and Israel for improper meddling seem to fall on deaf ears as the protests continue to resonate.

Events in Iran have sparked a debate here at home about what the U.S. should be doing in response. Some assert that the administration should openly and actively encourage the protesters in Iran while others believe that we should stay out of the process. Regardless of where one falls on this spectrum, though, these events already illustrate the power of a new public diplomacy channel present in new media venues.

As opposed to formal public diplomacy measures, such as educational and cultural exchanges, social networking sites like Twitter provide a way to informally connect people. These small-scale efforts could have long-ranging benefits. Right now, the American public is getting a glimpse of the Iranian public and gaining an understanding of what drives them, what they are fighting for, and how they are expressing their dissent. The Iranian protesters are also aware that they have a global audience, including those watching in the United States. Although the Iranian and American publics have been kept apart for three decades, new media may be helping to debunk stereotypes in each country that have been built up since the 1979 revolution.

In this paradigm, government works best when it works to ensure that free and open dialogue continues. Doing so can help to pave the way toward increased support for further engagement at higher levels. There will likely be opportunities for the administration to capitalize on this situation as it pushes forth with direct engagement. Already, however, social networking has gone far beyond allowing high school buddies to keep in touch. With a significant percentage of the population in Iran younger than 30, this method of connecting the Iranian and American publics could eventually lead to a level of engagement and understanding that is beyond the realm of formal public diplomacy.

Originally posted on The Moderate Voice and The Reaction.

Photo by Sinistra e Liberta.

A Case for Humans in Modern Aviation

Policy Innovations contributor Mikaela Bradbury reports on modern aviation:

I stayed away from the plethora of stories on the details of US Air Flight 1549 landing in the Hudson in the days after the event. I wasn't interested in many birds got caught in the engine, or the exact series of exchanges that went on in the cockpit. While reading the Wall Street Journal recently, though, a story about the incident caught my attention.

In particular, I was struck by a portion of Captain Sullenberger's testimony that emphasized the "importance of relying on experience and memory, rather than rigidly using written checklists to deal with unexpected emergencies."

The captain's comment illuminated the particular poignancy the story carries in contemporary culture. It offers welcome relief in otherwise bleak times. But more specifically the captain's rejection of rigid checklists, and his stunning performance in general, combats a looming specter in the airline industry, and America at large, of an increasingly mechanized and dehumanized work force–not to mention a work force devoid of human's altogether.

It could be argued that such mechanized and rule-adherent decision-making are partly responsible for the current financial crisis–where common sense and ethics took a back seat to an unquestioned faith in complex financial models–and has no doubt contributed to a number of other global crises haunting the globe.

In the airline industry, the battle between humans and technology is certainly being played out on the ground, where self-service check-in and online services have started to take over. Onboard, the winner of this battle is still undecided. Discount airlines in particular are wise to the role of personality in drawing customers, something that JetBlue established with its notoriously quirky crew.

On the other hand, quirky personal TV's are equally present in everything from ordering movies to getting a drink. Up front, the cockpit has become increasingly computerized and automated with digital navigation devices, while pilots face dwindling salaries.

As the value of human performance is at stake, the Hudson River episode demonstrates the indispensability of unquantifiable and un-programmable elements such as skill, spontaneity and intuition in solving unforeseen problems. As Sullenberger said in the WSJ, "The captain's authority is a precious commodity that cannot be denigrated."

Photo by davipt.

Options on DPRK: Bad and Worse

Policy Innovations contributor Mikaela Bradbury reports on Victor Cha's talk yesterday at Carnegie Council:

In an intimate gathering last night at the Carnegie Council, Dr. Victor Cha, former Director for Asian Affairs in the White House National Security Council and Director of the Asian Studies program at Georgetown University, addressed what he sees as one of the toughest negotiations in the world: the ongoing dispute with North Korea over its nuclear program. Parsing the discussion into three categories––causes, motivations, and ways forward––Cha attempted to shed some light on this unpredictable nation, where a recent series of muscle-flexing has pushed the DPRK to the top tier of U.S. security concerns.

With respect to potential causes of North Korea's recent behavior, Dr. Cha advocated the most simple explanation: North Korea is developing a nuclear weapons program because it wants a nuclear weapons program and part of the nuclear club. Blaming U.S. policy for North Korean hostilities is no longer valid, both in light of Bush's last minute deal with North Korea, and in light of the Obama administration's willingness to participate in high-level negotiations.

The question of "what North Korea wants" has confounded policy analysts for years. Problematically, Dr. Cha explained, many of the things people claim North Korea desires has already been offered them. And the two things that North Korea is really after, according to Cha, the United States can't give them.

More specifically, North Korea is set on being a nuclear state, and acquiring an agreement with the United States similar to the one India got in October 2008. Ironically, Cha speculated, once given that status, the DPRK would likely engage in mutual nuclear reduction negotiations.

The second and equally impossible item on North Korea's wish list, according to Dr. Cha, is an enhanced security agreement with the international community. The United States has already issued various negative security assurances to North Korea, one of which occurred during the Six-Party Talks, when the United States stated that it would not attack North Korea unless provoked.

Despite the significance of this overture, it does not address North Korea's concern over regime security. Namely, if North Korea were to open itself up for reform, it would still require international support in order to survive. In light of North Korea's human rights record, such external backing is unlikely. Given this deadlock, Dr. Cha struggled to find "good options." The proximity of North and South Korea rules out any military intervention. North Korea has stated that any transport sanctions or inspections of suspicious cargo at sea would constitute an act of war.

The remaining possibilities are neither comprehensive nor guaranteed to work. In the past, financial sanctions has proven somewhat effective in penalizing the North Korean elite. The United States could also work with various port countries to increase customs inspections, or persuade China and Russia to restrict their airspace.

With respect to China, Beijing claims to have little influence on the peninsula. Yet, in reality, it has both material influence and access to the leadership, making it the most critical player moving forward. Any pressure from China would have to be exerted covertly as to avoid appearing a lackey of the West, as Dr. Cha has overheard North Koreans previously say of Beijing.

In the end, Dr. Cha bleakly stated "nuclear non-proliferation is under assault." The recent emergence of North Korea's potential alliances with Syria only makes the threat more dire. In significant language, Secretary Gates has recently said that "the transfer of nuclear weapons or material by North Korea to states or non-state entities would be considered a grave threat to the United States and our allies." . As Dr. Cha warns, the "red line" for how much the United States is willing to tolerate may be approaching.

The current leadership transition occurring between Kim Jong-il and his youngest son leaves the future even more uncertain. On paper, this instability is the perfect condition for radical change. However, as Dr. Cha stated, internal "fluidity" often manifests in external belligerence.

As a testament to how little we know about the DPRK, the international community is still unclear about where we are in this leader transition–– whether it is "smoke before or after a fire," as Cha so eloquently put it. The same could be said about North Korea's erratic behavior. Signs of more to come or the last cries of a faltering dictator?

Meatless Monday: Retooling the American Diet

Policy Innovations contributor Mikaela Bradbury reports on global food habits:

The issue of animal rights and eating meat has resurfaced in mainstream politics and intellectual thought, as it touches upon global crises from climate change to food safety. Whether to eat other animals is now a practical issue of efficiency and self-interest, as well as an abstract moral dilemma.

The hunger and efficiency argument goes as follows: If it takes several kilograms of grain to produce one kilogram of beef, why aren't we eating the grain directly, and is it ethical to feed cows when human beings are starving around the world?

The self-interest argument applies on a personal and a planetary level, through the recognized health benefits of a vegetable-rich diet and the threat of climate change. Livestock rearing contributes an estimated 18 percent of total greenhouse gas emissions, more than the transportation sector. According to the United Nations Food and Agriculture Organization, the livestock industry is also a prime driver of deforestation, biodiversity loss, and water pollution.

Yet beyond the waves of public abstinence and outrage associated with cases of food contamination or animal disease outbreak, vegetarianism is still a long way from achieving the social status of hybrid cars as a response to global warming. In fact, meat consumption is expected to double by 2050. Although cars and meat share a similar story as twin culprits of climate change, the livestock sector sees no need to retool with the same urgency as the automobile industry, in anticipation of drastic market shifts and new government regulations.

Eating local is an emergent trend that combines food and transport, but its overall effect may be negligible, as food transport constitutes only 5 percent of total food-related emissions. "You can have a much bigger impact by shifting just one day a week from meat and dairy to anything else than going local every day of the year," argues Chris Weber, a professor of civil and environmental engineering at Carnegie Mellon University.

Last September, Rajendra Pachauri, chairman of the Intergovernmental Panel on Climate Change, made the same suggestion, urging people to eat a meat-free diet once per week. "In terms of immediacy of action and the feasibility of bringing about reductions in a short period of time, it clearly is the most attractive opportunity," he said.

This is the spirit behind "Meatless Monday," an idea that the Johns Hopkins Bloomberg School of Public Health has recycled from Herbert Hoover's WWI Food Administration. "It is a small change with large effects," said Brian Waniewski, director of the Healthy Monday campaign, in an interview with Policy Innovations.

Why Monday? According to some studies, changes that occur on Mondays are more likely to impact the rest of the week, explained Waniewski. People who are tied to the 5-day work week have internalized Monday as a "reset day," a time to purge the indulgences of the past and plan constructively for the future.

The notion of Meatless Monday hearkens back to previous eras of hardship when Americans were called upon to ration in support of the troops. Sid Lerner, chairman of the Healthy Monday campaign, reinvigorated the idea as a public health initiative in 2005, when the dangers of trans fats were gripping the media. Since then, Meatless Monday has repositioned itself as an effective response to environmental, economic, and health issues.

The movement will have to avoid sounding moralistic as it expands internationally. Particularly in developing countries, where hunger is the worst and meat consumption is expected to grow the most, Meatless Monday must be seen as a beneficial solution, not an unjust sacrifice. Although some of these countries may strive to leapfrog over the failures of modernization—such as obesity and high cholesterol—the Western diet is still strongly perceived as a sign of wealth and prosperity.

Photo courtesy of Curtis Hightower (CC).

THE $12 TRILLION TRAP: The Economic Crisis, the Obama Administration's Response and Its Global Impact

Policy Innovations adviser Joseph Stiglitz will speak tonight at a fund-raiser for pediatric care in Sierra Leone:

Welbodi Partnership invites you to an evening with Dr. Joseph Stiglitz, Nobel Laureate and Columbia University Professor of Economics, discussing "THE $12 TRILLION TRAP: The Economic Crisis, the Obama Administration's Response and Its Global Impact." The event will be moderated by Bloomberg News Editor-at-Large Mr. Robert Friedman, with an exhibition of photographs by Czech photographer David Lacina.

Time: May 26th 2009, 7-9PM
Location: Fourth Universalist Society of New York
160 Central Park West at 76th Street
Please RSVP at welbodinyc@gmail.com or by phone at (917) 945-7879

A minimum donation of $25 is requested. Exhibition photographs will be available for sale at $100. All cash donations and half of sale proceeds will go towards supporting the Welbodi Partnership, a charity dedicated to improving the provision of pediatric care in Sierra Leone. The event is made possible through the kind support of Rev. Rosemary Bray McNatt, the Fourth Universalist Society of New York, Mrs. Anya Stiglitz, Mr. Robert Friedman, and Mr. David Lacina.

Recessionistas Invade the Ad World

I had lunch today with an old friend who now teaches at a New York City university. He said that it is good being a professor because he doesn't have to worry about knowing what's cool anymore. As a student he had found that teachers who tried to be hip were, actually, a bit pathetic. I showed him my G1 Google phone asking him whether being uncool and geeky was cooler than the hip iPhone. He said geeky cool was so 1990s. Now, the coolest is the downtrodden "recessionistas." In fact, those with jobs risked being seen as outsiders in this pleather economy. Lo and behold, this aesthetic has reached Madison Avenue with GM's new advertising. GM is no longer about big, powerful SUVs but is the underdog fighting with the people.

Middle Path Policymaking in the US and China

A couple of years ago in anticipation of a Democratic White House and a new approach toward trade policy, I advocated a revised definition of "fair trade:"

Adam Smith showed that economic freedom allows people to maximize their potential to the benefit of all society. But total freedom, as Thomas Hobbes argued, leads to a short and nasty life. The Aristotelian notion of moderation might help reconcile this paradox: Trade should be neither too free nor too regulated.

Moderation, the "golden mean," and the middle path have recently come to characterize the current administrations of the two largest economies (using PPP) and largest emitters of CO2--the so called G2, China and the United States. Based on our conversations in China during our last two trips in the past year, two themes keep coming up: One is that although China's fate is tied to that of the United States, many Chinese feel fairly confident that their economy will pull through the financial crisis with no major political instability. In fact, some Chinese have sounded downright triumphant about their country's more influential status and its potential economic robustness.

Another theme that we have heard is that China will be drawing on many traditions to formulate its future policy platforms. One of those traditions includes Confucianism and the golden mean. Both of these themes come together in this fascinating op-ed in the China Daily, "Chinese model and the doctrine of mean," by Zheng Yongnian. Here is an excerpt:

But what exactly is the Chinese model? I think the Chinese model is a composite or mixed economic system. Its features include a mixture of ownerships, a combination of foreign and domestic demands, and the balance between the State and the market. The mixed economic model embodies a Chinese philosophy - the doctrine of mean. Guided by that philosophy, China has avoided extremes in the past 30 years. Neither neo-liberalism nor the traditional planned-economy socialism has dominated its economic practices.

China is the very incarnation of mixed-ownership economy. In the age of reform and opening up, China has allowed various types of ownership, including private ownership, foreign capital and joint ventures. But it has shunned hasty and complete privatization, and instead chosen a step-by-step trial-and-error approach. While reforming the sclerotic State-owned enterprises (SOEs), it encouraged the emergence and development of other types of ownership and gradually granted legal protection to all.

It is curious that the author is attempting to describe a "Chinese model" for economic growth—something that many Chinese and China watchers are reluctant to do for many reasons. One reason being that the historical factors that led to China's current position are so complex they cannot be emulated; another is that China's growth strategy, in all reality, has been ad hoc, not a coherent model.

In the US case, Obama has also been following the middle path of policymaking--an approach that carries its own risks. While the Bush Administration was almost simplistically clear about its policy goals, the Obama Administration is much more nuanced, measured, and therefore challenging to grasp. Some of this analysis has appeared in Slate this week.

In Jacob Weisberg's attempt to create a general theory about Barack Obama, he first notes Obama's equation of the middle ground as inherently a more moral ground:

He sees the middle ground as high ground. Candidates who talk about bringing people together, being uniters not dividers, or changing the tone in Washington are usually blowing happy smoke. At this point, however, Obama's focus on reconciliation is clearly more than shtick. We saw this impulse at work when he made pre-emptive concessions on his stimulus package in an unsuccessful effort to win Republican support. We saw it in another way when he personally brokered a compromise between the French and Chinese presidents at the G20 summit in London. Every few days, it seems, Obama, tries for a "new beginning"—with Iran, Cuba, the Muslim world, even Paul Krugman. Engaging with opponents animates him more than hanging with friends.

Similarly, and as several other observers have done, Slate author John Dickerson compares Obama to the Star Trek character Mr. Spock:

Obama is often compared to Spock because he never gets too hot or too cool and speaks in the careful way of a logician. But the president and the fictional character seem to have the same kind of empathy, too. Conservatives have interpreted Obama's call for empathy as some kind of soft-headed, group-hug approach to law, where how a judge feels about a case or a plaintiff is more important than anything else. Actually, as Dahlia and others have pointed out, all that Obama appears to be asking is that jurists have the capacity to embrace different perspectives and as much as possible stand in the shoes of those who will be affected by their rulings. The point is not to be overcome by fellow-feeling but to gain perspective.

All of this moderation in policymaking is a refreshing rejection of ideology- and faith-based policies of the past. It certainly bodes well for peace among great powers. But what, I wonder, will happen when bold action is required, for example in Copenhagen this winter? May I quote the singer Seal: "But were never gonna survive, unless...We get a little crazy." Will President Obama channel or find his Captain Kirk? Doing something radical for climate change will give the United States moral ground to push other countries to reduce emissions.

Photo by oceandesetoiles.

Green Mapping for Eco-Justice in Harlem

We mentioned in March that Carnegie Council had been involved with helping put together a video about the Green Mapping in Harlem. Columbia University's Earth Institute and Dorst MediaWorks have just released this wonderful documentary about Harlem's community response to ensure a new bus depot was outfitted with proper air filtration systems. It is a story about environmental justice taking place through community organization facilitated by technology--the maps. One of the theories behind this movement has been the need for religious communities to spread the moral logic for environmental protection. Check out the video here: