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Legatus Magazine

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John Dalla Costa | author
Feb 04, 2012
Filed under Ethics
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Ethics for austerity

Perhaps the only world leader who has careful deliberated the world’s many ills is Pope Benedict XVI. His last two encyclicals remind us of the central importance of hope, truth and charity. He recognizes that pragmatic approaches to economic development often produce despair for people who are rendered the disposable means for wealth creation . . .

John Dalla Costa

The world is groaning under the heavy and painful burden of debt. Even when we forget or deny our common sense, the iron laws of economics are such that spending beyond our means is nearly always foolish, often destructive and ultimately unsustainable. But knowing what to do doesn’t necessarily make it easy to determine how.

As much as austerity is a fiscal imperative, it also carries farreaching ethical implications that will ultimately reveal the moral priorities of society and managers. On one level, the ethical questions relating to austerity are fairly straightforward. Have we been honest about the substantive causes of the current crisis so as to have coherence and credibility for the belt-tightening being prescribed as a solution? Are the impacts of austerity distributed fairly so that senior executives experience the same sacrifices in pay, benefits and security that are expected of employees?

We are wrong to regard austerity as only a tactic. Scholarly research shows that previous efforts at austerity have mostly failed. Those who have studied the corporate reengineering phenomenon of the mid-1990s have shown that the promised efficiencies from staff cutbacks were rarely achieved or sustained. Often, downsizing destroyed the very culture needed for innovation and implementation. The loss of loyalty, coupled with the loss of corporate memory, also made companies much more susceptible to ethical impropriety. Austerity may be the right thing to do, but without ethical forethought it all too easily destroys value and degenerates integrity.

By any reasonable analysis we are facing multiple troubling deficits. Polls show that we have deep deficits not only in regard to public confidence toward the economy, but also in public trust toward CEOs, the political class and many of society’s institutions meant to protect the public good. And more ominous than even our economic deficit is our ecological one. Numerous metrics for gauging the ecological footprint of our consumer lifestyle and economic activity show that it would take the resources of five planet Earths to bring the rest of the world up to the Western standard of living.

Since our financial crisis is deeply entwined with crises in sustainability, moral meaning, and democratic participation, any effective austerity must account as much for ethics as for budgets. Perhaps the only world leader who has given careful deliberation to these multiple deficits is Pope Benedict XVI. His last two encyclicals remind us of the central importance of hope, truth and charity. Benedict recognizes that pragmatic and technical approaches to economic development often produce despair for people who are rendered the simple and disposable means for wealth creation.

Our vocation, Benedict reiterates, is to foster economic development that cherishes human development, advancing dignity, freedom, social cohesion and inclusion — as well as GDP. By implication, we need to apply our austerity to greed as well as waste: We need to be austere in according economic issues priority over human ones; we need to be austere in presuming that the market or new technology will, on their own, solve either our social and ecological problems or satisfy the primary needs of the human soul.

If we take a long-term view, austerity may actually be a type of dress rehearsal for a new economy based on frugality, creativity, respect for creation, and “relationality.” With great forethought, the Holy Father believes that we need a surplus of hope to effectively manage our multiple deficits — and that developing the common will to reclaim the common good will require steadfast pursuit of the truth, hand-in-hand with consistent and careful dispensation of charity. I think he’s right that society’s struggles from fiscal deficits cannot be segregated from our deficits in faith, hope and love.

John Dalla Costa is funding director of the Centre for Ethical Orientation, a Toronto-based consultancy providing ethics, governance and integrity services.

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