Clearly, our capitalistic system seems to be
in trouble, and the accounting professionals who support
capitalism are naturally troubled. A new set of rules seems
to have crept into the system. The assumption seems to be,
"Yeah, being highly ethical and moral in business is the
right thing to do, but it’s naïve to think that this is the
way the world works. Sometimes you just have to do things to
survive. Playing hardball means you have to bend the rules."
But capitalism can’t necessarily be blamed,
and accountants can’t, either. Capitalism is by far the best
economic system ever invented and holds great promise for
our collective future.
The underlying beliefs about our free market
capitalistic system are usually attributed to the Scottish
economist and philosopher, Adam Smith. In his classic The
Wealth of Nations (1776), Smith claimed that the free
market system is the best way to obtain the greatest good.
He believed that when people act in their economic
self-interest, it amounts to an "invisible hand" that helps
all. So, let’s focus on satisfying our own needs and
everybody wins, right? Well, that’s not quite what he said.
What is usually not mentioned when Adam
Smith’s ideas are discussed is that he was actually better
known as a philosopher who wrote a bestseller called The
Theory of Moral Sentiments. In it, he stated that we are
all born with a "moral sense." That is, he believed humans
are innately equipped with consciences. Because of this
assumption, he thought that the invisible hand of economic
self-interest would be governed by the people’s moral sense.
Economic self-interest, yes, but in the context of what’s
good for all.
Adam Smith did not envision the invisible
hand as a competitive, cutthroat economic system where you
grab what you can for your own personal gain and do your
best to destroy your competitors. Instead, he envisioned it
as people working competitively and productively for
individual gain and cooperatively for the overall good of
society.
We think he got it right. By all measures, a
significant number of people have experienced unprecedented
prosperity, living much better today than royalty lived 200
years ago. We all know that we have a long way to go before
all of humanity has even the basic standard of living, but
it was worse 200 years ago.
We also think accountants can, must and will
be a visible hand in assuring the people of the world that
true capitalism is alive and recovering. Capitalism’s
success hinges on people trusting the system, trusting that
when I engage in commerce with you, you will not cheat me!
Smith’s underlying assumption was that we are moral
individuals and we will operate our market by playing within
the rules.
The rules were and are moral rules. Keep
your word. Be responsible for your actions. Tell the truth.
Do unto others as you would have them do unto you.
Playing by the implied "new" but morally
bereft rules has cost billions of dollars for shareholders,
lost jobs and retirement funds for employees, and lost
commerce for the merchants and others who did business with
the firms that failed. But these criminals have done great
damage to the most precious commodity of all: trust in the
system.
Just as it’s true that capitalism is by far
the best economic system ever invented, it is also true that
accountants are the professionals best-positioned to make
sure the system can be trusted.
Of course, it will require moral
intelligence (essentially the mental capacity to determine
right from wrong) and moral courage (absent fear, there is
no courage) and competence (the capacity to act on our moral
intelligence). Accountants must help keep stressed-out
executives and individual taxpayers from behaving in a
morally incompetent manner.
Former Enron executives were brought to
trial. Arthur Andersen no longer exists, another casualty of
Enron. Other business leaders and their financial advisors
have been convicted or stand trial. All of this means
accountants must stand up for what’s right.
The most important skills for our collective
sustainable well-being are moral competency skills, skills
that allow us to honor the moral principles of integrity,
responsibility, compassion and forgiveness. Business schools
and their graduates—this includes but is not limited to
accountants—should take notice and take action. As
accountants in a capitalistic system, state CPA society
members are responsible for teaching and practicing the
moral competencies and beliefs that will contribute to a
healthy economy and to overall prosperity. Silence on this
subject simply serves to reinforce some of the misbehaviors,
to which we have all been witness.
No, capitalism is not basically an immoral
and selfish system. It is, has been and can continue to be a
wonderful economic system that provides great benefits for
the individual and for the common good. All we need to do is
live by the rules!
And, what are those rules? Adam Smith told
us: Tell the truth. Keep your promises. Be responsible for
your actions. Treat others as you would like to be
treated—with compassion and forgiveness. You have earned the
confidence and trust of the people and organizations for
which you provide accounting services. You are in a perfect
position to make a difference. We are counting on you!
