Christianity and “Social Capitalism”

The SEC charged Ephren Taylor with a fraudulent $11 million Ponzi scheme in April 2012. According to Reuters, “Taylor fraudulently sold $7 million of notes said to bear 12 percent to 20 percent annual interest rates, to fund small businesses such as laundries, juice bars and gas stations.” He “had conducted a multi-city ‘Building Wealth Tour’ in which he spoke to congregations” on the importance of “giving back.” He called himself a “social capitalist.” In actuality, he used the money on himself and his wife’s attempt to become a singer.

The congregants’ susceptibility to Taylor can be understand from grasping the larger historical trend within Christianity wherein the prosperity gospel—in which it is believed that God rewards “true believers” with material wealth—had replaced the anti-wealth view wherein being rich and saved is like a camel getting through the eye of a needle. In other words, the shift in historical Christian thought from a close coupling of wealth and greed to an outright rejection of such a linkage made it more likely that the lay Christians would view investing in “social capitalism” as sufficient to justify having wealth beyond subsistence living.

Secondly, Taylor’s assumed conflation or mixing of Christianity and social performance in business enabled the congregants to open their wallets presumably for religious purposes in line with a social conscience. It is worth pointing out that camel is not given a pass for using wealth in a socially responsible manner. In other words, if simply having wealth is indicative of underlying greed, how one uses the wealth is not sufficient to undo the linkage and justify having the wealth in the first place.

Moreover, fidelity to a social norm such as corporate social responsibility is not religious. Even though Unitarians maintain that certain social structures are the object of their faith, the religious domain contains a transcendent referent.  That is, faith in a religious sense is oriented to an object that lies beyond the limits of human cognition and perception.  Specific social structures do not qualify because they are in our human domain.

In fact, to advocate a particular social norm is not to justify ethically with ethical reasons.  That is to say, corporate social responsibility is not business ethics.  The difference can be explained by referring to David Hume’s naturalist fallacy, which holds that what “is” the case cannot justify what “should” be. In other words, you can’t get ought out of a melon. You need ethical reasons, such as “it is fair because x,” to justify what one should do. To advocate a social norm is not to provide an ethical reason; more would be needed to provide support for why a certain norm that can exist should exist.

Therefore, I question Taylor’s linking “social capitalism” to religion (and Christianity in particular). The application cannot even be justified under the rubric of religious ethics. In addition, the congregants were too gullible because they had applied or bent Christianity too far from its native turf.

See: God's Gold, available in print and as an ebook at Amazon.

Source:

Jonathan Stempel, “SEC Charges Ephren Taylor II ForAllegedly Bilking Churchgoers In $11 Million Ponzi Scheme,” The Huffington Post, April 12, 2012.

Hollywood Bribes China

The Foreign Corrupt Practices Act, known as F.C.P.A., “forbids American companies from making illegal payments to government officials or others to ease the way for operations in foreign countries.”[1] The practical difficulty facing American companies doing business around the world is that in some cultures bribes are so ubiquitous they are simply a part of doing business.  For American companies to refuse to participate in what is generally expected can be a competitive disadvantage, particularly if substitutes exist and the practice is widespread.

The full essay is in Cases of Unethical Business: A Malignant Mentality of Mendacity, available in print and as an ebook at Amazon.

1. Edward Wyatt, Michael Cieply, and Brooks Barnes, “S.E.C. Asks if Hollywood Paid Bribes in China,” The New York Times, April 25, 2012.

Efficiency and Ethics: On the Fairness of High-Speed Trading

Two months into 2012, the SEC announced that it had been examining the trading activities of high-frequency trading firms.  According to the Wall Street Journal, the SEC was “examining, among other things, whether high-frequency firms benefit from delays in the dissemination of prices from various corners of the markets. . . . High-speed firms use direct feeds from exchanges that can give them a leg up on slower traders.” High-frequency traders “can access prices a split second faster through their access to direct feeds.” This is accomplished by placing the trading computers in the same data center that houses the exchange’s computer servers. Just over a year later, the Wall Street Journal reported that high-speed traders were using “a hidden facet” of the Chicago Mercantile Exchange’s computer system “to trade on the direction of the futures market before other investors get the same information.” Even getting the confirmation of a high-speed trade just one to ten milliseconds faster can enable a computer to know the direction a commodity is going and trade on it. According to the Wall Street Journal, the “ability to exploit such small time-gaps raises questions about transparency and fairness amid the computer-driven, rapid-fire trading that increasingly grips Wall Street and confounds regulators.” Both the increasing use of high-speed trading and the problem of accountability from a regulatory point of view raise the stakes in determining the ethics of the practice. 

Has the increasing role of high-speed trading rendered the individual investor a "second-class citizen" in the stock market?

The full essay is in Cases of Unethical Business, available in print and as an ebook at Amazon.com.  

Rating Moody’s and S & P: A Structural Conflict of Interest

For years, banks and other issuers have paid rating agencies to rate their securities. This is a bit like restaurants paying food critics to write on their food.  In the wake of the SEC’s charge that  people at Goldman Sachs built the Abacus investment to fall apart so a hedge fund manager, John A. Paulson, could bet against it, the Senate’s Permanent Subcommittee on Investigations questioned representatives from Moody’s and Standard & Poor’s about how they rate risky securities. Carl M. Levin, the Michigan Democrat who heads the Senate panel, said in a statement: “A conveyor belt of high-risk securities, backed by toxic mortgages, got AAA ratings that turned out not to be worth the paper they were printed on.” Throughout the testimony, the institutional conflict of interest was salient whereby credit-rating agencies put market-share considerations foremost in rating securities presented by the banks that are paying the agencies.

The full essay is at Institutional Conflicts of Interest, available at Amazon.