11 Nov 2012

Sample Essay: Affirmative Action: Ethics and Colleges

Introduction

The practices of different institutions for giving priority to the ethnic minorities, women, or students are known as Affirmative Action. This action can be related to the recruitment of employees in different organizations or admitting students in various colleges or universities (Daigle). The affirmative action was designed for providing benefits to those people that do not have the advantage to take admission in any specific college due to their background. Affirmative action works on the assumption that if minority applicants were striving to take admission in colleges, then there would be some limitations or constraints attached with the applicants. Therefore, a system in which an additional weight granted to applicants for their race or ethnicity was made. At the initial stage of this system, it only involved racial quotes but now it has been considering different factors such as gender, sexual status, and economic backgrounds (Moore).

The two US states that are considered as a pioneer for implementing affirmative actions are Texas and California, because they have forcefully implemented affirmative action in their system. The basic problem for affirmative action is that most of the people relate this system with individual’s color, despite the fact that admission granted to the applicant is based on other considerations. The people against and in favor of this system have valid reasons to support their arguments (Moore). Some people argue that this system is not fair for all the students, where other think that people having disadvantages for their race, color or gender should be provided certain advantage for taking admission in colleges. There is no proper measurement of evaluating and calculating opinions of the people regarding affirmative action, and this is the reason that there are issues and reservations for this system (Daigle).

Background and History

The affirmative action can be evaluated based on its wider context, but history of this system is only documented for education and academic terms. The President of USA signed an executive order in 1961, where affirmative action used as a term related to civil rights. The reference of affirmative action initially made for dealing with the contractors, but with the passage of time, this system further moved forward. US President signed another Act in which discrimination in education towards racism was strictly prohibited (Anderson).

The Supreme Court heard a case of “Odegaard and DeFunis” in 1974, but the timing of this case made it debatable, and this is the reason that no comment was given on racial preference in this case. Another case of “Bakke and Regents of the University of California” commenced in Supreme Court in which decision was given that no minority candidate can be judged separately. This ruling was not helpful to reach diversity for racism considerations, as this case carried for more than 20 years. An appeal court gave a decision for “Texas and Hopwood” case in 1996, where order was given that admission on racism cannot be granted at “Texas University Law School” (Sherpa).

Florida State in 2000 prohibits admissions in the state colleges based on racial preferences, and students were only allowed to take admission based on their percentages. Nevertheless, it was revealed that the intended outcomes of these programs were not according to expectations of the authorities. The Supreme Court heard another two cases related to affirmative action in 2003, where the first case was between “Bollinger and Gratz”, while other case was “Bollinger and Grutter”. For the first case, decision was made that policies of affirmative actions were not constitutional, and they must be abandoned, whereas other case gave judgment that minority students should be given preference for getting admission in law school (Sherpa).

People against Affirmative Actions

Thomas Sowell wrote the book “Affirmative Action around the World” in which he has criticized that affirmative action does not work according to the intention of authorities, and it causes harm to a society (Anderson). He further states that if one individual or group get benefits from this system, the other individual or group will be damaged, which means that this system is damaging for the society as a whole. Ward Connerly, founder of American Civil Rights Institute, wrote in his bio that affirmative action is responsible for increasing discrimination and racial disparity in US, no matter this system is made for helping those people who have faced racial discrimination in US. An associate justice named Clarence Thomas said that his law degree was not valuable in front of the employees, because he was black. According to a South African judge, significance of law degree from Yale was different for black people and different for white people. Carol Costello points out that there are many people thinking that this is the right time to end affirmative action because it is not suitable for the society (Dworkin).

People in Favor of Affirmative Actions

Deidre Bowen conducted a research in 2009 in which benefits of affirmative action are explained. He stated that this system is useful to eliminate discrimination for the admissions in colleges, as racism is prevailing in the education system, and students of color have to face difficulties for getting admission in colleges (Sherpa). Anthony Marx, president of Amherst College stated that high-class colleges are not superior nor terrible, because they do not admit lower income students. The co-director of Civil Rights Projects Gary Orfield argued that affirmative action is useful for the people, but policymakers need to listen to the court verdict. Gary found out that he is not a part of the region where racial problems are common, but he feels that this system has many strong benefits related to the education of students. Michael Martinson supported affirmative action that this system did not affect white students to get admission in colleges and universities, and it is useful for black students who have faced discrimination for getting admission in their desired colleges (Sherpa).

Attempts for addressing this Issue

This system is a continuous debate for policymaking decision regarding admission in the education system. The authorities and policymakers have previously used many approaches to increase the number of lawsuits and proposals that have been rejected for affirmative action (Moore). Some policymakers try to increase minority students in their colleges by applying different methods, in which the most common method is to guarantee a particular percentage of students to get admission in their colleges. In some colleges, students gaining top marks are guaranteed to get admission as they deserve to get admission in their desired colleges or universities. Many states such as Texas, California, and New York have tried to decrease racism in education, as many policies regarding black students have been made and implemented. In some states, this system has been successful, but there are many colleges in different states of US where many people have criticized affirmative action (Doverspike, Taylor and Arthur).

Conclusion

The discrimination in education is still a common issue in USA, and strong policies are required that would be helpful to eliminate discriminatory admission practices by different colleges. The best argument for the usage of affirmative action is to promote different students groups so that level of education can be increased (Daigle). The current way of practicing affirmative action is not suitable for many people, as racism cannot be eliminated by overlooking other students that deserve to get admission in colleges. Moreover, if one individual is admitted to the college by affirmative action, then it is evident that the student who has been ignored will suffer from this system. Therefore, the government should take serious measures to address this issue, because discrimination in education can damage future of the students.

Works Cited

Anderson, E. “Integration, affirmative action and strict scrutiny.” NYU Law Review 77 (2002): 1195-1271.

Daigle, S. Affirmative action legality, fairness, and ethical use in college admission in both the graduate and undergraduate levels of federally funded programs. Research Report. Florida: Florida Atlantic University, 2004.

Doverspike, P, M Taylor and W Arthur. Psychological Perspective on Affirmative Action . New York: Nova Science Publishers Inc., 2006.

Dworkin, R. Affirmative Action: Does it work? Cambridge: Harvard University Press, 2002.

Moore, J. Race And College Admissions: A Case For Affirmative Action. New York: McFarland, 2005.

Sherpa, T. Is Affirmative Action in College Admissions Ethical? Research Report. Miami: International Center of Ethics, Justice, and Public Life, 2011.

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29 Jan 2010

Sample Essay: Ethics

In every society the general public as well as business organizations will be guided by certain norms on the basis of their respective ethics. Traditional values, customs, and religious thinking are influential in shaping individual values. At the same time the government and its agencies will make use of statutes and legislation for maintaining a disciplined social life. Various law enforcing agencies of the state will be interfering with the activities of individuals and organizations in case of conflicts with rules and regulations meant for greater common goods. In majority of the cases the ethical values of a society or of a business organization will be constructively serving the functions of legal agencies by maintaining the required discipline. Therefore in normal cases the interference of government agencies with legal powers can be avoided in the case of a society or organization preserving healthy ethical values. In such society or organization, the individuals are expected to follow the code of conduct and socially acceptable values, voluntarily. While defining and forming the code of ethics, larger interest of the society as a whole is taken into consideration. On such occasions individuals are expected to function in such a way that the greater common interest is respected (Ethics Today: Personal, Practical and relevant). The accusation of the antitrust and oppressive competitive activities against the Microsoft has come up before the court, when Bill Gates was functioning as its CEO. Bill Gates tried to deny the allegations but the court ruled against his argument and as a result the employees and stakeholders of the company were demoralized. Business Ethics was the major point in this case.

Social acceptance is the most important factor in shaping the ethics of individual as well as the group. Therefore for ethics to get established in any society, it must have social acceptance. The code of ethics will be nurtured and strengthened by personal values associated with positive attitudes and positive behaviors. On several occasions, in a social set up, members with diverse values may find it difficult to adjust with the code of ethics of a group. On such conflicting occasions the personal values must be adjusted with socially acceptable values so that destructive conflicts are avoided. Basically business organizations are working with an aim of making profits. (Is U.S. Society Serious About Business Ethics?).

By having a strong corporate ethics, a business organization will be able to follow fair business practices in order to avoid any damages or injuries to the customers and stakeholders. By fulfilling the legal requirements such as attaining of proper documents related to licensing and insurance, the organization can reinforce its corporate ethics with legal validity (Business Legal Issues). This is against business ethics to bargain stiffly by using the strong partner against a weak partner, by trying to impose the plans as per the unilateral decisions. The business organization must be given enough time to study about the possibility of structural changes. Mutual cooperation and trust between the companies, which has got developed as an ongoing process of business practices involving the active partnership must be respected and protected. As a natural process some kind of dependency may get developed between the two companies and in this relationship one may be at a weaker position due to its position being that of a junior partner. The flexibility and dynamic nature of a company will be decided to an extent by the structure of the organization. But on the part of one dynamic and flexible company, it is neither fair nor ethical to adopt a policy of bargaining with an intention to exploit the weakness and dependency of a faithful partner. Instead of adopting coercive methods of bargaining on the basis of its supremacy in the market, it will be better to have an amicable settlement to the issue by giving some more time to the partner to achieve the goals set by an appropriate team.

In the modern era of global economy and dynamic information technology, a company with strong culture and ethical values is in need of leadership with creative thinking. Knowing about the right tools combined with some regular practices will enable anybody to acquire the ability of creative thinking. In the case of organizations, managers and staffs can encourage creativity by ensuring the participation of people in decision making, problem solving and making changes in the work place. It is found that the best solutions to problems are possible when people are encouraged to and assisted with finding solutions. This aspect encourages organizations to develop creativity. (Practical workplace strategies).

On several occasions, due to adverse social realities, it may not be possible to follow practically the Ideal principles of values and ethics in a world of diversity. On such occasions it is advisable to adjust in a better way in conformity with the statute and in the interest of the organization. In the case of an individual, values are more related to beliefs and ethics are more related to behavior. Therefore values and ethics are not same. Values are based on beliefs and therefore not visible for the public. But in the case of ethics, as it is based on behavior, it can be seen by others. For an organization while deciding upon its values and ethics the relationship with these factors must be taken into consideration to avoid any major conflicts. At the same time adherence to legal requirements established by the respective government agencies is mandatory. (Values and Ethics).In this case the organization is functioning in the information technology sector and the mission and vision of the organization is guided by the social values and ethics related to the concept of optimization of efficiency by abiding by the rules, and regulations of the industry..

Assumptions, values, norms, and behaviors of the members of an organization play important role in shaping the culture of an organization. Culture of an organization is a decisive factor in projecting the personality of the organization. Every member of the organization can sense the culture, even though they may find it difficult to express it. (Organizational Culture). The aggressive steps taken by Bill Gates as the CEO of the Microsoft Company were crucial in broadening the business area of Microsoft and thereby making it a company with wonderful and the fastest growth. On the other hand Bill Gates along with his wife Melinda Gates created the charitable foundation known as the Bill& Mellinda Gates foundation. This charitable foundation became famous for its transparency in operation (Flat-pack accounting). Many of the business practices of the Microsoft, which have faced litigation, were approved by Bill Gates as the CEO of the Microsoft. The Microsoft antitrust case is considered as a land mark in the twentieth century corporate case involving antitrust and monopolization. During his deposition testimony in the court, Bill Gates denied the charges by either arguing with or evading the questions of the examiner David Boies. In spite of the denial by Bill Gates, the Court ruled that the monopolization, blocking competition, and the antitrust act were violated by the Microsoft.(Gates deposition makes judge laugh in court).

In the post industrial era business world, the economy is dominated by the trends that are prevailing in the information age and therefore the public policies must be enacted accordingly. In this context the case of United State v. Microsoft was influential in shaping the fundamental terms of competition in the dynamic high tech markets. There were certain similarities between the issues of Microsoft and those of the IBM. The IBM Company was paralyzed due to its entanglement with the government. Bill Gates tried everything in his power to avoid such a mishap with the Microsoft, but the IBM phobia of Gate resulted in government slamming down on Microsoft and thereby creating a situation of uncertainty combined with demoralized employees and slumping stock price. Before the beginning of the Microsoft trial, Bill Gates as the CEO of the company was regarded as a high tech hero with inspirational and innovative ideas. Under his dynamic leadership with full of ideas and burning passion the company was able to unleash an industry and thereby transforming an economy. He was able to reflect his image and foster a culture through the company. At the same time his lack of wisdom to the ways of the world resulted in his failure to develop his peripheral vision (The Truth, the Whole Truth, and Nothing but the Truth).

The definition of right and wrong may vary significantly as the human activities are getting more and more influenced by science and technology. A well defined system of rules is formed in an organization to provide exact definition of ethics. In such cases it may also happen that an individual’s values and views may be secondary to the code of ethics of the organization. An organization can benefit in many ways by implementing the code of ethics. A basic idea about ethics is that it must have social and legal acceptance. In every society and organizations there will be a set of rules and procedures. While functioning in a volatile and dynamic field of economy the leader of a company like Microsoft must be able to give due regards to the rules, regulations, and ethical standards prescribed by public agencies. If not done so, the aspiring and innovative decisions taken by the CEO like Bill Gates may some times prove counter productive for various interested groups including the stakeholders of the company.

References:

1. (Values and Ethics) can be viewed at website at
http://www.au.af.mil/au/awc/awcgate/ndu/strat-ldr-dm/pt4ch15.html retrieved 15 March2009.

2. (Organizational Culture) can be viewed at Website at
http://managementhelp.org/org_thry/culture/culture.htm retrieved on 15 April 2009.

3. (Ethics Today: Personal, Practical and Relevant) can be viewed at Website at http://www.casanet.org/program-management/volunteer-manage/ethics-today.htm
retrieved on 15 April 2009.

4. (Is U.S. Society Serious about Business Ethics?) can be viewed at Website at http://www.spectacle.org/0305/shatt.html Retrieved on 15 April 2009.

5. (Business Legal Issues) can be viewed at Website at
http://www.morebusiness.com/legal_aspects Retrieved on 15 April 2009.

6. (Practical workplace strategies) can be viewed at Website at
http://www.practicalworkplacestrategies.com.au/pws/ Retrieved on 15 April 2009.

7. (Flat-pack accounting) can be viewed at Website at
http://www.economist.com/business/displaystory.cfm?story_id=6919139 Retrieved on 15 April 2009.

8. (Gates deposition makes judge laugh in court) can be viewed at Website at
http://edition.cnn.com/TECH/computing/9811/17/judgelaugh.ms.idg/index.html Retrieved on 15 April 2009.

9. (The Truth, the Whole Truth, and Nothing but the Truth) can be viewed at Website at
http://www.wired.com/wired/archive/8.11/microsoft_pr.html Retrieved on 15 April 2009.

28 Jan 2010

Sample Essay: In Hard Times,Companies Should Concentrate On Their Own Profits Not Charity. Discuss

This paper is a discussion on the reasons why companies focus more on charity than profitability during hard times.  In order to carry out the discussion regarding the above mentioned statement, various relevant issues of business and management like Ethics and corporate social responsibility, business strategy, importance of finance, aspects of organizational behaviour have been focused upon in order to arrive upon a decent judgment.

One fundamental question for which answers are not clear and which is the basis of this entire dissertation is “why do people indulge in charity?”

The above question for which an answer is being sought is actually pretty critical and also a highly debated question.  Our society considers people who indulge in charity with great respect as it is believed that people do charity due to the great concern they have upon the society.  However, there is one more school of thought that, many people do charity for the sake of tax deductions.

Despite these contrasting perceptions of people indulging in charity, it is true that people who do charity activities are a real boon to today’s society.  It would be good that if more and more people across the globe come forward to donate their vastly accumulated affluence.  They should also ensure that their charity is distributed equally to people who are really in need and thereby ensuring their survival in the society.

People have a variety of needs.  Irrespective of one’s status, age, and achievements, one would still have some unfulfilled needs.  In order to satisfy their unfulfilled needs more effectively, people have learned to organize themselves into groups.  The process of organizing facilitates an organization in its specialization efforts (Frederiksen, 1982).  It helps the employees to develop specialized skills and enhances the productivity and efficient functioning of the organization.  The organizational system consists of social, technical and economic elements which coordinate human and managerial resources to achieve various organizational objectives.

Despite the fact that good human relations are a significant organizational objective even today, it is no longer the predominant approach in guiding management of employees within organization.  It is bow evident that many factors have to be considered in order to ensure high levels of employee satisfaction and productivity (Falletta, 2005).  In order to achieve higher employee satisfaction and productivity, organizations today are adopting the human resources approach, which treats the organizational goals and employee needs as being mutual and compatible, and which can be pursued in unison.

Decision-making describes the process by which a course of action is selected as the way to deal with a specific problem.  People at all levels in an organization are constantly making decisions and solving problems.  For managers, the decision-making and problem-solving tasks are particularly important aspects of their jobs. (Drucker, 1974) which employee should be assigned a particular task?  How profits should be invested?  Whether the problem is large or small, it is usually the manager who has to confront it and decide what action to take.

Managers make decisions dealing with both problems and opportunities.  For instance, making decisions about how to cut costs by five percent reflects a problem.  The manager also has to make decisions when there is an opportunity that can be exploited.  If the firm has surplus funds, the manager has to decide whether the extra funds should be used to increase shareholder dividends, reinvested in current operations, or to expand into new markets.

The quality of managers’ decisions is the yardstick of their effectiveness and value to the organization.  Managers are usually evaluated and rewarded on the basis of the importance and results of their decisions.(Drucker, 1998).  this indicates that managers must necessarily develop decision-making skills.

The success of an organization depends greatly on the decisions that managers make.  The Rational model which is believed to be one of the major types of models regarding how managers make decisions is discussed below.

The rational model of managerial decision-making has its roots in the economic theory of the firm.  When theories about the economic behaviour of business firms were being developed, there was a general tendency among economists to assume that whatever decisions managers made would always be in the best economic interests of their firms.  There was a tremendous support for this assumption from many thinkers of management.  The rational model of decision-making believes that managers engage in a decision-making process which is totally rational.  They not only have all the relevant information needed to take decisions but also are aware of all the possible outcomes and consequence of the decision so taken by them.

Ethics refer to the rules and standards governing a person’s conduct.  Ethics has only recently become an important area of study.  It has been found that ethical behaviour is influenced not only by individual or group behaviour but also by factors in the cultural, organizational and external environment.  Factors in the cultural environment include family, friends, neighbours, education, religion and media.  Ethical codes, role models, policies and practices, and reward and punishment systems comprise the organizational influences.  The external factors include developments taking place in the political, legal, economic and international arena.  All these factors work together in determining the ethical behaviour of individuals and groups in organizations (Research (ICMR), 2003).

There is a great deal of controversy regarding the nature of ethical behaviour.  Even though some persons may consider their behaviour ethical, their peers in the organization and people from other places of the world i.e. their counterparts may disagree.  An employee may consider the use of office stationery like pens, envelops etc. for personal use as unethical, whereas his colleagues may feel that since these things are not very costly, using them for personal reasons is not wrong.  The meaning of ethical behaviour differs from individual to individual and from group to group.  A research study in which business executives and business faculty members were asked to give their opinion on the unauthorized copying of microcomputer software revealed that while executives considered this behaviour unethical, faculty members did not.

It is hence proved that ‘Ethics’ is important for any organization and also its members.

Synopsis on Ethics

Ethics, in philosophy, is the study and evaluation of human conduct in the light of moral principles. Moral principles may be viewed either as the standard of conduct that individuals have constructed for themselves or as the body of obligations and duties that a particular society requires of its members ((ICMR), 2003).

Professional Ethics concerns one’s conduct of behaviour and practice when carrying out professional work. Such work may include consulting, researching, teaching and writing (Research (ICMR), 2003). The institutionalization of Codes of Conduct and Codes of Practice is common with many professional bodies for their members to observe.

Any code may be considered to be a formalization of experience into a set of rules. A code is adopted by a community because its members accept the adherence to these rules, including the restrictions that apply.

Good ethics and good business

Why should a company consider ethics in directing its behaviour – on top of law, self-interest, and convention?  The worst conceivable result of high moral standard would be competitive or other tangible detriment because the special efforts and costs a company attaches to ethical consideration result in net disadvantages for it.  There are a number of indications that the short-term profit from ethical conduct does not exactly burst into the limelight or even show clearly measurable financial disadvantage (Palanikumar, 2007).  It would be dishonest to exclude these effects in an option in action on corporate ethics.

On the other hand there are many empirical examples in which unethical corporate behaviour caused a great social outcry and intervention from the authorities, and presented no favourable options even in the short-term. A second conceivable possibility is that financial disadvantages due to investments over and above those required by law for instance in environmental, social, or safety areas or withdrawing from sale for ethical reasons could be compensated and balanced out by non-financial advantages like the company’s reputation (Keerti, 2007).

A third possibility is that ethical dealing might be worthwhile from both the financial and non-financial points of view.  These are most probable, at least in the mid- and long-term, for the following reasons.

Reduction in the cost of friction with social environment

First and foremost, ethical conduct brings reductions in the cost of friction with the social environment (for private individuals and institutions.)  For corporations, social friction costs arise when behaviour which is legal but seen as illegitimate or unethical leads to calls for boycotts from other organizations (Answers.Com, 2007).

On the other hand, there is growing evidence that a company’s “image” can become a competitive advantage because a “positive coefficient” arises.  This can become a decisive market advantage where a corporation offers products and services that are comparable in quality and usefulness with those of other companies.

Money in the form of deposits offers the least risk, of all financial instruments.  But its value is most eroded by inflation.  That is why one always prefers to store the funds in financial instruments like stocks, bonds, debentures, etc.  The compromise one makes in such investments is that (1) the risk involved is more, and (2) the degree of liquidity, i.e. conversion of the claims into money is less.  The financial markets provide the investor with the opportunity to liquidate the investments ((ICMR), 2003).

Keynes coined a new term “liquidity preference” by which his theory of interest is commonly known. Liquidity preference is the desire to hold cash.  The money in cash and the rate of interest which is demanded in exchange for it is a “measure of the degree of our disquietude (ICFAI Center for Management Research (ICMR), 2005).”  The rate of interest, in Keynes’ words, is the “premium which has to be offered to induce people to hold the wealth in some form other than hoarded money.”  The higher the liquidity preference, the higher will be the rate of interest that will have to be paid to the holders of cash to induce them to part with their liquid assets.  The lower the liquidity preference the lower will be the rate of interest that will be paid to the cash-holders.

Employees’ motivation

The fact that corporate behaviour which is at least frictionless but wherever possible goes beyond marginal ethics also motivates serious investors to purchase shares, and that the direct neighbours look to the company with pleasure and pride reinforces employees’ positive identification.

In the business setting, ‘social-responsibility’ is often employed as a synonym for a business’s or business person’s ethical obligations.  This is unfortunate because this loose, generic use of the phrase can often obscure or prejudice the issue of what a business’s or business person’s ethical obligations truly are.  To see why, one must appreciate that the phrase is also used to contrast a business’s or business person’s “social” responsibilities with its or his or her ordinary ones (Drucker, 2000 Rev ed).  A business’s or business person’s ordinary responsibilities are to manage the business and expend business resources so as to accomplish the specific purposes for which the business was organized.  However, there were many recent examples of companies which lack ethics in business. AIG and Lehman are a few of them which became recently popular.

A recent current affair that raised eyebrows and also created a panic situation to the millions of investors’ world over, in the global financial market is the financial crisis in some of the world famous financial institutions namely Lehman brothers’, American International Group (AIG), Fannie Mae and Freddie Mac (Amateur Economists, 2008).  Out of these financial institutions, Lehman brothers went bankrupt and Fannie Mae & Freddie Mac were seized.  The only fortunate institution among the ones listed above was AIG which was lucky enough to be bailed out by the U.S. Federal Reserve.

All these recent happenings can be related to what is known as “The Big Bank Theory” of finance and economics (PinoyMoney.com, 2008).  According to this theory, no government across the globe will allow any big financial institution or a bank to collapse so easily.  This is because the after effect or the consequences of such collapses would definitely be great and at time will be out of control to handle despite how big the economy in which the collapse occurred. This exactly is the basic reason as to why AIG was bailed out by the U.S. Federal Reserve.  The reasons substantiated by the U.S. Federal Reserve as to why it took this step of bailing out AIG was it felt that the collapse of such a big financial institution would definitely add to the woes of the financial markets and economy which is currently delicate.  The Fed also stated that the collapse of AIG would also result in higher cost of borrowings, reduction in the household wealth and also weaken the current performance of the economy.  It was also true that the collapse of AIG would not only effect the U.S. economy alone as felt by the Fed but would also have a drastic and negative impact on the global financial markets.

Subprime mortgage crises have become an ongoing economic problem in various parts of the globe.  The basic reasons behind these crises may be described as contracted liquidity in the banking systems across the globe and also in the credit markets.  Risky lending, excess of corporate and individual debt levels, risky practices of borrowing also can be added to the list of reasons for subprime crisis to occur.

Once the reasons as to why subprime crises occur is known, the next question that arises is as to what are the ways to avoid or decrease these crises from occurring.  One best solution would be modification of loan lending (ICFAI Center for Management Research (ICMR), 2003) (ICFAI University Press, 2003).  Lending is a crucial activity for a bank as it enables the bank to generate income.  But to sustain income generation, prudent decisions need to be taken both prior to and after sanctioning the credit.  These decisions are generally related to issues like the size, security and repayment of credit to be extended during a financial year, the industries to focus on, the geographical spread, the type of credit to offer, the type of proposals to finance, the disbursal mechanism, the collateral value, the method of pricing, the repayment schedule, the monitoring process, etc.  Credit is the mainstay for any financial institution particularly banks and financial institutions.  Almost 60% of the assets side o a bank’s balance sheet is credit.  The bank’s or the management of the various financial institutions’ across the globe should thus, ensure that lending decisions fall in line to sub – serve the bank’s overall objectives of growth and stability (ICFAI Center for Management Research (ICMR), 2005).

Apart from the above, pumping more money into the market and also reducing the amount of bank reserves would also serve as a solution to weaken the crises if not avoiding them to occur.

One another similar example that can be quoted in this situation is the Northern Rock Crisis.  Northern Rock is Britain’s fifth largest mortgage bank, and the Bank of England deemed it necessary for Britain’s economic stability to come to its rescue by offering the mortgage bank an open ended line of credit for the duration of the current liquidity crisis, which is set to continue well into 2008. The amount of the funding has not been specified but is estimated at more than £4 billion (Walayat, 2007).  It has specialised in mortgage lending based on the availability of cheap credit. The credit crunch that followed the collapse of the US sub-prime mortgage market meant that Northern Rock was unable to raise loans. The Bank of England stepped in to provide loans when depositors scrambled to withdraw their money in the first run on a British bank since over end and Gurney in 1866. Even Wall Street shuddered at the spectacle. The threat of contagion was felt internationally, and the Bank of England was forced to act (Talbot, 2007).

Northern Rock was facing difficulty raising money on the wholesale money markets.  It was experiencing difficulty funding its day-to-day requirements and had therefore sought a short-term line of credit from the Bank of England (BoE) in order to improve its liquidity. It is quite normal for the BoE to act as a ‘lender of last resort’ for banks struggling to raise funds (D’Arcy, 2007).  Northern Rock has a credit squeeze and is a bit short of cash, so it has therefore agreed a form of temporary overdraft (costing a mere 1% over base rate, or 6.75% a year) from the Bank of England.  This created a situation that had not been seen in Britain since the 1860s. On Sept. 14, 2007, as soon as the bank’s management announced that it had turned to the Bank of England for temporary assistance, long lines of clients appeared in front of Northern Rock offices trying to withdraw their deposits. The bank’s Web site collapsed under the huge wave of clients attempting to transfer money from Northern Rock accounts to other banks.

The bank’s crisis is linked to the global credit crunch which has been caused by the problems in the American sub-prime mortgage market. Northern Rock has been hit as other banks – the main source of its cash – are unwilling to lend in the current unsteady climate. However, the Bank of England, and the Chancellor, has stepped in to rescue the bank with extra funds, which they say is enough to save Northern Rock.  The U.K. government is facing growing criticism for its decision to temporarily nationalize Northern Rock. Taking the total volume of loans and guarantees provided by the Bank of England in combination with the value of mortgages on the troubled bank’s books, the state’s involvement in Northern Rock reached £ 100 billion (Košťál, 2008).

The crisis began when the management of Northern Rock and the government were approached by U.K. bank Lloyds TSB with a proposal to purchase Northern Rock for £ 2 per share if the government provided a credit of £ 10 billion to cover the risks associated with the takeover of the threatened bank.

Northern Rock’s problems have been caused by the crisis in the credit markets over the past few weeks, which has seen banks become increasingly wary about lending to each other.  The credit crunch began because a number of mortgage lenders in the US had been lending too much and too freely to consumers with poor credit ratings. As interest rates increased in the US; many of these borrowers were unable to keep up payments on their loans. Unfortunately, this was not just a problem for the banks that lent them the money.  Many lenders packaged up their books of so-called “sub-prime” mortgage debt and sold it to other institutions around the world in the form of high-yielding bonds. When the borrowers stopped paying their mortgages, the bonds were no longer worth as much as the institutions who had bought them thought. This caused a crisis of confidence in debt markets around the world – amplified by the fact that it was not clear exactly how exposed various companies were to the sub-prime crisis (The Independent, 2007).

After these series of incidents, Northern Rock shares slide further, with the stock opening 31% lower after tumbling by a similar amount in the immediate wake of the crisis. Meanwhile, savers continue to queue at Northern Rock branches across the UK. Darling intervenes, pledging that the government will guarantee all deposits lodged with Northern Rock (Association, 2008).

Despite reassurances that the money of its customers’ is safe, worrying pictures of customers the length and breadth of the country queuing up at Northern Rock branches dominated the news.  Northern Rock put on extra staff to deal with the surge of customers arriving at branches and some stayed open later to deal with them, with transfers of up to £140,000 taking place.

Systematic failure of duty is believed to be the main reasons for the crisis of Northern Rock bank.  Northern Rock has fared badly because without a large savings base to use as collateral on loans, it must seek support for loans on the debt markets. Until last year Northern Rock was considered as a stock market darling for its ability to tap into new markets, particularly among borrowers with few assets.  Northern Rock stands accused of “reckless” lending after it emerged.  The business practices of Northern Bank were also responsible for the crisis to occur.

The meaning of ethical behavior differs from individual to individual and from group to group.  A research study in which business executives and business faculty members were asked to give their opinion on the unauthorized copying of microcomputer software revealed that while executives considered this behavior unethical, faculty members did not.  ‘Ethics’ is important in the study of organizational behavior since it affects the way employees are treated and has a great impact on their performance and well-being ((ICMR), 2003).

In an organization which professes and practices high business ethics is likely to drive the entire organizational culture.  The human resource value will be driven by such ethics and when recruiters interview people seeking a cultural fit they mentally check of people who have high ethics in their business practices.  Only such people are recruited.  Obviously business ethics would have a high place during the induction of people into the organization.  Thus, pushing people to practice high business ethics similarly the culture that is going to be built within the organization will be of higher standards and will be more exacting in nature.

Any unethical business practice indulged in will be looked down upon seriously and would have a very high negative impact on individuals probably even including forced exits.  A forced exit when properly communicated across the organization would send a strong message within the organization cajoling people to stick to high ethical values, wherein punishments go beyond forced exits to the extent of legal actions – the message that is communicated both formally and informally would be a strong deterrent not to indulge in unethical business practices.

For instance, in the case of the much famed WorldCom debacle, indulging in unethical practices led to the total devastation of the company and its folding up.  This whole thing, in extremely rare cases, wherein there is a conscious effort on part of the management to hoodwink the stakeholders, the management would seemingly be following high ethical values while practicing undetected immoral business values.  Thus, creating an emotional conflict over a period of time will definitely give way to corruption of corporate culture.

The globalization of trade and commerce has produced spectacular new imperatives for organizations to take action against fraud and inducement. Academics and governments became familiar that fraud shunts assets into fruitless sectors, retards the growth of buyer markets, and excessively troubles the deprived. Companies often put into practice anti-corruption programs with the principal objective of plummeting susceptibility to fines and illegal sanctions.

As organizations become more and more global in nature, they are looking for out ways to safeguard their values and integrity-specifically, to fight dishonesty and bribery-while competing effectively in a broad range of cultures and business environments (Aamodt, 2001). “A burst of activity on the part of governments and international bodies created a comprehensive architecture of legal and regulatory standards governing corruption and bribery. Corporate anti-corruption and bribery programs vary by individual company, country of origin, and industry(BNET, 2003).”

As most of the companies today are doing business in a global economy, there would be situations that are to be faced by the managers and situations which really need certain decisions that are to be taken by them.  The decisions may be ones which have – in small or not-so-small ways – significant consequences for the present or future welfare of persons.  That is to say that situation of ethical choices would be faced.

Every significant profession and every institution that thinks anything of itself has its “something ethics” to proclaim – environmental ethics, media ethics, research ethics, and even corporate ethics are the consequence.  The latter has recently, along with environmental ethics, gained most in significance.  There are now a great number of national and international books, seminars, symposia, ethics networks, and journals exclusively devoted to business ethics.  There can be no doubt that not only “ethics” is “in” – business ethics is too.

The reason behind this is, if there had been a fundamental shift in social value systems and has the “worth” of ethical argument increase as a result?  That would be an explanation, for when traditional ways of life and institutions are not longer taken for granted, philosophical ethics, guided by the idea of sensible human life, seeks generally valid arguments about good and just behaviour in a methodical way.  There is no need to point out that we are living in a time of great social change.  If social change were to move in the direction of higher morals then all social groups and institutions – including business enterprises – would be faced with new legitimating demands.  Economic performance alone is no longer enough to give businesses legitimacy.  Non-economic demands, e.g., the sustainable fulfilment of social and environmental responsibility in industrialized and developing countries, have been increasing their significance for legitimating for many years.

Philosophical reflection is without doubt a fulfilling and intellectually challenging matter – also for those that bear responsibility in companies.  But if one wishes to do more than just get traditional moral philosophical knowledge over to people or preach romantic idealism, then ethics, including corporate ethics, must come down from its lofty realm of “ideas” and “values” and establish itself in day-to-day reality.  Acting responsibly would then not mean swearing allegiance to higher notions of approvable behaviour, but would emerge from a very worldly setting in which a company’s or individual’s activity has to be justified in the light of different values in pluralistic societies.

Acting responsibly always and primarily means acting intelligently, i.e. carefully weighing up the benefits and harm that one’s own actions can bring.  All moral activity occurs on the basis of a balance between the realization of interests and the avoidance of physical, social, or even state sanctions – not to mention those in any afterlife.  In the business environment characterized by cut-throat competition, organizations set insurmountable targets for employees who under pressure break rules and even resort to unfair practices to achieve the targets.

Business Cycles

History shows that the economies do not grow in a uniform pattern.  There may be several years of economic growth followed by a recession and in some cases even a prolonged depression.  This may be accompanied by falling national output, declining profits and real incomes and rising unemployment.    In course of time, the economy recovers and if the recovery is very strong it may lead to a boom.  During the boom period the economy will experience prosperity which means a long period of high demand, more employment opportunities and improving standards of living.  Prosperity may also lead to inflationary conditions marked by rising prices and speculation.  This would be followed by another slump in the economy.  All market economies are characterized by movements in national output, inflation, interest rates and employment.  These movements could be either upward or downward.

A business cycle may be defined as a swing in total national output, income and employment.  It usually lasts for two to ten years and is characterized by expansion and contraction in many sectors.  A business cycle has mainly two phases:  recession and expansion.  Peaks and troughs are the tuning points of the cycles.  Recession takes place when there is a downturn in the economy.

Economic growth is dependent on mobilizing savings and directing them into productive channels.  In this process, money supply can only play a limited role.  However, the role establishes an important connection between money supply, output and price level (ICFAI Center for Management Research (ICMR), 2003).  These relationships cannot be ignored even if the primary concern of the government is mobilization of real factors that ultimately lead to economic growth.

The demand for money in the society is very high.  Due to such a high demand, the reasons for people’s charity is never thought of or clearly known to many.  Demand in economics means effective demand, which can be defined as a desire backed by willingness and ability to pay for a particular product.  Thus, in order for a demand to be effective, three important factors namely the desire to buy, willingness to buy and ability to buy are the important factors (ICFAI Center for Management Research (ICMR), 2003).

The law of demand says that ceteris paribus when the price of a product is high, quantity demanded is low, and vice versa.  In other words, other factors remaining the same, the demand for a product is inversely related to the price.  When the relationship between demand and price is illustrated in a graphical form it is called the demand curve.  The demand curve slopes downward from left to right, because the price of a product goes up the quantity demanded decreases.  The demand curve is drawn with the assumption that only the price changes while other factors remain same.  Besides such a demand for money in order to carry out various transactions, some people demand it for hoarding or holding wealth in liquid form. It can conveniently be used according to variations in the market conditions (Pinkmonkey.com).

Demand for money means demand to hold money on hand.  Money in one’s hands earns no income.  If converted into goods or other financial assets one can derive either additional utility or income.  The supply money means the amount of money held by the people in the country.  In other words, the supply of money is the amount of money held by and used by the people for transactions, for making payments and for settlement of debt.  It does not include the amount of money with the Government in its exchequer and the amount of money held by the financial institutions such as banks.

The Supply Side theory, also known as Reganomics, was initiated during the Regan administration. During the 1970’s, the state and local governments increased sales and excise taxes. These taxes were passed from business to business and finally to the customer, resulting in higher prices. Along with raised taxes for the middle and lower classes, this effect was compounded because there was little incentive to work if even more was going to be taxed. People were also reluctant to put money into savings accounts or stocks because the interest dividends were highly taxed. There was also too much protection of business by the government which was inefficient and this also ran up costs, and one thing the Supply Side theory was quite good at was reinforcing inflation (Cyberessays.com).

Observations

Do companies actually increase their contribution to the bit of charity or does it just seem that?  If companies actually do increase bit of contribution to charity, is it because the human beings at the leadership level are just behaving like human beings?  Applying Freudian principles to this exhibited charity behaviour of leaders in the organization, a question that can be categorically asked that “are the leaders feeling guilty of having made large profits when the biding were good and are thus exhibiting remorse and hence doing more charity?”

On examining the collections made by a couple of charitable organizations does not actually reflect an increase in charity, to the contrary it actually indicates that bad times have actually fallen upon these organizations, but a word of caution needs to be added to this observation that most of these organizations which were touched upon to examine the fund inflow positions were depending on individual donors or rather than corporate donors.  So, we are actually examining individual behaviour and not corporate behaviour.  On examining some of the organizations, which are recipients of corporate charity shows that the Corporates were trying their level best to maintain the charity levels and in a few cases some new organizations had actually come forward to donate.

Short run trade-off exists between liquidity and profitability.  Other things remaining constant, the more liquid a bank the lower its return on equity and return on assets (The Banker, 2004).  Both asset and liability liquidity contribute to this relationship.

Facts about liquidity of a bank:

The more liquid a bank, the less profitable the bank

Liquid assets earn less than illiquid assets.

The shorter the maturity, the lower the yield.

The highest yielding loans are loans with the highest default or interest rate risk and are therefore the least liquid.

Asset liquidity is influenced by the composition and maturity of funds i.e. the ease with which a bank can convert assets to cash with a minimum loss (Comptroller of the Currency Administrator of National Banks, 2001).  Large holdings of cash assets evidently decrease profits because of the opportunity loss of interest income.

Now the question is – if the charity levels were being held constant, why does it seem like more in tough times?   The answer could possibly be because of one of the following three reasons.

1. Perceptions

2. Lens effect

3. An actual percentage increase

Perceptions – During bad times, when companies do their regular bit of charity, it gets noticed as if more than normal charity is being doled out.  Here a critical element of plays a role actually pointing to avarice that the dollar of charity can actually be re-deployed to save a favourite colleague’s job or can be possibly given to self as that missed or reduced increment which leads to the next point.

Lens Effect – During bad times, the work load on individuals tends to be much lesser than in regular times, which means every bit of activity in an organization tends to get noticed and becomes more often than not topics of water cooler conversation.

An actual percentage increase – Assuming that an organization has 100 units of total productive work and 5 units of charity work during normal times and while in difficult times the charity work might be actually reduced to 4 units and the actual work would have come to say 50 units, comparing the percentage of charity to productive work shows an actual jump of 3%.  In normal times, it would have been 5% and in difficult times it is 8% which translates to actual jump in percentage of charity.

The last observation that is relevant is that charity/ corporate social responsibility are being actively used by organizations world over to create a bonding and more often than not to set a culture of “giving” within the organization.  Usually, the human resources professional tend to grab the slack during times of economic difficulty to create a strong sense of bonding within the organization and encourage informal organizational networks.  The spin-offs of strong bonding and stronger informal networks are very much evident when there are higher demands of productivity leading to high stress levels across the organizations.

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01 Aug 2009

Essays on Jurassic Park

Man’s fascination with restoring ancient creatures using genetic technology is a relatively recent development, yet has made its way into classical literature and sparking a series of movies.  Jurassic Park, written by Michael Crichton, explores not only the potential benefits of this idea, but also gives fair warning of what can go wrong, should we become arrogant in our efforts.

In Jurassic Park, strange three toed lizards are reported on the coast of Costa Rica after they attack a group of children.  A lab technician at Columbia University, believing that the carcass of lizards to be that of a dinosaur, sends a fax of the lizard’s skeleton to a well known paleontologist, Dr. Alan Grant.  Grant figures out that it is a dinosaur skeleton but before he can do any more research on the subject is sent an invite from a rich man named John Hammond.  Hammond wishes to open a park of dinosaurs and invites Dr. Grant and a few others including a mathematician Ian Malcom to come to the park to determine if the park is safe for visitors.

While on a tour of the park the electricity goes out, sabotaged by a park worker turning off the security system to steal dinosaur embryos for a competing company.  The thief is killed by escaped dinosaurs on his way to the boat to give another company the embryos.  This leaves rebooting the island’s computer system to the others, a task complicated by the escaped dinosaurs.

Grant, Malcom, Hammond’s grandchildren, and others are therefore stuck in front of the T-Rex cage with no electricity to the security fence.  They are attacked and Malcom is seriously injured.  They escape to the visitors lodge where they figure out they have to get the island running again.  Grant goes off to get the electricity turned back on while the kids are attacked but end up safe by trapping the attacking dinosaur in the freezer. The survivors escape but as they are waiting for release, Grant is told about giant lizards that were reportedly seen fleeing into the jungles of Costa Rica.

The dynamic variety of characters in Jurassic Park alone gives many opportunities for essays.  Not to mention possible essays on the differences between the original novel and the screenplay (movie).  This novel could also be useful as an essay source for genetic engineering classes and even ethics classes.

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26 Jun 2009

Sample Essay: Healthcare Ethics

Introduction

Ethics speaks primarily to the right and wrong in human relationships. It is from the study of ethics and, consequently, a better understanding of moral principles, that society may hope to enhance the sense of tolerance, fairness, compassion, and sensitivity to another’s pain and thereby improve aspects of human behavior that place humans in a separate niche in biological history. Ethical questions, especially as they apply to medicine, have become common topics of discussion during the past twenty years. Bitter disputes have arisen regarding abortion, suicide, human experimentation, as well as the management of the dying patient and the severely disabled newborn. Today, the American health care has grown into a multi-billion dollar industry controlled by large corporations. It is clear that various ethical issues associated with delivering heath care services to patients get overridden by monetary interests.

Economic / Financial

In the past 50 years, few sectors of the U.S. economy have escaped the periodic ravages of recession. The health-care industry is a notable exception. Since 1950 hospitals and other health-related enterprises have experienced uninterrupted, indeed meteoric, expansion. Between 1950 and 1982 national health expenditures increased more than 25-fold, reaching $322 billion per year, and the proportion of the GNP accounted for by the health sector increased from 4.4 to 10.5 percent. During the 1970s health-care employment increased from 4.2 to 7.5 million workers, accounting for one seventh of all new jobs in the United States. Moreover, these trends continued through the recession of the early 1980s and 1990s. The fast pace of hospital expansion is indicated by the fact that in 1980 the average age of hospital capital assets stood at an all time low of 7 years, as compared to 15 years for the service sector as a whole and 23 years for capital in manufacturing industries.

Strikingly, the conquest of the main killers of the young (infectious diseases) was largely complete in the United States by the time the health-care sector began its explosive growth, and was clearly due to improvements in the standard of living and public health measures rather than curative medicine. The spectacular expansion of health facilities which occurred after the era of the main advances in life expectancy has been accompanied by massive government spending on curative medical care, a singular neglect of public health and preventive measures (which currently account for less than 3 percent of health expenditures), and very modest improvements in health. Moreover, many Americans lack access to the most basic medical services. The United States shares with South Africa the dubious distinction of being the only developed countries without universal health insurance. Despite the widely heralded Medicaid and Medicare programs, 25 million Americans lack health insurance of any kind, 40 percent of infants and toddlers are not fully vaccinated, and the elderly now spend as large a proportion of their incomes for health care as they did before the passage of Medicare. The paradox of vast increases in health care resources which are funded largely by the government yet fail to provide the services most critical to the improvement of health puzzles bourgeois health-policy analysts. An understanding of the role of health care in the accumulation of capital can help to unravel this mystery, forecast future trends, and focus the work of the left in this field.

Economics of health care

In the best of all possible worlds both economic efficiency and commitment to the individual patient would govern the delivery of medical care. In the real world the conflict between these two factors is increasingly disrupting the health professions. On the one hand, the traditional primary allegiance of health-care providers is to their individual patients: they cannot deny patients something they think would genuinely help. The doctor’s Hippocratic oath illustrates this. On the other hand, we all endorse the sensible goal of economic efficiency, getting the greatest value from our resources. We want to get the most health for our health-care dollars and to obtain as much value from every extra bit we invest in medicine as we could get by using the required resources on something else entirely. In economists’ jargon, we want to minimize our opportunity costs.

This conflict is sharpened considerably by the financial context of modern medicine. Once a patient is insured, the patient’s interest typically lies in receiving the best possible medical care regardless of whether the resources thus used might produce greater benefit elsewhere. The moral and professional allegiance of clinicians then seems to collide head-on with wider economic efficiency. Efficiency will sooner or later call for restricting care that would benefit individual patients. This is “hard efficiency”: it is surely not just the elimination of waste, and it leaves the health economist at seemingly irreconcilable odds with clinicians and their oath.

When each side in such a stark conflict has so much intuitive appeal, it is hardly surprising that the ensuing debate is heated. The traditional conception of loyalty to the individual patient even if that leads to sacrificing some of the overall value of resources gets ardently defended even by those who call for identifying and curtailing unnecessary procedures.

The push for hard efficiency won’t abate easily. Even if unnecessary procedures are better identified and curtailed, eradicating them is only a onetime saving. All historical trends point to continued growth in doubts about whether any and all care that serves the medical need of the patient is worth the money it costs. Randomized clinical trials will be telling more, not less, about the touch-and-go margins of effective care — what might possibly do a patient some good but is statistically and economically a dubious bargain. Both the range of options provided by medical technology and the age of the population will continue to increase faster than per capita income. Healthcare pressures on government and business budgets will grow, not diminish.

The lines of the continuing prospective debate may thus seem drawn already. Shouldn’t we come clean in our ethics and either honestly sacrifice commitment to the individual patient or frankly relent in the push for efficiency? Yet such a choice is bleak; we will swallow neither option without a moral gasp. Maybe we can avoid having to abandon either side, or perhaps we can at least reduce the force of their collision. Clinicians should be able to keep their oath of commitment to patients while at the same time taking much of larger economic efficiency to heart.

Politics

This century has witnessed the transformation of American medicine from cottage industry to large-scale capitalist enterprise. The health-care industry has received massive government subsidies, and has been largely exempt from the competition characteristic of many other sectors. Until now, any medical product has been guaranteed a virtually unlimited market. However, this expansion is giving rise to a contradiction between the health-care industry and other industries. In the past the capitalist class encouraged the growth of the health sector, but as the health-care industry expands, employee health benefits increase in cost and have by now become a major cost of production. In 1980 U.S. corporations were spending more than $65 billion a year for employee health benefits, and Chrysler executives were complaining that Blue Cross had become that company’s largest supplier. Corporate leaders have also begun to express concern about the increasing proportion of state and federal budgets devoted to Medicaid and Medicare.

Soaring health-care costs thus are becoming a major concern for the capitalist class as a whole. It is moving to curtail the special privileges which have allowed the health-care sector to reap greater profits and expand more rapidly than the rest of capitalist industry. The entry of the Business Roundtable into the health-care scene coincided with the start of government initiatives to end the privileged position enjoyed by the health-care industry. Federal grants for hospital capital projects were phased out starting in 1975, though the hospital industry was easily able to compensate for this loss by increasing its used of tax-exempt bonds. Other early efforts to contain health-care costs under the Nixon and Carter regimes were equally unsuccessful. However, more recent government attempts to rein in the health-care sector have more bite. As a reporter for the Boston Globe remarked, “The Business Roundtable’s decision to get serious about hospital cost control marked the turning point in the debate. Until then, the issue had been the province of insiders, the most influential of whom had more of a stake in the status quo [the continuing expansion of the health-care industry] than in cost containment.”

Under pressure from the business community, New York, New Jersey, and Massachusetts, among other states, have passed legislation sharply limiting hospital revenues. The Reagan administration has proposed the elimination of tax exemptions for health insurance and hospital bonds. Medicaid payments have been drastically cut, making it difficult for hospitals and doctors to profit from Medicaid patients. Perhaps most important, the basic structures of the payment systems for Medicare and Medicaid are being radically altered. Hospitals will no longer be paid for each individual test, procedure, or day of care. Instead, under Medicare the hospital will receive a fixed lump sum determined by the patient’s diagnosis. For instance, Medicare might pay a hospital $2,800 to care for a patient with pneumonia, no matter how long he or she stayed in the hospital or what tests or drugs were used. For the first time hospitals will profit by providing fewer services to each patient.

The incentive to do less is of course not new in health care. It is a central feature of so-called Health Maintenance Organizations (HMOs) which are increasingly popular among large corporate employers. The first, and still largest, HMO was started by Kaiser Industries to lower the costs of health care for its workers in massive New Deal construction projects like the Grand Coulee Dam. HMOs collect a lump sum in advance which covers all services delivered. Physicians are salaried and often share in any profits realized because of savings on patient care. Contrary to much recent propaganda, HMOs usually neglect preventive care, since cost savings due to prevention are most often realized after the patient has retired (either because of age or disability) and hence has lost his/her membership in the HMO. HMOs economize by emphasizing less personal and lower cost “industrial” style care, and erecting barriers to access which discourage members from seeking care.

Thus both government initiatives and corporate policies are forcing changes in the organization of health services. Capitalist rationalization and efficiency is replacing the ideology of “care and cure no matter the cost.” And changes on the horizon promise to complete the transformation of medical care into commodity production. Health care will be a product offered for sale on the market. Hospitals and HMOs will compete in offering corporations, the lowest priced health care which will maintain the productivity of their workers, and government the barest essentials of health care which will keep the unemployed, disabled, and retired from revolt. The state seems ready to forsake its role in assuring that health care resources are provided where needed. As a recent study by the Brookings Institution put it, “Congress has abandoned the principle that medical care should be provided whenever it is needed, that cost should not be considered when life or health is at stake.”

Competition

Medicine will increasingly be asked, “Does your practice improve the productivity and tranquility of the work force?” No more will doctors and hospitals be allowed to collect for every useless operation and superfluous machine. No more will health care for the “non-productive” poor, disabled, and elderly be lavishly financed by the state for the benefit of the private health-care sector. To be sure, the health-care industry will be allowed a handsome profit, but one in line with the rest of capitalists industry.

Already care for patients with a particular diagnosis is referred to as a “product line,” and administrators vie to manipulate these “product lines” to maximize profits and assure the survival of their hospital in the increasingly competitive hospital market. The extent to which the ideology of commodity production has come to dominate health-care administration is evident in the titles of some recent articles in the hospital administration trade journal Modern Healthcare: “Surgical Lasers Can Generate Profit If Volume of Use Can Be Guaranteed,” “Baxter Shows Hospitals How to Use Cost Data to Prepare for Price Competition,” “Managing Along Product Lines Is Key to Hospital Profits Under DRG [Medicare] System,” “Fixed Payment Rates Force Hospitals to Reassess ICUs,” and “Medical Records’ New Financial Role Dramatically Shifts Hospital Priorities.” This last article explains that under new insurance regulations, “The medical records department supplies the base information to interpret the medical stay into a financial picture,” and anticipates that “helping their hospitals collect billions of dollars in federal reimbursement will become the top priority of medical records departments. In the past, the department concentrated on maintaining accurate record for ongoing patient care.”

Social

The commodification of health care will have important repercussion for health-care workers and patients. Competition among health-care institutions will increase and result in the elimination of smaller scale, more personal and human sources of care. Health care will be monopolized by large corporations, employing thousands of workers organized to deliver care in an increasingly mechanized factory-like environment, with little human contact or understanding. Thus the familiar petty-bourgeois local doctor is already being replaced by “MediStop” centers staffed by anonymous employees providing technical interventions which keep working people at work and treat others as cheaply as possible. Care of the “non-productive” poor and elderly, and interventions aimed at improving quality of life or psychological well-being will receive short shrift. Public-health efforts to prevent the main modern-day health problems, such as heart disease and cancer, are likely to be crippled because such chronic diseases primarily affect workers in their non-productive post-retirement years.

Health-care workers will find themselves cogs within huge and growing enterprises. Administrators armed with elaborate computer systems will monitor and control day-to-day medical practice, dictating what tests and treatments are allowed for a given “product line” (disease). Physicians, in the past independent entrepreneurs, will serve as highly paid supervisors. For the first time, in 1982, more doctors in the United States were salaried than self-employed. For non-physician personnel the changes may be more painful if less dramatic. Hospitals will have more incentives to limit labor costs by holding down both wages and the number of workers. The proportion of health spending devoted to labor costs, which fell by more than 10 percent during the 1970s, will fall even more rapidly as machines replace many workers. Unions will increasingly be under attack.

Technology

The complexity of ethical dilemmas and resultant clamor will become more bewildering as technology continues to advance. We are facing a time when an egg and a sperm with desirable genetic attributes will be brought together in a Petri dish, nourished until transplanted into the uterus of a future mother, all according to parameters spelled out in a computer containing lists of potential donors. The ethical issues surrounding a surrogate mother are simple compared to those that all of us will face in the future. It has become a moot point whether ethically we should or should not move along certain potentially dangerous lines of research. The fact is that we will continue all areas of research and thus will be in need of greater understanding of ethics involved in the application of our knowledge. In order to clarify the fundamental premises upon which ethical decisions must rest, we need to stand back and assess our situation, free from the burdens of tradition, dogma, or gut reaction that limit our thinking.

As K. D. Clouser so pointedly expresses it, “Medical ethics is no big deal … it is simply ethics applied to a particular area of our lives … it is the ‘old ethics’ trying to find its way around in new, very puzzling circumstances.”[1]

Conclusion

The health care industry is one of the biggest and profitable business sectors in America. Americans spend more and more money on health care year after year, yet, the quality of services may not increase so dramatically and the ethics of medicine usually tends to be ignored in such a thriving sector of the US economy. The enormous sums now spent on health care are sufficient to assure health workers a decent standard of living, provide high quality curative medical services to all in the United States, enormously increase efforts in prevention and relevant research, and meet our now neglected international responsibilities in health. The issue is not lack of money but capitalist irrationality and waste: the insurance industry and armies of administrators which together devour 25 percent of all health-care spending, the billions of dollars of profits and advertising by drug and equipment suppliers, the massive duplication and maldistribution of facilities, and the greed and ideological bias of physicians which leads to millions of unneeded operations and tests, the proliferation of capital intensive treatments, and the neglect of non-technical (and hence unprofitable) therapies. Still, I sincerely believe that the pressure coming from various social groups is having and will have an even greater impact on the development of health care ethics, therefore, improving the quality of medical services.

Bibliography

K. Danner Clouser, “Medical Ethics: Some Uses, Abuses, and Limitations,” The New England Journal of Medicine 293, no. 8 ( August 21, 1975): 384.

Expenditures by John K Iglehart (The New England Journal Of Medicine, Jan. 7, 1999.  Volume 340:70-76).

Health Premiums to Jump Again Next Year: Insurance Rate Hikes in Area, Nation Likely to Be in Double Digits, Data Suggest by Bill Brubaker (Washington Post, June 24, 2003; PageE04).  Based on data from multiple sources, it appears that this will be the fourth year of premium increases in a row.

Why Are Local Healthcare Costs among the Highest in the Nation?  By John Dorschner (The Miami Herald, July 21, 2003).  An examination of the possible factors involved in high cost of health care in South Florida.

Health-Care Costs to Rise in 2004: Employers are expecting increase of 12%, fifth year in a row of double-digit gains by Vanessa Fuhrmans (The Wall Street Journal, September 29, 2003).  Many employers will shift some of the cost to employees.

Healthcare Costs Are Up.  Here Are The Culprits. By David R. Francis (The Christian Science Monitor, December 15, 2003).  Overview of the parts of the health care system that have become expensive.

Tough Trade-offs: Medical Bills, Family Finances and Access to Care by Jessica H. May and Peter J. Cunningham (Center for Studying Health System Change, Issue Brief number 85, June, 2004).  This study examines the difficulty both insured and uninsured Americans have in paying their medical bills, and how that difficulty affects access to care.


[1] K. Danner Clouser, “Medical Ethics: Some Uses, Abuses, and Limitations,” The New England Journal of Medicine 293, no. 8 ( August 21, 1975): 384.

12 Oct 2008

Essays on Genetic Engineering

Mankind’s concern with the identification and use of plants and animals is as old as civilization.  From the hunter/gatherers who selected the seeds of plants they knew provided sustenance for deliberate planting and cultivation to the breeding of cattle and other animals, mankind has been driven by a deep desire to understand and to control the world around him.  Over the millennia, this desire has given birth to the science we now know as genetic engineering.

The concept of genetic engineering has been around for many centuries.  Early genetic engineering took form in the selective breeding of dogs and horses, attempting to combine specific desired traits to create hybrid offspring that would possess those traits.  This is, in fact, the source of many “show dog and horse” breeds.  So successful was this form of genetic engineering that some believed genetic engineering could be used with human breeding.  This controversial philosophy and pseudo-science came to be known as eugenics and was, in part, the basis of Nazi beliefs in their alleged supremacy over others.

As the basis of genetic engineering became known over time, mankind began trying to find ways to manipulate the genetic structure of everything from field mice and flowers up to and including man himself.  Through occasional strokes of luck, many new species were developed, but each was in the same genetic family as the source material the scientists started with.

In the United States, the American courts have ruled that species created by genetic engineering are a form of intellectual creation, subject to patentability, though many in the scientific community decry the decision as inhibitive to continued academic and scientific development.  Coupled with the completion of the Human Genome Project in which the human genetic structure was mapped in detail, this court precedence has lead to deep concerns over human genetic engineering experiments, to the point that many jurisdictions worldwide have banned even the concept or anything related to it being pursued.

Another concern about genetic engineering has arisen in the field of agricultural engineering.  Over the years, many new species of food crops have been developed, some for disease resistance, others for flavor or uniform size (the last makes packaging of the produce easier).  A more disturbing development of genetic engineering has been the recent creation of “terminator” species.  These are genetically modified crops that cannot perpetuate through seeding, leading to an outcry from the farming community that such crops threaten their livelihood by not allowing them to save seed from one season to be used for the next planting season and could lead to crossbreeding contamination, potentially devastating crop yields worldwide as the terminator gene spreads indiscriminately.

Genetic engineering is a field with many potential applications and significant risk.  As such, there are many openings for essay topics and angles, both for the potential good that can come from genetic engineering and for the potential threat the science possess on the future of life on Earth.

  • Many scientists argue that genetic engineering could one day produce human clones whose body parts may be used as transplants if something should happen to the man or woman the materials came from.  Others argue that this is nothing less than playing God and committing murder.  What are the arguments presented on each side and is there a middle ground our society might be able to achieve on this issue?
  • In Europe, farmers have sworn to shut down their farms, rather than use terminator-modified seeds offered at below market rates by the developing companies.  What are some of the dangers and benefits to using such seeds and are the farmers over reacting or simply trying to keep our society safe from the threat posed by this genetic engineering?

Genetic engineering is a highly controversial science with activists up in arms on both sides of the table.  Since nature tends to act in unexpected ways outside the laboratory, it is important that scientists proceed with caution.

Students attempting to write about genetic engineering should be equally cautious as our understanding of genetic engineering is changing rapidly.  Even professional researchers and writers such as ourselves have a tough time keeping up in this ever-morphing field of human knowledge and activities.

Contact us today with your writing assignment and let one of our professional researchers and writers assist with its completion.

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