From Market to Capitalism: the Building of Institutional Ethics

This paper discusses the ethical barriers to development in economies whose institutions have not quite adjusted to the needs of capitalism. It is argued that at a given stage of market development, the market forces will either impose behaviours and moral codes which further sustain the development of capital markets or will be defeated. The defeat may lead a country back to pre-capitalist relations, behaviours and rules that will jeopardize any further development. In post-socialist economies, in particular, large sections of society are unprepared to apply the rules of advanced capitalist markets. Resistance to market becomes an obstacle to the building of institutional ethics and transparent markets. Only openness to foreign competition and foreign demand for higher ethical standards in business can help the adjustment of economic and legal institutions to the requirement of advanced markets. The Italian case offers an instructive example of contradiction between institutional backwardness and market dynamism in which the catalysing factor was foreign competition.