Don’t you lose your New Age/futurist/liberal street cred for coming out against ethics and ecological sustainability in business? Isn’t that like coming out against puppies, Christmas and grandmothers these days? Also, in the gruesome carnage of the Ponziconomy, wasn’t it the spectacular greed of, well, EVERYBODY that led to this destruction of all that is holy? Shouldn’t we then progress to a land of ethical business and ecological sustainability, one where Wall Street bonuses don’t seem ridiculous, solar panels go up everywhere, and everybody finally sees their way to acting nice?

Sorry – this week’s excitement about business ethics is a PR whitewash, at least as much, or moreso as that other canard, green business. Don’t bet a single dollar on ethics or the New Shiny Green Sustainable Niceness Economy.

But hear me out.

I got fired up about the notion of ethics this morning upon reading Umair Haque’s post entitled “Why Ideals are the New Business Models” in Harvard Business Publishing’s “Edge Economy” blog. In it, Haque extolls the virtue of ideals over business models claiming:

• Business models aren’t today’s fundamental economic challenge.

• Creating something valuable in the first place is.

• “Monetizing” + “business models” = zombieconomy

“Monetizing” toxic junk — from CDOs, to Hummers, to McMansions, to Big Macs – is how we got into this mess.

• Forget business models. Focus on ideals.

Reconceiving value creation depends on new ideals. Ideals shape what we wish to achieve in the first place: freedom, peace, fairness, justice — all are ideals vastly more powerful than mere business models. That’s because they are what ensure the value we are creating is authentic, deep, meaningful value — not just the shabby, threadbare illusion of value.

First, Umair Haque is right as an individual in this philosophy he espouses. This is all really good thinking, good values. I want him to be my neighbor, my business partner, maybe even my Congressman. This is precisely the thinking that lacked from the vast majority of business planning, and what got us into this mess. And he’s right, it’s the kind of thinking that will get us out of this catastrophe toward something ostensibly better.

The second, more important thing is that this idea doesn’t scale up whatsoever. In a practical sense, it is a complete pipedream, if you expect global capitalism to follow along. The concept of idealistically-driven, ethical business is utterly incompatible with the current system of business management and the globalized economy in general, which is why Harvard Business School, oddly hosting this idea, has taught the polar opposite of this thinking for years. People want cash, ROI, and they want it in a certain, reliable timeframe. The capitalist economy has functioned for centuries now on the notion that you put cash in the hands of a productive few, and with very little connection or effort of your own, it turns into profit. You invest in a company from New York with operations in China and Africa and Europe, and your cash turns into 107% of itself – magic! Bonuses are handed out, dividends paid, stock prices go up. Business cases would be created, and Harvard Business School would begin teaching them. (Ahem)

This magic is fundamentally at odds with the very notion of ethics, which requires some form of relationship. Global finance capitalism is about the neutralization of relationships. After all, part of the reason we’ve been ripping jobs up out of the United States and Europe and sending them to India is that we as consumers don’t care about 1,200 poor folks in Ohio or Alsace, and we ALSO don’t care about the wages of the people in India. Problem solved! Prices go down, wages go down, profits go up, stock goes up – magic, plus no messy relationships or ethics to worry about.

Now, if this was done locally, it would be another deal entirely. If you tried this same sort of operation in a small community – Padua, Italy; Eugene, Oregon; Kathmandu – the game would be completely different. There would be relationships at stake, small groups of people dependent on each other for income, possibly members of the same church, liable to run into each other at the grocery store, highly likely to slash each others’ tires at a bar. In a local context, the numbers on the spreadsheet detailing profit and loss would be important, but ethics would come into play – relationships would need to be tended, or there could be a serious downside to the transaction, a measureable downside. In local economies, ethics aren’t just a way to prevent bad public relations and a public harrumphing from Barney Frank, but are a necessary value in order to keep prosperity going.

This is entirely unoriginal thinking on my part. It was first advanced by a guy named Adam Smith, a Scottish philosopher who disliked the abuses of the royal system of mercantilism, underwhich oversized corporations, operating with the king’s good grace, abused suppliers, distributors, and consumers. Smith’s view of capitalism, explored in his book The Wealth of Nations, was one of small, entrepreneurial players, unable to effectively lobby the king, operating within sight of one another. Minimal secrecy would lead to a better understanding of supply and demand, and the general openness would keep members of a community conducting business in an ethical way – for reputations and cash were on the line.

Actually, capitalism at its most fundamental is automatically ethical, because it never would accept five conglomerates per industry operating over and above the authority of nation-states. Actual capitalism, in the Smithian sense, requires smaller players operating above board, improving communities. Yes they make money, but they also improve the community socially, culturally, and even ecologically. There’s no cheating, there’s no getting away with much, because ultimately, the people to whom you relate economically live within walking distance.

This is why monetization, good business models and ethics aren’t at odds. Ethics are great, but you still can’t eat ethics; business models and motility of capital will probably still run things. Planning a business without some form of cashflow-positive business model will be impossible.

UNLESS we are also transitioning to predominantly local economies. Then you get major changes. You won’t need that fake “green” business anymore either – because you won’t be able to steal ecological resources from surrounding communities without putting them back; the debt machine that made that possible will be broken down. And you won’t need ethical business either, since a lack of ethics will require you to repaint your car, which will suffer from keys, cans of coke, and other hazards of bad local PR. But that will be a major change, more significant than any changes in tax structure or regulation we’ve seen recently, because it will reshape global economics from the ground up.

The point is, don’t fall for a change in language to make yourself feel better about the necessary changes – wait until you see the actual change.