Latin American Capital Markets

DEVELOPING CAPITAL MARKETS—ETHICAL ISSUES 417at play, the marketplace cannot be construed as either a lyceum for model ethics ora morality-free zone.The most intuitive notions of fairness and predictability—justiceas regularity—may be nurtured through the workings of free markets. The businessworld is fundamentally cooperative, and markets foster sociability by providing theopportunity for people to work together without coercion, which in turn furtherspreads cooperation habits. And, as the ability to cooperate is dependent on ingrainedhabits, traditions, and norms, these very elements serve to build the market itselfthrough a sort of reflexive equilibrium between the general principles and challengesposed by real-life dilemmas (Solomon 1993).This means that market cultures are influenced by the kinds of real peoplewho participate in them as well as their experiences, which explain, even in a worldof converging standards, the peculiarities and particularities of each single market Toa large extent, operative ethics depends on learning-by-doing in the marketplace, sothat trade itself serves as a teacher and sometimes a promoter of the virtues of integrity,honesty, trustworthiness, responsibility, and prudence (Etzioni 1996; McCloskey1998). More often than not, the moral intuitions of market actors are formed not onthe basis of explicit rules, but out of ethical habits and reciprocal moral obligations internalizedthrough quotidian interaction (Fukuyama 1995). Liberal tradition claims thatconcepts such as fairness, impartiality, mutual respect, and reasonableness can be definedin ways not hostage to partisan agendas and that the market gives them a fairchance to become operative (Fish 1999). Indeed, honesty, integrity, reliability, and confidence—allvalues associated with trust—are moral concepts that express the coreof normative ethics, which is to do no harm to others, respect the rights of others(be fair and just), refrain from lying or cheating (be honest), keep promises (be faithful),and obey the law (Goodpaster 1997; Kagan 1998; Mill 1998).'Capital markets have a long-standing tradition of self-regulation. For example,Federal Reserve System (2002) sets out the ethical requirements for operating in theUnited States. Financial institutions are directed to establish their own comprehensiverules of conduct and ethical standards for the activities of their agents.Their policiesand standards should specifically address conflicts of interest, confidentiality, insidertrading, proper oversight, trading restrictions, internal controls, external audits, ethicaltraining, and related matters, all in accordance with the applicable laws and regulations,industry conventions, and other established policies in the United States. Numerousprofessionals intervene in trading, recording and reporting, information processing,1Diversity and multiplicity in the national and international communities pose mountainous challenges to the disciplineof normative ethics. Establishing ethical "bridgeheads" with the world of economics and business, which drivesthe globalization process, is one of the most urgent and complex (Enderle 2002).Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub