Latin American Capital Markets

DEVELOPING CAPITAL MARKETS—ETHICAL ISSUES 431and habits of civic behavior; and to adhere (however reservedly) to superior forms ofdemocratic government (Power and Clark 2001; Ryan 1994).This is why the attentionof policymakers, development experts, and international financial organizations,like the Inter-American Development Bank Group, should be focused toward effectivegovernance; as recent polls show, even in a region in economic turmoil and dramaticincome inequality, support for liberal democracy remains high and is likely tostay high (Latinobarometro; Lagos 2001).There is an inescapable link between socioeconomicdevelopment and a generalized belief in the legitimacy and effectivenessof government, but the perceived benefits of democratic forms of government consistentlyoverride it (Diamond, Linz, and Lipset 1990; Garreton and Newman 2001).The same line of reasoning can be applied to financial markets. They, too,need to join the collective enterprise of building intertemporal trust through theadoption of better legal frameworks and better standards for supervision and professionalactivity. Certainly, governments must refocus their efforts toward increasingtheir legitimacy and improving their political and socioeconomic performance. Thiswill require sound macroeconomic decisions, effective legal and administrative action,major commitments on the part of the private sector, and considerable luck But it isalso a moral enterprise whose rewards could spill over many other areas of social interaction,helping articulate a culture of rationality and decency, the moral underpinningsof civilized life.Twenty-four centuries ago, Aristotle suggested that a society that could notreach a practical agreement on its conception of justice—rationality cum fairness—might lack the capacity to sustain a political community (Maclntyre 1984).The discussionhere further suggests that a society that cannot reach a practical agreement onits conception of political community—freedom cum responsibility—may lack the capacityto establish mature capital markets.BibliographyArrow, K.J. 1974. The Limits of Organization. New York Norton.Association for Investment Management and Research (AINR). 1999. Standards ofPractice Handbook The Code of Ethics and the Standards of Professional Conduct.Eighth edition. Charlottesville, Va.: AIMR. (http://www.aimr.org/pdf/standards/english_code.pdf).Baron, M.W. 1997. In The Blackwell Encyclopedic Dictionary of Business Ethics. Edited byR H.Werhane and R E. Freeman. Oxford, Eng.: Blackwell Publishers.Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub