Stupid Money: Can You Ever Be Ethical With Money?

It seems like everything you could ever want to buy or invest in is morally, well, bankrupt. So what to do?

Stupid Money: Can You Ever Be Ethical With Money?

When you have to spend money on things (which of course you do, every day), the world can seem like a bleak place. Bearing in mind the unsavory aspects of industrialization and globalization, it can seem like every transaction you make inevitably negatively affects someone or something, somewhere. So how can one spend their money in an ethical way these days? Alongside two business ethics professors — Robert Prentice at the University of Texas’ McCombs School of Business, and Josh Perry at Indiana University’s Kelley School of Business — we’re going to look for some rays of light.

Where do you even begin to think about spending money ethically?
No doubt it can be overwhelming to try and navigate the marketplace — any marketplace — these days. Ignorance can be bliss, and it’s natural to envy, in a way, those people who just buy what they need (or want) and don’t care if it’s made by starving children or it melts the polar ice caps.

Citing the sentiments of Socrates (“The unexamined life is not worth living”) and Shakespeare (“To thine own self be true”), Perry suggests that we need to wake up and be aware about the stuff that matters — most importantly, what matters to you. What do you value? Child welfare? The environment? Democracy? Fair wages? Probably all of those things, but unfortunately, tough choices need to be made. After all, you could donate another $100 to your child’s school, or you could donate it to a homeless shelter. Since your time and money are finite, what’s most important to you?

Figure this out, and things will start to fall into place.

It’s pretty overwhelming, though — there’s so much out there to be concerned by.
Yeah, the world’s a big mess. And no matter what you do, there’s always more that can be done. But you’ve also got to be realistic. “If we wanted to go all out, we could do what some people do and give away almost all of our money to people who need it worse than we do,” Prentice says. “Almost all of us have a kidney we don’t need that we could give to somebody who needs a kidney.”

It’s the same thing with money: If you really, really wanted to be as ethical as you could possibly be, you could do tons of research and spend all your time figuring out the best purchases for everything, but you’d likely end up with paralysis by analysis and feeling very frustrated (and probably destitute).

“We have to decide how far should we go?” says Prentice. “And I think it’s reasonable to say to ourselves, ‘The things that I do impact other people and the environment, and therefore, future generations.’ So while maybe I don’t want to do what a lot of people think of as crazy things, maybe I should do a little bit of research to figure out what impact my actions have and what would be reasonable in terms of trying to make sure that, when I buy products, I don’t have too big an adverse impact.”

Every little bit helps, after all, and doing something is far better than doing nothing. Decide how much you’re comfortable with, and feel good about what you do. You don’t need to give away all your money to charity, but you can donate a bit of it (or even just your time) to a worthy cause. Think of it like this: You don’t need to donate your kidney, but you can probably donate blood.

Speaking on a purely selfish level: Is that going to be enough to assuage the guilt, though?
In a word, yes — it’s basic human psychology. “Most of us think of ourselves as good people,” Prentice says. “Therefore when we do things that we view as ethical, we feel better about ourselves, and are happier and more satisfied.” He adds experiments have shown that if people are given money and then told to either spend it on themselves or someone else, they’re happier after spending it on somebody else.

“If we can say to ourselves, ‘Hey, I had a good day today — look at one of the things I did: I invested in a fund that’s going to help reforest areas,’ that will make us feel better about ourselves if it’s something that’s important to us,” says Prentice. “Being good is important to most people.”

Perry points out that we’re all a bit different in terms of what it takes to make each of us feel satisfied, and thus, he recommends the AA-style “one day at a time” approach. Because it can be overwhelming and intimidating to commit to an “ethical” lifestyle, and easy to fail at it, ask yourself: “Can I live a bit more ‘ethically’ today than I lived yesterday?” says Perry. “Can I walk, bike or take public transportation instead of driving? Can I support a local business as opposed to a large conglomerate? Can I do a couple of Google searches to inquire about corporate policies on ethics, social responsibility and compliance with human rights before I decide which fill-in-the-blank to purchase?”

Again, doing something is better than doing nothing.

What if I screw up every once in a while? Nobody can live without a few contradictions, right?
It’s gonna happen. Modern living is based around conveniences that usually come with some kind of ethical trade-off, and nobody’s perfect. “Short of moving to Walden Pond, one is likely to live with some inconsistencies,” Perry says. “Does that make one an ethical failure or a hypocrite? I don’t think so. Does that give one a free pass to throw up the hands and say, ‘What’s the point, anyway?’ I don’t think so.” Just stay the course, and don’t lose track of what’s important to you.

Here’s the thing, though: I’m not rich, and buying ethically produced stuff is almost always more expensive. What are cost-effective ways to do it right?
Buying ethically is often thought of as a privilege few can afford. Not everyone can live like an NPR Joan Kroc Circle donor and shop at their local farmers’ market, install solar panels, wear well-made clothing or live close enough to their work to walk or ride a bike. So start by learning more about a few of the things you regularly buy, or something you have your eye on purchasing. There are plenty of organizations that track the ethicality of organizations: Perry suggests watchdogs like Transparency International and Ethisphere, who name the good actors and bad actors.

You could also just start Googling, and you’ll find all sorts of information — the internet makes it easier than ever to figure out who’s who, and thanks to the desire of people who want to live a more ethical life, companies are keeping better track of their own supply chains to make sure business is done right (or at least more reasonably). Plus, those labels you see like “Fair Trade Certified” or “Global Organic Textile Standards” aren’t meaningless: Companies do, by and large, have to dedicate a lot of resources and comply with the rules to be able to display most of those merit badges.

Obviously, that’s all pretty involved, so if you want a good general rule, here’s one from Perry: “The ‘ethics life hack’ is, whenever possible, to spend your money as locally as possible,” he says. “As a rule of thumb, the closer you can get to the source of production, the less likely you are to unwittingly participate in some potentially unethical entanglements up- or downstream. Then, after making a purchase, be thoughtful about repair, reuse and/or recycling options.”

If something ethically produced does cost a little bit more, Prentice says that studies show people are usually willing to pay a little extra for it. Obviously a few people will pay whatever the price, but most are willing to fork over a little more, which is good news for the world.

Is there any way for me to invest without being part of the problem?
There are lots! Ethical investing is now a thing — every reputable financial services company these days has social-impact funds from which to choose. According to Prentice, there are now so many that they differentiate themselves by being audited by third parties, so you can be sure they’re legit and that your IRA or college fund isn’t unwittingly funding blood diamonds or third world coups. Impact investing can fund companies that produce goods and services as varied as, say, sustainable farming, developing-world solar power or tech solutions for underserved communities.

I hate to ask this, but… am I going to do less well by investing in those?
Probably not! Various academic papers show that a well-run fund can produce at least average returns. They may not be world-beating investments, but they can be perfectly adequate — and good for the world.

What can I do beyond spending my own money more carefully?
Voting is a tremendously powerful tool. Organizing and mobilizing people you know is a step further. And Perry says that, just like spending as locally as possible, engaging with power structures (both government and private industry) at the most local level possible will yield the most satisfying and immediate results.

“If you want to see more ethical menus at your kid’s school, run for the school board,” he says. “If you want to see more ethical spending of local tax dollars, run for the county council. We are too often obsessed with what’s happening in Washington, D.C., when our opportunity for influence can be much greater at the local level. And it doesn’t have to involve running for a local elected position. Most local governments have commissions and committees that are often in need of volunteer members.”

Yeah, but… man, that all sounds exhausting.
True — and that comes back to the point that we each need to decide what’s most important to us. But if you need your spirits lifted, Prentice says the younger generation is way more concerned about spending ethically than older generations, to the point that many of his students say they want their first job to be for a socially responsible company — when he was in school, he says, it was the sort of thing he’d never hear anyone say. It takes a village, after all.

Plus, remember that this isn’t something you can do all at once, nor is it easy. But it’s worth it. “Again, ethics ultimately comes back to difficult decisions about priorities and trade-offs,” says Perry. “Living responsibly and consistently with one’s values is typically not accomplished by chance or with ease. It requires intentionality, and it is, if we’re being honest, often a more difficult path. The ethical life is one that evolves with experience and understanding. Cultivating practical wisdom is the work of a lifetime.”