The Peruvian resource curse, Confucius on business ethics and why some forms of discrimination are more acceptable than others

Peru, cursed

As global demand for minerals and metals booms, so should Peru’s economy. The resource-rich South American state is the world’s second biggest producer of silver, the third biggest producer of zinc and copper, and the fourth biggest of lead. Yet, despite economic growth of 8 per cent for the past two years and boom years predicted ahead, its population remains largely poor.

Peru is a victim of what academics have long defined as the “resource curse”, but not in the traditional sense. Most resource-rich states, particularly Africa’s oil abundant countries, care little for redistributing their resource windfalls. Not so Peru.

Successive governments have followed accepted wisdom when it comes to sharing out their mineral wealth. In the macroeconomic sphere, Peru has implemented disciplined fiscal policies. Politically, it has put its name to the Extractive Industries Transparency Initiative, the landmark revenue disclosure pact. Fostering decentralisation, civic participation and public-private partnerships can also be added to its list of measures.

The failure of the “Andean tiger” indicates that something is awry with the orthodox policies prescribed by international finance institutions such as the World Bank. This paper offers a thought-provoking diagnosis of the Peruvian case: poverty reduction exists but it is slower than expected; the economy remains reliant on mining and has not diversified; and social conflicts have multiplied, often because of “perceived collusion” between mining companies and government.

Peru’s natural mineral endowment makes it highly attractive to investors. Not so appealing is the political instability engendered by continued poverty. Companies are partly to blame for the tensions. Attempts to interact with local actors have been known to foster clientelism, to promote short-term spending and to “usurp the state”. Government, on the other hand, needs to draw up stronger mining regulation, the paper argues. For that, state institutions must be strengthened so as to act consistently across all levels of government. Though specific to Peru, there are lessons here for all resource-rich countries.

“A Thoroughly Modern Resource Curse?” by Javier Arellano-Yanguas, Institute of Development Studies, Working Paper, April 2008

Chinese wisdom

When Charles Hampden-Turner wrote his classic 1993 book “Seven Cultures of Capitalism”, he made no mention of China. The world has changed. The Asian giant now preoccupies business academics far more than Sweden, the Netherlands, Japan and the others on Hampden-Turner’s list.

International understanding of Chinese business culture remains vague, especially when it comes to ethics. But cultures change slower than economies and clues to modern management practices can be found in China’s ancient philosophies.

What did Confucius have to say about tax evasion, for example? Nothing directly, but much can be inferred from his teaching of guanxi, or “relationships”. According to Confucius’ theory, when a close relationship exists between parties, a greater ethical duty exists. Inversely, not disclosing your tax receipts to a distant, corrupt, government marks a culturally acceptable action.

Or why is whistle-blowing less common in China? Again, philosophy has an answer. The theory of “ren”, first espoused by Confucius and later taken up by Mencius, dictates that rulers (or contemporary managers) show goodwill to others. Their subjects, or employees, are expected to return such goodwill. Hence the complex moral obligations that prevent turning in a cheating boss.

Confucius’s concept of “Five Relationships” appears in few management textbooks. As China races forwards, maybe its points of cultural departure are worth examining in more depth.

“Historical Antecedents of Chinese Business Ethics” by Charles Rarick, Andreas School of Business, April 2008


No corporate code of conduct could admit to a sliding scale of discriminatory practices. Whether it be gender prejudice, age bias, religious intolerance or whatever other form of discrimination, companies are right to condemn them uniformly. Which is why we have academics to ask the unaskable.

This paper posits the question whether some discriminatory practices can be more tolerable than others. It starts with the premise that overt social discrimination is nothing new and that attitudes across society vary. Sexual orientation, for example, is perceived differently from marital status or health conditions.

Adopting a simple “rent-seeking model of conflict”, the author maintains that discrimination based on immutable characteristics such as race, gender, or ethnicity is much less acceptable than discrimination based on non-permanent characteristics.

Analysing conflicts generated by racial and generational discrimination, the author finds that the former is much less tolerated than the latter. Companies should not start rewriting their ethical codes. But nor should they expect all to be adhered to equally in practice.

“Socially Tolerable Discrimination” by Atsu Amegashie, University of Guelph, Working Paper, May 2008

News from campus

Only half of MBA students think that their personal integrity matters to corporate recruiters and nearly nine out of ten expect their personal values conflicting with what they will be asked to do in business. The findings form part of an extensive survey in 15 global business schools by the Aspen Institute.

The Haas School of Business is linking up with University of California, Berkeley, to launch the “Sustainable Products and Solutions” programme. The initiative, which is funded through a $10 million contribution by Dow Chemical, aims to integrate sustainability into new product development.

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