Morality, Financing, and Investing

Financing activity is typically focused on economic purposes and is aimed for profit, but what if the entity one is financing is corrupt or behaving in an immoral, objectionable way? Does profit supersede the immoral, objectionable behavior of that entity? What if a whole nation is acting in an immoral, objectionable way? Should one continue to finance that nation and entities in that nation or would halting financing and divesting be the moral thing to do in such a case?

While the answers to these questions seem obvious, in practice, this is not usually the case.

To premise this discussion, it must be highlighted that money, as discussed in The Functions of Money, allows ideas to come to life. Money allows things to happen. Furthermore, it does not only bring economic activity to life, but it is also a tool that enables political and social activity. We direct money into things we value and want. We direct money into activities and ideas that we want to materialize. For that reason, the financial sector is considered a critical and strategic component of any nation. It is the financial sector that mediates where money is being allocated and allows for fundamental activities in a nation to take place. Given the global nature of the financial markets though, as well as the financial dominance of a few nations, foreign investing plays a key role in shaping the activities and development of other nations.

Now, foreign investment is typically done with the aim of financial profit and gain. Foreign investors typically invest in countries they are optimistic about. That said, we do see foreign investment in bonds of a nation, for example, as support for that nation. Many of those investments are made with profit in mind, but some are made in strategic alliance and solidarity that goes beyond for-profit motivation.

To be clear, foreign investors could be private institutions, public institutions, supranational institutions, and individuals. While each has their own motive and goals when it comes to investing, at times those interests and goals overlap. Private institutions are expected to invest with profit in mind, but when it comes to certain initiatives and foreign investing, if the project or nation they are investing in is of strategic importance, they will go ahead with the investment in that project or nation because they believe this is the right thing to do regardless of the risks associated with that project and country – to a certain degree of course. Also, their is an understanding that access to capital is an essential requirement for a project or nation to succeed and achieve the goals it is aiming for, so the financing is provided with the belief that the money will allow for success. Investment banks, for example, work with governments to help them raise money in the debt markets, and the investment bankers sell such bonds to investors. While the investor is in search of a profitable venture, in some instances, investors invest in the bond of certain governments to provide the financial support needed for that nation to achieve its desires. The intuition here is that the government will be able to pay back the bond with interest in full, but a big motivation, in some cases, is also in supporting that country to allow it to achieve whatever it is seeking to achieve with the money being provided.

It is important to note that the financial sector has always played a major role in financing wars. Taxes were historically levied to fund wars. Bonds in Europe were leveraged to finance war ventures and military activity. Today, the global financial markets are used to fund such wars and military activity as well. So, here comes the question: if a nation is committing atrocities and war crimes, is it moral for any organization or institution, be it private or public, to continue financing a nation committing such atrocities and crimes?

With atrocities being documented and evident, the answer to the question posed is obvious. If any form of institution, organization, or individual continues financing a nation that is committing such atrocities, then the moral standing of such organization, institution, or individual is evidently objectionable. It is also clear that if an entity continues financing atrocious behavior, the goal is not purely profit, but it is in support of the actions of that nation or in the objectives and goals of that nation. In that sense, it is the objectionable actions and goals that the nation is committing that the entity is financing and that they fully support with their financing disregard of the for-profit element of financing and investing. The financing and investing is directed towards political and ideological goals as opposed to pure economic goals. This is especially the case for direct financing of such atrocities – i.e. in the form of investing in bonds that that nation is issuing or by providing other forms of financing to allow them to purchase the weapons they are using to commit those atrocities to fulfill their aims.

What about the financing of other activities in that nation committing atrocities though. As in, what about financing economic activity that is not going toward funding of weapons and direct funding of the atrocities being committed. Is it moral to continue, let’s say, investing in a business venture that is operating in the nation committing atrocities? For example, investing in the agriculture sector or any other non-defense/weapons sector of that nation? One can say that private businesses that have nothing to do with the atrocities being committed by the government of the nation they operate in are innocent and that it won’t make sense to stop financing them or doing business with them. However, money circulates and changes hands. Economic activity is essential for any country to operate. Part of the revenue generated from these private businesses is taxed, which enables the funding of atrocious behavior. Also, companies are run by individuals, and the individuals running the company might be investing or directly financing the nation committing the atrocities, so financing their businesses enables them to continue financing the atrocious behavior. Additionally, given that economic activity is essential for any nation, investing and financing businesses based in that nation is akin to supporting that nation. By not financing or doing business with a company in a nation committing atrocities, one puts pressure on that nation to change course due to the centrality of economic activity for sustenance of a nation. Continuously financing and doing business with companies based in the nation committing atrocities is a way of continuously supporting that nation. If the nation is committing immoral atrocities and one continues investing or doing business with companies in that nation, then the one financing and doing business with that nation is also complicit in the immoral, objectionable actions that that nation is committing due to the fact that they are enabling money to flow into that country, which enables the nation to sustain economic activity and maintain its atrocious behavior by the financial cushion it is receiving. Halting financing and investing in those businesses puts pressure on the country to change course and stop the inhumane atrocities it is committing.

In many cases, one financing and investing in businesses based in a nation committing atrocities is purely for for-profit reasons and detached from the political context and atrocities being committed by the government of the country the business is based in. That said, some financiers and investors continue financing activity in such nations because they align with that nation’s political and ideological motives. They use capital to enable the nation’s government to achieve its desires. This fact should put such financiers’ and investors’ moral standing into perspective.

Also, one might disagree with the actions being committed by that nation and not necessarily align with their political and ideological motives, but the investment opportunity is great. Would the profit aspect of this opportunity supersede the moral case given that any form of investing in that nation enables atrocious, immoral, and objectionable behavior to take place? At what cost, or moral cost, would one seek profit?