Some weeks ago I had written an article entitled An Economy Needs Peace which focused on the impact of war on an economy like ours. This was at the time when the war in the Middle East had reached a level of severity that it could have possibly spread beyond the Lebanese-Israeli border. Today's article continues where I had left off.

An open economy such as ours needs a peaceful international political environment for it to thrive, but it also needs to have ethical standards in its internal workings. Without such ethical standards, not only will the rule of law collapse, but economic policies stop making sense.

I do not believe that our country is experiencing an ethical collapse, and I would not wish anyone to interpret this week's contribution as a sign that we are about to have an ethical collapse. We have had a number of situations over the past decades when ethical standards were thrown in the dustbin, and we need to appreciate that it was during these times that our economy performed worst. In the last years our economy has proved to be very resilient to an adverse international economic situation, also because economic operators have by and large behaved in line with accepted standards.

This has continued to instil confidence in investors, especially international investors, as shown by the extent of foreign direct investment that we had in this country, either in new projects or in the expansion of existing ones. Institutions in this country have a tough job to keep on ensuring that the decisions they take are in line with the law of the land and in line with acceptable norms, and that executives in such institutions cannot create their own laws for the benefit of some. Equally, private sector economic operators need to act all the time within the confines of the law, and must appreciate that the law applies to them as much as it applies to others.

This does not mean that we have not had our doubts as to whether decision makers at all levels, in both the private sector and the public sector, have always acted ethically. However, we need to go beyond the emotional statement about why would someone have done something like that, to a more rational statement about how could these things happen. The tendency would be to look for the individual to blame and to ignore the bigger picture, which very often provides an understanding of the causes and symptoms of unethical behaviour. The tendency would be to look for the political scapegoat, very often ignoring that decisions are taken by technocrats, within the authority provided to them by their particular position description and accountability profile.

So why do ethics get lost in an economy? There could be several reasons for this, but I will highlight just three, which in my opinion are critical. The first is that within organisations, one does not hear very often statements encouraging basic virtues in operations and conduct. Credence is given to the notion that the end justifies the means. Moreover, commitment to corporate social responsibility is at times taken to mean that one has absolved one's duty to be ethical in one's everyday business dealings. I wonder how many performance related pay systems include incentives for ethical behaviour.

The second aspect is conflicting interests. We are all very keen to scrutinise whether persons holding public appointments have been involved in decisions where they have a conflict of interest. This is all very correct. However, have we ever stopped to question whether persons taking decisions down the line have conflicts of interest?

Have we ever stopped to consider whether persons lobbying for certain decisions to be taken, in representation of a particular sector, are pushing their personal agenda or whether they are pushing for the common good? To what extent are self-interest and back-scratching allowed to cloud decision-making?

The third aspect is related to the issue of recruitment. When organisations, including private sector businesses, resort to recruitment that is not based on competence but on the basis of some form of nepotism, they are ensuring that these employees are not loyal to their employer, but to the person that did them the favour. Employees stop appreciating that business success can only come about through sheer hard work, and therefore stop going the extra mile to do the right things and to do them correctly.

These are issues relating to individual organisations and have to be dealt with at a micro level. However, addressing such issues at a micro level, would ensure that a healthy macro economic environment, within which the economy can thrive.