Final answer:
The derivatives market before 2008 had standards but lacked strict oversight, which contributed to the financial crisis. Ethical business practices, rooted in honesty and fairness, are outlined in religious texts and are argued to affect economic stability and social justice.
Step-by-step explanation:
The ethical culture of the derivatives market prior to 2008 can be characterized as one that lacked stringent oversight and accountability, leading to risks that contributed to the financial crisis. Although there were standards of conduct, rules of operation, and requirements for record keeping, the enforcement and rigor of these standards were often inadequate. In the lead-up to the 2008 crisis, a combination of financial innovation with a lack of appropriate regulation created an environment of ethical flexibility that prioritized profits over prudence.
According to hadith, ethical standards in business should include honesty, fairness, and avoidance of deceit, implying that financial transactions should be conducted with integrity. These standards were ingrained in religious law to ensure that business practices adhered to moral principles and promoted social justice. Ibn Khaldun emphasized the importance of trade for governance, theorizing that restricting trade could lead to economic stagnation and decreased state revenue.
When examining the ethical culture from a political and economic perspective, it can be assessed that both government and businesses in the leading-up to the 2008 financial crisis exhibited a combination of conservative approaches in regulation but were innovative in financial product creation. This confluence resulted in booming financial markets, but also in increased systemic risks.
The connection between ethics and divine authority continues to be a matter of debate. Some argue that ethics are an expression of the divine and find their basis in religious law, while others see ethics as principles that can exist independently from any divine authority.
The responsibility of corporations for social, economic, and environmental issues is substantial, and the challenge of establishing ethical practices is amplified with the advent of emerging technologies. The rapid development of new technologies often outpaces the formation of corresponding ethical frameworks and regulatory measures, making it difficult to predict and mitigate potential negative impacts.