Simplistic Views Miss the Truth
The father of modern economics (Adam Smith), Ronald Reagan, economists Milton Friedman, Wall Street titan Ivan Boesky and students who take economics classes all say that greed is good.
Certainly, the Soviet – or post office worker – mentality of not working very hard because you won’t get more money for it stifles productivity and innovation.
And while socialism, communism or other “isms” might look okay on paper, corruption at the top leads to nightmares like Stalinist Russia or Nazi Germany.
On the other hand, the Bible says:
The love of money is a root of all kinds of evil.
It is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God.
All the believers were together and had everything in common. They sold property and possessions to give to anyone who had need.
No one claimed that any of their possessions was their own, but they shared everything they had.
For from time to time those who owned land or houses sold them, brought the money from the sales and put it at the apostles’ feet, and it was distributed to anyone who had need.
And religious leaders are slamming bankers for acting without morality.
So who’s right?
Competition Is Healthy … Unless Basic Rules Are Trampled
University of California, Berkeley professor of psychology Dacher Keltner notes:
Nobel laureate Milton Friedman famously argued that the single social responsibility of business is to increase profits as long as “it stays within the rules of the game.” The problem is, when greed for profits is the bottom line, the rules may fall by the wayside.
In other words, ambition and competition are healthy in a capitalist system when everyone is following the rules. But when people focus only on getting ahead, they tend to break rules.
Indeed, a series of psychological tests shows that the wealthy tend to act much more unethically – to lie, cheat and steal – than those of more modest means. And see this.
It’s not wealth itself. Wealthy philanthropists can do a lot of good (although the wealthy tend to be less generous and empathic than others). And wealthy business owners who have an ethical business model can employ a lot of people (although most jobs are created by small businesses, not big ones).
The Belief Which Is Itself the Problem
The problem is the belief that “greed is good“.
As Time noted last year in an article entitled “Why the Rich Are Less Ethical: They See Greed as Good”:
While stereotypes suggest that poor people are more likely to lie and steal, new research finds that it’s actually the wealthy who tend to behave unethically. In a series of experiments — involving everything from dangerous driving to lying in job negotiations and cheating to get a prize — researchers found that, across the board, richer people behaved worse. But, rather than class itself, the authors suggest that it’s views about greed that may largely explain the difference.
But why would people who feel socially elevated behave less ethically? The next set of experiments sought to examine this question, finding a connection between wealth and positive perceptions of greed.
The reason for this was not necessarily their class, but the fact they agreed with Wall Street‘s Gordon Gekko that greed is good. When the researchers examined the connection between beliefs about greed and unethical behavior, they found that class was no longer a significant variable. In other words, rich people tended to take advantage of others primarily because they saw selfish and greedy behavior as acceptable, not just because they had more money or higher social status.
To confirm this, another experiment examined whether a person’s attitudes about greed or his class status would predict cheating on a dice game. Researchers recruited 195 adults on Craigslist, queried them about their backgrounds and greedy attitudes, and then had them play a computerized dice game in which higher rolled scores meant a higher chance of winning $50. Unbeknownst to them, the computer always generated the same score: 12. People who believed greed was good were more likely to cheat and report inflated scores of 15 or higher.
Then, in a final study in which the researchers primed participants by having them talk about either the benefits of greed or something neutral (what they did that day), they found that poor participants were just as likely as rich ones — if they were primed to think greed was good — to support bribery or to cheat unsuspecting customers. In the neutral prime, rich participants were more likely to support unethical behavior.
As noted above, even laizzez-faire advocate Milton Friedman warned against breaking the rules in pursuit of profit.
Similarly, Adam Smith believed in the “invisible hand” of free market capitalism, but he also railed against conspiracies on the part of employers ”always and everywhere” to keep wages as low as possible, and against monopolies and the political influence that accompanies too much concentration of economic power.
And Smith supported regulation of banks, and a ban on high-risk, high-interest lending (the subprime of the day).
But won’t the free market capitalists keep themselves in check, so as to make sure that their companies survive … and to automatically create the best outcome for society as a whole?
No, and the leading voices for repealing all regulation and ignoring fraud laws – such as Alan Greenspan and Richard Posner – have now admitted they were wrong, and said that Wall Street must be regulated and fraud prosecuted.
Part of the problem is that many of the people running D.C. and Wall Street are – literally – psychopaths. In other words, a good chunk of the population is not like you and me: they don’t feel empathy for others or remorse for bad behavior. Assuming that they will work for the good of the whole is a recipe for disaster. For people such as these, only vigorous enforcement of tough laws against fraud – and enforcement of social morals (more about that below) – will work.
Again, trying to do better for yourself and your family is fine … unless you destroy the systems which sustain prosperity along the way.
For example, lack of trust – caused by widespread corruption – is killing the economy. Widespread fraud has largely destroyed markets and the rule of law. The big banks have become so blatantly lawless that everyone now recognizes that they are basically criminal enterprises.
Greed caused big corporations and government employees to break the rules, which led to the the financial crisis, the Fukushima nuclear meltdown, the Gulf oil spill, widespread food fraud and other major disasters (and see this). It has also caused them to act so ruthlessly that they are trampling on our freedoms.
And Warren Buffet – one of America’s most successful capitalists and staunchest defenders of capitalism – pointed out years ago:
There’s class warfare, all right, but it’s my class, the rich class, that’s making war ….
Of course, the wealthy already won that war … and are continuing to wage it to this day.
Indeed, we don’t even have capitalism anymore in America. Instead, in fighting to make more money, folks have so trampled the rules of the market and the rule of law which supports and sustains it that our “free market economy” has been overrun by fascism, communist style socialism, kleptocracy, oligarchy or banana republic style corruption. Whatever you want to call it, it ain’t capitalism, but rather a malignant hybrid of D.C. politicos and big company bosses.
The Answer: Enlightened Self-Interest
It’s too simplistic to say that greed is either always “good” … or the “root of all evil”.
The problem is not self-interest. The problem is unenlightened self-interest.
Unenlightened self-interest (and an unthinking, materialistic consumer culture) is killing us.
On the other hand, growing and competing to acquire more resources is healthy … as long as our behavior doesn’t destroy the systems we live in and depend on for our life, liberty and prosperity: the justice system, the markets, the natural ecosystem, and society.
Indeed, our very country was founded on the concept of enlightened self-interest.
When we all try to maximize our own benefit without paying attention the system as a whole, it destroys everything in the same way that out-of-control cancer cells kill the host.
We have to pay attention to the system as a whole – and make sure that it is healthy – at the same time we compete for our own individual benefit.
This is admittedly difficult. But if we want to prosper, we need to grow up. We’re not living in some utopian monastery where we can avoid all money … or a utopian Randian community where all capitalists are saints. We need to learn that greed is not an all-or-nothing, black-and-white concept.
We need to learn to be ambitious for ourselves and our families … while also putting energy into maintaining the systems which we need to prosper in the long run.