Should we accept the market glorifying greed?

Private markets are indeed grounded in selfishness and greed and are thus inherently immoral

Private markets not only tolerate naked greed, sharp practice, acquisitiveness, predation, exploitation, commercialism, and materialism. They positively encourage all these evils. In the words of the Communist Manifesto, they plunge us into “the icy water of egotistical calculation.”⁷⁹

Anacharsis of Scythia warned as early as the seventh century BCE that “The market is a place set apart where men may deceive one another,”⁸⁰ a sentiment seconded by Aristotle and many others. In 1933, at the bottom of the Great Depression, Matthew Josephson suggested in his book, The Robber Barons, that slavery was not the only contradiction marring the otherwise remarkable story of American economic development:

“To organize and exploit the resources of a nation upon a gigantic scale, to regiment its farmers and workers into harmonious corps of producers, and to do this only in the name of an uncontrolled appetite for private profit—here surely is the great inherent contradiction whence so much disaster, outrage and misery has flowed.”

Matthew Josephson⁸¹

The misery still flows, and it is time, as playwright Tony Kushner told a graduating class of college seniors, to stand up for “The people and not the oil plutocrats, . . . the multivarious multicultural people and not the pale, pale, cranky, grim, greedy people, . . . the hard-working people and not the people whose only real exertion ever in their parasite lives has been the effort it takes to [get politicians to] slash a trillion dollars in tax revenue and then stuff it in their already overfull pockets.”⁸²

The problem is not just that some people, given a chance to be greedy, will grind others into the dirt. The problem is the market system itself.

Somebody behaves badly in business

A bad personThe usual explanation. Some people are greedy, and they turn up everywhere, including in hospitals and churches.

A system that rewards itThe claim on this side. Not that markets contain greedy people, but that they select for greed and hand it the winnings.

Only the second column is an argument about markets. The first is an argument about human beings, and every position in this lesson accepts it. Keep the two apart and the rest of the page gets easier.

Hence, as Bill Moyers, one-time presidential assistant and prominent public television voice, argued, we must guard against “true believers in the God of the market who would leave us to the ruthless forces of unfettered monopolistic capital where even the laws of the jungle break down.”⁸³ Moreover, as Moyers continues, these market idolators may wrap themselves in the flag and rely “on your patriotism to distract you from their plunder. While you’re standing at attention with your hand over your heart pledging allegiance to the flag, they’re picking your pocket.”⁸⁴

This is all the more ironic because, as Lawrence Kaplan argued, “The market erodes national sovereignty . . . and, with it, much of the State’s legitimate authority. [If this process is not arrested], market identity [may] supersede civic virtue and national allegiance [as well as] foster . . . widespread atomism.”⁸⁵

Markets are inescapably immoral, and if we cannot eliminate them, we should at least not glorify them. Marcia Angell, former editor-in-chief of the prestigious New England Journal of Medicine, recalls that before the 1980s:

“There was something faintly disreputable about really big fortunes. You could choose to do well or you could choose to do good. . . . That belief was particularly strong among scientists and other intellectuals.”

Marcia Angell⁸⁶

It is important to stand up to what President Franklin Roosevelt referred to as “money changers in the temple” and “malefactors of great wealth.” But it is also important to recognize, and guard against, the greed that lies within each of us. No one living in an economically developed country can completely escape the charge of greed, because no one can completely avoid participating in a market system that thrives on waste, that ignores the sustainability of resources, notwithstanding the fragility of our increasingly crowded and overtaxed planet. As Bernard Muller said, in a letter to the editor of World Watch magazine:

“Against . . . growth-mania, we have as yet only a disarray of sustainability supporters. Not one government, not one country has renounced growth. . . . Society and governments must urgently intervene to impose upon the market . . . the objective of negative growth in physical resource use.”

Bernard Muller⁸⁷

Most of the chapter

1. Greed is out there
2. In plutocrats, robber barons, idolators
3. People you could name

The last paragraph

1. Greed is in here too
2. Nobody in a developed country escapes the charge
3. Including whoever is reading this

This side does not end by pointing at somebody else. That is worth noticing, because it is the part of the argument the other four answers find hardest to reach.

If greed is not exactly “good,” might it be at least useful?

Jennifer Beth Cohen states in her book, My Russian Affair, that: “Everyone’s life is all about himself or herself. That doesn’t mean that your concerns are all selfish or that you can’t or don’t care about others. But in the end it does come back to you, doesn’t it?”⁸⁸

One can alternatively argue that greed and aggression are not perhaps desirable in themselves, but still necessary for economic progress, a position that many commentators have taken. Ralph Waldo Emerson: “The greatest meliorator of the world is selfish, huckstering trade.”⁸⁹ Alan Greenspan: “[I]t is precisely the ‘greed’ of the businessman or, more appropriately, his profit-seeking, which is the unexcelled protection of the consumer.”⁹⁰

Economist John Maynard Keynes, by no means in the “greed is good” camp, thought that greed was useful, at least for now:

“Avarice and usury must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight.”

John Maynard Keynes⁹¹

The most forceful exponent of the “greed-is-good” philosophy, novelist Ayn Rand, held that greed is only menacing outside market environments: “When money ceases to be the tool by which men deal with one another, then men become the tools of men. Blood, whips, guns—or dollars. Take your choice.”⁹²

Channeled appropriately through markets, even the most immoderate greed, according to Rand, is only beneficent: “America’s abundance was not created by public sacrifices to ‘the common good,’ but by the productive genius of free men who pursued their own personal interests and the making of their own private fortunes. They did not starve the people to pay for America’s industrialization. They gave the people better jobs, higher wages, and cheaper goods.”⁹³

Indeed, Rand insisted, the selfishness of the rich and powerful is not even very selfish, properly understood: “The man at the top of the intellectual pyramid contributes the most to all those below him, but gets nothing except his material payment, receiving no intellectual bonus from others. . . . The man at the bottom who, left to himself, would starve . . ., contributes nothing [intellectually] to those above him, but receives the bonus of all their brains.”⁹⁴

BloodWhipsGunsDollars

She is not arguing that dollars are lovely. She is arguing that the list has only four items on it, and that whenever money stops being how people deal with each other, one of the first three takes over. Take your choice is the whole of her case.

Whatever one thinks of greed, it has no place in economic arguments. Markets are just technical, and thus morally neutral, mechanisms for human exchange

Social philosopher Daniel Bell described markets as a “techno-economic structure.”⁹⁵ Milton Friedman took the same position when he said that “[What is often referred to as the market] ethic . . . cannot in and of itself be regarded as an ethical principle; it must be regarded as . . . a corollary of some other principle such as freedom.”⁹⁶

There are numerous philosophical disputes flickering in the background here, technical philosophical disputes among rational choice theorists, welfare economists, and many others about whether it is possible to define concepts such as greed, selfishness, altruism, the collective good, and if so, how to go about it.

Two ways of answering the question you were asked

A moral questionIs it good or bad that we live this way? The first chapter and the first rung both think this is the question.

A technical questionHow does the mechanism work? A pulley is not kind or cruel. On this rung, asking whether a market glorifies greed is a mistake about categories.

This is the only rung that declines to answer. Notice that declining is itself a position, and that the two rungs above it both reject it.

No, the market is not morally neutral. It expresses an ethical principle, and that principle is not greed but rational self-interest

This is by far the best principle on which to organize a society. A defense of rational self-interest was memorably offered by the economist Adam Smith in the eighteenth century:

“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”

Adam Smith⁹⁷

“. . . He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. . . . He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”⁹⁸

The all-important distinction in Smith’s system is between rational and irrational self-interest. The world has had many economic systems based on irrational self-interest, and these bring only misery. For example, consider economic historian David Landes’ description of the Ottoman empire of the fourteenth to early twentieth centuries:

“The Ottomans had . . . taken over a region once strong, now enfeebled—looting as they went. Now they could no longer take from outside. They had to generate wealth from within, to promote productive investment. Instead, they resorted to habit and tried to pillage the interior, to squeeze their own subjects. Nothing, not even the wealth of high officials, was secure. Nothing could be more self-destructive.”

David S. Landes⁹⁹

Irrational

1. Take what is there
2. Squeeze the people nearest you
3. Nothing is secure, so nobody builds
4. The Ottoman example, and it ends badly for the takers too

Rational

1. Make something people will pay for
2. Come back next year and do it again
3. Which requires that they still trust you
4. Smith’s butcher, who is not being kind

Both columns are selfish. The word rational is doing all the work on this rung, and it means little more than taking next year into account. Whether that is enough to rescue the word from the first chapter is what you are being asked.

In Adam Smith’s and his successors’ view, it was the development of free markets that made rational, as distinct from irrational, self-interest possible. Walter Lippmann explained this idea: “Until the division of labor had begun to make men dependent upon the free collaboration of other men, the worldly policy was to be predatory. . . . At long last the ancient schism between the world and the spirit, between self-interest and disinterestedness, was potentially closed, and a wholly new orientation of the human race became theoretically conceivable and, in fact, necessary.”¹⁰⁰

The stress on rational self-interest also helps to explain why free markets are supposed to be “dog eat dog,” but are often quite civil and peaceful, indeed more civil and peaceful than authoritarian alternatives. Adam Smith stressed that rational self-interest is often a powerful tutor of personal and civic virtues: “Whenever commerce is introduced into any country, probity[,] . . . punctuality[,] . . . economy, industry, [and] discretion . . . always accompany it. These virtues in a rude and barbarous country are almost unknown.”¹⁰¹

Economist David Levy takes this further. Hope for personal gain may powerfully motivate us to pay attention to the needs and wishes of others: “Under [the profit system], even an insensitive man who would not pause to help a blind person across the street develops an interest in other people’s wants and whims when he contemplates investing in a business.”¹⁰³

The private market system is not grounded in greed, nor is it morally neutral, nor is it grounded in self-interest

Adam Smith seriously erred in suggesting that markets are based on self-interest, and his authority misled us for centuries. The market system teaches naturally selfish people to put aside their selfishness and practice some of the “highest” values of social cooperation that human beings have ever achieved.

“Market values” are the diametrical opposite of “every man for himself.” The “self-interest model” so beloved of economists is completely illusory. A young person may proclaim: I will start my own business in order to be my own boss. But if he or she persists in this illusion, the new business will fail, as most do. In order to start and run a successful business, one must be willing, above all, to subordinate oneself in the service of others. One must serve one’s customers and one must also serve and respect and nurture one’s employees.

Sometimes “bosses” are so talented or lucky that they do well without fully learning these lessons. Even then, they do not do nearly as well as they might have. The iron rule is: everything else being equal, the better you serve, the better you do. Predation, exploitation, parasitism, or greed may make this transaction, or even this year’s profits, fatter. But a business is defined as the present value of all future profits, and these true profits are ruined by selfishness, even so-called “rational” selfishness.

1This one sale, squeezed hard

2This year’s profits, fatter for it

3Next year, fewer people come back

4The business is worth less than it was

A business is the present value of all its future profits, so the whole line is what it is worth, not the high point. Every rung on this ladder agrees about steps one and two. They part company over whether anybody has to care about steps three and four.

“Market” values are not easy. They are extremely demanding, and in many cases take generations to learn. Nor are they “lower than” or “separate from” religious values. It is true that they are not identical to religious values, but they are rather “complementary” to religion and have arguably done as much as religion to “civilize” us, especially given the dark side of religion exemplified by religious wars. It is no coincidence that it was defenders of free markets who led the battle against world slavery and finally won it, against large odds, in the nineteenth century. As economist George Stigler writes:

“Important as the moral influences of the market place are, they have not been subjected to any real study. The immense proliferation of general education, of scientific progress, and of democracy are all coincidental in time and place with the emergence of the free enterprise system of organizing the market place. I believe this coincidence was not accidental.”

George Stigler¹⁰⁴

“Market values” are at odds with nationalism, tribalism, racism, and sectarianism of all kinds, and continually teach us to tolerate, work with, and ultimately appreciate people wherever and however we find them.

The hostile attitude of most economists toward the idea of the market as a source of moral values is hard to fathom, although it may simply reflect a lack of personal familiarity with business. Listen to Geoffrey Martin Hodgson: “The firm has to compete not simply for profit but for our confidence and trust. To achieve this, it has to abandon profit-maximization, or even shareholder satisfaction, as the exclusive objectives of the organization.”¹⁰⁵ This is quite wrong. In truth, confidence and trust do not in the least conflict with profits. On the contrary, one cannot have the latter without the former, as great businesses have shown throughout history.

Perhaps the ultimate wrong note of this kind was sounded by economist John Kenneth Galbraith, past president of the American Economics Association, when he wrote that: “There is nothing reliable to be learned about making money. If there were, study would be intense and everyone with a positive IQ would be rich.”¹⁰⁶ What Galbraith, like others, failed to see is that one does not necessarily need a high IQ to make money, but rather the right personal values, in particular an ardor to serve others and a degree of realism about how to do it.

Many economists do see morality in markets, if not perhaps the very highest morality. For example, The Economist comments on a study by Cornell economists Robert Frank, Thomas Gilovich, and Dennis Regan:

“If people can choose their ‘partners’ freely, and if honest types can spot each other in advance, co-operators will be able to interact selectively with each other—and will therefore do better than cheats. Experiments have shown that people are surprisingly good at telling co-operators and cheats apart, even on the basis of what seems to be limited information. So there you have it: narrowly self-interested behaviour is ultimately self-defeating.”

The Economist¹⁰⁷