What You Should Think About Greed

December 1, 2007

“Greed is a bottomless pit which exhausts the person in an endless effort to satisfy the need without ever reaching satisfaction.”

–Erich Fromm

Roaming the blogosphere provides observers with no shortage of comedic sights. People just making their first efforts at articulating political thought may give off that adorable vibe one senses in little children trying to get their hands around an adult tool. Then again, if the message is sufficiently hateful, they may instead give off that disturbing vibe one senses in little children trying to get their hands around a loaded firearm.

A prime example of this phenomenon is the vast array of instances in which the Gordon Gecko “greed is good” speech is cited as a compelling defense of cutthroat capitalism. Anyone of sound mind who actually watched Oliver Stone’s Wall Street couldn’t come away seeing Gecko as a hero. No doubt he was a complex and charismatic character. Also, in the context of the dramatic moment, his speech was an appeal to idealize cutthroat capitalism. Yet in the broader context of the film, the character was clearly a villain willing to inflict enormous pain and suffering on others simply to add even more money to his own uselessly vast personal fortune.

As a character, Gordon Gecko was an exceptional man. For example, he referenced Sun Tzu in a business context without completely mangling the application of that ancient wisdom. Ordinarily, when an executive or manager invokes that sagacious general, it is just before pulling a monumentally stupid move. The Art of War has much to teach about abstract strategy. Yet it also has much to teach about overseeing armies of slave-conscripts in the midst of deadly struggle. Since that text became fashionable with the MBA crowd, it has done far more to promote the view that free workers engaged in constructive endeavors should be treated like slave-conscripts than it has done to refine the abstract strategic thinking of business leaders.

Likewise, if his words are to be believed, Gordon Gecko was right to call for sweeping reform of management at Teldar Paper. When a private enterprise is taking huge losses while continuing to pay out large salaries to an unproductive legion of executives, change is warranted. Yet his actions represent the exception that proves the rule — not the rule in action. In reality there are plenty of bloated Teldar-style corporate bureaucracies and very little pressure to link pay with performance. Insofar as reality’s Wall Street drives business trends, it promotes the search for cheap labor abroad rather than real restraint in the realm of executive compensation packages.

If popular beliefs about the benefits of cutthroat capitalism were remotely true, then bloated executive payrolls at unprofitable companies would be rare and short-lived. Instead of the tight correlation between productivity and executive compensation that capitalism is thought to promote, year after year in the U.S., executive pay raises consistently outpace overall economic growth, sometimes by a substantial multiple!

Architects of modern capitalism often spoke of “enlightened self-interest.” In a world where capital market activity involves long-term investors taking an active interest in the management practices of companies they partially own, there is at least the theoretical possibility that greed will tend to promote good business practices. We do not live in such a world.

Much of the activity in capital markets today is short term speculation. Investors seek to cash in on growing trends or public reaction to world events rather than build wealth by supporting wise executive stewardship. Even institutional investors, like mutual fund managers, are no longer likely to hold long term positions of any consequence. Though he is held in much esteem amongst financiers and tycoons, virtually no one today emulates Warren Buffet’s practice of actively monitoring the management practices of companies supported by his investments. He has become a living relic of a bygone era.

The end result is an economic dystopia alluded to in Oliver Stone’s film. Corporate raiders gain control of a business, loot it for saleable assets, trim workforces, further cut payrolls by replacing experience and skill with untrained novices, declare an impressive short term profit, then laugh all the way to the bank. It is a strong driving force in the “race to the bottom” — a steady decline in the quality of goods and services. While financial insiders get new piles of money to place alongside the piles of money they already possessed, thriving businesses are gutted and abandoned.

Depending upon economic elites to be consistently enlightened in their pursuit of self-interest makes no more sense than depending upon hereditary aristocrats to be consistently enlightened in the exercise of despotic power. The core idea behind the establishment of the United States was that exploitation of the many by the few could be disrupted through periodic redistribution of power according to the results of a nationwide public process. While this approach to political power is widely embraced, it is hard to imagine many Americans endorsing a similar approach in which wealth would be periodically redistributed.

In fairness, there are some good consequences to economic inequality. Then again, there is a vast range of possibilities between absolute economic equality and cutthroat capitalism. Right now, only the empty promises of trickle down economics answer any demand for social justice. Just imagine the outrage if a group of hereditary political aristocrats answered calls for democratization with flimflam about how their immense personal privilege will eventually spill over to empower ordinary citizens.

Wealth and power are not the same things, but no society that has accommodated extreme concentrations of wealth has found ways to prevent them from also serving as extreme concentrations of power. Some would defend a greed-based competitive paradigm with assertions about human nature. “Communism didn’t work because people are too greedy” goes the propaganda point woven deeply into the fabric of American culture.

If we actually governed ourselves with total deference to human nature, then we might also argue that medicine doesn’t work because people are too vulnerable to sickness or police do not work because people do not possess a natural tendency to comply with statutes. Government is not about shrugging and letting the worst of human nature determine the course of human events. Government is about taking collective action to restrain the worst of human nature and promote the advance of civilization. In short, it is a means to transcend “the law of the jungle.”

Because of the strong connection between wealth and power, a system that is dedicated to rewarding the effective actualization of personal greed is a system that empowers the selfish, the dishonest, the shortsighted, and even the larcenous among us. It should come as no surprise that the end result is a tendency for public officials to wallow in the spoils of legalized bribery while looting the public treasury to subsidize their coconspirators in the military-industrial complex.

I do not contend that an absolute equality of wealth is either attainable or desirable as a matter of public policy. Yet I do contend wholeheartedly that anarcho-capitalist ideology is an immensely harmful set of ideas rooted in falsehoods. These falsehoods are sustained by popular personalities who manage to combine shoddy analytical skills with an excellent ability to manipulate the emotions of their gullible admirers. Even as American civil rights, environmental conditions, economic vitality, public morale, and global prestige are being devoured by the politics of selfishness, millions of voting citizens will perpetuate their habit of endorsing a candidate based chiefly on false promises of fiscal restraint.

I have no trouble agreeing with the consensus of religious teachings that greed, far from being good, should be regarded as an anathema. Yet I also acknowledge that, in specific contexts, subject to reasonable restraints, greed can be useful. We do not need to take “self-interest” entirely out of the American way of life, but it is long past time to restore “enlightened” so as to strike a optimal balance. This balance permits collective action to solve real problems facing real people in our own times while also permitting individual action to produce individual rewards. Decades of policy from dozens of prosperous nations prove that this balance can be achieved. All we need in our own society is the will to make it happen.