Greed and Capitalism, Part 1

[This is the first of two articles considering Greed Is Not Good for Capitalism]

 

Over at The Gospel Coalition, Greg Foster takes on Max Weber, and importantly sees capitalism does not so much thrive on greed as on stewardship,

Capitalism has not flourished most where there was a spirit of greed. It has flourished most where there was a spirit of stewardship—a sense that we are responsible to make the world a better place. That—not greed—is what produces a capitalism that thrives.

Of course there are problems:

Capitalism creates wealth, and there’s no denying wealth creates special temptations. You don’t have to accept Weber’s economic charlatanry to see that!
There are other factors. In a society with religious freedom, it is especially challenging to maintain a robust public moral culture. The academic discipline of economics has adopted a materialistic anthropology and utilitarian ethical assumptions. Our political system has adopted many policies and practices that incentivize materialism, exploitation, and crony capitalism.

But are these flaws, or inherent to the practice of capitalism itself? Some thoughts.s

The notion that capitalism thrives in moral or Christian framework implicitly creates the tension that Weber observed. That idea means at the very least that there are certain values that precede and govern the economic enterprise. The very role of self-interest in transactions pushes players to test these moral boundaries. Indeed, the historical experience has been to validate game theory: violation reaps the rewards, thus the bitter outcomes of so many extractive industries. The corollary to this would be a degradation of standards, unsurprising since the observance of moral precepts, that is of self-limitation, is itself a cost. So utilitarianism, the role of self-interest (aka “greed” or in polite circles perhaps “fiduciary duty”) gets validated, and indeed becomes normative.

This conflict between the moral sentiment and religious grounding and the imperatives of the emerging market or capitalist economies is well attested to in the literature and journals of the 19th Century, or for that matter in the family practices of the great capitalists themselves (thinking here of Ron Chernow’s portrait of John Rockefeller in Titan). In short, it’s real.

Second, the article assumes in good business school optimism, that companies in fact act for the best interest (“humanizes work, builds trust with customers, and orients workers toward creating value and serving the customer with excellence”). Greater honesty would admit that realizing this view is more a matter of privilege, that many work only to survive, seeking a satisfice role rather than one of pursuing excellence. Where one does not have a market dominant position the force of competition at the least creates the sense that one cannot afford such a move to excellence, no matter how personally desirable.

And that brings the other issue left out here, the nature of internal policies. The question of greed is often as much expressed in how one understands the varying claims on revenue: what portion properly belongs to the investor, what to the worker, what to benefits, what to reinvestment, what to improved processes and the like. Again, there is a societal or group dynamic at work here that limits the view of the participants themselves as to what they may consider to be even feasible. (Case: in the 70s the Fortune 500 firm, Herman Miller, limited CEO pay to a multiple of 35x the wage on the floor; current practices would find that decision to be fiscally irresponsible. Or read Dickens to see what could be tolerated).

To sum, while the idea that capitalism rests properly on moral precepts and Christian teaching may offer an explanation of where and how capitalism works best, it is a notion that is limited. And indeed, were we to admit it, by putting (biblical) ethics before business, it functions as an implicit critique of current practice. And ironically, that is not so far from where social justice begins.

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