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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On the Rich

[Rev. Daryl DeKlerk wrote an essay in The Banner on the Occupy movement, ending with a celebration of the rich, an argument that they have earned their wealth. Well maybe yes, but then again… ]

I’m also one of those who would be cautious about how we deal with social and economic issues. This is the territory for wisdom and prudence.

Rev.┬áDeKlerk does a fine job highlighting changes in global economics, and had he left it there I would be rather edified. It’s when he moves to the domestic front that he gets in trouble. There are three areas where I get cautious.

First, biblically: Scripture (and experience) does not allow us to take an uncritical eye on the rich or the poor. Whether we look at Proverbs, James, Luke or the prophets we encounter cautions about wealth and the spiritual dangers that arise from riches. The human, fallen nature of ours makes it easy to self-deal and look only after ourselves and our families. This note was missing in Rev. DeKlerk’s essay.

Second, economically: the treatment of the rich, the notion that they “earned it” would benefit from greater study of the structure of wealth. While some grow wealthy by leading and building teams in entrepreneurial organizations, other paths include the financial sector (a segment that has expanded substantially in the US economy in the past generation), natural resources, real estate, and inheritance.

As to earning it, as late as the mid-70s the chairman of Herman Miller was limited to a multiplier of 35 — his income was to be no larger than 35 times that of the average wage on the floor. And that company was not alone. Today, the multiplier is on the order of 300 – 400: has the executive suite become that smarter in this past generation?

Finally, Rev.┬áDeKlerk runs into the real differences between the United States and Canada. The two nations have quite different tax structures, and differing political approaches to their tax systems. Thus to say we shouldn’t raise taxes will mean one thing where there’s a 13% GST, say, but quite another where such phrases have a particular political and partisan cast.

The question that he has stumbled into is that of what makes a tax rate just — this is an interesting topic, but I am not sure it is one for a general publication such as The Banner.