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Forum on Economic
Reform In recent
decades the alliance of neoclassical economics and neoliberalism has hijacked the term “economic
reform”. By presenting
political choices as market necessities, they have subverted public debate
about what economic policy changes are possible and are or are not
desirable. This venue
promotes discussion of economic reform that is not limited to the one
ideological point of view. Greed
(Part I) Julian
Edney
1
©
Copyright: Julian Edney 2002-2005
An essay
concerning the origins, nature, extent and morality of this destructive
force in free market economies. Definitions. Paradoxes and omissions in
Adam Smith's original theory permit - encourage - greed without restraint
so that in a very large society [USA] over two centuries it has become an
undemocratic force creating precipitous inequalities; divisions in this
society now approach a kind of wealth apartheid, and our values are quite
unlike Smith's: this is an immensely wealthy society but it is not a
humane society. Wealth and
poverty are connected, in fact recent sociological theory shows our
institutions routinely design inequality in, but this connection is
largely avoided in texts and
in the media, as is the notion that greed is a moral wrong. Problems
created by greed cannot be solved by technology. We are also distracted by
already-outdated environmental rhetoric, arguments that scarcities and
human suffering follow from abuse of our ecology. Rather, these scarcities
are the result of what people do to people. This focus opens practical
solutions. Sign the tab in certain Midtown eateries and
your neighbors’ eyes slide over. Is that a
$48,000 Michel Perchin pen? What’s on your wrist
– a $300,000 Breguet
watch? In Palm Springs and Bel Air, $100,000 twin-turbo Porsches and $225,000
Ferraris buzz the warm streets. In New York at an exclusive Morell & Company auction last May, a single magnum
of Dom Perignon champagne was sold for $5,750.
And there are the paintings of course - one evening at auction two Monets sold for $43 million.2 Hotel rooms,
anyone, at $10,000 a night?
Estate agents in suburbs of Dallas and Palm Beach have advertised
baronial homes for sale at over $40
million.3 These are prices paid by the exceptionally
wealthy, the folks who skim the pages of the Robb Report (average annual
salary of subscribers: $1.2 million) in whose glossy pages are reviewed
the best of everything. In a recent issue a southern plantation is
advertised, "everybody's dream," at $8.5 million. Robert Reich points out that the superrich live
in a parallel universe to the rest of the country: much of the time we
don’t see them because they live in walled estates, travel in private
limousines and use different airports from the rest of us.4
There’s lots of them. There are now more than 200 billionaires. Some five
percent of American households have assets over $1 million. And we’re back
to levels of extravagant consumption not seen for 100
years.5 By historical accounts this is a nation of
persistent and resilient people with an unshakable mission: the pursuit of
happiness. This idea of happiness is largely connected with wealth (and
this connection has long philosophic roots). It is a nation of ambitious
people with notions of unfettered future growth, a nation that celebrates
abundance. There seems to be no reason anyone should be deprived of
luxury, if he works hard. Indeed with this country’s aggregate wealth,
there should be no reason anyone should ever go hungry or
suffer. People are going hungry in America. A Los
Angeles survey found more than a quarter of low income residents, many
working, are not getting enough food to meet basic nutritional needs. And
10% are experiencing hunger.6 Estimates are that 3 out of 10 Americans will
face poverty sometime in their lives.7 Misery is a word seldom applied to the
contemporary scene. Like wretchedness it seems antique, an Old World term.
But many Americans live in cold, dank slums; many do not earn enough for
shelter, many sleep outside. In America’s inner cities and at its lowest
levels, under freeway bridges and in tubercular alleys, in stained and
broken rooming houses and in torn-apart schools, misery exists and
persists. All our largest cities contain neighborhoods where some people live day to day in
apartments that could be mistaken for closets, some fearing to leave home
on gang-terrorized streets, some sharing bus seats with people with
drug-scarred arms. Every great metropolis has its skid row mired in fecal gutters, where whole blocks are awash in
narcotics and violence, its inhabitants despised and flatly
abandoned. America is once again a nation of
extremes. Sealed Off As this society grows, it becomes more unequal.
As aggregate wealth goes up, equality goes down. Our population has soared
13.2% in the last decade alone to 281 million,8 and the wealth
has been concentrating in fewer hands (it has since the 1770s9)
and the difference between the richest and the poorest is now immense.
While the wealthiest individuals count their assets in the tens of
billions, the lowest classes are falling. Americans’ earnings are more
unequal today than they have been any time in the past 60
years.10 Some corporations' CEOs have
been making over 400 times the hourly rate of their lowest
worker11 but this inequality is not just a feature of
businesses, it spans a variety of professions, perhaps to include my favorite musicians and your favorite athletes. For example, shortstop Alex
Rodriguez's $252 million 10 year baseball contract pays him $170,000 per
game.12 To a person receiving the average allocation of $83 per
month in food stamps, the inequality is astronomical, and the chances of
closing it so small it doesn’t feel like a real freedom.
If the best-off are sealing themselves off, the
worst-off are also doubly fenced about, this time by the distrust and
aversion of those above. Around 20% of American children are living in
poverty. An estimated two million are homeless some time during the
year,13 including whole families and people who have full- or
part-time jobs.14 This is a flamboyantly optimistic and
self-congratulatory society, and the puzzle is why it allows this
suffering. The inequalities are stunning, but a frequent attitude is a
shrug – so what?. These days it is hard to plumb a
concern. Frequently I survey acquaintances with this
touchstone question, attributed to Rawls:15 Suppose there are
people living on one side of a big city who throw weekly parties so lavish
that afterwards they are throwing out meat, while on the other side of the
same town are people so poor they cannot afford to buy meat at all. Is
this a moral problem? I get a spectrum of answers: "No problem" to
"Yes, of course" and in between "Technological, but not ethical problem,"
and "Maybe, but (horrified look) what solution are you pushing?" – as well
as some yawns, as if these questions were so old fashioned. I believe the
variety of these responses eventually leads to the question of what kind
of society we live in. Winner Takes All My first point is that these extremes of wealth
are connected. While the rich are growing richer, the poor are growing
poorer,16 and this is no coincidence. But we largely deny the
connection. This is a society which, as the divide between the happy and
the abject grows, tries, now by education, now by medication, now by
paradox, now by distraction, to avoid the inhuman consequences of its
collective actions, and in the end – because none of those strategies is
effective – it is one that uses specific strategies for vacating reality.
Defenders, of course, argue that the rich
getting richer benefits all, and that in an economy that is an unlimited,
growing, open system, all can rise, that (once we get through temporary
difficulties) we will find a full and abundant
world. In fact these are not so much arguments as
swollen cliches. There is indeed a problem, and it has a
history. I will sift the philosophy of utilitarianism and Adam Smith’s
founding economics theory for origins. Smith's 1776 treatise, we recall,
tied the growth of wealth to the work of common entrepreneurs. It refused
the inherited inequalities of aristocracy and with the Enlightenment's
notion of reason, a quality accessible to Everyman, it promptly
democratized the economy. This philosophy was exported whole cloth to the
new America, and it has since grown to dominate our economic policies, its
influence is now worldwide. But despite its original claims, we will find
it woven with mystical filaments and contradictions. I will show that as
the theory is commonly related, it is hard to separate rationality from
dogma. Competition is a fundamental good in
utilitarian economics. Competition is a process which results in
inequalities – winners and losers. It cannot be, in a society of free
competitive units, that competition among all is good for all. Modern
analysts Cook and Frank show free market competition has become so stark
that we are becoming a winner-takes-all society.17 In a giant
economy, aggressive acquisition, greed, where so widespread and popular as
to be celebrated, has resulted in colossal differences, so that, as much
as we are accustomed to reproaching the Europeans for their inequalities,
we are now caught in a lie. We have become more unequal. The United States
is the wealthiest nation. But its 20.3 percent child poverty rate ranks
worse than all European nations.18 Historians Will and Ariel Durant19
estimated in their survey that the gap between the wealthiest and the
poorest in America has become greater than at any time since Imperial
plutocratic Rome. Paradoxes Inequality is a non-issue to the defenders of
Smithian economics. The pursuit of excellence
makes it inevitable and, they argue, the pursuit of excellence benefits
all. So we are hostage to a paradox. As powerfully as we struggle for
wealth and happiness we fling ourselves on the axiom that we all are
equal, leaving some damage to the national psyche. The whispered truth is that this nation bent on
the pursuit of happiness is not so happy. Suicide afflicts all classes,
and suicide rates are now so high as to eclipse homicide rates with three
suicides for every two murders. Surgeon General Satcher partially blamed the media.20
Clinical depression is at its highest rate in decades.21 There
are unprecedented rates of anxiety, companionship itself is receding,
trust is fading.22 Tens of millions are using prescription mood
elevators. Scarcity oppresses. And the worst signs of
unhappiness cluster in the lowest cuts: we have among the highest national
rates of imprisonment, and the Administration concedes there are 5 million
hard-core drug users in America23 and millions of alcoholics,
all disproportionately among the poor. Resonating with the battle cry of the French
Revolution, Liberte, Egalite, Fraternite, the
American Constitution was written with promises of human liberty and
equality. Freedom and equality qualify as the fundamental political
virtues. They are the two legs upon which democracy walks.
The second of the promises is broken.
So we first have a philosophical problem: There
are many reasons for inequality, but it is ensured in an unfettered
materialistic society by a celebrated style of acquisition we call greed.
Greed is not just the whimsical excess of the individual. Its most
virulent forms are displayed by business groups and corporations – but
aggregated, it is an antidemocratic force. Greed demolishes equity. Simply, you cannot
have both unrestrained greed and equality. Apartheid Economy The principle of freedom always comes first,
argues the Smithian capitalist. But in America,
freedom has become something else, a wild individualism24 with
a strange amnesia – a disconnect between parts of our culture. A kind of
sociopathic haze is settling, helped by
mood-altering drugs and television, and appearing in the fashionable cluelessness and chic ignorance - so ubiquitous they
have aerated society to numbness. Another facet is the narcissism (to
rival one of Dostoevsky's characters so narcissistic he cared more about
an ounce of his own body fat than the lives of 100,000 of his own
countrymen25). What the free individual chooses to do is now
paramount., and the poor understand that detachment is the pivot.
Detachment allows the paradox that you can both compete with others but
not be involved with what results. The concept of "the common good" has almost disappeared, and nobody
is his brother's keeper. Neither are these inequalities an unfortunate
by-product of the healthy struggle. Competitive acquisition for the sake
of exhibition is again in vogue – and it seems television repeatedly
flaunts that on the way to wealth, there are no principles competitors
won’t compromise. Besides hunger and fear, lack of health care, decent
education and housing shortages, which make living hard, the poor live
with brash opulence in their faces. People in decaying buildings daily
watch glittering television scenes of shining cars, ocean yachts, and
overflowing parties of the rich and famous. Owned by these images, a poor
person cannot but feel the differences, and year by year these images add
a sedimented frustration, resentment, sense of
failure and inferiority which they cannot avoid. Poverty is also punitive. The poverty-struck
family is not just paying the price of its own failure: it is also paying
the price of others’ success. Still, many regard these problems as if they
were no more than the economy’s stubble, moles, and split ends.
Second, we have a practical problem. The Durants show a cycle repeating through history. Great
social inequality creates an unstable equilibrium. The swelling numbers of
the poor and resentful come to rival the power of the rich. As grievances
and restlessness grow, government worsens, becoming tyrannical. Eventually
a critical point arrives. Wealth will be redistributed, either by
politics, or by revolution. Denying the Shadow Could it happen in America? To some analysts,
it is already beginning. A survey released by the Milton S. Eisenhower
Foundation attributes our enduring levels of violence to "vast and
shameful inequality in income, wealth and opportunity among urban poor"
who are often "trapped in places of terror"26 - inequalities
which are simply un-American, opines C. Murphy.27 Troubling
studies exist, but we surround this research with technicians questioning
methodology and politicians arguing the study represents no reality. There
is denial: "Forget the data," asserts one newspaper columnist on poverty
issues, "…things have gotten better."28 Finally, this issue is no longer the
environmentalist's concern about scarcity of natural resources, nor the
population expert's warnings about Earth’s limits to growth. These
scarcities are man made, the result of what people do to people. The fact
is, far from being an abundant world, it is a world of scarcity because we calibrate
it so. And yet the moral connection is absent. Currently our aggregate wealth is like a high
tide, covering many unpleasant things on the ocean floor. When there is
full employment, we all seem happily raised. But a few years ago the
Harvard Business Review carried an article daring to look down: Richard
Freeman29 warns that under the surface America is becoming
dangerously segregated, forming an apartheid economy, and the lowest are
not free to move up. Freeman adds a shadow. He sketches in a huge new
group of Americans, the economically sinking workers who are trailing
their counterparts in other advanced countries. Sociologist Derber’s
point is that where people are homeless, starving, or jobless, civil
society has failed.30 But these demographics will not reverse,
because we are a society busily denying its own shadow. In this essay I
will pull back the curtain on the irrational in this driving, powerful
economy. Instead of an overarching machinery running on smooth technical
devices, we shall see a clutter of denial, rationalization, visionary
statements and internal contradictions. And the quietness around this
topic has another reason. Perhaps we had better be quiet. If we look up,
we see Goliath. Definitions Greed vastly predates Smithian economics, of course. It is one of the
Bible’s Seven Deadly Sins. Contemporary dictionaries define it as intense
acquisitiveness of (usually material) goods or wealth. To dilate: Greed is
the acquisition of a desirable good by one person or a group beyond need,
resulting in unequal distribution to the point others are deprived.
Competitive greed is the same type of acquisition deliberately to create
that inequality. Punitive greed is the same type of acquisition
deliberately to leave the deprived suffering, powerless or disabled.
Sometimes it takes fine grained analysis of circumstance and motive to
distinguish these, but all the preceding involve overt behaviors, and the measure is the resulting
inequities. Simple greed does not require intention, for instance while
continuing to acquire in the face of others’ deprivation a person denies
greed explaining he is unaware of results; it is still greed, the measure
being the resulting inequity. Next, passive hoarding which perpetuates
extremes of inequity previously created is also greed. Next, greed is not
always impulsive. It may be planned and calibrated; sustained effort and
greed are not incompatible. Next, greed can be exhibited by person, group,
corporation, even government. Common observation also shows personality
differences. Not everybody exhibits the extremes of greed; but I believe
all people act on the impulse at some time in their lives. Separately,
greed can be purely mental, a longing, or craving, akin to obsession and
addiction, not acted upon, but this is the province of the
psychologist. In practice, as James Childs points out, greedy
individuals usually hoard both wealth and
power.31 The origins of greed are not mysterious. Like
the origins of the drive for power the seeds are everywhere, and if a
little bit feels good, more must be better. Previous lack is not necessary
to start greed any more than fire is started by lack of fire, but like
fire greed expands where it can, it has no internal homeostatic mechanism
and the bigger it gets, the faster it grows. Its spread is also quickened
by social imitation, akin to panic spreading through a crowd.
Greed is not a rational
force. As a concept greed has largely lost its moral
sting. Few contemporary dictionaries include that it is reprehensible. The
modern fashion not to sound judgmental, situation ethics, and the habit of
social scientists to use past deprivation, social pressure, low self
esteem, background, entitlement and myriad extenuating circumstances to
explain the behavior, make the moral question so
complex, all has crumbled into uncertainty. This essay resurrects the moral dimension. If
the consequences of greed are harm and pain, it is immoral. If greed is
flaunted, when the pain is known, it is also sociopathic. These situations are quite common. Anyone
doubting the concept of punitive greed should recall that the ancient book
by Sun Tzu The Art of War is required reading in top corporate
circles. Not all wealth is created by greed, and not all
inequalities are caused by greed, but if you could start with a society of
complete equals, unrestrained greed will be sufficient to quickly render
that society unequal. It is also the purpose of this paper to suggest
repairs, for which we need to know how our present problems started. Our
founding economic theory is tangled. You
had to be Bold The ordinary test of a philosophy is whether it
makes people better and happier, whether it results in prosperity,
cooperation and peace. Utilitarianism seemed a swaggering success because
it dismantled the smothering pessimism of the Middle Ages, when a social
caste system shackled your life chances, church dogma shrouded attitude
and thought. Hobbes's dictum at the time was that life for Everyman was
solitary, nasty, poor, brutish and short . Our current economic theory is
based on a radically different idea. You had to be bold bringing out new ideas in
the European 1700s but they were revolutionary times and philosophers
risked their necks pushing some new arguments that people were created
equal and each had the liberty to create his own destiny. The French
Revolution opened with its violence for equality. In England these ideas
took shape as utilitarianism, a put-together philosophy that is neither
profound nor poetic, but which was brazenly inclusive, and it
confronted a national system
of unbearably elaborate dogma and ancient ritual. Jeremy Bentham, Henry Sidgwick,.
J.S. Mill and Adam Smith drew the
footings. Inverting the Problem Rather than religious, utilitarianism uses
secular, psychological motivators to explain human behavior, the emotions of pleasure (happiness) and
pain. Pleasure is a good. Its ethics: units of pleasure and pain can be
summed and compared, and we should choose the act that results in the
greatest good for the greatest number, calculations that any person can
do. Utilitarianism is practical, astonishingly democratic, and
astonishingly rule-free. The utilitarians
bluntly advised governments, let the people alone. Let them be human,
doing what they do naturally. So instead of having high priests and nobility
dictating values, utilitarianism promotes the values of science, which are
truth, practicality and factuality. Adam Smith’s contribution was a step
further, to give happiness a mercantile slant. In the new philosophy there
is no conspicuous concern with sympathy, compassion, honesty, courage,
grace, generosity, altruism, charity, beauty, purity, love, care nor honor. It accepts that humans are fundamentally
selfish and egoistic and that they don’t care about society-as-a-whole. So
how does utilitarianism reconcile the selfishness of individuals with the
common good - a problem no other social philosophy had solved?
Adam Smith’s breakthrough was inverting the
problem. He simply declared that the selfishness of man and the good of
society go together. The general welfare is best served by letting each
person pursue his own interests. Each unit egoistically strives to better
his own lot and maximize his own pleasures. In exerting himself so, he
looks for efficiency, for better ways to make money. He’ll invent a better
way to cure hides or find a quicker delivery route, for entirely personal
gain. But these are soundly rational moves from an economic point of view,
and when everybody does this, it sums and spreads through the community,
which is improved as if lifted by an invisible hand because no individual
intended that end. And we note all of this is achieved without the value
of justice, because justice, like the preceding list of noble values, is
not a natural quality. It requires rules, and utilitarianism is
fundamentally to be rule-free. Its writers were bold. Utilitarianism pitched a
very big tent. As far as theories go, it is fabulously inclusive, reaching
down from intrahuman emotions all the way up to
prescriptions for nations. For Smith, a country is its economics.
Exported raw to America, this principle spread
like wildfire, melding with the American philosophy of Pragmatism. Old
morality withered, except where it became an instrument of economic
progress. Little of value existed outside of usefulness, and a
means-to-ends consciousness became urgent. It also emerged in the national
consciousness that this pursuit was unlimited – this was the spirit of
freedom. At the end of the 1800s, enormous business and
enormous acquisition was understood as heroic. It still is. We still
believe in the invisible hand, and that the outsize wealth of the topmost
benefits all. These are the footings of our contemporary capitalistic
society and our progress in national wealth has been the awe of other
countries. Lost
in the Rout The typical high school textbook teaches a
skimmed version of Adam Smith’s argument that as the rich get richer, it’s
good for everybody. Not until he gets to college does the student find
complications in Smithian capitalism, such as
the persistence of inequalities, and of poverty. If the student pursues
the study of economics he will eventually read texts containing
"Indifference Curves" which show the economy actually does better with
social inequality.32 The original ideal of equality is tainted,
the pursuit of happiness is full of conditions. Utilitarianism runs into trouble with some
simple counterexamples. If we should judge an act by what brings the
greatest good to the greatest number (the ‘hedonic calculus’) then, for
instance, in setting up a factory to make cheap clothes, the pain caused
to employees doing tedious work for low wages is offset by the greater
benefit to the greater number of customers who benefit from cheap clothes,
and the factory is a good idea. This example shows how the hedonic calculus is
a sum of pleasure units weighed against units of pain. It is a simple
additive economics, held to be rational. But in each example, there is no
provision for the minority caught offside. Why don’t we have public
executions? – the pain to the victim would be more than offset by the
summed satisfactions of all the spectators. A second counterexample, in
different circumstances: suppose, on a battlefield, a hand grenade is
tossed in on five soldiers in a trench. If one of them throws himself on
it, saving the lives of the others, the hedonic calculus makes this a good
act. But utilitarian ethics is also satisfied if one of the soldiers is
pushed or ordered onto the grenade because four lives are still saved at
the cost of one. Other philosophical systems would consider that an
entirely different act. The usual explanation for these counterexamples is
that utilitarianism includes an understanding that we are all enlightened
people with civilized motives. Selfish, yes; competitive, yes. But we
would never take pleasure from the suffering of another human, and we are
not cruel – we are simply not that kind of people. We are a species of competitives, and each person is inclined to do what
benefits him and utilitarianism does not recognize greed nor avarice as
moral wrongs. It regards self promotion as rational. It does not list
equality as a social virtue. The problem is, utilitarianism is a
philosophy with no ideals to offend anybody – just what
works. In the 1800s, through its industrial stage,
Smithian economics consumed whole cities, and in
the rout, gentlemanly civilities were lost. Some people got prodigiously
wealthy, others suffered. But Darwinism was also rising and the
robber-baron acquired allies among the Darwinists who held that inequality
is an unavoidable fact of nature, so in capitalism’s results, no guilt. It
held, there are only the strong and the weak. Historically, it took more
than a century after Adam Smith for the western democracies to question
child labor. Until that time, the invisible hand
justified the misery of legions of ragged and barefoot children whose
lives were ruined in dank mills and deep mines, whose profits made Britain
and America so powerful.33 Squeezes In fact there are many ways to crack Adam
Smith's theory and John Nash's34 famous mathematical rebuttal
is only one. An elementary rule of logic is that when there
is a contradiction anywhere within a theorem, the whole theorem is false.
The center of Adam
Smith economics is a paradox. It says, what’s good for the selfish
individual is also the common good. Secondly, it says, when you and I are
in competition, what’s good for me is also good for you. Those two by
fiat. Next paradox: utilitarianism does have an
indirect gesture at equality. The notion is that when many units compete
under the same rules of market exchange, the ever-circulating of goods and
money keeps the whole system fluid; units are free to enter and exit this
system at will. There is only one system, the free market, so we are all
in the same boat, so we all must be the same. In practice, of course,
history shows us a boat or ship of state with sweating galley rowers down
on benches in the bilge, and with people up on deck all dressed in colorful finery, their faces upturned into the
glorious sun. Yes, we are all in the same boat. And what is different is
supposed to be the same. The fourth self-contradiction is that free
market capitalism is supposed to rectify past inequalities by allowing
free competition, which is something that results in inequalities.
Further, Smith’s system cannot be regulated at
the extremes where self-interest becomes the greed of not-so-well
intentioned entrepreneurs, profiteers in cartels, and of corners,
squeezes, and monopoly makers. All of these also want wealth but they are
for the common bad. But here is the most obvious point. Try to fit
greed into the hedonic calculus and watch the ethics. Greed is the
outstanding moral wrong because it reverses the utilitarian ethic, with
greatest happiness for the smallest number. The most popular way to handle paradoxes are to
ignore them, of course. They take thought, and I'll argue later this is
discouraged by our culture of bombastically bright entertainment. Another
way is to repair them with rationalizations. Historically, the
contradiction between the Constitution's talk of happiness and justice,
and what was visible to the naked eye, that most workers’ lives were still
nasty, brutish and short, was rationalized by saying actually pain and
suffering are good because they goaded the poor into greater efforts, thus
the economy is energized. And this rationalization thrives today.
Since the promise of upward mobility is
axiomatic in Smithian economics, we should take
a closer look. Present inequality is vast enough, the chances for the poor
to work to close up the gap are long gone. Inequalities of this magnitude
tend to become hereditary35 and by and large, the descendants
of the American poor will be poor. Upward mobility is a sacrosanct notion
in Smithian economics, very widely held because
the freedom to move up represents hope - in some people’s minds, this
freedom rebuts all criticism of the system. Let's measure this myth. While
there is freedom to move up adjacent classes (a stock hand may rise to
supermarket manager in a lifetime), the same freedom allows many people
also to fall, which is called downward mobility, and which occurs in
similar numbers. But the chances of a person born poor climbing all five
classes into the top ("making it"), while occurring in a few widely
publicized instances, are too small to constitute a real freedom.
(Remembering that the top is an extremely thin, long tip to a
pyramid,36 one sociologist puts the upper class at roughly 3
percent of the population. About 7.7% of that has moved in from below – a
minute, and historically persistent, figure.37 The argument
that everyone is free to rise to the top is dismantled in most
introductory sociology textbooks - although a student must usually wait
until college to read this. But the trick of flaunting possibility to mask
actual probability is not a casual device. These paradoxes are no less nonsensical because
they are cross-stitched into the writings of professional economists.
Economists have been building on Adam Smith's examples of pin factories
and canal barges for more than two hundred years. Our libraries contain
shelf upon creaking shelf of intellectual embroidery around these basics.
But the end result is that today all we have is a long, groping slavery to
principles which don’t work; can’t work; because some of Adam Smith’s
axioms don’t even rise to the level of common sense.
Mystique A historical detail: one of the popular
distractions of Smith's era was spiritualism. The vernacular was
everywhere. Rawls has unearthed a minor book in utilitarianism, F.Y. Edgeworth's
Mathematical Psychics. In that era, leisure time for the upper classes was
spent at seances. Sidgwick was president of a Society for Psychical
Research and actually conducted experiments to evoke mysterious forces.
Science was in its infancy. And Smith's "invisible hand" is not a
scientific principle. It is a mystical concept. Marx's principles were once the major rebuttal,
but now that communism has largely collapsed (of the world’s 260 countries
only 5 now are communist) Adam Smith’s doctrine appears to emerge again,
as if the winner, a victorious truth. If size is success, the showcase
example is today’s megacompany, the corporation
"overweeningly powerful and accountable to no
one",38 almost magical, because the belief also lives that once
a certain high level of anything is achieved, you are invulnerable and
above the law. This is a place where heroes live – the Nietzschean mystique – where big things get done,
where no one is slowed down by theoretical contradictions.
Money Happiness Recently, psychologists have provided a
decimating argument against Smithian theory.
Ryan and Deci39 have summarized a whole literature in
psychology on the antecedents of human well-being. Psychologists have
always wondered what makes people feel good, and for decades they have
quizzed people on the intricacies of happiness. The general answer, all
the more reliable because it is based on voluminous and cross cultural
research, is that money is not a reliable route to happiness. Happiness is
based on other, internal factors. The relation of wealth to well-being is
tenuous; only below the poverty line does money bring well-being, above
it, increases in personal wealth do not bring increased happiness. A
corollary finding is that the more people focus on financial and
materialistic goals, the lower their feeling of well-being. Finally,
certain people tenaciously believe that money does bring happiness; they
are the unhappy. Together, these findings largely dismantle Smithian theory of human motivation. For the present
essay it also means that the motivation behind greed, pursuit of material
wealth to extremes, cannot be for the happiness it brings. There is
nothing heroic about greed. It is closer to obsession.
In fact, after the fall of communism, most of
the original problems of industrial capitalism have reemerged too – in different guise. Instead of local
factories and mills, we have transnational
corporations, just as indifferently employing hordes of unprotected labor, including children, for egregiously low wages
in foreign countries. All notable developments for a philosophy that
was invented against privilege and tyranny. Making It If we are to build up a system with paradoxes,
we must promote contradiction as we go. This begins with the contradictory
myths we are teaching our children. We are currently teaching our young two
incompatible morality tales. Horatio Alger's children’s books from the 1800s
tell the story of a boy from ragged tenement origins who struggles from
poverty up to riches in an urban odyssey of unflagging effort,
single-minded ambition, determination, tenacity and hard work. The boy
hero meets tyrannical employers, jealous competitors, wily criminals,
prejudice and derision of the poor. He defeats mountainous odds to emerge
finally on top, financially successful, pulling his own mother up out of
poverty, and this all with his good character intact, in a world where the
good guys always win. The youngest minds get molded around the idea that this sort of ambition
makes a person invincible. This myth instills a
trust in long term, hard work . Yet in the same semester our schoolchildren
learn the opposite value: how to turn a quick profit using cunning and
slick chatter. A contemporary of Alger’s, Samuel Clemens (Mark Twain),
wrote luminous country tales, regularly read to children. In one, Tom
Sawyer, a juvenile in a mid-nineteenth century American small town, is
ordered to complete a wearying chore one beautiful Saturday morning, to
whitewash a long fence. But our Tom is a gifted talker, and he figures a
way out of the task. As each of his friends comes walking by, Tom plays
the work up to be a magically rare opportunity, and his friends,
persuaded, compete for a chance to try it, actually paying Tom their toys
to let them paint the fence. More friends come by and Tom gets rich from
all their prize possessions while getting them to do the work for him
until the task is done. The story is imagetic
and funny, but it values slyness over effort, and it makes a clear point
of getting ahead by exploiting one’s friends. Despite the phosphorescent
prose, this tale is about skimming and suckers in a world where the good
guys do not win. In it, winners are people who subtly know how to
manipulate the wants of others.40 It would be nice if children generalized from
Alger and colored themselves all industrious,
righteous, honest, rational and forward thinking. But growing up, some of
us have absorbed the point that hard work is for dupes, and that out of
the sleeve of ambition comes the hand of greed. Distraction The topic of greed battles with a powerful
distracter. Poverty, I have argued, is partly a product of
unfettered greed. But since the 1970s we have been captured in
the orbit of a certain kind of argument, that we have poverty and scarcity
because our planet Earth has limits and we are running out of food and raw
materials. Actually there is a new consciousness on this
point. Analysts Mark Sagoff41 and Bjorn Lomborg42
head this argument. Since the 1970s environmentalists have been predicting
energy will be dangerously short because we consume too much. These
predictions are framed in phrases of standard economic theory, in material
terms, with mathematical projections of dire depletion and collapse of the
ecosystem if we continue at present rates. They state we will imminently
see starvation among industries for materials, accompanied by starvation
among people. But these predictions simply haven’t turned
out. Both analysts document that since the 1970s the world's most basic
resources have actually become more abundant and cheaper. There are
ultimate planetary limits, of course, but we are nowhere near. Malthusian
arguments that starvation exists because there are ‘too many people’ don’t
compute. In far too many places where the absolute level of food supply is
adequate, there is famine. The world now produces enough food for everyone
to have an adequate protein-rich vegetarian diet if the food was equally
distributed. But, says Sagoff,
neither technology nor economics can address the major causes of
starvation which are corruption, mismanagement, ethnic antagonism, war,
trade barriers, and social conflict. Absolute levels of raw resources are
not getting worse; what is getting worse is the difference in income
between the wealthy and the poor. Technological methods will not bring
solutions. Not until we try a solution that turns on the moral will we
begin to see improvement. Scarcity is man made. The whole debate needs a
new pivot. There is a lot of misery worldwide, and the
argument that there is abundance for all who would only try is false. We
need a new paradigm to explain life-threatening scarcity in the face of
plenty. Part II of “Greed” will appear in
the next issue. Notes 1. Julian
Edney Ph.D. is based in Los Angeles. (Contact at
bottom of this page.) 2. "Fine
wines are hot lots at auctions in New York." 2002, New York Times, May 27,
P. A 12. 3.
Forbes.com Magazine, 12 April 2001. 4. Reich,
Robert B, 1991. "Secession of the successful." New York Times Magazine, January 20, p.
16. 5. Galvin,
J. "Wretched excess." 2000, Ziff Davis Smart Business for the New Economy,
August 1, p. 122. 6. "Many
miss out on food stamps." 2001, Los Angeles Times, June 23. Section B
p.1. 7. "3 in 10
Americans face poverty, study says." 1998, Los Angeles Times, August 10,
Section A p. 15 8. "State
picks up house seat as Sunbelt grows." 2000, Los Angeles Times, December
29, Section A p.1. 9.
Converting old wealth into modern terms is tricky but it appears in 1774
the top 1% owned 14.6% of the national wealth. By 1989 it owned 36.3%. In Gordon
J.S. "Numbers game," 1992, Forbes, October 9 p
48. 10. Murphey, C. "Are the rich cleaning up?" 2000, Fortune,
24 September. p. 252 11. See for
example: Childs, J.M. 2000. Greed. Minneapolis,
Fortress Press, p.36 12. Los
Angeles Times, 2000, December 12. Section A. p. 1. 13. Profile
of the nation: An American portrait. 2000, Farmington Hills, MI., Gale
Group. P. 180. 14.
"Families total 43% of homeless, survey reports." 1993, Los Angeles Times,
December 22. Section A p. 1 15. Rawls,
J. A theory of justice. 1971. Cambridge, MA. Harvard University
Press. 16. "Study
finds widening gap between rich, poor." 2000, Los Angeles Times October
20. Section B p.3. 17. Cook,
P.J. and Frank, R.H.
The winner-takes-all society: Why the few at the top get so much more than
the rest of us. 1995. New York. Viking
Books. 18. Vleminckx, K. and Smeeding,
T.M. (Eds) Child well-being, child poverty and
child policy in modern nations. 2001. 19. Durant,
W. and Durant, A. The lessons of history 1968, New York: MJF Books. 20. Surgeon
General aims campaign at rising suicide rate. 2001, Los Angeles Times May
3. Section A p. 14. 21. Lasn, K. and Grierson, B.
"America the blue." 2000, Utne Reader.
September. P.74 22. Lane,
R.E. The loss of happiness in market
democracies. 2000. New Haven: Yale University Press. 23. America
Online News, 2001, by Scott Lindlaw. 10
May. 24. Derber, C. The wilding of America. 2002. New York.
Worth Publishers. 25.
Dostoevsky, F.M. Notes from underground.
1864/1992. New York: Bantam Books. 26. "US
crime study sees society in trouble." 1999. Los Angeles Times. 6 December.
Section A p.22 27. Murphy,
C. "Are the rich cleaning up?" 2000, Fortune 24 September. P.
252. 28. "Is
America the land of the poor?" Investor’s Business Daily 1999, 27 December
P. A.1. 29. Freeman,
R.B. "Toward an apartheid economy?" Harvard
Business Review 1996. Sept-Oct p. 114-121 30. Derber, C. Ibid. 31. Childs,
J. Greed. 2000. Minneapolis, Fortress Press. P. 24. 32. Rawls,
J. Ibid ,p.33. 33. Bly, R. The sibling society. New York: Vintage Books.
1977. 34. Kuhn, H.
and Nasar, S. (Eds) The essential John Nash.
Princeton, N.J. Princeton University Press. 2002. 35. Lasch, C. The revolt of the elites and the betrayal of
democracy. 1995. New York: Norton. 36. Rose,
S.J. Social stratification in the United States.
2000, New York: The New Press. 37. McGuire,
C. Social stratification and mobility patterns. American Sociological
Review. 1950, v. 15, p.200. A
historical study cited
by Gabler found that in 1850, 2 per cent of the
wealthy of that period had been born poor while 90
percent were descended from families of affluence and social position:
Neal Gabler, Life: The movie.
1998. New York:
Vintage Books. p. 30. 38.
Attributed to Robert Monks, quoted in H. Scutt,
The trouble with capitalism. New York: Zed Books 1998. P.
176 39. Ryan,
R.M. and Deci, E.L. On happiness and human potentials: A review of
research on hedonic and eudiamonic 40. Mark
Twain is listed as a caricaturist and a satirist but this does not change
my point because the very young do not know
enough to distinguish satire (some adults can’t
either). 41. Sagoff, M. "Do we consume too much?" Atlantic Monthly,
June 1997, p. 80. 42. Lomborg, B. The skeptical
environmentalist. 2001. New York: Cambridge University
Press. ___________________________ |