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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already-outdated environmental rhetoric, arguments that scarcities and human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. ___________________________ |