In January 2009 Wall Street investment bank executives willfully accepted millions of dollars in bonuses—an estimated 20 billion dollars worth—in spite of the fact that they precipitated our current economic troubles. President Obama publically scolded them, not for causing the problem but for adding insult to injury in accepting a bonus. Obama said these bonuses were shameful and that those executives receiving these bonuses did not show personal responsibility or have any regard for what many in this country were experiencing.
In light of the economy being shaken to its knees, this outright display of self-interested behavior—let’s just call it American capitalism—looms before us causing disgust, if not intense anger among many. What makes these actions seem so reprehensible is that these very people—and the institutions they represent—created a very deep hole from which the rest of us must climb out of. It will take significant energy just to get us back to where we had been—which for many of us will still be a hole. Accordingly, the anger, disgust and downright hostility that many feel toward these executives—and those complicit in this assault on the working class—seems justified. How could it be that those who precipitated this are not only protected from the consequences of their self-serving actions, but in many cases are financially rewarded?
The straightforward simple answer is, the system makes it so. According to the self-interest maxim of our economic system, economic order emerges when each individual seeks to better his/her condition. This is precisely what the executives are doing—looking out for No. 1. What’s in it for me is our battle cry. When there is a choice between we and me, choose me! Thus they were doing what the system requires; seeking to maximize their material self-interest. Let’s face it these executives haven’t responsibility to anyone else but to themselves and to their organization. What’s the evidence? Take a look at the trend in income inequality in the U.S.—it is well documented. The gap between the haves and the have-nots has been increasing for quite some time—and the haves like keeping it that way (it is after all self-interested behavior).
The often-heard adage its just business, nothing personal captures quite well a very common experience. In the conduct of business there is no requirement for, or responsibility of, compassion; beneficence is not a principle in our version of capitalism. In fact the creator of our system spoke specifically against such concerned action. Adam Smith claimed “it is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from the regard to their own interest” and moreover “every man…is much more deeply interested in whatever immediately concerns himself than in what concerns any other” (Wealth of Nations). This belief leads to a very important underlying assumption, that when every individual acts in his/her self-interest the greater good will be served—here greater good means wealth creation in society. Our entire economy rests upon this assumption. Smith bought into the belief of his day that society is nothing but the sum of the actions of each individual–it is nothing apart from what each individual separately contributes to it.
So, if each improves materially, then it stands to reason that society will also be better off—unfortunately this is a logical fallacy. Proven fallacious by what we are now experiencing, have experienced before and will likely experience in the future. It seems the American Dream is in reality for many a nightmare. The well-engrained belief is, seek your own gain and the invisible hand will see to it that your actions will contribute to the welfare of society. Well in our current situation it appears the invisible hands were tied. So, who was in-charge of keeping those hands free to help? Might they have been focused on their self-interests?
Contrary to popular belief we, as human beings, are not inherently selfish. What we are is quite adaptable. Through enculturation, we tacitly learn and incorporate the values and beliefs of the society within which we live. That is, if the society within which we have been educated and live fosters self-interested behavior, then it shouldn’t be a surprise to see the overwhelming majority displaying this trait and believing that it is an inherent trait—that it is not something we choose.
Clearly, not only in accepting the bonuses but also in taking the actions that led to the near collapse of our economy, the executives were acting as the capitalistic maxim of self-interest dictates. So let’s stop blaming those who are simply behaving as the system would have them behave, and turn our attention to the root cause, the system itself. Unless we change the governing beliefs and principles of the business of business, the actions we take will do nothing to stop our recurring nightmare. No amount of government regulation will keep us from the effects of invalid assumptions—just ask the lobbyist and the big contributors to political careers. If we wish for ourselves and for those who will live after us not to relive the past—to realize progress—then we need to fundamentally change the system. Merely seeking temporary symptomatic relief will only ensure the continued existence of the cause and ultimately the decline of our society. It will keep the have’s having more and the rest of us poor suckers making it possible.
[adapted from It’s the EconoME Stupid: The cause and solution to many of our difficulties]
Greg, do you really believe this simplistic liberal non-thinking? That we are all simply evil greedy materialists, and we would all be better off if we were poor, unemployed, living in tin shacks?
Adam Smith was correct, if we build a society based on our own self-interests, then all of us would attain our goals.
Why blame “American Capitalism” for the banking failure caused by congresses’ marxist policies of wealth redistribution and irresponsible spending? Certainly a banking employee is not responsible for forcing Senator Dodd or congressman Franks hand to create the legislation that destroyed our economy!
It certainly seems “the Blame” rests squarely on the irresponsible policies and spending by congress and Obama.
Your conclusion to ‘fundamentally change’ what is left of our capitalist economy is an unprofessional conclusion and the wrong presciption.
have Copied the short article below from the UK”s Daily Telegraph 25th of January 2010
Lord Myners, the City minister, has stepped up the Government’s criticism of bankers by calling for an end to the “greed is good” culture, which he says has spread through the “inherently dangerous” banking industry.
Ministers are not the only ones criticising bankers. The New Economics Foundation wants to curb bankers’ salaries with a maximum wage. It claims that childminders deliver more value to society than bankers, even though our current economic system fails to reward this. And Barack Obama last week unveilled plans to break up the largest American banks.
MPs round on Lord Myners in attack on City pay culture
Religious leader call for end to ‘legal euthanasia’ move
Britain at War: a timely knock
British military in Afghanistan ‘insufficiently resourced’, says former commander
Minister lays down ‘astonishing’ challenge to Government over helicopter shortagesOn the other hand, free-marketeers argue that self-interest provides vital incentive that encourages rapid economic growth. They say that what gets denounced as “greed” will actually help banks repay government bail outs and, therefore, benefit us all.
Who is right? Is greed bad? Are bankers’ salaries totally out of proportion to their efforts? And do we need new laws to fix the problem?
Greed and pay being incongruent with contribution are symptoms (or effects) of the system itself. Self-interested behavior is a fundamental design element of the system. Thus laws won’t fix the system; they can only act as a moderating constraints on the system. That is, until self-interest finds a way around them.
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