Capitalism: Virtuous? Rapacious? Or Simply Sociopathic?

If there was a single fatal flaw in the Occupy Wall Street movement, it was that it became mired in the tar pits of the Greater Social Anxiety. So many causes – worthwhile and frivolous -  came to attach themselves to this little band of protesters that the central message became lost as the movement grew in size.

That was certainly true in my home city of Toronto, where every political force who had an ax to grind got into the fray. It deteriorated to the point where homeless folk were recruited from the streets to occupy the Occupy tents while the agitators retired to their nearby condos to shower, relax, and have a swill or two of Pinot Grigio.

Limousine Socialism indeed.

Similar forces are evidently at play in the Canadian Province of Quebec, where a little over 100 days ago, some student activists started doing what student activists have been doing for decades: complaining about tuition fee increases. Today, with the infusion of various Big Union and other political juggernauts, the movement has transformed into a Rage Against The Man. Whatever they are complaining about, it’s not just about tuition anymore.

If we cast ourselves back to the infancy of the Occupy Movement, it seems to me that it was about too much wealth and power being concentrated in the hands of too few ultra-rich capitalists. These Mega-Capitalists were running amok with the American, and therefore the World Economies, with impunity – even the People’s President, Barack Obama seemed to be reluctant to do anything about the illegal and immoral activities that led us to the Great Wall Street Debacle of 2008.

The model of Rapacious Capitalism had let us down, with a thud.

Many “small c” conservatives and “small c” capitalists identified with this fundamental message. Understanding that any system that fails to install appropriate checks and balances – process control, in SCM parlance – has a very real potential to run wild after a time. The Bad Guys get inside the system, figure out how it works, and then proceed to accumulate inordinate levels of power. They can then operate freely to their own benefit, and to the extreme detriment of thousands if not millions of innocents around them.

This is true not only for business, but in every aspect of life from sports to politics.

It is within this context that I encountered an exchange between two intriguing writers.

William Deresiewicz is a contributing writer for the New York Times, who crafted an interesting piece that originally appeared in the Times on Sunday, May 12, 2012. It is titled Capitalists and Other Psychopaths:

THERE is an ongoing debate in this country about the rich: who they are, what their social role may be, whether they are good or bad. Well, consider the following. A 2010 study found that 4 percent of a sample of corporate managers met a clinical threshold for being labeled psychopaths, compared with 1 percent for the population at large. (However, the sample was not representative, as the study’s authors have noted.) Another study concluded that the rich are more likely to lie, cheat and break the law.

The only thing that puzzles me about these claims is that anyone would find them surprising. Wall Street is capitalism in its purest form, and capitalism is predicated on bad behavior. This should hardly be news. The English writer Bernard Mandeville asserted as much nearly three centuries ago in a satirical-poem-cum-philosophical-treatise called “The Fable of the Bees.”

“Private Vices, Publick Benefits” read the book’s subtitle. A Machiavelli of the economic realm — a man who showed us as we are, not as we like to think we are — Mandeville argued that commercial society creates prosperity by harnessing our natural impulses: fraud, luxury and pride. By “pride” Mandeville meant vanity; by “luxury” he meant the desire for sensuous indulgence. These create demand, as every ad man knows. On the supply side, as we’d say, was fraud: “All Trades and Places knew some Cheat, / No Calling was without Deceit.”

In other words, Enron, BP, Goldman, Philip Morris, G.E., Merck, etc., etc. Accounting fraud, tax evasion, toxic dumping, product safety violations, bid rigging, overbilling, perjury. The Walmart bribery scandal, the News Corp. hacking scandal — just open up the business section on an average day. Shafting your workers, hurting your customers, destroying the land. Leaving the public to pick up the tab. These aren’t anomalies; this is how the system works: you get away with what you can and try to weasel out when you get caught.      (Read more…)

A rebuttal to Deresiewicz’s assertions was written this week by Chris MacDonald of Canadian Business Magazine, who argues that the cement that holds capitalism together is a little concept known as “ethics”:

Contrary to what you’ve heard, there is nothing immoral about capitalism.

A couple of weeks back, the New York Times published a truly scandalous opinion piece by essayist William Deresiewicz with the provocative title, “Capitalists and Other Psychopaths.” The views expressed in the piece are not just false, but dangerous.

The central claim of Deresiewicz’s essay is that “capitalism is predicated on bad behavior.” In fact, capitalism in no way requires bad behaviour. Indeed, to function even moderately well, capitalist markets rely on a general pattern of basic goodwill and honesty of its participants. Commerce of any kind requires trust, and trust is predicated on the expectation that the other person is going to follow some basic rules of decent behaviour. The niceties of the rules that ought to govern business are up for debate, but the basic need for some sort of rules is not. Capitalism, in other words, presumes ethics.

Deresiewicz is right, of course, that bad behaviour does go on within capitalist systems. That’s not exactly a news flash. Nor is it unique to capitalism. There’s no evidence that either feudalism or communism magically turns humans into selfless and cooperative purveyors of peace, love and understanding.

The beauty of a free market, as Adam Smith taught us, is that it can generate benefits even among the mean-spirited. The taxi driver who took me to the airport this morning doesn’t have to like me, and he doesn’t have to be a particularly lovely human being. All that’s necessary, in order for me to get to the airport, is that he wants to make a living. But in no way does capitalism require that people be vicious or even indifferent to each other’s fates. As Nobel laureate Ronald Coase put it, “The great advantage of the market is that it is able to use the strength of self-interest to offset the weakness and partiality of benevolence.” We are limited in our sympathies for others. The good news is that, in the marketplace, our commitment to our own welfare, and the welfare of those we hold dear, inspires a great deal of creative and industrious activity that has as its very useful side-effect the provision of benefits to others. (Read more…)

I am a fan of what I will call “Ethical Capitalism”. Capitalism is the only system of which I am aware that possesses enough objectivity within its mechanisms to maximize the benefits to all stakeholders, at least in theory. No totalitarian or authoritarian system has been able to accomplish this, as individuals who occupy the top of the pyramid inevitably act in their own self-interests with complete subjectivity.

I continue to have faith, but I fear that we do not sufficiently stress ethics in our schools, nor  do we sufficiently embrace it in Western Culture. Further, legislation must be continuously improved in order to provide an ethical framework within which free people can operate. Penalties for will fully ignoring this indispensable glue should be terrible and swift, and this failure ought to be the shame of the Obama Administration and a large portion of the Washington elite.

What are your thoughts? I welcome you comments and feedback.

No related posts.