Isn’t Capitalism Based on Greed?

This is the title of Chapter Five in Jay Richard’s book, “Money, Greed, and God.”  I have previously written about this book on a couple of occasions:

If I become rich, won’t someone else become poor?

and

Can’t we build a just society?

This time around we’re tackling one of the biggest misconceptions about Capitalism.  Isn’t it inherently greedy, while socialism is not (apparently.)

Jay starts out with a quote by Adam Smith that is probably used more than any to prove that Capitalism is greedy.

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interests.”

However, Jay argues that his point is misconstrued.

“His (Smith’s) point about self-interest is that, in a rightly ordered market economy, you’re usually better off appealing to someone’s self-love than to their kindness.  The butcher is more likely to give you meat if it’s a win-win trade, for example, than if you’re reduced to begging…unfortunatly most people never read Smith for themselves, but see his words pulled out of context from The Wealth of Nations and commandeered for a philosophy he would have rejected…he knew the difference between self-interest and mere selfishness.”

Jay goes on to argue that proper self-interest is a good thing. 

“In fact, proper self-interest is the basis for the Golden Rule, which Jesus called the second-greatest commandment, after the command to love God: “In everything do to others as you would have them do to you; for this is the law and the prophets.”  I’m supposed to use my rightful concern for myself as a guide in how I treat others…Smith’s point was not that the more selfish we are, the better a market works.  His point, rather, is that in a free market, each of us can pursue ends within our narrow sphere of competence and concern – our “self-interest” – and yet an order will emerge that vastly exceed anyone’s deliberations…The central point is not our greed, but the limits to our knowledge.  The market is a higher-level order that vastly outstrips the knowledge of any and all of us.”

This next section is probably my favorite argument for why capitalism makes more sense in a fallen world than socialism.

“So capitalism doesn’t need greed.  At the same time, it can channel greed, which is all to the good.  We should want a social order that channels proper self-interest as well as selfishness into socially desirable outcomes.  Any system that requires everyone always to act selflessly is doomed to failure because it’s utopian.  People aren’t like that.  That’s the problem with socialism: it doesn’t fit the human condition.  It alienates people from their rightful self-interest and channels selfishness into socially destructive behavior like stealing, hoarding, and getting the government to steal for you.

In contrast, capitalism is fit for real, fallen, limited human beings.  “In spite of their natural selfishness and rapacity,” Adam Smith wrote, businesspeople “are led by an invisible hand…and thus without intending it, without knowing it, advance the interests of our society.  Notice that he says “in spite of.”  His point isn’t that the butcher should be selfish, or even that his selfishness is particularly helpful.  rather, his point is that even if the butcher is selfish, even if the butcher would love nothing more than to sell you a spoiled chunk of grisly beef in exchange for your worldly goods and leave you homeless, the butcher can’t make you buy his meat in a free economy.  He has to offer you meat you’ll buy freely.  The cruel, greedy butcher, in other words, has to look for ways to set up win-win scenarios.  Even to satisfy his greed, he has to meet your desires.  The market makes this happen.  That’s making the best of a bad situation, and of a bad butcher.”

There is such an important distinction in the worldview here.  We’ve heard these claims being thrown at us by liberal thinking people.  Big Business is bad, Insurance Companies/Wall Street/Oil Companies/Pharmaceutical Companies/Mortgage Brokers, etc. are greedy.  While it’s true that the individuals who work in those organizations certainly are motivated by self-interest, if left to the devices of a truly free market, it wouldn’t matter.  I can be as greedy as I want, and try to rip you off when doing business with you for a short time, but as soon as I have competition for your business, you’ll take it elsewhere.  Pure, unadulterated, selfish greed never thrives for long in a truly free market.  The very fact that you’re free to choose makes it impossible for you to be taken advantage of for long.

Now, before you start saying, “David – some of those businesses you mentioned ARE greedy and DO whatever they want, and I don’t really have a choice where I buy my gas, or get my drugs, etc,” think about what you’ve just said.  If you don’t have a choice where you get those things, or who you get them from, then the free market isn’t at work.  Don’t blame capitalism for their problems.  Clearly they are playing by a different set of rules than free market capitalism.  If the words “Government Regulation” can be used in conjunction with any of those industries, blaring sirens should be going off in your head.  Maybe this is not free market capitalism we’re dealing with here?  We’ll let that percolate in your mind a little for another time…

Let’s wrap this subject up with an email my dad wrote the other day regarding the recent passage of the Healthcare Package:

“(speaking about “Tea Party” rallies)The reason people participated in those rallies is that conservatives were spontaneously mobilizing in recognition that liberals (or progressives as they like to be called) have taken over the country politically and are intent on replacing the principles of individual liberty and free market competition that were baked into our system of politics so very skillfully by our founding fathers.  The genius of those men who looked at 10000 years of recorded history and realized that all men are prone to selfishness and abuse of power and that the best way to combat that in a society is to have a system where no individual has so much power that he can take from one person and give to another to suit his own vision of Utopia.  They firmly believed that free market competition and decentralization of power to the state and local level was the key to achieving this end.
 
Adding this new entitlement of the “right to healthcare” at the Federal level is absolutely contrary to what they believed.  So the question one has to ask is, “are Americans so much more enlightened today than were the founding fathers?”  and “Are the people in power today so much less likely to abuse their power than what the founding fathers were concerned about?”  The system they set up was successful beyond their wildest dreams, but now we are ignoring that history and believe we somehow know better than them.”

Look for Part 2, coming soon – “Doesn’t capitalism MAKE people greedy?”

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