How our economic system is designed to promote greed, fear and selfishness
Rob O’Grady writes in ‘150-strong’: Aldous Huxley suggested that “Our present economic, social and international arrangements are based, in large measure, upon organized lovelessness,” and, on the evidence, it appears that he was right. Our current system, governed by the reconciling force of profit motive, is dominated by greed and fear – certainly not love!
The Limits on Social Responsibility and Ethical Standards
The renowned 20th-century economist Milton Friedman also understood something of the objective rationality of the profit motive, and one of his more controversial theories stated that, provided it does not break the law, under no circumstances should a business aim to do anything other than make a profit. He believed that social responsibility was a fundamentally subversive doctrine, and was scathing of those who claimed that businesses should concern themselves with promoting desirable social ends. In Friedman’s view, it would be tantamount to treason if a business executive were to consider taking on responsibility for “providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers.” (New York Times Magazine, September 13, 1970) While it may be controversial and somewhat ruthless, the validity of his theory is apparent: shareholders have the right to sue the directors of a public company if they believe the directors are not acting in their interests to maximize profits.
In practice, there are many shades of gray associated with the implementation of this statute, and businesses adopt various policies of social responsibility to further their interests, their motives ranging from altruistic at the positive end of the scale to calculated and self-serving at the other. Somewhere in the middle of this range is the theory of green economics, which holds that consumers will pay extra for environmentally friendly products, thus aligning the social good of environmental protection with the business aim of profit. Accordingly, a chicken farmer is able to sell free-range eggs for a higher price to those who oppose the cruel practice of keeping hens in cages.
But when businesses face an ethical choice that does not result in increased profitability, the choice of business executives ultimately comes down to whether to remain in business or not. Regardless of the level of social or environmental aspirations of a private enterprise, the underlying reconciling factor must always be profit, because without profit the enterprise will cease to exist, along with its superior moral and ethical stance.
And so there are many questionable situations that arise in our society that are accepted as normal, because companies must compromise their ethical standards in their quest for profits. To sell their product, cereal companies put so much sugar in children’s breakfasts that it is damaging to their health. Moneylenders make people slaves to debt by giving loans to those who are in no position to repay them. Casinos make money from gambling addicts, and furniture companies make furniture from old-growth rain forests. Supermarkets sell tuna caught from stocks that are overfished and approaching extinction. Food companies douse the soil with pesticides, killing the life of the land. Alcohol and tobacco companies market to the addicted and the vulnerable. Employers put thousands of people out of work at short notice to beat analysts’ expectations. Mining companies build mountains of toxic tailings that leach into the ground water. Media companies exploit the suffering of grieving people to sell newspapers and magazines. Arms manufacturers sell advanced weapons systems to murderous regimes. Power companies build nuclear power plants on earthquake fault lines. The litany of examples of compromised ethics goes on and on, and there are many thousands of books and films that bear witness to them and the suffering that they cause.
The Profit Motive is Inherently Negative
A basic effect of the profit motive on society is that it promotes a gross form of selfishness. The imperative of the marketplace to make a profit means that there is little room for sentiment, for the niceties of human dignity or compassion, because if you take your eye off the bottom line someone will take over your market share and muscle you out of business. There are a few moderating influences: the influence of the self-aware, ethically-attuned consumers (who swiftly turn into price-sensitive consumers as soon as ethics impinges on their spending power); attempts at regulation through law (which is a clumsy instrument); and the innate goodness of people that shines through in some situations. But in the game of capitalism the most selfish participants generally come out to be the winners.
The profit motive also promotes greed in its most potent form by encouraging hoarding: the successful competitors strive to accumulate a larger surplus than their rivals, because the bigger their pile, the more secure their position. This creates a class of wealthy people who, with an overabundance of resources at their disposal, are able to enjoy material pleasures to an excess, while others are forced to live without even the basic necessities. That class of wealthy people is also able to indulge in the more subtle psychological pleasure of exhibiting their influence and self-importance, which accrues to them through their control of resources. In turn, this creates divisions in society and establishes hereditary privileged groups, which further amplify these patterns of greed over time.
In any situation where there is greed, at the opposite swing of the pendulum there awaits its faithful companion – fear. For those who have wealth, there is the eternal fear of losing it, and for those who have never had wealth in the first place there is the fear of not being able to survive and make their way in a world dominated by greed and selfishness. While we teach our children not to be selfish, greedy or afraid, we do all we can to perpetuate a system that has these three negativities at its very core. How can we expect our children not to see us as hypocrites?
Aldous Huxley suggested that “Our present economic, social and international arrangements are based, in large measure, upon organized lovelessness,” and, on the evidence, it appears that he was right. Our current system, governed by the reconciling force of profit motive, is dominated by greed and fear – certainly not love! This is a fact that even the most fervent supporters of the capitalist system cannot hope to refute, and while some, such as the libertarian devotees of Ayn Rand, somehow find it possible to rejoice in it, it stands to reason that if we continue on this path of embracing profoundly negative values, it will surely lead us to our destruction.
It is true that politicians can enact legislation that directs behavior through the threat of punishment, or by rewarding desirable conduct, but the law is only a moderating force. It can only do so much. And, as was discussed in Part 3 of this serialization, the application of the law is fraught with unintended consequences, prone to the perpetuation of bias, and is a driver of much negative behavior.
It is only by addressing the incentive system operating that we might be able to produce outcomes that are significantly different. On this, there is more to come from 150 Strong: A Pathway to a Different Future.
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Law as a Counterpart to the Profit Motive
Rob O’Grady, Club Orlov
One further significant shortcoming of the law is that it is biased in favor of those with money. The cost of engaging lawyers to resolve a dispute in the courts is significant, and those with the biggest budgets – insurance companies and other large corporations – have a far greater ability to prevail in litigation than ordinary citizens. There is often a total mismatch between parties that are in disagreement. A lawsuit is a small risk for corporations, with their armies of lawyers and with millions or billions of dollars in their war chests. To battle them, private citizens may have to stake their life’s savings and commit a significant portion of their lives.
Bookshelf: 150 Strong – A Pathway to a Different Future
Rob O’ Grady explains why none of the existing large-scale systems —be they capitalist or communist— would work. For a community to function well, it must resolve conflicts as they arise. It can only operate if we personally know every other person. This limits the maximum size of the community to Dunbar’s Number—around 150 individuals.