Contra Ayn Rand, and Gordon Gekko, greed is NOT good
Here is a point I’ve been meaning to make publicly to other Objectivists for many years. I posted this as a comment on John Enright’s post.
Ayn Rand called Galt’s Gulch a “utopia of greed” in Atlas Shrugged, but I think that was one of her tactical mistakes; greed happens all the time and it’s not a good thing.
It seems to me that a valid Objectivist definition of greed would be something like “seeking a value out of context.”
Often the context which gets dropped includes things like the importance of honesty, rationality, or respecting the rights of other people.
It seems clear to me that the current financial crisis is the result of greed — but the greed of politicians, for the most part, rather than Wall Street.
Politicians like Barney Frank and Chris Dodd have been greedy by claiming, in effect, things like:
- that the actuarial tables used in the mortgage industry could be safely ignored in favor of bleeding-heart social engineering programs (ignoring the importance of rationality)
- that they are not responsible for having created the financial crisis, even though they encouraged the subprime mortgage industry and were responsible for oversight of Fannie Mae and Freddie Mac (ignoring the importance of honesty)
- that American taxpayers should bear financial responsibility for the crisis they created (ignoring the rights of other people)
In such cases, politicians are seeking a value (political power, promoting a social agenda, saving face) while dropping or ignoring the relevant context.
That sure looks like greed to me, and I would expect most Objectivists to agree.
Greed as an explanation is a non-explanation. There is only one source of greed in a mixed economy and that is government. Fannie, Freddie and ACORN are all products of government not capitalism. Capitalism has nothing to do with this crisis. Socialism is the cause. This crisis is a failure of socialism because it was socialism that justified all the government programs, legislation, regulations (or lack thereof) and bad lending practices that created this crisis. If anyone is guilty it is the CEOs of Fannie Mae and Freddie Mac, ACORN, Democrats and high level members of the Barack Obama campaign. The reason capitalism is being blamed for this crisis rather than government intervention is because the Democrats want to hide their complicity in creating this crisis and they want to use it to defeat the Republicans who also had nothing to do with the crisis. This is a crisis created by socialist premises and the lies of progressive Democrats.
At this point, it looks like the Democrats are going to succeed in blaming the crisis on their political enemies when they are the actual cause. This is a repetition of what happened after the 1929 collapse of the stock market. The people who caused the problem, the interventionists in government, blamed the free market and then controlled the government for the next 16 years. Their actions prolonged the depression and if this repeats itself we can look forward to another extended depression. You asked for it, you got it.
Rob writes: “There is only one source of greed in a mixed economy and that is government.”
So CFOs never massage the numbers in order to improve their credit-worthiness? CEOs never tell a lie to inflate their stock price?
Under my proposed definition, both of these would be instances of greed, of seeking a value out of context.
I see no reason why such behaviors would go away just because we’re in a mixed economy rather than a pure free market.
Greed explains nothing.
Rob,
I respectfully disagree. Greed explains, or identifies, the fact that an act was no ordinary act of self-interest. Rather, someone dropped the moral context in which their actions, and their pursuit of their own self-interest, is morally justified.
When you pursue your own self-interest but violate other people’s right along the way, we usually call that being “greedy.”
That is something to be avoided, and (in my opinion) Objectivists do themselves a disservice by hitching their trailer to Gordon Gekko’s uber-Neitzschean “Greed is Good” perspective.
Greed is not good.
Joshua
Two points, on on the meaning and use of the word “greed”, and one on where and how greed can be found, as it pertains to the mortgage and lending collapse.
“Greed” is a difficult word, because everyone wants a better material life, and will hungrily pursue those things they believe will enhance their lives. Such greed is not bad in itself, which is why selfish action is necessary and moral. Greed does not necessarily mean desire to acquire the unearned, but it is generally used in that context. There should be a new to enable a better distinction.
Greed is not the essential problem in this crisis, but there are indeed many people who do not understand a rational moral code, The latter are willing to unjustly seize opportunities at the expense of others. In this mortgage and housing debacle both types of greed are at work. Many of the lenders operated on the erroneous understanding that their actions were safe and legitimate… they were backed by the largest banks and lending agencies, which were in turn backed by the government. Many view the government as the ultimate financial safety net. Only a very few lenders (e.g. BB&T) saw the risks of the usual mortgage loans as too dangerous… they treated houses as and high risk mortgages as high risk, rather than considering themselves to be protected.
I am sure many CEOs were rightfully seeking the best profit they could for their businesses, as it is in the interest of all of their staff and shareholders for them to do so. That does not necessarily make anyone evil or “not good” for their ‘greedy’ actions. However, they were not being smart CEOs, in contrast to John Allison (an Objectivist!) of BB&T. You could say Allison was truly greedy, because he looked at the long term picture and made sure HIS corporation would not collapse.
However, the politicians and bureaucrats behind things like The Community Reinvestment Act, Fannie and Freddy, and the issuance of fiat money, are all acting to ensure their political success. That is, they want power, not only to press their vision of economics onto America and Americans, but also to influence American social mores. Instead of relinquishing the aforementioned state manipulation of the banking market, Congress has confiscated more taxpayers’ money to bailout the failing companies and to falsely prop up the economy with still more fiat money. This way, they retain power, by using other people’s wealth (including that of BB&T) as if it were their own. This is where the worst form of greed is to be found.
Ordinary, honest greed, that takes into consideration risks and which functions by mutual consent, IS good. It is what makes Apple produce a better cell-phone, and why its shareholders invest in Apple. To blame greed as the essential is much too simplistic.
Greed in the instance of Wall Street is immensely wealthy actors who know that they will amass wealth whether they succeed or fail. The whole mortgage securities and derivatives thereof was like insurance companies selling earthquake or hurricane insurance and indemnifying against events larger then their policy premiums can bear. If you know you can wash your hands of your debts, then you are much more likely to have a devil may care (or greedy) attitude toward financial risk.
It is a good thing that a good portion of Wall Street disappeared. The big financial hurricane hit and now we are seeing who was better at the game of risk management. I think a lot of the public complaints about Wall Street are hilarious though. It’s like a gambler complaining about the wealth of casino bosses. If you don’t pull the slot machine lever, you won’t lose your money.
Another principle is that you have to understand what you are investing in. Not necessarily an accountant’s view, but a holistic understanding of the business model. You can use diversification to avoid individual pitfalls of bad finances, but you cannot diversify against global lack of foresight and vision in an industry.
Jim
Your point makes a good distinction, Josh. I’ve never felt comfortable hailing greed as always good.
As I like to say, there are two kinds of faith: faith because of evidence (e.g. the sun will rise tomorrow, because of its long history of doing so) and faith in spite of the evidence (e.g. the earth is literally flat). Or, more concisely, there is rational faith and irrational faith. It seems to me that the word “greed” may be similarly used — and misused.