Greed and self-interest, Smith recognized, do not arise out of capitalism. They arise out of human nature. Capitalism, Smith writes, arises out the human “propensity to truck, barter and exchange.” Workers, no less than employers and investors, are motivated by greed and self-interest. These are universal tendencies. Karl Marx famously disputed this, insisting that greed and self-interest were the products of societies that had private property. Marx held that in a communist society there would be no private property and therefore neither greed nor self-interest. In such a society, Marx rhapsodized, people would be motivated to work not for their own good but for the public good. Marx probably recognized how foolish this sounded, so he offered a vision in which the work itself would be light and sporadic. In his imagined society, people could do physical labor in the morning, fish in the afternoon, and do criticism in the evening.10 Sounds like the life of a professor of romance languages at an elite American university! Even so, we recognize today that Marx’s communism doesn’t work. At best, it is a utopia, a “city in speech.” No actual society can function that way. Actual societies must be built on human nature as it is, not as we wish it to be.
None of this is to suggest that Communism never works. There is a place where Communism works beautifully—in the family. The family, after all, is based on the Communist principle, “From each according to his ability, to each according to his need.”11 Right away we see that the charge that people work only for themselves—for their own greed and self-interest—needs to be modified. Most people work to support their families. In some cases, this is an extended family that includes older parents or other relatives. Why does Communism work in the family? Because there is a tight knot of affection that binds the community together, so that the interests of one are virtually identical with the interests of others. This bond is much harder to achieve in larger communities because our affections grow thinner as we move in concentric circles from the family to relatives to a local neighborhood to a wider community of countrymen. Patriotic though we may be, it’s hard to feel about people we don’t know as we do about people who are close to us.
Greed and self-interest may be features of human nature, but shouldn’t an economic system that encourages these vices be morally condemned? To answer this question we must look closely at the motives of capitalism and also at what entrepreneurs actually do. Here we contend with a variety of contradictory positions. The philosopher Ayn Rand, for instance, published a book called The Virtue of Selfishness. Rand’s position was: of course capitalism is based on selfishness, and that’s wonderful, because selfishness is wonderful. “The attack on selfishness,” Rand wrote, “is an attack on man’s self-esteem.” Of course Rand was being provocative. She too meant self-interest more than selfishness. Why then use the word “selfishness”? Rand’s answer: “For the reason that you are afraid of it.” Rand’s advice: be not afraid. Her goal was to insist that it is ethical for people to do what’s good for themselves.12 In a sense, Rand took the familiar charge against entrepreneurs—you people are greedy, selfish bastards—and pleaded guilty. What’s wrong, she asked, with looking out for Number One? I admire Rand’s pugnacity, but ultimately I think her attempt to overturn two thousand years of Western morality is quixotic. Contrary to Gordon Gekko, greed is not good. As for self-interest, it may not be a vice but neither is it a virtue. We can understand a fellow who cares mainly or exclusively about himself or herself, but we cannot on those grounds admire such a person.
A different understanding of the motives of capitalism comes from technology guru George Gilder, who insists that capitalism is based on altruism. Giving—he says—is the moral center of the system. Gilder points out that many successful entrepreneurs have already made their money; they don’t need to come to work every day. Think, for example, of Ted Turner, Richard Branson, or Mark Zuckerberg. Yet these guys continue to work. Why is that? Gilder says it is because they have the gift of creativity, and they want to share it with society. They are not primarily motivated by money; they are primarily motivated by love of what they do. Call this the eros of enterprise. Certainly these tycoons continue to harvest huge rewards. But the rewards are not—at least not now—why they continue to do it. Rather, Gilder says, these are creative gift-givers who put their big ideas and innovative products out there, and then they are gratified to see how well they are received. The consumer, in a sense, repays the entrepreneur for his generosity, and the entrepreneur measures his creativity by how well it is received in the market. Truly successful entrepreneurs, Gilder contends, recognize that “the good fortune of others is also finally one’s own.”
Obviously tycoons who don’t have to work for a living are rarities. My focus is not on them but on ordinary people who start and operate businesses. Why do they do it? They do it to make a living. In this respect they have the same motivation as the workers they employ. But here is the difference. The worker to be successful has only to please his employer, but the employer to be successful has to please a much wider community of consumers. My point is simply that success under capitalism comes not through self-absorption but by attending to the wants and needs of others. Capitalists who make good profits do so not because they are especially self-interested but because they are especially good at empathizing with and serving other people.
Ironically it was Adam Smith who made empathy the central theme of his other book, A Theory of Moral Sentiments. Here Smith made a surprising observation. “To feel much for others, and little for ourselves, to restrain our selfish, and indulge our benevolent, affections, constitutes the perfection of human nature.”13 Smith, the great champion of the invisible hand and of capitalist self-interest, admits that the best of human nature is an orientation away from the self and toward others. Morality requires us to transcend and in some cases even repudiate self-interest. Smith failed to add, however, that this is precisely what successful workers and entrepreneurs do. They put themselves in the place of others. They ask: How can I provide a service that is really helpful to other people? How can I develop and improve my products so that they better meet what consumers want?
While self-interest may be the motive for capitalism, empathy is the operative virtue that is required for success under the capitalist system. And this I believe is the key to understanding why so many entrepreneurs and workers like what they do and take pride in it. In some respects, it seems strange to find people taking pride in being a doorman, or sweeping a floor, or adding up numbers, or selling widgets. The aristocratic attitude is to revile such petty and degrading activities. Oscar Wilde once wrote that to do manual labor, of the kind that a janitor does, is depressing enough; to take pride in such things is absolutely appalling. Marx too complained of the worker who is alienated from his labor. I suppose this feeling of lassitude, of boredom, of watching the clock and waiting for the weekend, is understandable enough. Yet many Americans understand that “the mind is its own place” and how you feel about your work depends on what attitude you bring to it. For many workers and entrepreneurs, even those doing “unglamorous” tasks, there is pride in a job well done. Clean floors, proper accounts, and useful widgets all improve the lives of others and there is a moral satisfaction in providing these.
Having empathy for others may not seem like such a big deal. Don’t we all, as humans, display empathy in our professional dealings with others? Actually no. Except for the clergy and doctors, I don’t know of any field that draws out human empathy as much as entrepreneurship. Consider, by contrast, the mentality of the intellectual. Years ago, when I worked at a research foundation—a so-called “think tank”—I asked one of my colleagues, who was finishing up his book, “What’s your book about?” He informed me, “It’s about the theories of the Physiocrats.” I asked him, “Who besides you is interested in reading about the Physiocrats?” He looked at me with puzzlement. Clearly the question had not occurred to him. In other words, he was writing about what he cared about, and whether there was actually a market for his w
ork was a secondary, almost irrelevant, question. Of course I would not be surprised to find the same fellow, once his book came out, bemoaning why there were not long lines to purchase his book at Barnes and Noble. But even then it occurred to me that no entrepreneur would think that way. No entrepreneur would go into the business of, say, selling soap without first asking, “Who are my consumers? How can I best satisfy their wants and needs?”
The most creative, and ultimately the most highly rewarded, entrepreneurs are those who carry empathy beyond meeting the demand of others. Instead, they are the ones who envision the wants and needs of others even before they have them. Many years ago, at a Forbes CEO conference, I met Akio Morita, the inventor of the Sony Walkman. Morita told me that before he thought of the idea, no one had requested a music box that was small, portable, and allowed for individual listening through earphones. No one even knew that would be a good idea. Morita said he got the idea himself when he took his family to the beach and had to endure the awful music that emanated from the boom boxes of teenagers. Morita asked his engineers to figure out a way to shrink a car radio so that people could hear their favorite music without inflicting it on others. The Sony Walkman was a huge success. Here is “supply side” economics in its classic form. Demand does not precede supply; supply precedes demand. The genius of Morita—this old Japanese man—was to recognize what millions of American young people wanted even though they had no idea they wanted it until it was made and offered to them.
I give the example of the Sony Walkman but I could just as easily have mentioned Facebook, Federal Express, or the iPhone. I could add very simple inventions, like roll-on luggage. I don’t know who thought of that one, but I do know that for decades people went around airports lugging huge suitcases, until someone got the bright idea to put wheels on them. In each of these cases, entrepreneurs created demand by introducing a product that no one asked for, but millions of people wanted it once it was available. I call this “extreme empathy” because it’s a case of entrepreneurs providing for the wants of consumers before consumers even know what they want. For these entrepreneurs—and entrepreneurs in general—profit is not a measure of how greedy or selfish they are. Profit is a measure of how well they have served the wants and needs of their customers.
In his book The Passions and the Interests, Albert Hirschman shows how capitalism, far from being a system of theft and looting, arose historically as an alternative to theft and looting. In fact, capitalism was built on a human proclivity entirely different from the desire to rob and pillage. Hirschman notes that in the ancient world—and even today, in many parts of the world—wealth was obtained by looting and conquest. If your group or tribe wanted possessions, you simply seized them. The impulse to conquest comes from what Augustine termed the libido dominandi, the lust for power. This powerful passion included not merely the desire for goods but also for slaves and concubines.
According to Hirschman, the early modern thinkers who advocated capitalism recognized this passion as destructive but also powerful. They also knew that merely preaching against it might not be sufficient. So they sought to curb or check the desire for conquest by opposing to it an equally powerful desire: the desire to accumulate. In their view, the “passion” for predatory conquest could be mitigated, and ultimately eliminated, by the “interest” in capitalist accumulation. Hirschman quotes Montesquieu’s words, from the Spirit of the Laws: “It is fortunate for men to be in a situation in which, though their passions may prompt them to be wicked, they have nevertheless an interest in not being so.” In both cases there is acquisition, but in the former case it is violent, involuntary, and socially harmful; in the latter it is peaceful, consensual, and socially productive.14
In other words, capitalism civilizes greed in the same way that marriage civilizes lust. Greed, like lust, is part of the human condition. These emotions cannot be eradicated, although some monkish sects have certainly tried. And to the degree that greed leads to effort and lust to pleasure, why should we seek to eradicate them? At the same time, it is widely recognized that these inclinations can have destructive effects. So they have to be channeled in such a way that they serve us, and society, best. The institution of marriage allows the fulfillment of lust, but within a context that promotes mutual love and the raising of children. Lust is refined and ennobled by marriage. Similarly capitalism channels greed in such a way that it is placed at the service of the wants and needs of others. Under capitalism, helping others is the best way of helping yourself. Capitalism provides a virtue to prosperity.
CHAPTER 11
WHO’S EXPLOITING WHOM?
It is said that justice is equality, and so it is, but not for all persons, only for those who are equal.
ARISTOTLE, POLITICS
In 2011, President Obama went on one of his periodic rants about capitalism. Obama said that in “most countries” teachers are paid “on par” with doctors and he bewailed the fact that we don’t do that in America. A little research showed that Obama’s factual claim was false—most countries pay doctors a lot more than teachers—but we can see where Obama is going with this argument. He’s suggesting that capitalism may create abundance but its rewards are distributed without regard to merit. Obama’s implication is that both teachers and doctors provide something indispensable to society and therefore they deserve to be paid a comparable wage. In his book The Audacity of Hope Obama makes a similar argument about CEO pay. He says that CEOs are now paid much more, compared to those who work for them, than was the case in the past; then he declares that there is no economic rationale for this: “It’s cultural.”1 One of Obama’s key objectives as president is to change the culture so that reward is in proportion to merit and people are paid their “fair share.”
The puzzling aspect about Obama’s “fair share” talk is that our solomonic president never says what anyone’s fair share actually is. This is not an unreasonable thing to ask of a liberal: In what society would he be a conservative? If a liberal wants people to have more, he or she needs to specify how much more. Obama, however, seems to believe that there is some Platonic definition of “fair share” out in the Empyrean. He simply knows that people aren’t getting their due. Presumably his confidence on this score arises from a conviction that American society distributes rewards so unequally. We live in a country where the top 1 percent owns more than a third of the wealth. The top 10 percent has two thirds. And this of course means that the bottom 90 percent controls only about a third of the wealth. Yet Obama’s comment about teachers and doctors seems to imply more than the claim that there is inequality and we should strive to reduce it. Rather, Obama seems to say that some people are getting too much for what they do and others too little. Consequently, the pie must be carved differently not just to equalize outcomes but to give people what they truly deserve. Obama’s argument does not appeal to compassion or even to pure egalitarianism; it appeals to just deserts.
Obama’s claims about teachers and CEOs gets to a broader puzzle about how a capitalist society assigns rewards. At first glance, it seems that there is no relationship between merit and reward. Athletes and entertainers, who provide services much less indispensable than teachers and doctors, earn vastly more than either of those two professions. Earlier I mentioned the example of the parking lot guy who parks all the cars and makes money for the resort, yet he gets a pittance of that money. From his point of view, there is no relationship between work and reward. He does the work, and “they” get the profits. This is pretty much how workers feel in a variety of occupations. They are the “makers” and their bosses are the “takers.” In a truly fair and merit-based society, they should get more and the bosses should get less.
These arguments are, whether their proponents recognize it or not, anchored in Karl Marx’s notion of “surplus value.” Marx is largely discredited today, because Communism proved a failure, and Marx’s prophecies proved dead wrong. Still, Marx’s core argument about the injustice of capitalist distribut
ion remains hugely influential, because it seems to reflect common sense. Marx argued that everything that is produced under capitalism is produced by labor. Even machines and technology, Marx pointed out, are simply the products of past labor, since it took human effort to make those machines and technology. Whether skilled or unskilled, labor is responsible for everything that is made and sold.
The way that capitalism works, according to Marx, is that entrepreneurs provide the initial capital and use this to pay workers for their labor. This is their cost of doing business. Products, however, are not sold for what it costs to make them. They are sold for the highest price the market will bear. The difference between what things are sold for, and what it costs to make them, Marx terms “surplus value.” It is another name for “profit.” Marx contends that capital by itself is worth very little—since money has a modest rental value called “interest”—and therefore once this interest is paid, workers are responsible for the full value of a product. Despite this, workers actually receive only the labor cost of that product, leaving the entrepreneurs or capitalists to make off with the difference.
Dinesh D'Souza - America: Imagine a World without Her Page 16
