Business leaders must be citizens as well as profit-maximisers
"The point is, ladies and gentleman, that greed - for lack of a better word - is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms - greed for life, for money, for love, knowledge - has marked the upward surge of mankind."
It would have been one thing for these words to have been spoken by a famous industrialist as part, perhaps of a great biopic. The director Oliver Stone could have put the fictional words into the mouths of Henry Ford or Thomas Edison, for example. We would have learnt that great inventors and industrialists motivated by the love of ideas and the pursuit of profit – by “greed” for “knowledge” and “greed” for “money” - helped create the past prosperity and past inventions from which we still benefit today. In the spirit of nearly every novelist, poet and filmmaker since free enterprise was written about, Stone didn't, of course. As with his other movies, his intention was to subvert. The words he crafted were spoken, therefore, by Gordon Gekko – the villainous character played by Michael Douglas in Stone’s classic 1987 movie, Wall Street. The Gekko character was allegedly based on Michael Milken, the “junk bond king” who went to jail in 1989 after being convicted on 98 accounts of racketeering and fraud. Sentenced to ten years in prison, Milken only served 22 months – an outcome that could also have been scripted by Stone. As the film ends and just before the credits roll “even when they’re caught and convicted… the crooks of capitalism get off lightly” could have appeared on the silver screen.
Gekko’s “greed sermon” gets to the heart of the world’s love-hate relationship with capitalism. After the collapse of communism in 1989 some kind of version of capitalism – one perhaps characterised by heavy state involvement, as in China, or of the more Anglo-Saxon, democratic variety – became the only economic show in town. But it is hard to love a system which is based on humankind’s sinful traits especially when its proponents appear as crooked as a Gekko or Milken. In “Forging Capitalism: Rogues, Swindlers, Frauds, and the Rise of Modern Finance” (2014), Ian Klaus insists that vice has always been part of capitalism’s make-up.
Adam Smith did not talk of greed but he did talk of self-interest. “It is not from the benevolence of the butcher, the brewer, or the baker,” he wrote, “that we expect our dinner, but from their regard to their own interest.” You can defend self-interest and I would. It is not, for a start, particularly selfish or even selfish at all. It doesn’t inevitably lead to criminality – as in the fictional case of Gekko or the real life case of Milken. It can lead to the iPhone, a new malaria-defeating drug or the development of a crop likelier to withstand a drought. Even if it doesn’t lead to something as transformational as anything like that, the butcher, baker and brewer – as much as the banker and Silicon Valley entrepreneur – don’t just truck for selfish benefit. They truck for their children and wider family, too.
But it all remains inadequate. Uninspiring. Unsatisfying. Compared to the grand promises of heaven on earth from Marxists or even the heart-on-sleeve generosity of philanthropists it’s terribly unheroic. We are moral people and without a vision we perish. A system based on accidentally good results is unlikely to produce great loyalty although it is better that self-interest is harnessed for good – as it is in capitalist societies – than it is for ruin – as in communist experiments. Nonetheless, “many people,” writes John Plender in “Capitalism: Money, Morals and Markets” (2015), “will continue to feel ill at ease with the paradox whereby capitalism converts vices such as greed and vanity – or, in the more innocuous version, self-interest – into virtue.” How can it be, to quote John Maynard Keynes, “that the nastiest motives of the nastiest men somehow or other work for the best results in the best of all possible worlds”? That “nastiness” consisting of – among other things – speculation, massive indebtedness and raw greed.
So what is the answer to the question: Will people ever love a system built entirely on self-interest? No. They never will.
This Prosperity For All manifesto doesn’t try to neuter “the greed for life, for money, for love, knowledge” that has indeed powered “the upward surge of mankind.” Instead it asks for free marketeers to be more than bakers, brewers, butchers and junk bond traders. It asks for them to be citizens too.
It demands that boardroom CEOs don’t routinely pay themselves telephone number salary increases. That they maximise the long-term purpose of their firms – rather than their short-term profits. That they accept that the free trade deals of tomorrow will have to include a greater measure of environmental and social responsibility. That they accept that people with economic power cannot buy a similar level of power within the political sphere through donations and lobbying power.
The challenge we need to meet was set out by the founder and CEO of the Whole Foods supermarket chain. John Mackey warned that if the public comes to think businesses are “basically a bunch of psychopaths running around trying to line their own pockets”, then the system is in trouble. If the public doesn’t think business is fundamentally good, he continued, and can’t be trusted to do the right thing business is inviting large-scale and destructive regulation. If, in contrast business exercises responsibilities to all its stakeholders - customers, employees, investors, suppliers, and the larger community – “the impulse to regulate and control would be lessened.” For reasons set out throughout this ten part analysis I also think a capitalism of serious citizenship will also be a more successful capitalism. I write as a journalist rather than a politician or economist or businessman. The policy ideas I offer are not ready-to-implement but are largely intended to provoke debate. But before we get into the meat of the analysis let’s examine the attitudes to capitalism of the public in seven diverse nations. The results offer food for thought for friends and opponents of the free enterprise system.