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Thursday, September 29, 2016

A Tale Of Two Smiths: What Capitalism’s Founder Would Think Of Goldman’s Greed

Adam Smith made a distinction between self-interest and selfishness — and he knew that too much of the latter would lead a nation to ruin.

It has been over a month since Greg Smith’s letter of resignation sent Goldman Sachs into full PR panic mode. Since then, the firm has completed its great “muppet” sweep, Mr. Smith has secured a blockbuster book deal, and Lloyd Blankfein has found himself fighting off stories of a growing power struggle at the top of Goldman high command.

All of this makes for good copy, but it risks obscuring the enduring moral dilemma at the heart of the original letter. Namely, when it comes to doing business, can we make a meaningful distinction between self-interest and selfishness? Or, apropos of Mr. Smith, should a place like Goldman ever hold itself to a higher standard than “How much money did we make off the client?”

Another Smith certainly thought so: Adam Smith, the founding father of modern economics. He first made his name as a moral philosopher with The Theory of Moral Sentiments, a careful diagnosis of the concern we have for others, the attention we show ourselves, and how the tension between the two underwrites a common code of ethics.

One of the principal villains of Smith’s work was Bernard Mandeville, an occasional philosopher who impishly elided fine-grained distinctions. His scandalous work,The Fable of the Bees, was an allegorical poem involving a thriving beehive that bore more than passing resemblance to 18th-century England. Accounting for the affluence and ease the bees enjoyed, Mandeville made two contentions sufficient to give any high-minded economist heartburn.

First, he claimed there was no essential difference, morally speaking, between the con man and the merchant. Both were driven by selfish instincts to get the better of their fellow man (or bee), and to that end, both trucked in deceit. Yes, the con man broke the law, but the merchant hid behind it.

Mandeville’s second claim was even more scabrous: So be it. Vice, not virtue, kept the wheels of commerce turning, with the benefits shared by all:

Thus Vice nurs’d Ingenuity,

Which join’d with Time and Industry,

Had carry’d Life’s Conveniences,

It’s real Pleasures, Comforts, Ease,

To such a Height, the very Poor

Liv’d better than the Rich before,

And nothing could be added more.

If these lines sound a little bit like “greed is good,” then you get Mandeville’s point. Human beings are selfish, and thank goodness for it. Otherwise, we might end up like the bees, who are nearly wiped out after a spell of virtue saps their ambition, spoils their economy, and exposes them to outside attack.

  • William Deutschlander

    Autocracy and Dictatorship have much in common and Mandeville was common to those veiws.
    Smith was a discipline of Democracy.

  • rustacus21

    Sadly, the lessons lost are greater than issues raised here, re: selfishness vs. self-interests. Democracy was meant to, among other things, be responsible for tutelage in expanding “affirmative” virtues among the citizenry. This failure on the part of Democracy proponents has meant the void has been inevitably, invariably, filled by Conservatives, whose ‘virtue’ base is rooted in injustice, greed, violent brutality & of course, selfishness. We can’t have such a conversation w/out exploring the ideological roots of this entire discussion, including the inaffectuality of common sense & reason in “forcing” legislators to obey the (70 + percentage of) peoples will in eliminating tax cuts, which the federal government has, since 2001, had to borrow billions per year, in order to pay for tax cuts which, theoretically (I say insanely contrarian) were suppose to pay for themselves, create jobs & cost the government not a dime (according to the puppeteers in charge of GWB’s evaluation of…). Consequently, injustice, vise, selfishness & greed have expanded to such a point, the 3 branches of government are all helpless in arriving at a determination as to how to continue this facade of denial that we are now, in fact a plutocratically-defined Constitutional American Democracy. The American people were again duped, w/the plutoratically conceived ‘T-(for mind ‘terrorists’) party, as they were in every election since 1980, as Conservative concepts began defining the Liberal/Progressive fundamentals of our Democracy. It’s therefor no surprise that the electorate would divide, all the way down to questions over honesty, transparency, patriotism, commitment to Democracy & even reason itself…

  • howa4x

    The problem we have is that our moral institutions that should be teaching these lessons are themselves greedy , and morally bankrupt. They laud the rich to come to their houses of worship and never scold them for making too much, or being obscenely wealthy. Wall St is hedonistic and that was how it was formed. It was never supposed to be a place to seek morality but rather make a profit on investment. We voted for a capitialistic system that has gaps between the rich and poor.
    We did at one time have an unspoken social contract that said: We will allow you to make great wealth and not tax 90% away, and for that you will create employment oppurtunity for the masses. The problem was that with the election of Reagan , we had the largest transfer of wealth from the middle class to the 1%, and we allowed them to break the contract. If we want to add morality to our economic system then we have to put the contract back in place and say to the super rich, either create jobs wiith your wealth or we will tax it away and seed new industries that will create empolyment Then of course everyone will scream socialism, and the Republicans will fight it tooth and nail, and the tea party will dress up like patriots, and Fox will beat this to death, and the democrats who are too whimpy to fight will run and hide. That’s why things willstay the same.

  • Christian Martin

    What would capitalism’s founder think of Goldman’s greed?? Whatever the f@#! Goldman-Sachs told him to think!! The powers that be will do more than just kill an individual to prove a point (remember J.F.K. – broad daylight,in a major city,in front of thousands of onlookers and media). And if an individual is unafraid of them or uncooperative then they will reach out and touch your friends or your family. This is simply the world we live in. It is no coincidence that Kennedy was pushing campaign finance reform,reversion to the greenback or precious metals,and an end to lobbying as we know it. Back to sleep America……Back to daily drunkeness,numerous pills, and your precious small-minded religions and pop culture distractions…..back to sleep while I finish raping you and stealing the rest of your wool!!