The Profit Motive, Greed, and Tyranny
Our constitution was made only for a moral and religious people.
— President John Adams, 1798
Is there some society you know that doesn’t run on greed?
— Milton Friedman, 1979
In a famous 1979 interview, Phil Donahue challenged Milton Friedman to defend capitalism against the charge that it fosters greed. Friedman deftly parried that greed motivates men in all nations, not merely the free ones, and that the only difference between nations on this score is that in a free market economy, greed creates general wealth and prosperity that benefits everyone, whereas in a controlled economy greed creates only impoverishment and oppression. In short, greed, if unleashed in an atmosphere of individual liberty, is a great benefactor of mankind.
Pragmatically, this sounds right, and defenders of liberty frequently cite or mimic this response as a rejoinder to those who, influenced by generations of post-Marxist propaganda, continue to attack economic freedom on the grounds that the profit motive and private property are immoral.
The problem with Friedman’s position stems from his weakness, perhaps typical of even the greatest economists, for seeing man as a set of motives and inclinations that remain static, and will continue to function in the same manner, with the same predictable results, within an unchanging system, like a well-programmed computer model. History, however, provides an endless series of examples to demonstrate the fatal flaw in the economists’ computer model-like assumptions about human nature.
According to this economist’s model of man, a classical conception of moral virtue is an unnecessary bauble in a free market economy, as the profit motive alone, if unrestrained by despotic regulations, will provide for the well-being of mankind. This is why Friedman is so boldly emphatic about accepting Donahue’s term, “greed,” and with it Donahue’s suggestion that a free economy exalts this vice. In fact, he goes so far as to universalize this motive while explicitly distinguishing it from virtue, as in the brief video clip below, so as to leave no doubt that he is not using the word “greed” ironically, or in any special sense, but literally to name a motive traditionally identified as a vice or sin:
Notice that Friedman simply accepts the premise that capitalism is based on greed, a moral vice, and that it is through this immoral motive that societies flourish. The key exchange, it seems to me, is this one:
Donahue: But [the free market] seems to reward not virtue as much as the ability to manipulate the system.
Friedman: And what does reward virtue? You think the communist commissar rewards virtue? You think a Hitler rewards virtue? You think — excuse me, if you’ll pardon me — do you think American presidents reward virtue? Do they choose their appointees on the basis of the virtue of the people appointed or on the basis of their political clout? Is it really true that political self-interest is nobler somehow than economic self-interest?
At the heart of this witty answer is the hard but false distinction, even an implied contradiction, between “self-interest” and “virtue,” such that self-interest, used here almost interchangeably with greed, has great social value, while virtue is largely irrelevant from the point of view of economic theory. Let us take a closer look at this argument, which is directly disputed by the logic of human nature and by the wisdom of the men who crafted the freest market in history, America’s founders.
First, contra Friedman, it is clear that a free market may be distinguished from a controlled economy precisely on the grounds that it can, in principle, reward virtue. For example, under socialized medicine, you must accept the medical professionals assigned to you, the wait times imposed upon you, and the level of care determined as appropriate for you by a faceless bureaucracy. In a free market, you are at liberty to judge a doctor on the basis of his competence, professionalism, proficiency, diligence, sense of responsibility to his patients and his Hippocratic Oath, or any other grounds of skill or character that you deem appropriate. If you find a doctor deficient in any of these areas, you are free to take your medical business elsewhere.
For another example, in a compulsory school system, you have little decision-making authority over what kind of person will teach your child. In a free education market, you would be the worst kind of parent if you sent your child into the hands of another adult several times a week without considering that person’s character, dedication, and trustworthiness, in addition to mere academic qualifications. (Think about that, moms and dads.)
So virtue may indeed be rewarded in a free market economy, without contradicting self-interest in the least. Whether a free market does, in practice, reward virtue or vice is largely a matter of the general level of virtue or vice in the society. In a time in which men were generally of good character, or at least respectful and appreciative of such character, the virtuous teacher would, all things being equal, be rewarded with more or better students, the virtuous doctor with more patients — and the virtuous presidential candidate with more votes.
Friedman’s model of greed as benefactor is built on the faulty presupposition that the pervasive immorality of our age is a universal and necessary condition. But ask yourself: Are today’s consumer products built to last the way products were in earlier eras of industrial manufacturing? Would Henry Ford have tried to get away with cheap, quasi-fraudulent nonsense equivalent to filling a potato chip bag with air to create the illusion that there are a lot of chips inside? Are our upper middle class suburban mini-castles built with the level of pride in craftsmanship and architectural detail that was standard in the ordinary urban homes built by and for blue collar immigrants three generations ago? Would a sleazy operator like Bill Clinton have enjoyed increased popularity after belittling the presidency as he did, and finally be elevated to honored elder statesman status, by the America of 1850?
If not, then why not? The answer seems to be that the general level of public morals in past eras demanded a higher standard from everyone. A businessman or politician who lacked the basic character expected of all citizens would have been forced, out of self-interest, to act as though he were moral, for fear of losing the public’s trust. P.T. Barnum’s famous line — “Sincerity is everything; if you can fake that, you’ve got it made” — expresses this point perfectly. There was an implicit societal expectation that men who wished to trade with others should display the character of a good man, and success in the market depended somewhat on such display. In a moral society, virtue is rewarded by the free market, just as vice is rewarded in a morally bankrupt society. (Consider today’s popular music market and its accompanying videos, in which pornography is the standard afterschool fare of every child, while heads of state clamor for photo ops with the market’s star pimps and hookers. Could the same have happened a century ago?)
This is not an argument against the invisible hand, i.e., against the societal benefits derived from allowing men to pursue their own interests, motivated by their private desire for profit. My question is whether the long-term benefits of the invisible hand depend, as its early proponents insisted, on that hand being wielded primarily by good men. It is my contention that today’s shrinking circle of liberty under the increasing global control of a crony-capitalist progressive elite is proof positive that virtue matters. If economists cannot account for this, so much the worse for the science of economics.
Wealth is good. Not only is the pursuit of wealth not immoral, but in fact it has a certain positive relation to the moral virtues. The “profit motive” is just a narrow expression of one aspect of the classical desire for happiness that was understood to be the core of morality throughout the Western tradition, until the late eighteenth century, when German philosophers decided that morality required the denial of the individual man, thus effectively negating the moral inheritance of millennia.
The classical conception of happiness tended to exalt the contemplative life above the practical, as a concomitant of elevating the soul over the body. Nevertheless, it was always understood that even if the fullest happiness is found in wisdom or contemplation, our material nature is a necessary support for such a life. That is, the best life must integrate our bodily nature into our spiritual goals, and this requires some measure of practical well-being. We need material goods to live in comfort, to provide for our future security, and to fulfill the responsibilities of social life. If we are not to steal our wealth from other men, then we must acquire it voluntarily or through inheritance. In order to trade, we must have something of value to offer. In short, the lawful acquisition of wealth is a practical good derived from our natural desire for happiness, i.e., for self-preservation and self-development. It is therefore perfectly consistent with our pursuit of virtue — understood in the pre-Kantian sense — and actually supports it in many ways.
We must avoid a common error here, however, namely defending “the wealthy” per se, rather than “the profit motive.” Pursuing wealth is consistent with virtue. Being wealthy, on the other hand, is not a virtue in itself — even if that wealth was acquired through voluntary exchange in a free market. Much depends on what use is made of that wealth once acquired, which in turn will depend on the character of the wealthy man.
Defenders of freedom may bristle at sentences like that last one, suspecting that anyone who is concerned about how the rich man uses his wealth is looking to regulate its use, or to redistribute it. On the contrary, I have no interest in separating the wealthy man from his money, or in determining how he ought to use it. My concern is only that he not use it to promote regulations or institutions that would prevent the rest of us from enjoying the same freedom that allowed him to prosper. In other words, the wealthy man must be virtuous enough to withstand those special temptations and opportunities presented by great wealth which, if succumbed to, can and do lead to real tyranny.
Virtue in the wealthy is a special concern for society as a whole, not because wealth is immoral, but because the combination of wealth and vice is a recipe for the most potent social poison.
In the Republic, Plato, in the process of showing the virtuous life to be the happiest, has his brother Glaucon challenge Socrates with one of the most incisive moral questions ever raised. Invoking the legend of Gyges, a man who happens upon a ring that completely conceals him from others’ awareness, Glaucon ask whether the virtuous man, should he fall into possession of such a ring, would remain virtuous, or whether he would rather exploit his invisibility to gain unjust advantage over others. In other words, will the virtuous man do good even when there is no fear of punishment or blame for vice?
The framing of Glaucon’s question presupposes — and this seems to comport with common sense — that the vicious man would take advantage of the ring of Gyges to secure perceived benefits unjustly at others’ expense.
Great wealth is one of the definitive cases of a real life “ring of Gyges.” It can obviously be used to achieve advantages for oneself beyond the realm of legitimate trade, such as by buying influence or supporting politicians who will legislate in one’s favor, against the interests of freedom; funding propaganda campaigns to discredit political organizations dedicated to individual liberty and the rule of law; backing politicians, think tanks, academics, and media organizations that seek to establish, support, and defend institutions that would entrench a permanent, unassailable ruling class, thereby thwarting potential challengers to one’s elite status.
Moral character means good habits of feeling and response to challenging conditions. Many of these challenges may be encompassed under the rubric of “fear,” broadly defined. How a man responds to life’s fears — of the future, of difficult work, of illness, of poverty, of isolation, and of death — is determined as his character is formed in youth. If he is a courageous, temperate, properly proud, and reasonable man, he will face such fears, and others, without forsaking his respect for the dignity and rights of other men.
If he lacks strong character, life’s challenges, rather than strengthening his will and buttressing his virtue, will forever tempt him into vices that he only resists, if at all, out of fear of social consequences. And if he has achieved great wealth and elevated social position through his work, he will be threatened with a new fear, peculiar to those who have won the world — the fear of losing it.
Just consider the excessive fear of loss that must grip the soul of a morally weak man who finds himself king of the hill, as he surveys all the men trying to climb up at him from all sides.
Virtue allays the fears of a man of character. Men without virtue will allay their fears immoderately and irrationally. Hence the disease of cronyism and the freedom-destroying alliance of progressive political factions and the business titans who see their security and aggrandizement in freezing the market in its current configuration, namely with themselves as the power players. Without virtue, there is nothing to prevent such elite men from putting on their ring of Gyges.
American compulsory schooling is, and always was, an anti-freedom racket, backed from its early days by wealthy industrialists who saw in public education the perfect opportunity to produce the skilled but submissive workforce they needed, and, by implication, to create a general population that was mentally and morally suited to serve its masters, rather than strive for achievement on its own terms. (John Dewey, the socialist indoctrination theorist par excellence, was employed and funded in his research by J.D. Rockefeller’s General Education Board. The great industrialists knew exactly what Dewey was driving at, and saw how it could advance their own ambitions as well.)
The use of compulsory schooling to create a collectivist quasi-caste system in which “the masses” are weakened and artificially prevented from pursuing unpredictable greatness which might threaten the established economic hierarchy expands with each generation throughout the developed nations. This is the perfect model of what happens when greed is excused on the grounds that it yields social benefits. Greed yields the same result socially that it yields in the individual: material benefits gained at the price of moral and intellectual enslavement.
Meanwhile, the corporate elite hardly restrict themselves to one fundamental subversion. Consider the widespread corporate advocacy for the global environmental agenda, with its pseudo-science aimed at justifying the abolition of private property, the gradual forced migration of people into cities, and industrial regulations that would virtually outlaw new private development and invention from gaining a foothold in the market, by effectively criminalizing actions that have hitherto been regarded as the very basis of economic freedom.
And we cannot neglect the current U.S. Chamber of Commerce in its advocacy of amnesty for illegal immigrants. One need hardly wonder why the entrenched economic elite would see their advantage in legalizing millions of poorly educated people who are willing to work but essentially dependent for their sustenance. The purpose of “getting them into the system” is not to give them the benefit of upward mobility, but to ensure that they never seek it. “The system,” in this case, is the modern form of the ring of Gyges.
But make no mistake: the system at issue here is not the free market. It is, rather, the extremely unfree simulacrum of a market — parallel to the more general late-modern simulacrum of liberal democracy in which the “free world” has subsisted for generations — maintained by an ugly polygamous marriage of progressive intellectuals, tyrannical power-mongers, cynical careerist politicians, and a corporate elite seeking to maintain and perpetuate the status quo, meaning its own wealth and influence, by any means necessary. This power structure has its equivalents throughout all the global progressive branch plants formerly known as the nations of the free world.
We are living through the proof that greed is no benefactor. Yes, free men without virtue may create wealth that benefits us all. But free men without virtue will also be the undoing of freedom. This is exactly as so many of America’s founders warned. The survival of a free republic, they argued, depends on the virtue of its citizenry. Were such warnings intended only for the “little guy,” or for private life? On the contrary, the general virtue of the society is necessary especially for the sake of those who rise to positions of prominence and influence. They, above all, having the means and opportunity to undermine the whole for their own private advantage, must have the character and the moral impetus to resist doing so.
It is evident from the foregoing how the economics of greed contradicts itself, and, as a matter of practical historical fact, how the West has been lost.