Gordon Gekko, in the 1987 movie, Wall Street, famously states: “Greed is good, greed is right. Greed… captures the essence of the evolutionary spirit. Greed, in all of its forms, greed for life, for money, for love, for knowledge has marked the upward surge of mankind.” This inherently flawed statement is the corrupted view of capitalism that, sadly, far too many of our bureaucrats and government officials alike subscribe to.
It is not that capitalism is fundamentally wrong; in fact, quite the opposite is true. History has shown that, despite the inevitable flaws of human nature, capitalism in concurrence with the free market economy has proven to be the most effective economic system. But how has capitalism become synonymous with greed for so many people?
The great Adam Smith, widely considered the father of modern economics, provides a clue: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” This quote, taken out of context, is easily equated with greed. Smith, however, meant something entirely different. He viewed people as social beings who derive pleasure and satisfaction in seeing the good fortune of others. Therefore, he holds, one’s self-interest is inextricably tied to that of his neighbors; this is the true essence of capitalism as intended by its most renowned “father.”
We should take the common conflation of greed (in the evil sense) with capitalism and substitute it with an association with corruption. Corruption undermines a market economy, it creates vast inequality and leads to civil unrest. Transparency International compiles an annual index called the ‘Corruption Perceptions Index,’ which rates countries on their transparency, the strength of their integrity standards for public officials, and the independence of their judicial systems. None of the top 20 most corrupt countries in the world rank in the top half of GDP per capita (the generally accepted measure of standard of living). Inversely, the 20 least corrupt countries in the world all rank above 40th in GDP per capita. Furthermore, if oil rich countries such as Iraq, Libya, and Venezuela are excluded from this comparison the differences become even starker. All of the remaining 17 most corrupt countries rank below 160th ($6400 USD) in GDP per capita.
Africa has the gloom designation of having the world’s most corrupt countries; even so, many of these countries have received billions of dollars in foreign aid. So where does the money go? While fractions of it may actually go to helping the people, the majority of this money lines the pockets of government officials. To illustrate the corruption in many African nations, a CNN reporter asked the president of the Central African Republic (159 on the CPI) why he refused to give up his personal monopoly of the country’s refined oil industry. His response was, “Do you expect me to lose money in service of my people?”
These problems are not isolated to countries an ocean away. Perhaps the most significant example of corruption in recent history directly caused the 2008 financial crisis. Lenders, financiers and rating agencies all contributed to the collapse. Lenders began offering predatory loans called NINJA (no income no job no assets) loans to people who were not financially capable of paying them back. These loans were then passed on to big banks where they were grouped together in supposedly low-risk securities called CDOs. The rating agencies knew these securities were high risk but rated some of them AAA (deeming them of the highest quality and lowest risk) nevertheless because they depended on staying in the banks’ good graces to earn business. Naturally, this begs the question: where were the regulators during all this time? The Securities and Exchange Commission (SEC), which is in charge of overseeing the financial industry, was massively understaffed and could only handle a fraction of the files that landed on their desks.
The fallout of the corruption in the 2008 financial crisis was estimated by the Treasury Department to equal a loss of 19.2 trillion dollars in household income and a spike in unemployment to 10.1 percent. The distrust this created between the business elites and politicians with the citizens led to the huge rise in support for populist candidates in America and across the globe. But without a change in policy or ethics, there is nothing to ensure that these newly elected candidates are any different than their predecessors.
Our governments and businesses have become so enthralled in their greed and selfishness that we have come to blame capitalism, but in reality, they only use the façade of capitalism to further their agendas. We must promote ethical behavior by the way we behave ourselves, by researching before voting for public office, and by holding our politicians and business elite accountable for their actions. Ideally, all humans would act ethically. Unfortunately, though, we are an imperfect race.
It is this undeniable truth that so principally ennobles the conservative’s cause: to withhold as much power from the government as is reasonable. After all, “is it really true that political self-interest is nobler somehow than economic self-interest?” as the great Milton Friedman once so aptly professed. Even still, we must ensure that we have common-sense regulations and measures in place to incentivize ethical behavior and strongly deter corruption, the bane of any society, not just a capitalistic one. Adam Smith offers an eloquent ‘second’ with the following: “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.”
— Matt Collins is a sophomore studying economics and Spanish. He is a new contributor to THE ARCH CONSERVATIVE.