Essay on Greed is Good?
In the 1987 Oliver Stone film Wall Street, Michael Douglas (playing the fictional Gordon Gekko) delivered a particularly concise formulation of what many people, in retrospect, thought was wrong with that whole decade. “Greed is good,” he proclaimed (echoing a real-life speech by Ivan Boesky, a few years before).
This vulgarization of Adam Smith’s model of free enterprise, in which self-interest had a carefully contained and nuanced meaning, had long been familiar. The doctrine of the “invisible hand” (converting acts of individual greed into the blessing of universal prosperity) had worked its way deep into the American ideology, and, accordingly, there was nothing too extreme or too good to be said about greed.
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But, what is greed? Why has it been considered a vice and a sin throughout most of human history? Why do we still use the word greedy not as a term of praise but as a criticism, a put-down, a condemnation? Plato referred to pleonexia , a serious vice that might best be understood as grasping . There is a fine line between idealism and ambition, which one might describe as “reaching,” and avarice and greed, which are something quite different.
“Grasping” has a sense of desperation about it, something unseemly, the unmistakable suggestion of “too much.” And that is what greed is, “too much.” In the film Key Largo, Edward G. Robinson discovers in a word what he has always wanted, what drives his vicious criminal career: “more!” he says with gleeful enthusiasm, “that’s it, more!!”
“Greed is good” is a contradiction. Greed is by definition not good. But that, of course, doesn’t answer the question: What is wrong with greed? Greed (avarice) is an excess. It is like gluttony, an embarrassment, and the explanation “I wanted more” does not serve as an excuse but rather confirms the unbridled vulgarity.
Given our characterization of business as irreducibly social and necessarily involved with mutual interests and concerns, the supposed place of greed in business mentality is surely embarrassing in itself. And yet, the idea that greed is basic to business has been firmly established, if not by its practitioners, then certainly by its critics.
How odd, then, that we so often celebrate and reward greed as “ambition” and “drive.” Greed is not vision. It is a lack of vision. Let us see it for what it is, an extreme form of selfishness, an oblivion to all virtues, and neglect or contempt for any good but one’s own.
Abstract greed is a falsification of what drives people, but there is an analog that is no less abstract but much more insidious in the corporate context. It is what business theorists in the twentieth century have often called the profit motive. Never mind that the phrase was invented by nineteenth-century socialists as an attack on business and its narrow-minded pursuit of the dollar, the mark, and the yen to the exclusion of all other considerations and obligations. The idea is that the natural desire for profit drives the free enterprise system (and so, too, each one of us).
A more sophisticated version of the myth of the profit motive avoids the extravagant generalizations regarding human nature, interpreting the motive more modestly as a matter of contractual obligation, not natural necessity. “The social responsibility of business,” writes Milton Friedman in a famous polemical article, “is to increase profits.” (1)
He does not include the word only, but it is clearly implied. Friedman argues that the managers of a company have a fiduciary responsibility to the owners (in a publicly held company, the stockholders), which is certainly true. But notice that Friedman’s argument, although it is headlined in terms of profits, is in fact concerned with the notion of responsibility, not a profit concept at all. Managers and executives may make profits, but not (as such) for themselves.
Such talk of the profit motive causes more damage than any amount of sleaziness or dishonest dealings on the part of the business community. It is the narrow-minded language of the profit motive that gives rise to public suspicion.
Peter Drucker, in his magnum opus Management, writes of managers that “it is their own rhetoric that is one of the main reasons for hostility. . . . There is only the profit motive, but why that desire should be indulged in by society any more than bigamy, for instance, is never explained.” (2)
“Profit” is an economist’s term. It is not merely an increase in wealth, and it is not what one earns when one works for a living. You’ll never get rich working for a living. Profit is, technically, what is “left over” after all costs have been paid. In practice, profits are often what the board or the boss says that they are.
But profits are neither “natural” nor a motive. Anthony Flew, defending profits but attacking the idea of a “profit motive,” rightly asks whether we should also talk about a “wage motive,” a “rent motive,” and an “interest motive.” (3) This little reduction ad absurdum quickly demolishes its target.
Of course, people work for profits in a profit-making system. But profits are a means to an end -- for a corporation, survival, for an individual, money to spend. Profits get distributed and reinvested. Profits are a means to building the business and rewarding employees, executives, and investors.
The profit motive is often attacked as a form of selfishness. Once again Flew makes the point rather nicely. He carefully distinguishes pursuing one’s interest from selfishness, taking as an example his daughters eating their dinners: “It would be monstrous to denounce them as selfish hussies, simply on that account.” Flew adds, “the time for denunciation could come only after one of them had, for instance, eaten someone else’s dinner too.” (4)
Who is supposed to have this so-called profit motive? Employees don’t have it: They have a salary to earn and a job to do. Managers don’t have it: They have obligations and responsibilities. Top executives, too, work for salaries and bonuses. They work for profits only insofar as they are also shareholders in the company. It is only the investors, the “owners,” who do not “work for” profits, and if anyone has the profit motive, presumably they do. It is on their behalf, according to this myth, that the entire system functions.
But stockholders are not homines economici, that is, merely economic self-maximizing beings. They are people with values and virtues who presumably care about something more in life than how their shares are doing. To be sure, they do hope and often expect to make a profit. And that means that the businesses themselves have to make a profit.
In Peter Drucker’s startling turn of phrase: “If archangels instead of businessmen sat in directors’ chairs, they would still have to be concerned with profitability, despite their total lack of personal interests in making profits.” (5)
But businesses and businesspeople make a profit only by supplying quality goods and services, by providing jobs, by supplying capital and taking risks, and by fitting into the community. Norman Bowie has argued that profits, like happiness, are most easily obtained when not pursued as such. If you want to be happy, you need to pursue not happiness but other goals. So, too, “the more a business consciously seeks to obtain profits, the less likely they are to achieve them.” Bowie aptly calls this “the profit-seeking paradox.” (6) One might think of it as a conceptual antidote to the mythical profit motive.
Gordon Gekko said his “Greed is good” speech mostly with reference to the managerial waste of the shareholders’ money. He mentions the fact that the CEO and upper level managers receive huge salaries and numerous bonuses: all this comes out of a shareholders’ pockets. For Gekko, ‘greed’ is the ability to control the unnecessary spending of upper level managers in order to help shareholders retain their real profits.
Gekko’s position does promote greater social good: it is actually based on the principle of utilitarianism that could be described as ‘the greatest good for the greatest number’. Instead of having upper level managers of huge corporations share extraordinary benefits and tremendous salaries, Gekko suggests that those money are used to gratify those who were responsible for founding the corporation – its shareholders.
Therefore, ‘greed’ in Gekko’s mouth is not bad, but actually good. He wants shareholders have what they deserve to have; certainly, such an attitude will not be tolerated by the managers he refers to, and he will have to struggle for the greater social good that he strives to achieve. The “greed is good’ speech is one of the most moving moments in the film, and I believe that gecko is completely right in what he says.
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