Fallen markets linked to fallen human beings

9 Comments

'The Market Crash', by Chris Johnston, cropped to 300 px by 300 pxI enjoyed Neil Ormerod's reflections on the global financial crisis. I found challenging his argument that lack of knowledge rather than greed was its primary cause.

But while agreeing with Neil on the importance of knowing more about the economy, I would still argue that we should focus first on greed. The essential knowledge we need — about how fallen human beings behave, and about how to control the effects of such behaviour — we already have.

It may be helpful to offer crude working descriptions of economics and greed. Economics encompasses the particular set of human relationships that are involved in buying and selling, in commercial exchange. Greed is the desire to make maximum profit in transactions without thought for how others directly and indirectly affected by the transaction gain or lose by it. There is no thought fo a larger or a common good.

Knowledge about economics is more like historical knowledge than like the natural sciences. Because it deals with human behaviour, it can never be more than provisional. Human beings are not predictable in their relationships. Nor are their motives for acting fully discoverable. So although the collection of data and analysis of patterns are important, ultimately they need to be brought together in a theory that is necessarily laden with judgments about human beings.

Greed is endemic in relationships that involve commercial exchange. That is to say that everyone is sometimes tempted to it, and that many people are consistently motivated by it. It is a fact of life. The need to regulate it is recognised in laws on weights and measures, on contracts, on printing currency and on other ways in which people try to maximise profit at others' expense. But greed itself, of course, is not illegal. Nor are those driven by the desire for wealth monsters. They belong to us.

As financial transactions become more complex and abstract, they encourage a culture of greed. People whose central desire is to become wealthy are attracted to courses and institutions that explain how money works and how to manage it. The most ambitious succeed, and join firms that have a reputation for being millionaires' creches, where making money without regard to its social context is the object of the firms.

There they work in an environment in which greed is taken for granted and endorsed. If successful, they can look forward to high salaries and bonuses, become partners in their firms and later take their places on boards and advisory bodies and as lecturers in business schools.

When responsible for their firms, they naturally shape them to expand the culture of greed. They focus not on the contribution that the firm makes to society, nor on building loyalty between clients, workers and management, but on the unremitting pursuit of profit and the return to shareholders. And people entrust their money to these firms in hope of larger returns.

The culture of greed shapes what comes to be accepted as economic knowledge. Theories that reward greed are publicised and held to be true. They are given publicity by financial journalists and canonised in economics classes, and become the accepted wisdom of bureaucrats. The results can be seen in the acceptance of prima facie daft theories of efficient markets and of the benefits of extending private ownership of public utilities and services. These theories soon became financial orthodoxy, and greatly increased private wealth at a social cost.

The part played by the culture of greed in the global economic crisis was to weaken the trust required for economies to function well. The immediate cause was the multiplication of instruments that diffused responsibility for debt. That may have been dealt with. But the culture of unbalanced pursuit of profit remains, and it encourages people to place the same trust in the markets that they would in loan sharks, and in governments that they would in compliant police. Trust grounded in mutual greed is precarious.

This is why the issue of corporate salaries is so important. Salaries are a statement of values. Only those who are thoroughly immersed in the culture of greed would believe that their firms will attract good candidates only if they are offered several million dollars a year, and bonuses to boot; only those thoroughly immersed in the culture of greed would be attracted by such demeaning invitations.

So in order to defend the trust that lies at the heart of the economy, governments should regulate salaries — at least in companies that enjoy an effective public guarantee because they are too large to be allowed to fail. Regulation, of course, is symbolic; its merit is to remind the government that its duty is to ensure that markets serve society.

It is important to accumulate knowledge about the economy, both to facilitate day to day economic management and to disprove self-serving economic theory. But the human reality of commercial transactions, and particularly the place of greed and its regulation, are more significant. Greed will always be ahead of the numbers, and will weave them into an alluring dress before deeper reflection can show this to be a raiment of cobwebs.

The relationship between knowledge and greed is worth dwelling on because the next economic crisis will surely be bound up with climate change, whose severity and imminence become daily more apparent. Here, too, the call for more knowledge, more certain science, can be heard.

But when our generation is judged, it will be for seeking our own narrow interests without thought for those of future generations. The tranquillity of greed must not be left undisturbed.

Brake failure on the economic freeway: Neil Ormerod responds


Andrew HamiltonAndrew Hamilton is the consulting editor for Eureka Street. He also teaches at the United Faculty of Theology in Melbourne.

Topic tags: Andrew Hamilton, neil ormerod, global financial crisis, greed, ignorance

 

 

submit a comment

Existing comments

Way over the top, Andrew, way over the top. Are you trying to tell us that everyone, anyone, who is financial ambitious is greedy? And thus bad, very bad. This would be the same as saying that anyone who enjoys eating is automatically a glutton.

Sure, greed is bad - but isn't greed a relative matter, not so much of what you do but how excessively you do it.
Of course if no-one were allowed to make any money then our whole present capital/financial/social system would collapse completely. Or is that indeed what you are advocating?
John R. Sabine | 22 October 2009


Can someone please give me a credible reason as to why a limited resource called money should be in the hands of seemingly fewer and fewer people? This does not seem to make economic sense. Or is it me who is not making sense? Could it be that greed, long term, runs the risk of pulling the rug out from under the economy of capitalism?
Andrew | 22 October 2009


If we are going to start naming the greedy and overpaid, could we include the stars of the sporting and entertainment industries?

I am sick and tired of only the CEOs of multi-national corporations having the finger pointed at them. Let Tiger Woods and his ilk dodge a few well aimed rocks as well!
Joseph Lanigan | 22 October 2009


A piece that has obviously has the weight of much reflection over the last year behind it, Andrew.

1) Living in NSW I was struck by your reference to "daft theories of the benefits of ... extending the private ownership of public utilities and services." In such cases we see the greed of governments wanting to use a state's bottom line as a means of assuring voters that they can be voted in again.

2) Your piece is a reflection's on Malcolm Turnbull's rubbishing Kevin Rudd's essay on greed last year.

3) It reminds me of Helder Camara's words in the 60s(?):'To what hell have we come when the sole motive for human activity is profit'?


Joe Castley | 22 October 2009


Thank you Andrew for an article, which for me, was full of commonsense, wisdom, discernment and intelligence.

It is very hard to hear someone else's ideas, when they challenge some of our long held convictions.

Greed is rarely acknowledged. It is perhaps insidious ,and destroying of others. It appears to rule one's life and relationships.

How we are`all guilty. Is it difficult to admit one's greed? I guess it could be, as nearly every thread of our society is touched by it.

I would like to think that 'service', may help diminish some aspects of greed in our society.
Bernie Inntrona | 22 October 2009


I am not so much concerned with Fr Hamilton's comments on greed as I am on his highly contentious statement in the second last paragraph on climate change.

It is typical of the alarmist nonsense that many sprout to justify drastic action. Recently Gordon Brown was saying that climate change will render more damage than both World Wars.

It is done to justify governments coming together at meetings like Copenhagen and making agreements which will see more and more power centralised in supra-national bodies. It is ultimately all about control.

We will have to pay ever increasing amounts of taxes to these parasitic bureaucracies. Money will taken from the evil first world and redistributed to the third world as reparation for our carbon sins.

Of course, most of this money will go down the drain the way that most aid does now. Corrupt African regimes will pocket it an not change the lives of their citizens one iota. But all the guilt-ridden catastrophists of the West will feel better.

If you want to see the idiocy of the AGW alarmism, go to youtube and search for 'Bob Carter'. He dispassionately takes this mega-fraud apart, whilst showing the shameful silence or vilifying by our press and politicians to any voice that goes contrary to the mantra of CO2 generated doom.
Patrick James | 23 October 2009


I agree with Andrew Hamilton. Greed will always beat skill and knowledge every time. And not enough people speak up against it until it is too late. Any economic system that rewards greed will always be an unjust system.

St. Thomas Aquinas wrote that greed was “a sin against God, just as all mortal sins, in as much as man condemns things eternal for the sake of temporal things.” In Dante’s Purgatory, the penitents were bound and laid face down on the ground for having concentrated too much on earthly thoughts.


Nathan Socci | 25 October 2009


I agree strongly with the thrust of Andrew's argument.Is it over the top? Well, I suppose that depends upon what standard you use.

If we look at in the context of Christian scripture, or in the context of an 80:20 world, then no, I don't think what Andrew says is over the top. Acquisitiveness is greed, full stop.

That doesn't mean we should all be flayed for our white good purchases and renovations. Like all vices it is in most of us, I am sure.

But what we need, I believe, is a renewed coversation about its antidotes: including that forgotten principle of the Catholic Social Teaching, the universal destination of goods; and some even half credible understanding of what 'need' is. If these concepts were reclaimed and understood, at least by our Catholic communities, then I believe 'financial ambition' would look very, very different.
C. | 26 October 2009


best ever ever
cuz cuz | 30 October 2009


Similar Articles

Mixed blessings on Anglican road to Rome

  • Andrew McGowan
  • 23 October 2009

Liberal Roman Catholics have particular reason to be perturbed at the influx of ex-Anglicans driven not by ecumenical zeal, but by dogged adherence to positions on women's ordination or human sexuality which bespeak a broader conservatism.

READ MORE

Strange encounters on the Spanish Camino

  • Tony Doherty
  • 14 October 2009

We entered the house expecting the warm hospitality usually offered to weary pilgrims. But a small ancient man barred our way and attacked us with a venom normally reserved for carriers of some ancient plague, snarling like an enraged guard dog.

READ MORE

We've updated our privacy policy.

Click to review