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Current Affairs

A Magazine of Politics and Culture

Is Capitalism Built on Greed?

Some leftists say that capitalists are not personally greedy and act as they do because the system forces them to. But that’s wrong. Capitalist greed is indeed a choice.

If you are new to socialist theory, you might assume that socialists think capitalists are greedy—that owners and bosses are selfish and immoral and trying to get as rich as possible because of their personal acquisitiveness. But, especially among Marxist socialists, a lot of thinkers on the left actually reject this way of talking. For instance, in Vivek Chibber’s forthcoming book Confronting Capitalism: How the World Works and How To Change It, a useful plain-language primer on socialist economic theory, Chibber writes that “capitalists aren’t motivated by greed but by market pressures.” He elaborates:

Capitalists don’t cause harm to their employees out of malice or greed. Their motivation comes from the brute reality of market competition. If a capitalist doesn’t produce at the lowest price, he knows that he will lose customers, and if that continues, his firm will start bleeding money. So he has to keep his selling price as low as possible. But if he’s going to lower his selling price, he also has to lower his costs, or he won’t make any money. Hence, he tries to pay out as little as possible for his inputs—the machines and raw material that he buys, and the wages he’s paying to his workers. So every capitalist constantly tries to get the most out of every dollar he spends, including from his workers. This is how firms survive in the market. It has nothing to do with greed.  

Ben Burgis, in Jacobin, says along the same lines:

Crucially, the capitalist drive to accumulate money isn’t primarily about individual capitalists being bad, greedy people, but rather the relentless pressures of the system itself. A capitalist who doesn’t ruthlessly pursue profits will be outcompeted by those who do.

This fits with the story that many capitalists tell themselves, which is that they are not in it for themselves. If your boss cuts your pay, you will be given an explanation to do with market forces. No capitalist ever confessed that they just want to earn as much money as possible because they like money.

Now, the story told about market forces putting pressure on capitalists to cut costs is true, and it explains why exploitation may not be purely the result of employers’ selfishness. But the Marxist argument is wrong, because it concludes from this that capitalists are not motivated by greed and selfishness, even though this is precisely why capitalists go beyond “surviving” in the marketplace and actually become rich.

One reason I can tell there is no necessity beyond selfishness to pursue gain is that I have started and run a “business” myself that does not pursue gain, and I know that it was a choice for me not to try to maximize my gains. Current Affairs is subject to certain market pressures (we have to keep our magazine priced low enough to where people will buy it), and the lack of money in media means that salaries at Current Affairs aren’t very high. But nothing compels us to pursue profit, that is to make money above what it takes to cover our costs. If we want to expand the business, we will need to make money. If we were incorporated as a for-profit enterprise that needed to “maximize shareholder value,” we would need to make as much money as possible. But these are choices, not imperatives imposed upon us by the economic system. I know that it is not necessary to maximize profit in order for a “firm to survive in the market” because I have spent six years helping a firm survive in the market without pursuing any such imperative. 

Chibber and Burgis explain why a capitalist who does seek to maximize profits will need to exploit people, and why even a business that is not operated for profit may find itself having to cut costs ruthlessly in order to survive in a competitive market. But market forces do not constitute an explanation for why a capitalist would ever need to maximize their own profits in the first place. The desire to maximize one’s return is a function of greed.

Capitalists are greedy, and very obviously so. In fact, elsewhere in the book, Chibber gives us evidence that capitalists are greedy. Explaining how a capitalist who invests money is seeking to make more money, Chibber writes that “while it is important for him to recoup his original investment, of course this isn’t all he needs. For one thing, he wouldn’t have made any money for himself.” If not for the additional increment the capitalist makes over and above what is put in originally, “his entire effort becomes a kind of philanthropic endeavor, in which he pays out to others, but takes nothing home for himself. … [A]s everyone knows, it is the pursuit of profit that shapes the entire organization of production in capitalism.”

But what prevents the capitalist from operating philanthropically, and taking nothing for themselves? Or taking home only the same amount as the lowest-paid worker? Why does the capitalist need to “take something home” over and above the amount needed to subsist? It’s perfectly possible to start a business and operate it in the interests of the community without using it to make a fortune. The capitalist chooses to try to make money, and it’s that choice that is accurately described as acquisitiveness, or greed, because nothing in the economic system mandates it. Jeff Bezos does not need to be a billionaire. He didn’t need to take any ownership of Amazon himself. He exploits people for his own benefit because he has an insatiable greed and lust for power, not because facts about the economy compel him to own the company.

When we are asking whether capitalists act as they do out of greed or if they are compelled by some kind of systemic force, one way to test the proposition is to think about what would happen if we substituted an altruist in the capitalist’s role. We can see that certain things would not change. If you made the CEO of a company an altruist, but the CEO was under a legal mandate to maximize shareholder value, then if they exploited their workers less the board of directors might replace them. The altruistic CEO alone may have few options to improve the company. But the owner of a company, the person who puts up the capital, can make a huge difference depending on whether they are pursuing gain or the public good. Pursuing gain means that workers have to be more exploited than market pressures alone require so that a sum of profit can go to the owner. If public good is the goal, no such sum need be generated. Nor does the owner need to relentlessly expand the business in order to pursue larger profits. The business can stay the same size, if doing so serves the public good.

Since it is obviously wrong to say that capitalists aren’t greedy, why would socialists make this argument? One reason is that Marxism, often presented as a kind of “scientific socialism,” developed as a way of trying to understand the economy as a machine that operated according to certain principles. Engels, in discussing the utopian socialists, said that socialists prior to Marx had seen socialism as a grand moral idea, an expression of “absolute truth, reason, and justice” that “has only to be discovered to conquer all the world by virtue of its own power.” Indeed, Robert Owen, the wealthy textile manufacturer who founded early socialist communities, said on his deathbed that he “gave important truths to the world, and it was only for want of understanding that they were disregarded.” Marx and Engels realized that simply exposing that capitalism was immoral and that socialism would be better was not enough. One needed to understand the mechanisms of capitalism in order to figure out how to replace it. “Moralism” became a dirty word among many socialists, because morality was perceived to be mostly irrelevant. The Marxist socialist is not a religious teacher but an engineer who takes apart the machine, sees how it works, and tries to rebuild it to work along different lines. 

To this day, many socialists also do not see capitalists as being particularly human, and so they are inclined to explain them as rational-maximizing robots. To treat the capitalist as selfish is to treat them as a person who could do better, rather than a faceless money-maximizing automaton, which is what they often appear as from the worker’s perspective.

It makes quite a bit of sense, then, that socialists wouldn’t want to humanize capitalists by making them seem as if they are people just like ourselves. But ironically, in developing a theory that capitalists cannot do otherwise, they let capitalists off the hook. They gave up the argument that being rich is immoral, even though it obviously is. This socialist argument allows people like Elon Musk to say that they aren’t greedy even as they violate every norm of human ethics to accrue as much for themselves as possible, without anything in the economy forcing them to do so.

Importantly, the fact that capitalists are selfish, and that their selfishness drives a great deal of their exploitative behavior, does not mean that we simply need to persuade the world’s owners to be nicer or to voluntarily shed their possessions and turn their companies over to the community or the workers. It could simultaneously be true that personal greed plays a major role in the pursuit of profit and that attempts to talk greedy people out of being greedy are doomed to fail. One of the fears that some Marxists have, I suspect, is that when we begin to talk in moral terms, we start to think of political action in terms of making people better, rather than seizing power. But the moral and the militant need not be considered mutually exclusive. We can be cynical about the likelihood of capitalists’ becoming better through moral exhortation alone and also recognize that, for the most part, it is not the “market” but their own pathological and sociopathic pursuit of their self-interest that compels them to act as they do.

Sometimes something that is very obviously untrue is believed because everyone has an interest in believing it, even if those interests vary or are opposed. So, for instance, both the government and an anti-government terrorist group might have an interest in exaggerating the strength of the terrorist group. Similarly, both socialists and capitalists have good reasons to say that capitalists aren’t “selfish” but it is “the system” that compels them to act as they do. So an argument that makes little sense and is obviously at odds with reality (where rich people could easily choose not to be rich, and capitalists make profits by choice) persists because it is convenient for both the system’s proponents and its critics to believe it. But the fact that a falsehood is useful does not justify believing it.

Some of capitalism’s defenders do not make the argument that capitalists aren’t greedy (though usually they prefer the term “self-interest,” which sounds much less objectionable). Milton Friedman replied to the question of whether capitalism was built on greed by insisting that Russia and China run on greed as well. But this is not a justification, either. We must reject the idea coming from many wealthy people that, as Jag Bhalla puts it, “unbridled greed is just simple human nature.” (Bhalla says we have accepted a “greedocracy.”) We ought to acknowledge the simple fact that those who try to get more than they need to live a life of basic comfort, with luxuries of the kind that everyone deserves, have accumulated their luxuries because they have deprived others along the way. This has been done by choice. Everyone could have had plenty, because there is plenty to go around, but decisions are made every day that prevent this outcome. Nobody makes the capitalist maximize profits, or pay their workers less than they pay themselves, and “the market made me do it” is an excuse that should make socialists highly dubious. And while it is the case that persuading capitalists to shed their wealth and join the proletariat is not an intelligent revolutionary strategy, it is crucial for socialists to understand that human beings are not mere billiard balls whose moral choices are dictated by the systems we are in. We have agency, and that agency confers responsibility. There are no excuses for enriching one’s self and exploiting others.

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