In honor of the greatest moralist who never lived
Copyright © 2004 by Bill Becker
A Textual and Thematic Deconstruction of Sixteen Responses by Distinguished Scholars and Public Figures to
the John Templeton Foundation's "Big Question":
Table of Contents
|Essay 1||To the contrary — Jagdish Bhagwati. May 24, 2009|
|Essay 2||It depends — John Gray. May 24, 2009|
|Essay 3||Yes, but... — Garry Kasparov. May 24, 2009|
|Essays 4-14||and Panel Discussion: In progress.|
Does the Free Market Corrode Moral Character?
Essay 1. To the contrary, by Jagdish Bhagwati.
(Jagdish Bhagwati is University Professor of economics and law at Columbia University, senior fellow for international economics at the Council on Foreign Relations, and the author of In Defense of Globalization. He writes widely on public policy and international trade. - JTF)Synopsis:
Bhagwati notes up front that any mention of the free market on university campuses leads to an "avalanche of criticism of globalization." According to its critics, globalization lacks a "human face," and "sets back social and ethical agendas such as reduction of child labor and poverty in poor countries and environmental protection everywhere."
Bhagwati disagrees with these accusations. His studies show that "the outcomes were the opposite of those feared" by well-meaning critics. For example, globalization led to higher earnings by rice growers in Vietnam. Those higher earnings led parents to keep their children in school rather than in the paddies, as had been previously necessary. Competition in the global marketplace has also narrowed the gap between wage levels for equally qualified men and women. Women are paid less than men overall, and competition drives men's and women's wages in any particular market toward some intermediate point. Bhagwati foresees the day when wage equality will be a reality across the globe.
China and India have "reduced poverty dramatically" and "improved material conditions for hundreds of millions of their people" through globalization. Bhagwati says that "focusing on growth is better described as an activist 'pull-up' strategy," in sharp contrast to critics' traditional characterization as a "conservative 'trickle-down' strategy." "Growing economies pull the poor up into gainful employment and reduce poverty," he asserts.
Bhagwati considers "hardly plausible" the claim by globalization's critics that "a widening free market ... expands the domain over which profits are pursued, and [that] profit-seeking makes people selfish and vicious." As evidence he points to the Calvinist burghers of the Golden Age, who made their fortunes in international trade (i.e.: globalization). They indulged their "altruism rather than their personal appetites."
Bhagwati then comments on "the Jains of Gujarat, the Indian state that Mahatma Ghandi came from": "The riches that the Jains reaped from their commercial activities were harnessed to their values, not the other way around." The implication, of course, is that Jain values are good values.
Bhagwati follows with a quote from John Stuart Mill, about the positive effect commerce has on moral character:
The economical advantages of commerce are surpassed in importance by those of its effects, which are intellectual and moral. It is hardly possible to overrate the value, in the present low state of human improvement, of placing human beings in contact with persons dissimilar to themselves, and with modes of thought and action unlike those with which they are familiar. ...There is no nation which does not need to borrow from others, not merely particular arts or practices, but essential points of character in which its own type is inferior.... It may be said without exaggeration that the great extent and rapid increase in international trade, in being the principal guarantee of the peace of the world, is the great permanent security for the uninterrupted progress of the ideas, the institutions, and the character of the human race.The phenomena Mill describes are found in "today's global economy," Bhagwati says. Executives and managers of Japanese multinationals brought their wives with them to New York, London, and Paris. The wives paid attention to how Western women were treated by Western men, and upon returning to Japan, "they became agents of social reform."
Bhagwati notes Adam Smith's disapproval of a particular European "man of humanity" who would not "sleep tonight" if he were to "lose his little finger tomorrow." But, this same man, Smith notes, would "snore with the most profound security"if a hundred million Chinese were "suddenly swallowed up by an earthquake," because "he had never seen them."
No longer, says Bhagwati. What may have been true for earthquake victims in far-off lands in Smith's day has been rendered false by today's free market:
"Last summer's earthquake in China ... was met by the rest of the world not with indifference but with empathy and a profound sense of moral obligation to the Chinese victims. It was globalization's finest hour."
Thus does Bhagwati end his essay.
The title of Bhagwati's essay, To the contrary, suggests that the free market not only does not corrode moral character, actually fosters moral character. Does he succeed?
We note that Bhagwati does not address the question of what is meant by "free market" (nor will he). Instead, he immediately conflates the meaning of "free market" with "globalization," even though there is no essential connection between the two, either semantically or practically.
"Globalization" can mean exactly what it means today - the virtually unfettered movement of goods, services, and, most important, the instantaneous transfer of capital - across national boundaries in perfect harmony with monopolistic practices within sovereign nations. It is also consistent with the economic domination of one nation over all others, a status that the U.S. reveled in for years. Regulation of American business originated in response to the unremitting efforts of the corporations to establish monopolies, and we can be certain that without regulation, bald-faced monopolies would be the order of the day, as opposed to the thinly disguised monopolies that dominate the present economy.
Bhagwati suggests that globalization is a new phenomenon, when in fact it is as old as recorded history. Considering only Europe, for example, the early "globe" consisted primarily of the Mediterranean Sea. The earliest seafaring peoples, such as the Phoenicians, traded goods with their business counterparts along the Mediterranean coastline. In the mid-19th century, long after the "globe" was accepted as being spherical, the United States "globalized" Japan at gun-point. Britain forced China — also at gunpoint — to become a nation of opium-eaters to absorb the produce of its Indian poppy fields.
Bhagwati's reference to the Calvinist burghers of Amsterdam, who indulged their "altruism rather than their personal appetites" is weak on its own terms: that was then, this is now. One common criticism of U.S. capitalism since Ronald Reagan embraced radical laissez-faire is of the casualness with which corporate raiders purchase profitable companies, dismantle them, sell off the parts or move them to the Third World or to China, and usually raid the pension plan before firing a large percent of the workers. The CEO of the mid-20th century, who was at least somewhat concerned about the welfare of his employees, is considered a sissy in today's corporate boardrooms.
In 1973, Uruguayan writer Eduardo Galeano published The Open Veins of Latin America: Five Centuries of the Pillage of a Continent. From Spain's first incursions into the New World to numerous Western hemisphere dictatorships beloved of Wall Street, "pillage" and "globalization" can be considered synonymous. A "personal virtue and concern for others" on the part of European and American beneficiaries of such globalization cannot seriously be suggested.
But, we must ask: if globalization per se, as practiced in the "old days"—until the "free market" craze took off with the Reagan administration, say—did not necessarily produce morally admirable enterprises, perhaps globalization since then has worked a more benign magic on its practitioners.
If so, it certainly was not apparent during Reagan's term, or in that of his successor, George H.W. Bush. When the revolutionary Sandinistas, whose mottos and practice were a "preferential option for the poor," and the "logic of the majority," succeeded Nicaragua's perennially U.S.-backed Somoza dynasty in 1979, the Reagan and Bush administrations unleashed the atrocity-prone contras on their peasant supporters. It took ten years, but the Nicaraguan people finally cried "uncle" and returned to the globalized fold in 1990.
Perhaps, then, 1990 is when "personal virtue and concern for others" began flowering under globalization. Maybe so. But if so, the improvement has little to do with globalization or the "free market" per se and far more to do with bad publicity given to globalized sweatshops by globalization's critics. Considering that Bhagwati's title, "To the contrary," means that the free market-cum-globalization actually fosters moral character, his observation that globalization has brought men's and women's wages closer together is more a contradiction than support. To wit:
"Firms competing globally soon find that they cannot afford to indulge their pro-male prejudices. Under pressure to reduce costs and operate more efficiently, they shift increasingly from more expensive male labor to cheaper female labor, thus increasing female wages and reducing male wages. Globalization hasn't produced wage equality yet, but it has certainly narrowed the gap."
"... they cannot afford to indulge their pro-male prejudices." What can this mean except that the firms would prefer by far to continue indulging these prejudices, and thus prefer not to reduce the gap between men's and women's wages. They are forced to do so. Where is the moral achievement here? Moreover, men's wages go down, in accordance with Adam Smith's observation that the "masters" always conspire to "sink" the wages of labor. To the contrary of Bhagwati's To the contrary, let me suggest that moral advancement on the part of multinational corporations would raise the wages of women to the level enjoyed by men. Bhagwati's "moral" progress here can also refer to a near-zero percentage increase in women's wages versus a significant percentage reduction in men's wages. I suspect that this is indeed the situation in the majority of cases.
In fact, there is nothing about globalization per se that creates an upward trajectory for the "equal" wage Bhagwati expects to be earned by both men and women. Competitive pressure to sink wages remains as powerful today as it was in Adam Smith's day.
It is unlikely, too, that the tendency of sweatshop managers to sexually abuse their female workers has been reduced on account of the higher wages the women now earn. Instead, women earning Bhagwati's "higher" wage might well be less inclined to resist an abusive boss than would women earning less. Overall, I suggest a serious cognitive disconnect between Bhagwati's theme and his example here.
On closer inspection, John Stuart Mill's quote is perhaps the wrong one.
"It may be said without exaggeration that the great extent and rapid increase in international trade, in being the principal guarantee of the peace of the world, is the great permanent security for the uninterrupted progress of the ideas, the institutions, and the character of the human race."
Without exaggeration? That's what they believed before tensions in Europe erupted in the apocalypse known as World War I — war was unthinkable because of the interlocking commercial ties between the European nations. So much for that theory.
Bhagwati's invocation of the Jains does not do his thesis much good either. I was online as I read his reference to the Jains, and I immediately Googled the phrase: "Economic success of the Jains." High on the hit list was JAIN BUSINESS ETHICS, by Atul K. Shah in Accountancy Business and the Public Interest, Vol. 6, No. 2, 2007 (Shah is Chief Executive of Diverse Ethics email@example.com)
As described in Shah's paper, the Jains do indeed seem to confirm that ethical and fair business practices are possible. Toward the end of his paper, however, Shah notes:
"In the case of Jains, globalization has been a boon because it has helped them to live their values and earn their income over a much larger geographical space and market size."
... "However, retaining culture in a changing world and in foreign lands is trying for any community, and the Jains have not been immune to this."
... "The existence of stock markets and quoted companies has given rise to a huge increased in 'unearned' income and wealth — this has led to significant financial indigestion and the related ills. Aparigraha* needs to be reminded and revived, as money has taken over so many social customs - even at times festivals and celebrations are dominated by who has given what rather than the inner wisdoms and spirituality. In India, there is a huge boom in Jain temple construction, not because of the need, but because of the importance of exhibitionism and showmanship. There seems to be an obsession with control over anything - be it wealth, business or public activity, and the deeper sense of charity and selflessness is getting lost in this tide. If they are not careful, the Jain business success story of today may become history in a short span of time." (pp. 127-128)
* "[T]he principle of Aparigraha explains that possessiveness and materialism are the root causes of human bondage and prevent us from realizing true spiritual freedom and liberation." p. 119.Does Bhagwati know something about the Jains that Atul Shah doesn't know? It seems that the moral character of the Jains is indeed in danger of being corroded by globalization. And, if the practitioners of an ethical business tradition over 2000 years old are in such danger, what chance do the rest of us have?
First, it appears that Bhagwati has a knack for picking examples that undermine, rather than support, his argument.
Second, the essay is really nothing more than a simple description of how things work today on the international economic sphere. While a description can serve as an explanation - e.g. geometry and physics can explain why billiard balls go where they do - it is usually not adequate as analysis of meaning or conclusions. (I will try to provide a comprehensive discussion of this concept in my own response to the essays in Essay #14.)
Meanwhile, I'm sure it is true that a higher income for Vietnamese rice growers has made possible a better education for their children; good on them, as Molly Ivins would have said. But the fact that Guatemalan women working in a foreign-owned maquiladora, say, earn more than they can by selling fruit in the local market-place tells us nothing about the "personal virtue and concern for others" of the maquiladora's managers or owners. Nor does it in any way indicate whether the CEOs of multinational corporations who purchase the maquila's output have any particular concern about their "moral character" beyond wanting to avoid bad publicity for benefitting from sweatshop conditions. As mentioned above, such bad publicity is not the result of 'globalization' or the 'free market', but results from (too few) human rights advocates and non-governmental organizations (NGOs) which uncover workplace abuses. Indeed, I suggest that whatever improvements we may see today in labor-intensive globalized factories, and any improvement in the distribution of wealth (precious little, in fact) is the result only of years of work by human rights activists and organizations.
Finally, Bhagwati's conclusion that the international response to the 2008 earthquake in China was the result of globalization is just plain silly. It was the result of governments deciding on a humane response. The very same governments that sent aid for Chinese earthquake victims still wring their figurative hands over the African genocides that are taking place even as I write this: "Oh," lament our august heads of state and foreign ministers, "if only there was something we could do to stop those mean old warlords from forcing 10-year-olds to become soldiers and to kill innocent women and children." The solutions are clear, but "globalization" has not fostered a single one of them.
It is true, of course, that "globalization" includes the truly amazing advances in communications technology and availability across the globe: telephone service; television; and most important, the Internet and the World Wide Web. And, it is certainly true that these advances have made human rights and workplace abuses more visible, even in the most obscure corners of the globe. Finally, it is true that human rights improvements depend on such publicity. Thus, Bhagwati avers, television and the Internet "have played a huge role in expanding our social and moral consciousness beyond the bounds of our communities and nation states." (My emphasis.) I suggest not. Television and the Internet have expanded our ability to know what is happening. How we respond to what we learn is totally independent of these mechanisms. Global moral progress, as defined here, does depend in part on the dubious capacity of corporate managers to be shamed into abandoning, or at least softening, the most egregious practices that always drive the Dow Jones upward. More affective are the individual decisions of thousands, perhaps millions, of ordinary people to apply either market or electoral pressure for change. Fair trade coffee is becoming a staple on the supermarket shelf, but we still have a very long way to go.
Bhagwati falls down on two major counts: first, he conflates the meanings of two independent economic genres: "free market" and "globalization." Second, he does not show, even on his own terms, that his "free market-cum-globalization" fosters moral character in the JTF sense of "personal virtue and concern for others." All of the positive phenomena that Bhagwati promotes as deriving from moral enhancement can easily be attributed to a cold-blooded assessment that if you want to make a lot of money in a world where a lot of pesky human rights activists are blowing the whistle on workplace abuse, you'll have to treat your employees better than your instincts dictate. Bhagwati gets the first "C".
Does the Free Market Corrode Moral Character?
(John Gray is emeritus professor at the London School of Economics. Among his recent books are False Dawn: The Delusions of Global Capitalism (Granta) and Black Mass: Apocalyptic Religion and the Death of Utopia. (Penguin - JTF)
Gray introduces his major themes as follows:
"Free markets corrode some aspects of character while enhancing others." Whether the result is good, on balance, depends on how one envisions the good life. Much also depends on whether one believes that other economic systems can do better. The question can only be answered by comparing realistic alternatives and by understanding how different systems promote divergent types of human character."
Gray next warns against relying on "ideal models," here referring to a commonly held view-even assertion-that "free markets emerge spontaneously when state interference in the economy is removed." "[F]ree markets are not simply the absence of government," says Gray. They depend also on law and the existence of property rights, both of which are "enforced-and often created-by government." Moral constraints such as the proscription of blackmail and child pornography are always incorporated into modern free markets. (Gray's emphasis.)
Gray notes the origin of mid-Victorian England's free market in the state-enabled privatization of lands formerly held in common or not owned by anyone. Farm labor then migrated to the cities, becoming the "industrial working class" and "the free market's human base." The resulting laissez-faire economy lasted only a few decades. After winning voting rights, the industrial working class demanded that the "economic activity" that depended on their labor be subjected to "various kinds of regulation." This eventually led to "the managed market economy that exists in Britain and many other countries today."
"[E]conomic systems are living things," says Gray, and thus "free markets rarely work according to the models constructed by economists." "[B]ooms and bubbles, busts and crashes" prove that "it is only in economic textbooks that markets are self-regulating." This background makes the "relation between economics and ethics" more clearly visible. "[E]ntrepreneurial boldness, the willingness to speculate and gamble, and the ability to seize or create new opportunities" are the character traits "most rewarded by the free market." But, these are not the traits "most praised by conservative moralists." The qualities admired by these conservative moralists - "prudence, thrift, the ability to press on patiently in a familiar pattern of life," along with "traditional values that stress the value of enduring human attachments" - "do not usually lead to success in the free market," and "when markets are highly volatile, these conservative traits may well be the road to ruin."
Adam Smith, "one of the originators of free-market economics," saw that the "subversive dynamism of the market cannot be confined to the marketplace... [but] demand[s] a high degree of mobility and an ingrained readiness to exit from relationships that are no longer profitable." The society thus "constantly on the move is unlikely to be a society of stable families or to be notably law-abiding."
"[T]he answer to this question [of which set of values to choose, we surmise] depends on how one conceives the good life," says Gray. A "liberal" may see "the exercise of personal autonomy" in what the "traditional moralist" sees as "family breakdown." Such "personal choice is the [liberal's] most vital ingredient for a good life," while "the preservation of valuable institutions" is more important to the conservative. Gray tends to a liberal view, but, it is really not so important whether one is a conservative or a liberal. The important point is to accept that "though free markets reward some moral traits, they also undermine others. If they emancipate individual choice, they at the same time corrode some traditional virtues. One cannot have everything."
Centrally planned economic systems are not necessarily any better than the free market, Gray continues. "Centrally planned systems have corroded character far more damagingly and with fewer benefits in terms of efficiency and productivity." Former Soviet bloc economies "only functioned ... because they were riddled with black and gray markets." Gray comments on the failure of the Soviet bloc to replace the "greed-fueled anarchy of the market" with "planning based on altruism," as called for by the Marxian model. "Corruption was ubiquitous" and "actual life in Soviet societies was more like an extreme caricature of laissez-faire capitalism, a chaotic and wasteful environment in which each person struggled to stay afloat. Homo homini lupus-man is wolf to man-was the rule, and altruism the exception." Thus, those with "the fewest moral scruples did best."
Gray begins his summary by noting that "No economic system can enhance every aspect of moral character. All rely to some extent on motives that are morally questionable. Greed and envy may be vices, but they are also economic stimulants." But, regardless of the stimulant, "an economic system is good to the extent that it harnesses human imperfections in the service of human welfare." Toward this end, "the true choice is between different mixes of markets and regulation, none of which will ever be entirely morally benign." Different historical contexts will call for different mixes of the market and regulation, "But one thing is clear: a modern market economy cannot do without a measure of moral corrosion." Here Gray ends his essay.
Gray begins well: "Free markets corrode some aspects of character while enhancing others." This is in keeping with the spirit of the JTF project—to examine how "the free market strengthen[s] or undermine[s] personal virtue and concern for others." We are justified in expecting a discussion of how and why these corrosions and enhancements happen-which aspects of character are most prone to corrosion or enhancement, say; or perhaps a story or two: how the free market corroded a previously enhanced character, or how a corroded character was transformed into an enhanced character through the magic of the market.
But Gray does not follow through. Instead, he dons the mantle of the 'wise old uncle" and finesses the question altogether.
By way of illustration, let us imagine a plausible "result" of the interplay between corroded and enhanced characters in the free market—a vector sum, so to speak. ("Result" here is Gray's term, clarified below.) Now let us go back to the bad old days when farm workers had no bargaining rights whatever. (The powerful agribusiness lobby saw to it that farm labor was excluded from national legislation that gave other workers the right to collective bargaining.) Farm workers were thus underpaid, and worked long hours under dangerous conditions. It was not uncommon for crop-dusting planes to spray the fields with pesticides even as the farm workers toiled in them. The accident rate was high. The short-handled hoe caused serious back problems over time. While they made millions of dollars from the labor of farm workers, industrial-scale farm owners refused absolutely to provide them even token benefits. (Years before Cesar Chavez took on California's agricultural barons, John Steinbeck wrote two books about the problem. Harvest Gypsies, which led to Grapes of Wrath.) Thus, the owners' combined greed and indifference to the JTF precept "concern for others" make it entirely reasonable to consider their moral character to be "corroded". I have no trouble with that conclusion, at any rate.
Let us now imagine that we are asked whether we think this "result"—namely the ensemble of low-paid, often-injured farm workers and very rich agribusiness owners—is good or bad; and why we think that way. I know many people, including myself, who would say that the "result" is bad, just because, in our view, the farm owners show no concern for those whose labor makes their wealth possible, and the farm workers are harmed unnecessarily to boot. For many people, this is a natural and common way of looking at such situations.
It is also the wrong way, according to Gray. "Whether the result is good, on balance, depends on how one envisions the good life," rather than on any sentimental notions we might have about harm to others, especially in the service of greed. We did not know this.
Gray does not clarify whether our "envisioning" is of the good life for ourselves, for others, or a combination of the two. Given the self-centered nature of the free market, he most likely means the good life as we wish it for ourselves; and probably as we observe others already enjoying it. (For many believers in the free market, to actively want others to have a good life is evidence of socialist or communist tendencies, so it is unlikely that this is what Gray has in mind.) Gray's "on balance" suggests a "majority rules" protocol for deciding whether the "result" is good. We can plausibly surmise that Gray is suggesting that those who "envision" the good life similarly also judge the "result" that produces that good life similarly—namely "good"—even if it includes some pretty corroded behavior.
If so, it is Gray who is mistaken. It should be obvious that there is no necessary connection between my vision of the good life and whether I judge the methods for obtaining it good or bad. I am not alone in agreeing with the wealthy owners of the large industrial farms that they, "on balance," live the good life. They live in nice houses, eat well, send their children to good schools, probably vacation in exotic locales, have access to health care, and enjoy all sorts of benefits that high incomes produce. If that is not "the good life," nothing is. These blessed folks undoubtedly consider the "result" we are discussing to be good. But, I and my friends do not agree with them, in spite of "envisioning" the good life much as they do. We still consider the result to be bad.
How can this be? Are we stupid? In my reading of Adam Smith, did I overlook an economic law that precludes a concern for others just because I might benefit from their exploitation? After the California legislature gave farm workers the right to collective bargaining, should I have comiserated with the industrial farm owners because their good life might be slightly less good?
Either I am thick-headed, or Gray's instruction is not instruction at all. Perhaps I will learn something useful from his next pronouncement: "Much also depends on whether one believes other systems can do better."
We can presume that "much" here refers to matters over and above one's view of the good life; Gray does not give us the slightest hint as to his meaning. Nevertheless, I suggest that there is a method in his vague formulation. One of the most effective ways to disarm any criticism of anything whatever is to challenge the critic to show that there is something else in that same category which is better. If the critic cannot point to a better example, the status quo"wins." "It may not be perfect, but it's the best we've got," says the challenger. "Might as well not put too much energy into trying to improve things, either," is the subtext.
(Parenthetically, this tactic poses a very serious moral problem for whoever uses it. It implies that he has effectively handed the responsibility to set his own moral limits over to others. Thus, if he can find anyone who behaves even a little bit worse, he can bask in the role of moral superior. Experience shows that the tactic works quite well, which is what makes the memories of Hitler and Stalin so valuable to the American right.)
Thus, an apologist for my "bad" result, above, would most likely counter by saying that at least the American farm worker is free to choose another line of work, in contrast to the poor Soviet citizen who pretty much had to do what the government required him to. The apologist might also suggest-in fact did suggest more than once-that if I don't like it here in America, I should move to Russia. Indeed, the standard defense of capitalism, with all of its flaws and violent subtexts, depended for many decades on the failure of the centrally planned Soviet economy to deliver to its citizens anything near the abundance and quality of consumer goods that Americans enjoyed. (Gray, too, will invoke the Soviets later in the essay.) I have long maintained that the appearance of the Soviet Union on the world scene was an unalloyed blessing bestowed by Mammon on America's capitalists. It certainly enriched the owners of the weapons shops. But I digress.
Gray loses here as well. His formulation notwithstanding, it is in fact possible for me to imagine ways of making the "result" better without going so far as to posit "other economic systems" that "can do better." When I was promoting the United Farm Workers Union, I supported collective bargaining legislation similar to that which had long benefitted other sectors of the workforce. This is hardly revolutionary, but Gray's subtle suggestion that the choice is starkly either-or has the effect of diverting attention away from thoroughly mainstream and "reasoned experiment within the framework of the existing social system," to borrow from John Maynard Keynes's compliment to President Franklin Roosevelt for his approach to ending the Great Depression. Gray speaks as if everyone who imagines improving the system has revolution in mind. It is a very clever gambit.
Gray then rachets up his rhetorical challenge to the critic to show that "other systems can do better" by suggesting that he or she must have a virtually total grasp of economic theory, as well as the psychological wisdom and insights of a Freud, a Jung, or any of the other great psychological theorists: "The question can only be answered by comparing realistic alternatives and by understanding how different systems promote different types of human behavior."
Well now. Does Gray not realize that we are reading these thirteen essays, by distinguished scholars and public figures, precisely to gain some of this "understanding," and perhaps to learn, even if not in pedantic detail, about a plausibly realistic modification or two of the more egregious aspects of the free market? It is also our expectation that Gray himself, of the London School of Economics, no less, will help us along our way. So far, we are totally out of luck.
Nor will our luck improve. Gray continues with advice to those who "think that free markets emerge spontaneously when state interference in the economy is removed." They apparently do not know that "free markets are not simply the absence of government," but instead "depend on systems of law to decide what can be traded as a commodity and what cannot." For the hard-core, laissez-faire-loving deregulator who might be tempted to backslide, Gray advises that slavery, blackmail, and child pornography are not acceptable in modern market economies. Get used to it: "Free markets always involve some moral constraints of this sort." [Gray's emphasis.] Gray apparently associates with a lot of straw men. I have never run into a laissez-faire type who advocates slavery, blackmail, or child pornography. Even self-identified Libertarians don't go that far. Gray's examples here are as irrelevant to the question as are Bhagwati's 17th-century Calvinist burghers of the Netherlands.
Gray then gives us a bit of the history of the free market, followed by numerous decorative truisms, many of them trivial. He then departs utterly, and masterfully, from the project at hand. He does so in two very sophisticated paragraphs.
First, like Bhagwati in Essay 1, Gray invokes the father of capitalism, Adam Smith:
"Adam Smith, one of the originators of free-market economics, was also an astute critic of commercial society. Smith feared that the market economy emerging in his time would leave workers adrift in cities lacking cohesive communities. As he perceived, the subversive dynamism of the market cannot be confined to the marketplace. Free markets demand a high degree of mobility and an ingrained readiness to exit from relationships that are no longer profitable. A society in which people are constantly on the move is unlikely to be a society of stable families or to be notably law-abiding."
It is reasonable to assume that Smith expressed the fear paraphrased by Gray here in Wealth of Nations, but I was unable to locate any plausible source for it there by searching the full text for several of the significant terms or combinations thereof. (E.g.: "stable families," "law-abiding," "readiness." I grant that this may be because the paraphrase is subtle enough that I missed connecting it with its source. Any assistance on this point will be appreciated.)
Even on its own terms, though, it seems an odd choice for an authoritative opinion of whether the free market corrodes moral character. We are given to believe that Smith worried about hordes of erstwhile farm laborers, now city-dwelling workers bereft of the "cohesive communities" that helped them tread the straight and narrow path, changing occupations and dumping their families at the drop of a hat, and looting the local shops on their way to the new job. The whole "society" is transformed into a cauldron of lawlessness.
This seems to me to be quite a stretch. Certainly there was much that was squalid and dangerous about city life then, as there can be today, but my reading of Wealth of Nations suggests that Smith probably saw the risks to the moral character of the former rural inhabitants of "cohesive communities" as a normal part of living in the city. As an astute psychologist and sociologist, Smith understood that the rise of the cities was an irreversible, and even beneficial process. Smith certainly seems to have had a far less positive opinion about the benefits of living in a rural "cohesive community" than Gray suggests he had:
CHAPTER IV. HOW THE COMMERCE OF TOWNS CONTRIBUTED TO THE IMPROVEMENT OF THE COUNTRY.Gray then returns to the theme of "the good life." "In the end, the answer to this question depends on how one conceives the good life." The liberal sees personal autonomy—presumably even at the cost of family breakdown—as more important than the preservation of "valuable institutions" as desired by conservatives and "traditional moralists."
Gray then admits his own preference: "With regard to contemporary Western societies, I tend to a liberal view." Is this the liberalism of the late 18th century and the Gilded Age, known as classical, laissez-faire liberalism? Or is it liberalism as it was redefined by Franklin D. Roosevelt as he tried to repair the damage done by the classicists, and which was so badly damaged by Ronald Reagan, Rush Limbaugh, and the Republican right? Gray does not tip his hand.
But then, it turns out that it is not at all important whether one is a liberal of any stripe, or even a "traditional moralist." Rather, what is important is to be a realist (my term, my emphasis)—we must recognize that "though free markets reward some moral traits, they also undermine others. If they emancipate individual choice, they at the same time corrode some traditional virtues. One cannot have everything."
One cannot have everything. Duh. We hoped Gray would provide some insights as to how the free market "strengthens or undermines personal virtue and concern for others", but we are told only what we already know, and quite condescendingly at that.
But the real problem for Gray is that Adam Smith himself answered the question he—Gray—has so skillfully avoided, and Smith answered it quite unequivocally. Here it is:
The Rent of Land, p. 109. CONCLUSION OF THE CHAPTER (Great Books edition of Wealth of Nations, by Adam Smith.)
"... and who accordingly have, upon many occasions, both deceived and oppressed it." This is the comment by Smith that I hoped E. J. Dionne could bring up for discussion at the February 5 panel discussion. If it is not relevant to the question at hand, nothing is.
We can plausibly conclude that Smith considered a substantial percentage of the merchants and master manufacturers of his day to be crooks, of whom everyone should be suspicious. Moreover, Smith's observation that profits are "naturally low in rich and high in poor countries, and ... always highest in the countries which are going fastest to ruin" is also relevant to the very "booms and bubbles, busts and crashes" that Gray so blandly invokes as just market business-as-usual. Can we not surmise that a country going "fastest to ruin" as a result of a "high rate of profit" is also the victim of serious moral corrosion somewhere along the line? President Barack Obama was elected just because of the latest rounds of deception and oppression of the public by those who ostensibly pay homage to Smith, but who over the years have in fact distorted his message beyond recognition.
In the interest of fairness, let me say that we have two possibilities here: either Gray is aware of this passage by Adam Smith—whom he has made it a point to paraphrase—or he is not aware of it.
For the sake of argument, let us suppose that Gray is ignorant of Smith's opinion here. Perhaps he has never actually read Wealth of Nations, but relies on other sources for Adam Smith's commentary. Perhaps he read only such portions of it that were assigned to him by his professors. Perhaps he read it through, as I did, but the meaning of this trenchant passage escaped him.
If in fact Gray is aware of the passage, we must ask why he did not refer to it specifically as perhaps the most relevant comment Adam Smith made about the free market and moral corrosion. Why did Gray reach out to left field for a comparatively trivial example of a concern Smith expressed—about the effect of city life on erstwhile rural workers?
The answer is that Gray is a member of an economic priesthood, and that Western economic dogma, as he learned it and taught it, absolutely requires that Smith be represented to the general public as being opposed to government regulation of business—always. To suggest otherwise, publically, is to court excommunication and chronic unemployment. Had he broken that rule, Gray would not likely be emeritus professor at the London School of Economics today; nor would we be reading his essay on the free market and the corrosion of moral character. This is not to say that Gray was necessarily aware of such a self-interested motive. He might genuinely suffer from the syndrome described by Sinclair Lewis: "It is difficult to get a man to understand something when his salary depends upon his not understanding it."
So much for Gray and Adam Smith.
Gray goes on to mention that the now-defunct Soviet economy cannot be seen as a positive alternative to the free market. Here he gets a point for not saying that the Soviet economy was communism. Instead, "actual life in Soviet societies was more like an extreme caricature of laissez-faire capitalism, a chaotic and wasteful environment in which each person struggled to stay afloat." This is true; the term "communism" has always been misapplied to the Soviet system, which was a variety of state capitalism. The earliest Christians probably came closest to being true communists.
But even here Gray fudges the semantics, toward laissez-faire capitalism's advantage. It is plausible that the Triangle Shirtwaist fire in 1911 at least approaches the worst of the Soviet system:
"The fire at the Triangle Waist Company in New York City, which claimed the lives of 146 young immigrant workers, is one of the worst disasters since the beginning of the Industrial Revolution. This incident has had great significance to this day because it highlights the inhumane working conditions to which industrial workers can be subjected. To many, its horrors epitomize the extremes of industrialism. The tragedy still dwells in the collective memory of the nation and of the international labor movement. The victims of the tragedy are still celebrated as martyrs at the hands of industrial greed.
Indeed, Marxist theory was inspired by just these kinds of "horrors [which] epitomize the extremes of industrialism." Gray appears quite neutral about the fact that, as Jesus said about the poor, the potential perpetrators of such horrors are always with us.
For example, eighty years after the Triangle Shirtwaist fire, we had the Hamlet chicken processing plant fire, in which 25 people died when they could not escape through doors that were locked from the outside. The non-union plant, located in North Carolina, benefitted from never having had a safety inspection in its 11 years of operation. The anti-communist, laissez-faire-loving North Carolina government clearly didn't want to interfere with the prerogatives of the owners.
Thus, Gray's "extreme caricature of laissez-faire capitalism" appellation here is itself a bit extreme. But, he at least takes a small swipe at laissez-faire.
Gray gets another point for his second use of the term "regulation": "No, the true choice is between different mixes of markets and regulation, none of which will ever be entirely morally benign in its effects." But, he throws in "regulation" out of the blue, without preparation or background. For example, instead of reminding laissez-faire addicts early in his essay of the trivial truth that slavery, child pornography, and blackmail had long been morally constrained, he could have commented on the deregulation Kool-aid that they inspired Congress to drink with them over the years, and which led to such debacles as Enron and the current economic meltdown. Without indicating whether he approves of "regulation" or is resigned to it, Gray returns to the project—barely.
Since the JTF project itself is a thoughtful response to the excesses of specifically American capitalist practice, it's too bad that Gray could not see fit to include in this essay at least the sense of a conclusion he drew in one of the very books mentioned in his credits above:
"The idea that the United States is a universal model has long been a feature of American civilization. ... Yet the claim of the United States to be a model for the world is accepted by no other country. The costs of American economic success include levels of social division - of crime, incarceration, racial and ethnic conflict and family and community breakdown - that no European or Asian culture will tolerate." John Gray, (1998) False Dawn: the Delusions of Global Capitalism, New York, New York Press, p. 216. Cited by Chalmers Johnson in Occasional Paper No. 22, Japan Policy Research Institute, August 2001.If the European and Asian cultures reject the American model of economic success, perhaps they are trying other models. Indeed they are, but we get no hint of that from Gray. Instead, he dredges up the old Soviet bogeyman. This essay is underperformance with a vengeance. Gray gets a "C."
Does the Free Market Corrode Moral Character?
(Former world chess champion Garry Kasparov is a leader of the pro-democracy coalition The Other Russia. He is the author of a book on decision making, How Life Imitates Chess, and speaks to business audiences worldwide. He lives in Moscow. — JTF)
[First, a note to the reader: My initial plan to provide a general summary of each contributor's essay, followed by my analysis, will not work. The effort and time required for the remaining 12 sections-11 essays and the panel discussion-is simply too much. I would probably not finish this year. I will therefore skip the summary for this and each following contribution, and the panel discussion, and go directly to my analysis. Thus, I recommend even more strongly that the reader download the Templeton booklet and the panel discussion transcript, and read them carefully as a check on my own presentation. — Bill Becker]
Garry Kasparov's opening paragraph stakes out a definite position: "Yes, [the free market does corrode moral character], but ... other systems are worse. The free market is a crucible of competition that can bring out the basest in human nature. Competition is fierce, and when survival is at stake, there is no room for morality." Following Churchill, though, Kasparov thinks that "the free market is still superior to all the other economic arrangements that have been tried."
So far, Kasparov is addressing the question on its own terms, and he does so in no-nonsense, categorical terms. Perhaps too categorical; perhaps more categorical than he himself intends. In any case, I suggest that he is somewhat less careful in his rhetoric than he should be.
"The free market is a crucible of competition that can bring out the basest in human nature" is obviously true. His next comment is ambiguous, however: in the present context, this American English construction-even idiom- "when survival is at stake" can be understood in two senses: first, as meaning that survival is always at stake in any crucible of competition; second, as a hypothetical-"if survival is at stake", allowing for the possibility that sometimes "crucibles" of competition are not "to the death." [The reader is invited to repeat the entire sentence a few times, alternating between the word "when" and the word "if". The subtle difference in meaning should be apparent.]
Neither interpretation follows from Kasparov's preceding statement, however. Even if we limit the circumstances to those where a company's survival is truly at stake, we cannot assert that "there is no room for morality." Just because competition can bring out the basest in human nature does not mean that it must, or always does, bring out that basest. It is always possible for a principled businessman/-woman to decide to "go under" rather than engage in what he or she considers immoral conduct. On the other hand, it is certainly true that many firms have engaged in unethical behavior solely to increase market share, even monopoly. Generally, these firms have been in no danger of "going under" if they do not behave unethically. There is more variety and subtlety in "fierce competion in a crucible" than Kasparov has accounted for in these comments.
Finally, Kasparov's Churchillian observation that "the free market is still superior to all the other economic arrangements that have been tried" hinges on the meaning of the "superior," one of the hairier of ethical and economic problems. Here Kasparov may have put himself in a bind.
The differences between the mainline European economies-Scandinavia, Denmark, Holland, Germany, France, Italy-and the U.S. economy have been well- and long-reported upon. The strong partnerships between government and business in these now-EU economies fit well into the category of "other economic systems that have been tried." If for no other reason, this interpretation is plausible just because U.S. laissez-faire advocates loathe these European economies as being socialist. And, the reason U.S. laissez-faire proponents loathe them is precisely because the peoples of Europe have decided they are "superior" to American-style capitalism. Indeed, generally accepted contemporary standards for measuring the relative quality of life between nations show that-on balance, let's say, following John Gray-these EU nations are doing quite well for their constituents, in some areas better than we are here in America.
Now, Kasparov may intend to fold the European systems into the same category as the command economy of his native Russia, which he certainly dislikes. But that would be to show a disdain for the very democratic process that he purportedly wants to see implemented in Russia. The Europeans want these economies, as in their broad outlines they are today, and they consistently choose representatives who will implement their will. This does not mean, of course, that there is no disagreement about specifics, but on the whole, even conservative European politicians do not seriously propose to dismantle the social benefits that their economies provide: universal health care; adequate vacation time; probably a level of workplace safety rare in the U.S.; a respect for unions in spite of the inconveniences that strikes might occasionally cause; a serious movement toward environmental responsibility. Even the anti-social Margaret Thatcher could not undo completely Britain's relatively people-friendly social policies vis-a-vis the .U.S.
Kasparov then expands on his stark introduction: in a free market one cannot pause even "momentarily to aid your brother during your struggle to reach the top-to beat your competitors, to maximize earnings, to buy a bigger house." If you do, "you will be surpassed by those without such qualms." In light of these realities, "in a truly free market, can there exist consideration for the good of one's fellow man?"
Kasparov says yes.
First, the "seemingly cruel nature of unregulated market forces ... can improve the well-being of society" because, "if a society values moral behavior, it can be in one's self interest to practice and preach moral behavior." Thus, it can make sense "for a company to donate a share of its profits to charity," because "such giving can enhance a company's image in ways that do improve its competitive position. In a free market, reputation is based on popular opinion, and that perception can become a material benefit."
Second, Kasparov notes that charitable giving increases when at least the majority in a society reaches a level of surplus such that "survival is no longer in doubt." [In context here, this "prosperity" arises in a free market, because "all the other economic arrangements that have been tried" are inferior.] "Individuals [then] have the luxury of indulging their moral character. No one would take desperately needed food from the mouth of his own child to give it to the child of another ...[but] bounty makes charity feasible."
Overall, Kasparov's description of what can happen, and often does happen, in the free-market environment is generally accurate, and in the spirit of the inquiry. But, there are problems nonetheless.
The problem with the first "rule" (as Kasparov refers to it) is that we are talking about moral character, not simply behavior that "looks" moral from the outside. Character is the internal wellspring of our behavior, and behavior tainted by self-interest is not considered to be "moral behavior." Our "consideration for the good of one's fellow man" is in its most important sense a matter of the heart, guiding our behavior because of what we consider its "rightness," not because it will help us get a better house. Moreover, moral behavior is usually considered most laudable—most heroic—when "self-interest" is totally absent. Those who lost their lives on 9/11 after returning to the collapsing World Trade Center, on the chance that they could save even one person, are perfect examples.
Additionally, we are not surprised when we learn that a person we suspect of behaving "morally" primarily out of self-interest suddenly "switches sides" when doing so will increase his or her gain. In fact, it is expected.
On the other hand, behaviorist psychology holds that changes in behavior may lead to changes in attitude and even personality. In essence, this is what Kasparov is hoping for from initially self-interested "moral" behavior.
But, where corporations are concerned, that hope may well be a chimera. University of British Columbia Law professor Joel Bakan relies on the work of his colleague, psychiatrist Robert Hare, to argue that the modern, publically held corporation—considered in law to be an individual person—exhibits several important characteristics of the psychopath, including pathological lying; conning and manipulating people; inability to feel remorse or guilt; callousness and lack of empathy, and failure to take responsibility for one's actions. (The Corporation: The Pathological Pursuit of Profit and Power, by Joel Bakan; DVD by Mark Achbar, Jennifer Abbott, and Joel Bakan. 2004). (See http://en.wikipedia.org/wiki/PCL-R#Hare.27s_Checklist_and__other_mental_disorders)
As regards favorable public opinion: Admiring a steel or a coal company in the rust belt for donating to a respiratory disease center, say, even as that company lobbies heavily against cleaner air standards is evidence of serious naiveté or serious confusion.
On the second point, Kasparov is undoubtedly correct, in the broadest sense, that surplus makes it more likely that people will be charitable toward the needy. But again, there are complexities.
First, this does not show that the free market has affected character. In the society that [finally] achieves a surplus, the woman who previously gave all of her food to her own child might well now donate a part of her surplus to charity. It is perhaps legitimate to say that in such a transition, true differences in individual moral character might be revealed that were hidden in the environment of scarcity-differences that are clearly independent of the free market.
Second, what would Kasparov make of studies showing that the working poor give a higher percentage of their incomes to charity than do the well-off. (http://www.portfolio.com/news-markets/national-news/portfolio/2008/02/19/Poor-Give-More-to-Charity?print=true#) The well-off are players in the free market to a much greater degree than are the working poor. If they keep a larger portion of their earnings than do the poor, shall we conclude that the free market "made" them greedier than they were before they accumulated a surplus? This of course suggests that the free market does corrode moral character rather than supporting Kasparov's argument.
Third, Kasparov defines corporate moral behavior too narrowly-as charity only, and that for the purpose of gaining "commercial advantage." Other forms of truly moral behavior, as "moral" is usually defined—not raiding the pension plan; not seeking monopoly; not polluting the environment or destroying an ecosystem; not placing Joe Camel at the eye level of a five-year-old on a convenience store shelf, seem not to figure into Kasparov's scheme.
Kasparov reinforces his case with criticism of Saudi Arabia and Russia-exceptions to the incentives-cum-rules that "only strengthen the case for the free market." As the "rapacious behavior of the state-supported oligarchy that runs Russia today" demonstrates, "in the absence of real competition, there is no commercial advantage to moral conduct." Ironically, his final judgement unwittingly sums up the 8-year administration of George W. Bush: "A dominant clique simply does not care about its reputation."
Kasparov then wraps up this theme: "Though the relentless pursuit of self-interest can corrupt, a fee market clearly creates incentives for moral behavior. Other systems lack these concrete incentives."
Kasparov's introductory clause alone is correct. The incentives he mentions above are, and always have been, trivial in comparison to the incentives for behaving "immorally." It was exactly the free market that produced the excesses of the gilded age, the Robber Barons, and recently, Enron and the current economic meltdown.
(Let me recommend here a reading of the Enron telephone tapes as an example of the "consideration for the good of one's fellow man" shown by the young hotshots who gamed California's deregulated energy system.
In fact, the true incentives to behave "morally" are almost exclusively regulatory, and the European Union is currently the only economic venue in which the consumer's interest is taken at all seriously. Just before I wrote this, the EU fined Intel a record $1.45 billion for using "illegal anticompetitive practices to exclude its only competitor and reduce consumers' choice," The previous record fine was against Microsoft for "for blocking competition in markets for server computers and media software." (New York Times, May 14, 2009.)
Kasparov then discusses the efforts of the "utopian thinkers of the 19th century," who "looked around at the cruel excesses of the industrial revolution, especially in the United Kingdom and the United States," and who "imagined a future in which harmony would replace struggle and selfless cooperation would replace brutal competition."
But, finally, these utopian socialists, believing in "man's fundamentally moral nature" were naive. The "world in which man desire[s] harmony and contentment more than competition and achievement" does not exist. Our "ancient struggle to survive" controls our behavior, and "we deny our instincts at great peril." When we try to control these instincts, Kasparov suggests, "self-generating incentives for moral behavior are replaced by edicts and punishments." In the case of the failed Russian experiment, the final outcome was "totalitarianism and terror."
But anarchy is not the answer to Russian-style repression and corruption, says Kasparov. "Rather, the alternative is a system in which individual freedoms are combined with incentives to act morally. The free market economy—along with democracy, which is the free market of ideas—is the closest that we have come to that."
Kasparov then closes his argument:
"So, yes, the free market can lead to the corruption of moral character. It is man's nature always to want more, and the free market enables these urges with few protections for those who fail to thrive. But attempting to restrain these basic human needs and desires leads to greater evils. All the needed evidence can be found over the last century in Russia, from the czars to the Soviets to Putin's oligarchic regime today."
"So, yes, the free market can lead to the corruption of moral character." Kasparov is correct, of course. But, it appears that his traumatic experience with the Soviet and post-Soviet political economies has produced in him an equal, opposite, and dead wrong reaction. His apology for American-style laissez-faire capitalism is stated in such stark, categorically Darwinist terms that one cannot really believe that he has accurately expressed himself. Does Kasparov really believe his opening statement that there is "no room for morality" even when survival is at stake? Does he really consider the regulated economies of the major EU nations to be "greater evils" than Putin's oligarchy, which oligarchy, he says, provides all the evidence needed to condemn government intervention in business affairs? (My emphasis.)
To be sure, Europe faces monumental challenges as it tries to amalgamate the former Soviet-bloc nations and the original, affluent 15 members of the European Union (EU15) into a single, workable political economy. The guiding principle of this effort "emphasizes values of trust and tolerance, solidarity and justice." A 2007 consultation paper prepared for the Bureau of European Policy Advisors begins:
"How can the social well-being of all Europe's citizens be best advanced within a globalising world? This question should be at the heart of everything the EU and its Member States do. Public policy imperatives, such as 'Growth and Jobs', the Lisbon strategy, and the drive for greater competitiveness are not ends in themselves - but means to an end - the well-being of European citizens." (This, and the immediately preceding quote are from the Introduction to the Second European Quality of Life Survey, P. 1)
(Let me note here that these two quotes would elicit howls of laughter in any American corporate board room or conservative think tank.)
It would be a pity if Kasparov really believes that the European leaders who think in the above terms will necessarily degenerate into corrupt plutocrats. So far, these leaders are expressing the hopes of most of Europe peoples; does Kasparov reject that exercise of democracy as misinformed and naive?
Second, both early and late laissez-faire capitalist history shows that Kasparov is also dead wrong in asserting that only a free market provides incentives for moral behavior, to say nothing of whether it actually leads to improved moral character. Before government began seriously regulating business behavior, the corporations wreaked havoc on the well-being of millions of workers, and are still wreaking havoc on the environment. American regulation of business, now seen as a necessary corrective to 30 years of deregulation, is unlikely to produce a Russian-style oligarchy. Without regulation, America's present trajectory is inexorably toward a Central American-style oligarchy. David Cay Johnston, in Free Lunch, argues that the U.S. economy is already like Brazil's.
Kasparov is dead wrong in his major conclusions, and I suspect that his revulsion at his own country's history has given him to see American capitalism through a badly distorted lens. At least he gave us something we could get our teeth into. Kasparov gets a C+.
Page originally posted May 24, 2009