Greed Is Good

September 25, 2008 – I’m being facetious, of course. A brief philosophical discussion about greed, its pros and cons, and where the deification of greed is taking us.

By The Cerebral Aesthetic Vagabond

Sometime during the 1980s, perhaps beginning in 1980 itself with the dawn of “Mourning in America,” those three words became the mantra for our whole culture, and we’ve been sliding downhill into oblivion ever since. The emerging financial crises are borne of greed, and it is ongoing selfish greed that will prevent their proper resolution, prolonging their painful consequences for our society and economy.

Oddly enough, from the standpoint of genetics, a little greed is good because it increases the probability that one’s genes will be successfully propagated. But like so many things in life, too much greed is detrimental. Like so many things in life, the challenge is to identify the proper balance between too little and too much. Too little greed threatens the survival of the individual, while too much threatens the survival of the group. The latter might not matter much except that we are social creatures for whom the group is as important to our wellbeing as are food and water.

Today, greed is utterly out of control and beyond merely irrational: it’s bordering on pathological insanity. I honestly view people who are consumed with insatiable greed as suffering from mental illness or defective genetic wiring. At some point their quest for boundless wealth ceases to have any rational basis and becomes an end in itself, inevitably causing the person engaged in such a quest to lose all touch with their humanity and reality, not to mention the difference between moral and immoral, legal and illegal. All such considerations take a back seat to obtaining more, more, more.

Need For Balance

Although people have always pursued wealth, it seems that in the past there used to be more balance between the desires of the individual and the needs of society. Between religion, government regulation and societal mores greed was once viewed as repugnant and was, therefore, somewhat restrained. Company owners genuinely cared for their employees and understood that the wellbeing of their employees would ultimately benefit them. Henry Ford, for example, paid his employees well above the standard wage, in part so that they’d be able to buy his automobiles! [7] While some might scoff that his beneficence was self-serving – and he’d be the first to admit that – it was, nevertheless, a win-win arrangement from which the workers genuinely benefited. Such far-sighted philosophy has by now been completely abandoned on the trash heap of corporate history.

What caused us to throw such decent moral values out the window? Was it the two socially and economically tumultuous decades preceding the 1980s that caused people to “give up” on society, turn inward and focus on themselves? Were greedy people, so long restrained by the left-swinging pendulum of social mores, waiting in the wings for an opportunity to come out of the shadows, an opportunity afforded by Reagan’s faux laissez-faire ideology? Was it a gnawing, subconscious awareness of the unsustainability of our way of life that caused people, sensing a threat to their survival, to “go native” and start grabbing all they can?

Contrary to the ethos of greed, I have often fantasized about shedding myself of everything I own and wandering the world completely free, like Caine in the television show, Kung Fu. While I recognize that such a way of life poses challenges, especially in a world which restricts freedom of movement and frowns upon people who do not behave “normally,” and I recognize that it might not be practical once one reaches old age, such an ascetic existence still holds much appeal for me. Nevertheless, being a pragmatic person, I lead a rather conventional lifestyle. “Stuck” as I am in this life, I might as well be comfortable, so I have all the trappings of comfort: a roomy house, nice furniture, a well-equipped kitchen, a large collection of books, music, and movies, plus all the tools I need to maintain the house and yard. For the most part I feel content, just as I did a decade ago. I could use a little more money to ensure my financial security (I’m living a little too close to the hairy edge right now), but I have never felt the need to go on a money-making binge. Past mentors of mine have been utterly frustrated by my apathy toward making money.

Cost Of Greed

In the past, when everyone’s boats were rising because the country was generating genuine wealth, the greed of a few was less of an issue. But in today’s non-wealth-generating, zero-sum economy, one person’s greed is satisfied (and only temporarily) at the expense of others. Ironically, as the nation has become poorer, inequity has increased.

Evidence of this zero-sum redirection of wealth from the many to the few can be seen in how the ratio of executive pay to employee pay has changed over the years. I’ve read (I have no reference) that back in the 1960s the ratio of executive pay to employee pay was around 30:1; by 1980 it was 42:1; by 1990 it was 107:1; by 2000 it was 531:1. [1, 2, 3, 4, 5]. Today the ratio has backed off a bit, but it’s still over 400:1. I seriously doubt that today’s executives are ten times as skilled as yesterday’s, especially looking at all the companies being run into the ground today, their former executives walking away from their smoldering disasters with severance packages in the tens of millions of dollars.

CEO Pay as a Multiple of Average Worker Pay, 1990 - 2005

My reason for focusing on the executive-employee pay ratio is not to demonize executives or argue in favor of salary caps for executives, but merely to present evidence that greed has been running rampant since about 1980. This shocking ballooning of elite salaries is not limited to corporate executives, however. Entertainers (including professional athletes) have also enjoyed compensation increases that far outstrip both inflation and the salary gains of the rest of us. The first actor to earn a million dollars for a single film was Elizabeth Taylor, for the film Cleopatra in 1963. [6] Today the going rate for a top actor for a single film is upwards of $20 million. Inflation, even as high as it is, certainly did not elevate the cost of living by twenty times since 1963. Actors on television shows forty years ago earned hundreds to thousands of dollars per episode; today they earn as much as one million dollars per episode! Perhaps the most famous professional athlete ever, Babe Ruth, made $80,000 in 1930. [8] Today his peers easily earn hundreds of times that, again, far outstripping the increase in the cost of living. Meanwhile, their poor fans have to shell out unbelievable sums for tickets to see their games in person.

Moral issues aside, greed is detrimental to the economy. One person can only spend so much, so whatever money they accumulate in excess of what they need is money that won’t find its way into the economy. Most likely, such excess accumulations will end up parked in unproductive “investments,” possibly even outside the country. Consider a person with a $100 million fortune. A person cannot spend such a fortune in several lifetimes unless they squander it, so it will simply be locked up, out of reach of the economy. Alternatively, consider 10,000 people who each had another $10,000. They would spend that money, fuel economic growth and vitality, and ironically, help make the elites who control the economy even wealthier! Yet, unlike the wise Henry Ford, today’s elites are blind to this simple logic. Their focus is on immediate, short-sighted, and ultimately futile satisfaction of their greed.

This new ethos of greed has slowly trickled down from the top of the financial food chain to the masses. With wages declining and inflation ramping up, the means and incentive for the masses to save money the old fashioned way disappeared. Instead, people were forced to look for higher yield “investments” to generate income. Thus, they turned to stocks in the late 1990s, fueling the dot-com bubble, and then housing in the early 2000s, fueling the housing bubble. With no new bubbles to blow, the whole greed-engendered financial facade is now collapsing.

Conclusion

I support prohibitions on fraudulent and criminal behavior that directly harms others, but I don’t think greed falls into that category. Excessive greed has an indirect impact on others, making it difficult to precisely stipulate what constitutes excessive. I think that’s a decision best left to each individual. I think greed is really a moral issue, one that we seem to have forgotten to examine anymore. Believe it or not, I feel sorry for people who are greedy beyond necessity. Instead of forcibly restraining such people, who I regard as mentally ill, I would ask them to ask them to ask themselves, “Do I need all this money?”

References

1. June 15, 1997; Business Week magazine, Executive Pay (http://www.businessweek.com/1997/16/b35231.htm). The average compensation of the top dog was 209 times that of a factory employee, who garnered a tiny 3% raise in 1996.

2. April 19, 1999; Business Week magazine, Special Report: Executive Pay (http://www.businessweek.com/archives/1999/b3625002.arc.htm). This year, the boss earned 419 times the average wage of a blue-collar worker.

3. April 17, 2000; Business Week magazine, Executive Pay (http://www.businessweek.com/2000/00_16/b3677014.htm). In 1999, the average CEO earned an astonishing 475 times the average wage of a blue-collar worker.

4. http://www.eridlc.com/onlinetextbook/index.cfm?fuseaction=textbook.chpt20. CEO salary compared to blue-collar worker: 1980: 42 times; 1990: 85 times; 2000: 531 times.

5. Demos (http://www.demos.org/inequality/ByNumbersMay31.pdf).

6. Answers.com (http://www.answers.com/topic/elizabeth-taylor). Taylor was the first actress to earn a million dollars for one film, for 1963's Cleopatra.

7. Britannica Online Encyclopedia, Henry Ford (http://www.britannica.com/EBchecked/topic/213223/Henry-Ford). In 1914 the Ford Motor Company announced that it would henceforth pay eligible workers a minimum wage of $5 a day (compared to an average of $2.34 for the industry) and would reduce the work day from nine hours to eight, thereby converting the factory to a three-shift day. Overnight Ford became a worldwide celebrity. People either praised him as a great humanitarian or excoriated him as a mad socialist. Ford said humanitarianism had nothing to do with it. Previously profit had been based on paying wages as low as workers would take and pricing cars as high as the traffic would bear. Ford, on the other hand, stressed low pricing (the Model T cost $950 in 1908 and $290 in 1927) in order to capture the widest possible market and then met the price by volume and efficiency. Ford’s success in making the automobile a basic necessity turned out to be but a prelude to a more widespread revolution. The development of mass-production techniques, which enabled the company eventually to turn out a Model T every 24 seconds; the frequent reductions in the price of the car made possible by economies of scale; and the payment of a living wage that raised workers above subsistence and made them potential customers for, among other things, automobiles—these innovations changed the very structure of society.

8. Wikipedia, Babe Ruth (http://en.wikipedia.org/wiki/Babe_Ruth). In 1930, which was not a pennant year for the Yankees, Ruth was asked by a reporter what he thought of his yearly salary of $80,000 being more than President Hoover's $75,000. His response: "I know, but I had a better year than Hoover."

The End