Moral Foundations Of Free Market Economy (repost)

Actually it should say "Immoral" at the beginning, and "Economy" at the end should be replaced by "Ideology". There, now you have an indication as to where this article is headed...

_{source: Pxhere}

Thinking about "the human condition" often leads me to believe that we are strange creatures indeed. Evolution has endowed us with a highly developed brain and nervous system that gave us the ability to reason, work together to overcome our physical limitations, plan ahead by extrapolating past events into an imagined future and decide which actions are needed to make that imagined future a reality. In modern western capitalist societies there seems to be this eternal tension between the ideals of mutual responsibilities and community on one hand, and the benefits brought by the individualistic and competitive free market economy on the other.

The free market economy, or capitalism, is the all encompassing ideology we all live our lives in. The power of any ideology is this: when it becomes the prevailing ideology, it becomes the truth around which we organize our lifes. We make decisions according to that truth and we listen to leaders that validate that truth. That's why capitalism is more than just an economic model; it's an economic and social order with a political sibling named liberalism.

Liberalism (again another -ism mind you) is the ideology of individual freedom and as little government as humanly possible. Government should only protect the rights to private property and physical safety of individuals and let them be. Extrapolate this ideology into economics and you get capitalism: free enterprise by free individuals trading on free markets. These ideologies define for a great part the material and economic conditions that shape our thoughts and our society.

Here we begin to see how capitalism influences our moral behavior, as the model is solely driven by individual agents seeking to maximize their personal property, their own wealth. The ideology states however that the resulting need for greed is a good thing, because when all those wealth grabbing agents interact on a free market, with their own desire for a profit as the main motivator, somehow a market equilibrium will arise by which the common good will be served.

_{Image by Tumisu - source: Pixabay}

It's the biggest mind-fuck in history if you ask me. Everything in our lives and in our evolution as a species says that egoism is a bad thing. Now we have an all encompassing and global ideology that promotes selfishness as a virtue. This is the cause of that eternal tension between our sense of community and the selfishness promoted by our modern world-religion of free market laissez-faire capitalism.

Even when in 2008 the world economy almost suffered a fatal meltdown by the irresponsible and sometimes even illegal behavior of the world's largest financial institutions, we still refuse to talk about capitalism's fundamental flaws and its obvious negative influence on our moral behavior as individuals as well as societies. We humans are essentially tribal creatures; we operate in groups, not as individuals. As such we've developed behaviors and traits that culminate in what we now often call sheepish behavior; most of us are followers and only some become leaders.

We copy each other's behavior and decisions, even when it is rationally or morally wrong; thousands of psychological experiments have confirmed that. In capitalism this means that we blindly copy each others selfish and elitist behavior: we simply follow what we perceive as "the rule of the game". And we do this as to have a chance to become part of an elite group of humans for whom there's no materialistic concerns whatsoever, the super-small percentage of successful winners that look down at the rest of us.

This ideology of selfishness gained enormous popularity when the Berlin Wall fell and Gorbachev started his Perestroika in the 1980s, and this is when Ronald Reagan and Margaret Thatcher ushered in a new era of laissez-faire capitalism, fundamentalist-individualism and the Friedman Doctrine by Milton Friedman. In his book "Capitalism and Freedom" he writes:

"There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."

_{Milton Friedman - source: Wikipedia}

Friedman popularized the idea that a company's only responsibility is to its shareholders. The CEO's, CFO's and other managers are employees of the shareholders and should work with only their interests in mind. Friedman's ideology has managers continually looking for ways to maximize profits for the shareholders, at the expense of the workers and even the environment. This became the dominant model of how we designed businesses and markets around the world. In a 1970 news article Friedman said the following:

"In a free enterprise, private property system, a corporate executive is an employee of the owners of the business. He has a direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible"
_{source: New York Times - Sept. 13, 1970}

It should come as no surprise that Friedman criticized anyone who argued for responsibilities of companies beyond maximizing profits, even going so far as to call them socialists that threaten the very freedom of our society. And in a sense, good ol' Milton merely mirrored the fundamentals of the capitalist model posed by Adam Smith of the individual agent seeking to maximize their personal wealth. It's just "the rules of the game", you see? Also that manager you hate so much because he or she keeps the pressure high, to perform at your maximum best at all times, is just following the same rules. And you to, slaving away at your desk, that's just your role in that same global game.

All employees have to align their behavior and decisions with the wishes of the shareholders. Managers cannot spend money on anything other than necessary for the profit of the shareholders. If you were to invest in better filters that reduce the pollution to an extent beyond the requirements of the law, then, according to Friedman's theory of shareholder value, you're stealing money from the shareholders if they don't allow the filter to be installed. The managers have only one duty that guides their moral behavior, which is to maximize the profits for the shareholders. The human behind the manager has other moral guidelines in other departments of life, like the family, the friends at the sports-club and in the role as "a good citizen". Friedman's ideas fell on fertile ground in those years after communism and socialism died.

_{The Invisible Hand of the Market
Image by Andrew Russeth - source: Flickr}

When we blindly accept the rules given by an ideology, it has become a dogma, a religion almost. So when we hear the scandals related to the biggest companies in the world, like Enron, Lehman Brothers, Goldman Sachs and so on, don't think they're the exception to the rule. Instead recognize that they play according to the rules of a system that promotes greed and selfishness. They are not deviations of the norm, but rather overstretched interpretations of the rules of the game. The financial products that almost spelled the demise of capitalism in 2008 were nothing more than the brain-childs of managers seeking for new ways to make more profits for their shareholders, further incentivized by ginormous bonuses.

We're at a point in our cultural evolution that this ideology of the self is taking over all aspects of human endeavor. Take competition: we blindly accept that competition is a good thing and it's not confined to sports and the economy anymore; even in universities there's a "publish or perish" mentality nowadays... And in this game survival of the "strong" is praised as competition is a central aspect of the capitalist world religion.

The Chinese classic text Tao Te Ching ends as follows:

A saint does not possess and accumulate surplus for personal desire.
The more he helps others, the richer his life becomes.
The more he gives to others, the more he gets in return.
The Tao of Nature benefits and does not harm.
The Way of a saint is to act naturally without contention.
_{source: Tao Te Ching - .pdf}

This seems wise to me. And it also seems to describe a whole other game than capitalism; it seems to say "above all, do not compete, be selfless and generous, cooperate". The exact opposite of the rules we collectively follow, thinking we do so individually. But we're just sheep, taking the path of least resistance and acting as selfish as our role-models, just following the rules of the game. We should not be surprised by the so called excesses of capitalism, be it the disregard for worker safety, financial scandals, environmental malpractice and other externalization of social responsibilities, as this is what institutionalized greed naturally leads to. Watch the below linked video to learn how we're now seduced by capitalism itself into believing we can leave the system unchanged, that we can make the evil work for the good...

_{RSA ANIMATE: First as Tragedy, Then as Farce}

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