Greed: The word itself has become central to the political debate over the budget, taxes, union benefits, what constitutes ethical behaviour, and the shape of our society.
The problem is the indiscriminate use of the word has blurred its meaning.
Those on the left use the word as an epitaph against the successful as epitomized by Sen. Bernie Sanders “When is enough enough?” he asked in his impassioned plea for raising tax rates “on the rich.”
But at the same time, those on the right embrace “greed” as vital to the functioning of our economy. Economist Walter Williams, for example, wrote in his essay “The Virtue of Greed,” “It’s greed and not compassion that gets things done.”
This lack of moral clarity threatens our liberty. It destroys our ability to distinguish between theft and the pursuit of happiness; between vice and virtue, and undermines our ability to be a self-governing people based on the norms of ethical behaviour.
We instinctively know that greed is bad for society and see it in its original meaning as a vice, an action that should be condemned in all of its forms. What, then, should we make of 13th century theologian Thomas Aquinas’ claim: “…one man cannot over-abound in external riches without another man lacking them”? Is the desire for wealth, or the accumulation of wealth, per se, evidence of greed?
In the time before capitalism, the aristocracy for the most part lived high by taking from the poor. Even today in some countries such as North Korea where the “dear leader” does not lack any human comfort while most of his country faces starvation, this statement holds true.
But many of the world’s richest – such as Microsoft’s Bill Gates, Google’s Sergey Brin and Larry Page, and even the NBA’s most valuable player for the past two years, LeBron James – gained their wealth by making valuable and/or unique contributions to society, either through the products they invented, or the entertainment they provided. They became rich, not at the expense of others, but through voluntary commercial exchanges.
Calling those who are wealthy “greedy,” solely because of their wealth, or to suggest that the human drive for a better life is the same as greed, muddles our thinking. Muddled thinking is dangerous because it can lead to policies that punish both virtue and vice, that interfere with our inalienable right to pursue happiness, and lead to more, not less, poverty.
For guidance on what class of actions constitutes greed, we can start with three of the 10 Commandments, which prohibit killing, theft and lying. These “shalt nots” deal with the use of coercion or deception to advance one’s well-being at the expense of another through involuntary or fraudulent exchanges.
This more narrowly focused notion of greed is coherent with the law, which since antiquity has penalised murder, theft, embezzlement, extortion and fraud.
I could find no similarly evocative word for virtuous behaviour that may generate extraordinary wealth for those who contribute to our society and gain their riches through voluntary exchanges. The word enterprise, however, is appropriate because it acknowledges the hard work and commitment required to achieve extraordinary success, and is therefore worthy of our praise.
This distinction between greed and enterprise is consistent with the powerful negative implications associated with greed. Greed is a charge that implies sinfulness, a morally corrupt character, a crime against society at large. It should not be used to demonize the desire or drive for wealth, per se. Rather, it should be reserved for those who use coercion or deception to gain their wealth by reducing the wealth of the community at large.
Greed implies a negative sum game.
By contrast, enterprise implies a positive sum game. Those who achieve their goals through enterprise contribute to the wealth and opportunities, incomes and living standards of others.
Google’s founders realised their wealth through the hard work and creativity necessary to transform their vision of making all of the content on the web easily accessible for free into reality. In the process, they have created a company with a market value of $200 billion and enriched the lives of not only their employees, but also millions of people who use their search engine every day. They have earned our praise and honour. Their wealth is a just reward for their virtue.
Knowing the difference between greed and enterprise empowers us to distinguish clearly between those who achieve wealth through theft and deception, such as Bernie Madoff, the perpetrator of the largest Ponzi scheme in history, and those who achieve their wealth by expanding the opportunities of others, including those who are successful in their chosen profession or field of play.
It is also consistent with the observation that greed is demonstrably bad for capitalism. The fraud and deception – e.g. greed – associated with the collapse of WorldCom and Enron in 2001, for example, were associated with a sharp decline in the stock market as investors began to question the integrity of financial statements in general.
With this distinction, we also can see that politicians too can be greedy – if not for money through corruption, then for the power to impose their will through the coercive power of the state. Taxes, rules and regulations, corporate bailouts, subsidies, protection from competitors and transfer payments are all one-sided exchanges and when excessive, reduce the wealth of our society.
Finally, this distinction warns that enterprise can morph into greed. Sometimes the desire for success or wealth can cause us to cheat, whether it be an athlete who uses performance-enhancing drugs or an executive who uses accounting tricks to overstate short-term earnings in order to increase his bonus. Companies that use political connections as part of a strategy to cripple their current or potential competitors can also be considered greedy because their success is now at the expense of customers in that market.
We can test the distinction between greed and enterprise by substituting the word “enterprise” for “greed” in the fictional character Gordon Gecko’s famous speech from the 1987 movie Wall Street:
“Enterprise, for lack of a better word, is good. Enterprise is right. Enterprise works. Enterprise clarifies, cuts through, and captures, the essence of the evolutionary spirit. Enterprise, in all of its forms; enterprise for life, for money, for love, knowledge, has marked the upward surge of mankind and enterprise, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA.”
Ask yourself: Doesn’t this make more sense than the original?
Enterprise, Not Greed, Creates a Better World originally appeared in the Daily Reckoning. The Daily Reckoning now provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.