Even though I am not an economist or a businesswoman, I know for sure that the economy of the United States has gone bad. The unemployment rate is lower than ever and the citizens of America are tightening their belts as they work on the long forgotten term: frugality. What happened to us? Is it really because capitalism failed in our country? Eamus Catuli brings up an argument about the failure of capitalism which he believes to be the reason for our current economic sufferings. Greed, he says, is the reason for capitalism’s failure.
Catuli’s criticism toward capitalism is mainly based on ethical principle of virtue. Ethical principle of virtue focuses on decisions that promote good habits of character such as altruism and selflessness. According to Catuli, capitalism, on the other hand, promotes self-interest and greed, meaning that the system seriously neglects virtuous ethics. The blog post starts off with a medieval example of loans without interest and contrasts it with capitalistic bank system—-an obvious demonstration of self-interest. Another example refers to heinous acts of head figures of major capitalist institutions as they demand huge salaries and bonuses at the expense of their own companies’ financial crisis—-a classic case of greed. What capitalistic society refers to as “demand,” Catuli translates it as greed which equals to one of the “seven deadly sins.” And as people attempt to survive in capitalistic society where people’s successes are measured by materialization of “greed,” they slowly learn to lose virtue and adapt to live according to greed.
True, capitalism is, simply put, not nice. It is the world of survival of the fittest. It is a society where niceness often gets manipulated by the greedy hands. But, should capitalism be completely responsible for the mess in today’s financial crisis simply because it failed to teach us how to be nice? I mean, socialism may have been nicer, but it failed in many countries throughout history and they converted to capitalism for a change. Also, there were times when the United States was ecstatic over booms in economy such as in the 1920s (the Roaring Twenties—-well, before the stock markets crashed) and 1950s (it wasn’t just the babies that boomed around that period). So I am guessing that capitalism doesn’t just teach self-interest and greed, but it teaches people something else as well. It teaches people about their rights and duties as an individual. It may fail to teach people to give up some portion of their greed for the benefit of the society. But it teaches other valuable virtues such as endeavor and work ethics for the demands in life.
Following Catuli’s arguments based on the ethical values, one can evaluate capitalism based on ethical principle of rights and duties. Interestingly, the ethical principle of rights and duties is implicitly based on morality. This principle encourages decisions that respect what others are entitled to and/or people’s duties to protect those rights. Rights and duties are interrelated concepts; rights of one person indicate other person’s duties. Catuli mainly focuses on the rights and duties for the others which is quite apparent in his admiration for the ascetic life (demonstrated by Catuli’s examples of saints: Buddha, Gandhi, Jesus, St. Francis, and Mother Teresa). Indeed, these saints are truly admirable. But Catuli should also realize that people have rights and duties for their own lives. People have rights to gain happiness and one way happiness can come is through financial profit. If that is the case, loans with interest might be the perfect system that fulfills both rights of an individual and duty for the others. Through adding an interest, the lender is profiting to some extent for his or her personal gain and at the same time, fulfilling the duty to help the borrower who may be needing money immediately. A win-win situation!
Another way to view capitalism is through the perspective of ethical principle that is based on utilitarianism. Ethical principle of utilitarianism stresses decisions that can bring about the maximum benefit to a maximum number of people. There are two types of utilitarianism based on whether they are the actions or the rules that determine the outcome. Catuli brings up an example of failure in capitalistic society in terms of act utilitarian principle.
We now have heads of key capitalist institutions demanding huge salaries and bonuses even as they destroy their companies, their clients’ investments and their employees’ pension funds.
Once again, greed and self-interest made these heads of capitalist institutions to become blind to the harms stemming from self-interest. They took actions that will benefit only themselves and few others and at the expense of harming the other majority of the people.
Additionally, Catuli belittles Smith’s idea of “invisible hand” and its proclaimed function as the rule utilitarian measure to regulate the forces of excessive self-interest. The abstract concept of the “invisible hand” cannot function well in a capitalistic society because unlike Smith’s intention of increasing the ratio of sympathy, self-interest will always shadow sympathy people feel for the others. Moreover, since people’s success hinges on financial profit, people in capitalistic society have come to accept the misconduct of big bankers or the CEOs as something to be tolerated, or worse, something to be justified.
If that is the case, to some extent, excessive capitalism, a.k.a. greed, is the reason for today’s financial crisis. Granted, those big bankers or CEOs may simply be claiming their rights as they ask for compensation for the high positions that they hold in a society. Usually, in order to reach the top tiers of the social pyramid, much effort, much brain effort, is required whether it be high educational level or great amount of intellectual experience. Such privilege is not something everyone can have. However, if the company or the economy comes to a crash because of the “better” ones’ greed, these “better” ones who gained some amount of temporary cash-success will eventually be affected. And such result will be un-utilitarian for those individuals as well.
Perhaps, in general, the concept of virtue is indispensable when it comes to ethical principles. The core of Catuli’s argument is based on virtue which he considers as the epitome of human value. He even ends his essay with this note: live for what really matters. It is great to live for virtue. Virtue is what really makes human beings different from other species. Human beings have the capability to suppress and regulate natural instincts for something more classy and noble. However, Catuli argues that capitalism forces people to choose something more instinctive, something easier like greed and self-interest. And since capitalism failed to promote ethical principles of virtue, the major concept that influences the other ethical principles, it may have failed in many dimensions regarding ethics.
But there is one distinction to be made in Catuli’s arguments: there are basic, biological human demands that must be satisfied such as food, clothing, and shelter before one can think about ways to live morally. And these necessities are “demands” in life that is inevitable, indispensable and inherent. To equalize the concept of demand and greed might be asking too much for people who are not so spiritual like the saints Catuli mentions. Capitalism urges people to endeavor for the demands in life. If all the demands in life were fulfilled easily, people will be more prone to be selfless.
Unfortunately, that is not true in today’s society for we have to cope with limited resources. This brings up another point: easy attainment of demand may encourage people to become lazy. Therefore, the downside to complete elimination of greed may lead to sloth which is also one of the “seven deadly sins.” Greed is a side-effect from the system that has to work with limited resources and excessive demands. Thus, capitalism may have inevitably caused greed and self-interest to dominate over compassion and altruism. Nonetheless, the original purpose was to promote endeavor and hard work to people with the motivation of earning the needed “demand.”
In essence, capitalism, too, started out with virtuous intents. It is a system that makes people believe in their rights, perform necessary duties to the others, endeavor and work for personal pursuit of happiness. What Catuli sees today is the result of excessive endeavor and a workaholic fight to make ends meet and reach further for the ultimate personal happiness that advances with time as people aim for higher goals. I agree that today, with serious financial crisis, we need to restrain excessive capitalism. As Catuli recommends, enforcing semi-socialism may be a rule-utilitarian solution to rein in capitalism that has gone too far. And Catuli may be right—-perhaps it is time to pay attention to less-prioritized virtues like taking-one-for-the-team.
Nonetheless, condemning capitalism based on its loss of more spiritual virtues is extreme. Every system has side effects. It would be too ideal to believe that a system with perfect moral values exists.
Perhaps Catuli should give capitalism a break. There are flaws in the system, but there are also valid merits. And who knows? The “invisible hand” might just be working its magic as it builds up upon its previous errors. And that “invisible hand” might just be people’s greed to re-build a better ground for another competitive capitalism that can satisfy people’s self interest and stabilize the economy simultaneously.