“That Morality Overrides Self-Interest in Economics” by Roy Moore
So-called neoliberal economic assumptions of private property, competition and the profit motive are established to increase utility and efficiency. However they are morally bankrupt and only benefit a small elite, leaving most people in poverty. An impeachment.
In this essay, I will question the efficiency of modern economics, particularly that of the prevalent neoliberal economics, focusing specifically on the efficiency of competition, the profit motive, and private property. Subsequently I will critique that view by adding a moral constraint to show that efficiency solely in terms of markets and financial profit alone does not benefit society generally, but rather promotes an increased wealth for a minority, often at the expense of the majority.
The Right to Life
Much of the following argument is based on an important assumption, that the right to property is secondary to the right to life. Life precedes property, for no-one can own property without first owning their life. Though property rights are often considered to have developed out of the need to hold personal possessions, to consume that necessary to sustain life, the permanent right to an exact possession in modern law has evolved, often superseding the right to life, as later shown.
What follows from this is a new definition of profit. Throughout I will contrast the monetary definition of profit with a long-term social profit based around economics working for people rather than people working for economics. This new form of profit is based on the above assumption and suggests that efficiency isn’t just of monetary value, but must account for the inalienable right to life of each person. This difference is pivotal in understanding the inefficiency of the profit motive, competition and private property, as although it may be possible to bring about greater nominal wealth, it is inefficient, according to measures of inalienable rights, to concentrate wealth in the hands of a minority: this social definition of profit, then, is the practical application of the right to life superseding property.
Profit and the Profit Motive
Perhaps the most popularized argument for the free-market is that while the capitalist “intends only his own gain… he is… led by an invisible hand to promote an end which was no part of his intention” (Smith 1976, p.477). It is, however, also important to note Smith’s concern for the capitalist’s greed, as “All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.” (Ibid., p.437) Though considered the founder of modern economics, Smith noted the threat of an unchecked and individualistic profit motive, arguing that markets do not always correct themselves; some control is necessary to protect the market from monopolies and other vested interests.
Many liberals consider self-interest as ‘rational’ or part of human nature. Since, in the formulaic statistical approach of micro and macro economics, utility is often considered no more than self-interested financial gain, promoting monetary interests over others. With such assumptions of human nature, the inevitability of competition in producing both winners and losers leads those winners to logically strengthen their own position, creating a kind of superstructure perpetuating little but their own success. We must, therefore, question the purpose of such assumptions, and it is here that John Ruskin notes the effects of such economic principles, writing that profit in economics is a zero sum game: for every buyer, there is a seller; one receives only what another gives.
If the art of making money is to take all you can from the buyer perhaps “You sold your bread well today: [but] was it to a dying man who gave his last coin for it and will never need bread more…?” (Ruskin 2007, p.44) Thus, a brief history of how such ‘developed’ countries financed their industrialization usually reveals some form of slavery, colonialism or coercion. Thus, while this means profit becomes the general maxim to “Buy in the cheapest market and sell in the dearest”, it seems that such financial profit usually comes at a social cost not factored into traditional economic accounting: “Charcoal may be cheap among your roof timbers after a fire, and bricks may be cheap in your streets after an earthquake; but fire and earthquake may not therefore be national benefits.” (Ibid., p.44)
It is not difficult to see, then, how the art of profit is often the art of exploiting others, and economics without such moral constraint leads to such violations of humanity, to the point at which:
“…the pluses, make a very positive and venerable appearance in the world, so that everyone is eager to learn the science which produces results so magnificent; whereas the minuses have, on the other hand, a tendency to retire into back streets, and other places of shade, — or even to get themselves wholly and finally put out of sight in graves: which renders the algebra of this science peculiar, and difficulty legible; a large number of its negative signs being written by the account-keeper in a kind of red ink, which starvation thins, and makes strangely pale, or even quite invisible ink, for the present.” (Ibid., p.79)
With such self-interest the capitalist may still, as Smith notes, benefit society. He argues that the farmer, butcher and baker all act in their own self-interest but still provide a service to society, a better organization through the division of labor. Though such externalities do benefit society, Ruskin notes those negative externalities which are often forgotten, products and occupations which damage society, and the majority who suffer due to the distribution of such goods. Ruskin’s hypothesis, then, seems ever more correct the wealthier society becomes; despite increasing wealth, poverty and inequality continue to grow: “in 1830, the ratio in average per capita income was three to one, in 1960 sixty to one, and in 1997 seventy-four to one.” (Risse 2005, p.349).
The incentive and practicalities of making money can only exist in some sort of competitive framework. It is important to note, then, that those who finish first in any competition do so only in relation to those who finish second and third respectively. As results are found and winners receive their prize, their position is strengthened and thus their ability to reinvest with greater capital, gain greater market share, or extract more marginal product from employees. In this framework, Ricardo defines the natural rate of wages as that which maintains the laborer, but Ruskin once more inserts morality to show that profit for the capitalist does not mean gain for all. Instead of an invisible hand gently pushing towards the benefit of everyone, competition leads to an inequality which is much more of a vivid slap in the face for that majority born into poverty.
Ruskin thus changes the priorities of economics, noting that “Twenty people can gain money for one who can use it; and the vital question, for individual and for nation, is, never ‘how much do they make?’ but ‘to what purpose do they spend?’” (Ruskin 2007, p.85) Where Ricardo defines the natural rate of wages, Ruskin questions the very purpose of ‘natural’; what is natural for Ricardo, according to such economic theory, is that which serves his interests. If seeing laborers as mere tools in their factory and keeping a multitude in poverty for cheap labor is beneficial, then it is ‘natural’ according to such a view.
It makes economic sense, therefore, for even those working in healthcare to test banned drugs on children[i] with falsified documents to support ethical consent, and to make their own product appear more effective by lowering the recommended dose of the control drug to patients, even if this leads to the disablement and death of children (Ahmad 2001). The entire relationship between capital and labor, then, between those who won the competition and those who have nothing, is based on a power struggle of exploitation. Without balance, one dominates the other, their interests effectively determining the life of the other. Until each person has an inviolable right to life, such exploitation can only continue. Where such exploitation exists, no inviolable right to life does so.
What follows competitive markets is inequality, but what permits the legality of the extreme inequality today is the institution of private property. Permanent property rights allow one person the legal right to choose to withhold even the means to life. Once we take our first assumption, however, the right to life is above property rights requiring a more just distribution. Even Nozick’s Entitlement Theory, ultimately driven by property rights, acknowledges this priority; a point which when properly expounded erodes property’s permanence to agree with our assumption:
“an owner’s property right in the only island in an area does not allow him to order a castaway from a shipwreck off his island as a trespasser… the theory does not say that owners do not have these rights, but that the rights are overridden to avoid some catastrophe.” (Nozick 1974, p.180)
Consequently, in moderate scarcity should one person not have justly acquired enough property for their own consumption while another has justly acquired more than they can consume, some distribution seems to be required to avoid such catastrophe: the owner’s right to deny a person those means of life is overridden because of a greater need. It is this acknowledgement, that need is greater than property, which demands redistribution for the sake of social justice, particularly for those who have been born into poverty cycles and who had no choice in their acquisitions. In this sense, the efficiency of economics is judged by its ability to fulfill those obligations of social justice, rather than being a summary of collective wealth by GDP, PPP or some other average statistical measure.
When life precedes property, it becomes logical to conclude that distribution follows need. It is not a far stretch from here to the familiar slogan “From each according to his ability, to each according to his need” (Marx 1970): only those who have can provide the resources, only those with need will receive; anything else is unjust, an inefficient ‘catastrophe’. In this vein Proudhon declares “Property is robbery!” (Proudhon 1904, p.3) as it denies what is the right of those who need it. The problem is not scarcity, as there is enough food despite a 70% global population increase, as calories per person has increased 17% (FAO 2002). That the required redistribution cannot legally occur without the consent of the ‘owner’ is due to the institution of private property.
Economics as Morality
Effectively, the debate is reducible to one thing: purpose; for what purpose are modern economic assumptions established as law? The answer is fairly clear given the historical basis of the evolution of power, that even voting rights, for example, were subject to conditions of property ownership. Competition, private property and the profit motive all serve the interests of a minority who won the competition and thus consolidate their wealth and power. Almost all of these are from those ‘developed’ countries, creating a system of control, whereby entire nations of people are classed as first, second, or third world, according to their respective wealth, where two people from different economic situations are considered alien to each other based solely on statistics.
Such definitions show the bankrupt morality of such principles. Perhaps this stems from the evolution of economics as a separate subject. The etymology of ‘economics’ derives from ‘house’, meaning “there was no clear distinction made between household management and the economy, or between politics and economics, or between economic theory and moral philosophy.” (Holloway 1992, p.160) When separated from the political realm, as Holloway argues occurred in the transition from the Feudal to the Capitalist system, the end goal of economics becomes monetary gain. Instead of that transition leading to greater freedom, only greater poverty and inequality have been achieved; as capital and labor became free, masters could search the globe for cheap labor, rather than being tied to any particular serf.
Within such extreme inequality, justice, fairness and even the right to life have been lost. But if we remove the partiality of those who establish profit motives for their own ends we are left with the conclusion that all people are equal, that life is worth more than property, and we gain a purpose for wealth beyond the “frivolous and useless” consumption of scarce resources (Smith 1976, p.437). With growing poverty and inequality it is surely becoming more and more necessary to challenge these assumptions of neoliberal economics to stop, perhaps, the greatest injustice in the history of mankind.
If the purpose of economics is in the accumulation of money we have our methods. If, however, we finally see the moral imperatives in repatriating economics with other disciplines we find a new rationality and efficiency. Where we finally accept the inalienable rights of each person we allow ourselves the chance to recreate our world and fashion society in a manner fair for all. The next step in economic evolution is with us: either we continue to reap the benefits of the suffering of so many, or we find those moral imperatives and create our own purpose, to change the course of economics and the lives of millions of people worldwide.
[i] Children are defined as those aged below five years old, thus the statistics are greater if children aged between five and sixteen are included. (You et al 2009)
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