Wednesday, July 11, 2018

Economic Insanity: Chapter 8 (part 2)


Competition Restrained by a Higher Good (Part 2)

Who Really Believes in Unfettered Competition?
Unfettered competition, most free-market advocates insist, is the most necessary component of a successful economic system. And the most convincing argument supporting this assertion just happens to be communism. Ask any capitalist if unrestricted competition is good, and the answer will be, “Of course competition is good. All you have to do to see this clearly is to look at communism, a system that removes competition from economic endeavor.”
      Any capitalist would tell you that competition is necessary in order to achieve quality, efficiency, and variety. Communism does not achieve these three desirable results, but is that because communism lacks the competitive forces of capitalism? Perhaps it lacks a great many other things too. Unfettered competition does indeed fuel the fires of quality, efficiency, and variety, but the reasons for achieving these ends are all wrong. Wouldn’t it be better to achieve them for the right reasons, for a higher purpose, such as the good of society and the full preservation of choice in the marketplace?
      The conservatives, in particular, talk a good game when it comes to unregulated competition. In fact, given the opposing view, their talk makes a good deal of sense. They pledge allegiance to the banner of laissez-faire capitalism, all in the name of freedom. But do they walk their talk? Do they really believe their own words? The evidence here, I’m afraid, is against them. As David Barash explains:
      We are supposed to believe that conservatives believe in the virtues of competition, tooth and nail, dog eat dog, and may the best man win. . . . But do they really believe in such a free-for-all? Consider the Lockheed and Savings and Loan bailouts, or the various and numerous forms of “corporate socialism” whereby government provides special benefits and tax breaks to large corporations, especially those engaged in military contracting. What conservatives really prefer is competition among the nonrich, the wage earners, the smaller and less well established . . . especially since out of this competitive fray generally come lower wages and a more docile workforce.1
      Many people claim to believe in unhindered competition, but when push comes to shove, we discover that they’d actually prefer to have the government step in and ensure their success and prosperity, rather than having to “earn” it (and possibly lose it) in the mercenary marketplace they extol. It is only certain classes of individuals, apparently, who should be unprotected from the hostile, predatory environment. So who really does believe in a totally free market? Perhaps no one.
      Both individuals and businesses usually believe in free competition only to the degree that they feel they can win. If I were scheduled to play Andre Agassi at tennis, for instance, I wouldn’t be so gung-ho about competition. Self-interest, as one might expect, lies at the heart of the competition issue. If unfettered competition is in our best interest, we’re for it; if, on the other hand, our competitors are in a position of strength, we immediately want the rules changed. Sure, I’ll take on Andre—if he wears leg chains, a straitjacket, and holds the racquet in his teeth.

A Better Metaphor
Three metaphors have often been used to define our win-lose competitive system: (1) the athletic contest or “game,” (2) war, which bears striking similarities to sports, and (3) the jungle. One major problem with these win-lose metaphors is that they all serve as excuses for not creating a system in which our unique American ideals can be practiced. They disavow any higher goal that should focus and mold our competitiveness.
      The game metaphor is inappropriate, for life is not a game. Food and shelter and health care and education should not be the prize for winning a contest. The war metaphor is also improper, for doing battle over the necessities of life, or even the luxuries, is barbarous. We are a society, we claim to be civilized, and we must either unite and thrive or splinter, decline, and die as a society. The jungle metaphor is perhaps most repulsive, for human beings are not simply members of the animal kingdom. Our intelligence, creativity, self-awareness, advanced communication skills, preservation of history, and capacity to rise above instinct and exercise reason and compassion set us apart from other animals. Why, then, should we be satisfied with economic relationships based on a metaphor that applies better to lions or sharks or raccoons? Why can’t we adopt a metaphor that places our economic interaction on a par with our social and political aspirations?
      What we need is a better metaphor to guide us in economic endeavors. Consider, perhaps, the orchestra metaphor. There is indeed competition between the violinists in an orchestra. They all desire to occupy the first chair. But this competition is not an unfettered, totally self-interested, win-lose type of competition. The last thing any serious violinist wants is for another violinist to play wrong notes, for this would reflect on the whole orchestra. A higher good governs the competition. Each violinist wants the orchestra—and, hence, all of its parts—to play superbly, flawlessly. But each violinist wants to be recognized as the best—not because others foul up, but because he or she is simply more excellent than the others. This healthy competition rests on the idea of being considered the best of the best. And it is all possible because a greater common good, a higher ideal governs the competition and binds the players together.
      The only way we can have this type of competition in our economic pursuits is for us as citizens to recognize a higher ideal. If we can learn to view the American Dream as something more than an economic game of grabs, perhaps we can experience a quality of life and social excellence that has eluded us.

Free Competition Leads to Authoritarianism
Unfortunately, however, we do not yet live in such a society. We live in a system that permits unlimited capital ownership, and we behave according to the win-lose metaphors. And it is not surprising that this type of mercenary competition carries its own inherent flaw: The freely competitive marketplace becomes less competitive over time, the inevitable result being an increase in inequality—in other words, a swift departure from a central goal of the American Dream.
      David Korten explains that “a competitive market is competitive only when there are enough buyers and sellers that each has many alternatives. However, by its nature, untempered competition creates winners and losers. Winners tend to grow in economic power while losers disappear. The bigger the winners, the more difficult it is for new entrants to gain a foothold. Market control tends to concentrate in a few firms, so that the conditions for competition are eroded.”2
      The longer the free market remains totally free, the less competitive it becomes. This is inevitable, but to say that it becomes less competitive does not mean that it becomes more cooperative. On the contrary, as power concentrates, only the most successful predators thrive, and the resulting imbalance fosters autocratic rather than democratic relationships. Unrestricted competitive economies tend quite naturally toward authoritarian systems.
      Because untempered competition destroys the competitive marketplace, there must be some sort of restraint placed on competition. And we have two choices. We can either change the structure of our system to make cooperation and fair play more attractive and then bridle our own behavior by following common sense and proven moral truth or we can pass laws and regulations to bind our hands. The latter, which we are now pursuing with a vengeance, is really no choice at all, for you can’t legislate morality. You can’t enforce it either. When internal moral checks and structural barriers to immoral behavior are nonexistent, no amount of enforcement on either Wall Street or Main Street will stop individuals and institutions from finding loopholes in the system, from behaving like predators. If we want a mercenary marketplace where competition is virtually nonexistent, then let’s make no changes in the status quo. But if we are even half serious about creating a moral, fair, cooperative marketplace, then we need both structural limits and internal moral barriers to protect us from the abuses that we’ve grown accustomed to.

Benevolence
In a significant paper titled “The Sympathetic Organization,” David K. Hart points to a philosophically sound path that would lead us to the type of economic relationships we need. He argues convincingly that “human nature [has] not one, but two, primordial aspects: the need to love self (self-love) and the need to love others (benevolence).”3 A major problem with modern capitalism is that it has enthroned self-love (“What’s in it for me?”) and abandoned benevolence. Hart insists that this organizational neglect of a fundamental human need has created a society in which individuals are alienated not only from one another, but from themselves and their work. “Alienation results when an individual is separated from something essential to the development of his or her full human potential. It is not, then, just a minor psychological dyspepsia, but rather the spiritual sickness that comes with the ruination of one’s life possibilities. Our modern age experiences it through the soul-destroying entanglements of modern organizational life.”4
      Organizations, in essence, dehumanize individuals by treating them as functions. “In modern organizations, individuals are linked to other individuals in artificial relationships defined solely by the organizational mission.”5 Friendship and benevolence are not only unnecessary in such an environment, but often harmful to organizational objectives.
      “The management orthodoxy,” Hart concludes, “is not only incorrect but unendurable. Based upon a mutilated version of the whole self, the orthodoxy reduces individuals to their organizational functions and estranges them from the rewards of their work. Work is devalued into an instrumental activity valuable only for what it contributes to organizational goals. It has no intrinsic meaning. The individual’s labor is a commodity and this makes the individual a commodity also.”6 Human beings who are treated as commodities cannot reach their full human potential, nor can they become truly happy.
      What I wish to establish by inserting a portion of Hart’s argument at this point is not merely that the absence of benevolence and the abundance of alienation in modern society are negatives that we should correct. In the context of this book, the relevant point is that self-interest’s domination in modern capitalism is not mere coincidence. Self-interest and unlimited ownership are products of each other. Self-interest, of course, lies behind the desire to accumulate unlimited capital, but unlimited capital ownership also begets greater self-interest.
      What I have proposed thus far is that we abolish unlimited capital ownership. This is a structural change. But if we change the structure without also correcting the moral and behavioral flaw it promotes, then the untempered self-interest rampant in society will pervert and perhaps destroy the new structure we attempt to introduce.
      What we must undertake is not just an economic reformation; we must attack the very roots of our un-American economic system. We will be unsuccessful in this venture, however, unless we can embrace a higher goal than “What’s in it for me?” and unless we can restore that part of our nature that unrestricted capitalism has taught us to ignore: benevolence.

Restrained Competition
The reason for both restructuring the parameters of capital ownership and encouraging individuals to adopt benevolence as a guiding star in their economic dealings is to curb the competitive nature of our economy. As discussed earlier, the most compelling argument for a highly competitive economy is that competition is responsible for all the things that make our lives comfortable, secure, and healthy. Without competition, we are told, people are not motivated to succeed, and there is little impetus behind technological advancement. Competition, because it pits one individual or company against another in a struggle for survival, yields a never-ending stream of new products, each intended to give its producer an advantage over “the competition.”
      While I admit that competition does spur technological growth, and that the by-products of corporate warfare have benefitted society in many ways, I have come to two other beliefs: first, that competition has also brought us the waste and inefficiency of planned obsolescence, the curse of a decimated environment, artificial growth that is becoming a straitjacket rather than a liberating force, and an economy based on adversarial relationships rather than cooperative ones; and second, that competition is not the only impetus for improving the human condition.
      Indeed, I submit that a noncompetitive environment would actually free people to be more innovative, more creative, and more directly motivated to make life better for one another. Regardless of the competitive or noncompetitive nature of their environment, human beings have an innate desire to improve their individual and collective condition. And in a noncompetitive environment the risks of failure that deter all but the most daring innovators would be gone. In short, if we removed the rewards for self-interested innovation, I believe more people would be inclined to share Ben Franklin’s attitude and motives for bettering the lives of their neighbors:
      To avoid or overcome the perpetual problems caused by miscalculations of self-interest, Benjamin Franklin chose the course of modesty and disinterestedness as a means for progressing. True, Franklin wanted to succeed in his business and he worked hard to do so. . . . But in all his endeavors, his objectives were to do good and to be useful as opposed to getting rich or gathering honors. His emphasis was on contributing rather than obtaining; on giving rather than receiving. Strange as it may seem, it was Franklin’s “indifference to the things of this world” that unleashed his full creative powers. . . .
      Benjamin Franklin was one of those rare individuals who had it within his power to become immensely wealthy, but who declined the opportunity to do so. To his mother he had written that he would rather have it said of him that he had lived usefully than that he had died rich. When his business attained a level to assure him of financial independence he turned his interests to science and government. Believing “That, as we enjoy great advantages from the inventions of others, we should be glad of an opportunity to serve others by any invention of ours; and this we should do freely and generously,” he made no effort to patent or profit from any of his inventions. The Franklin stove alone could have made him a fortune, but he chose not to patent it, and printed the plans for it in his own newspaper.7
      A noncompetitive system based on limited capital ownership and benevolent behavior would breed this sort of outlook on life. It is our current system and its rewards that work to prevent this sympathetic way of living, which to varying degrees lies dormant in the hearts of men and women everywhere. A noncompetitive system, in which people didn’t have to fight and scratch for their “just due,” would unlock many of these latent qualities and put them into action. Large authoritarian organizations, on the other hand, must manipulate or force creativity and innovation to the surface.
      If people were freed from the desperate craving to secure their future and the perceived necessity of acquiring more than they actually need, they might be surprisingly inclined, even eager, to focus their energies on assisting their fellow men and women—and find great happiness in doing so. In such a society, “What’s in it for me?” would become obsolete thinking.
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1. David P. Barash, The L Word: An Unapologetic, Thoroughly Biased, Long-Overdue Explication and Defense of Liberalism (New York: Morrow, 1992), 176.
2. David C. Korten, “A Deeper Look at ‘Sustainable Development,’” World Business Academy Perspectives 6, no. 2 (1992): 26–27, adapted by Willis Harman from “Sustainable Development,” World Policy Journal (Winter 1991–92).
3. David K. Hart, “The Sympathetic Organization,” in Papers on the Ethics of Administration, ed. N. Dale Wright (Provo: Brigham Young University, 1988), 68.
4. Hart, “Sympathetic Organization,” 71.
5. Hart, “Sympathetic Organization,” 77.
6. Hart, “Sympathetic Organization,” 87.
7. George L. Rogers, ed., Benjamin Franklin’s The Art of Virtue (Eden Prairie, Minn.: Acorn Publishing, 1990), 115, 158–59.

Tuesday, July 3, 2018

Economic Insanity: Chapter 8 (part 1)


Competition Restrained By a Higher Good (Part 1)

The fundamental question of management theory is: What links
individuals together in cooperative endeavor? The answer, according to the
contemporary management orthodoxy, is self-interest—the raw egoism of Hobbes
and Mandeville, refurbished in chic, modern, linguistic garb. . . . All organizational
behavior is summarized in the inelegant phrase, “What’s in it for me?”

—David K. Hart,
“The Sympathetic Organization”

The suggested changes to our ownership tradition discussed in the preceding chapter are entirely structural in nature. And although structural changes are necessary both to prevent economic suicide and to bring our economy into harmony with our political and social patterns, structural changes alone are not sufficient. Altering the structure of our economy without somehow modifying the habitual patterns of human thought and interaction would be similar to buying new computer hardware, but running the same old virus-infected software. In essence, as individuals we have been operating within the structures and patterns of unbridled capitalism for so long that even if we suddenly found ourselves on a completely different playing field, most of us would go right on behaving as the system has always rewarded us for behaving.
There is a moral aspect to this question of economics that we must deal with on an individual, rather than a structural, level. Implementing a new economic structure with new rules and restrictions would of course reward individuals for behaving in new ways, but some behavioral patterns are quite hard to break—and you can’t legislate everything, morality in particular. Consequently, we must develop a new economic rationale, a moral argument, if you will, to support the types of behavior that must accompany the necessary structural changes. This moral argument must address two related issues: self-interest and competition.

Why We Need a Guiding Philosophy
In The Worldly Philosophers, Robert Heilbroner explains in some detail why we have had political, moral, and social philosophers for millennia, but economists (or worldly philosophers) only in the past few hundred years. There are, he says, three basic approaches to ensuring the survival of the human race. First, society can organize itself by tradition. In essence, people serve particular functions in society because their fathers did, or because they are limited by their class or caste to certain types of labor. Second, authoritarian government can ensure that tasks get done by assigning people to do them, whether they want to or not. Neither of these approaches to ensuring survival required any kind of economic philosophy. Only the third alternative demanded an accompanying rationale. And this third alternative was “an astonishing arrangement in which society assured its own continuance by allowing each individual to do exactly as he saw fit—provided he followed a central guiding rule. The arrangement was called the ‘market system,’ and the rule was deceptively simple: each should do what was to his best monetary advantage.”1
This third arrangement was not unrelated to the social and political philosophies of classical liberalism, suggesting that individuals were more important than the traditionally authoritarian institutions to which they belonged. Liberty, self-rule, justice, equality, private property, happiness—all these ideas added momentum to the great change from traditional or command systems to a free-market economy. “No mistake about it,” says Heilbroner, “the travail was over and the market system had been born. The problem of survival was henceforth to be solved neither by custom nor by command, but by the free action of profit-seeking men bound together only by the market itself. . . . The idea [however] needed a philosophy.”2 And philosophies abounded. Starting with Adam Smith and continuing on to the present day, great and not so great thinkers have put forward their ideas on how to best order and justify this new system. “Out of the mêlée of contradictory rationalizations one thing alone stood clear: man insisted on some sort of intellectual ordering to help him understand the world in which he lived. The harsh and disconcerting economic world loomed ever more important.”3
Indeed, economic matters loom more and more important as time passes, for the simple reason that our economic system must continually rationalize its very existence. That third alternative requires a philosophy, a justification, because when push comes to shove it is in conflict with the political, social, and moral philosophies of classical liberalism, the foundation of our Western way of life. This third arrangement for ensuring the continuance of human society is based solely upon the principle of self-interest, a principle that, when isolated, is at odds with the political theories, social ideals, and moral principles that have shaped our Western world.
Self-interest, however, is too problematic as a sole motivator of people in a community. When made the guiding rule, when unchecked by social constraints, political intervention, or moral concerns, monetary self-interest leads inevitably to centralized power, authoritarian structures, and command systems. In other words, without a motive higher than self-interest to guide or at least temper it, the third alternative inevitably collapses back into some form of the second alternative, and the individual ends up again at the mercy of arbitrary authority. For a while our political system, our social objectives, and our good moral sense held this contrarious economic motivator at bay, but in the end the strain was too great. Something had to give, and self-interested economics had too much momentum, too much appeal. What we need desperately today is a fourth approach, an approach that goes beyond custom, command, and self-interest, an approach consistent with our political, social, and moral heritage.

Republican Disinterest
Self-interest is actually a moral question, not just a value-neutral economic motor that is supposed to drive the mindless machinery of the free market. Indeed, self-interest is a very troubling moral question, for an economic system based on this principle creates almost irresistible incentives for people to behave in patently immoral ways.
Who would argue that we must be a moral people in order for self-government to work? This is what some would call a “no-brainer.” The freer we are, the greater a burden we as individual citizens must bear in creating a society of order and justice. Republicanism, succeeding monarchy as the dominant political system, “put an enormous burden on individuals,” says Gordon Wood. “They were expected to suppress their private wants and interests and develop disinterestedness—the term the eighteenth century most often used as a synonym for civic virtue. . . . Dr. Johnson defined disinterest as being ‘superior to regard of private advantage; not influenced by private profit.’ We today have lost most of this older meaning. Even some educated people now use ‘disinterested’ as a synonym for ‘uninterested,’ meaning indifferent or unconcerned.” Disinterest, however, is actually the exact opposite of self-interest.
“Republics,” Wood continues, “demanded far more morally from their citizens than monarchies did of their subjects. In monarchies each man’s desire to do what was right in his own eyes could be restrained by fear or force.” In republics, the only effective restraint on self-interest and private gratification is the sense among citizens that they must often sacrifice personal advantage for the public welfare. It is indeed ironic that self-interest—the one force that Wood identifies as needing to be restrained if a republic is to hold together—is the only force that traditional economic theory proposes as a social adhesive. This is not only a highly illogical thesis; it is also a disturbingly immoral philosophy.
What we have in modern America, then, is a form of government that requires a disinterested citizenry and an economic system founded on the principle of self-interest—a perfect mismatch. And, unfortunately, the economy is in control. To correct this problem, as I have already suggested, we cannot merely tell people to become disinterested. All the incentives in the present system encourage the exact opposite behavior. What we need is a fundamental change in the structure of the economy, so that our economic system actually encourages disinterested action. But we also need a higher ideal than self-interest to bind us together, for self-interest, even though it does cause us to “do business” with one another, also creates too many impediments to true economic and societal health.

Lip Service
The escalating height and frequency of the hurdles economic America requires companies to jump if they want to stay in the race puts immense pressure on them to increase their productivity and develop innovative new technologies. A very natural consequence of this pressure, within a system that enshrines self-interest, is for companies to become, over time, increasingly and hostilely competitive. American companies have always felt the need for, even thrived on, fierce competition, but as the growth spiral steepens and accelerates, making it harder for companies to climb to the next level, their perceived need to compete will intensify dramatically. In our twentieth-century mercenary marketplace you either eat or get eaten. Consequently, most companies nowadays focus primarily on beating their competitors and enlarging their bottom lines, rather than providing a service to society.
I used to ask the students in my management classes at the university, just to keep a finger on the pulse of their attitudes and misconceptions, what the purpose of a business is. I always asked this out of the blue, without any sort of preamble to bias their replies. And without exception, their first answer was, “To make a profit.” Rarely, even when I dug a little deeper, did they bring up the radical notion that businesses exist to provide a service to society. These were juniors and seniors in the business curriculum, and they had learned their lessons well. They were prepared for life in corporate America, or, as they called it, “the real world.” This “real world,” however, is anything but real. It is both inconsistent with the values of the American Dream and inherently illogical.
I remember reading the account of one business consultant who asked a group of high-level executives the same question. Their answer was identical to that of my students. They said their businesses existed to make a profit. This wise consultant then asked them how their drug and prostitution operations were doing. The executives were, of course, astonished at this request. “I just assumed,” he answered, “if you were in business to make money, that you’d be involved in the most profitable kind of business.” To bypass the best opportunities would be both inefficient and contrary to the stated purpose of their companies. These executives suddenly understood that their business activities were restricted by deeper purposes that they had perhaps not yet fathomed. And so it is with almost all companies.
Businesses today, for the most part, are so caught up in beating the competition, expanding their operations, and making a profit that they are either oblivious to or, at best, pay lip service to the idea of serving society. They are anything but disinterested. Corporate mission statements and hordes of management gurus notwithstanding, businesses have become ends unto themselves rather than instruments for achieving a greater societal good. And their recruits from the business schools already know which side their bread’s buttered on.
The problem with this acute management myopia is that on the practical, everyday side of the ledger the larger question of economics is ignored, thus focusing all the attention and resources of corporate America on the grand ideal of making a buck. The direct consequences of corporate America’s shortsightedness and misdirected energies are not trivial.
Because businesses and other institutions are not knit together in common purpose by an openly acknowledged concern for the greater good of society, but operate primarily on the principles of self-interest and self-perpetuation, the competitive climate in America has become one of hostility and aggression rather than cooperation and fair play. Because of this prevailing climate, modern businesses and business people are necessarily caught up in a brutal fight for survival. They must not only survive the inherent illogic of the system, but they must also survive head-on confrontations with competitors who wouldn’t blink an eye at putting them in their economic grave.
Survival is what twentieth-century American capitalism is all about, not service, not quality, not human development. Companies focus on quality, not for quality’s sake, but in order to survive. They emphasize service, not for the customer’s sake, but to increase market share. They create more humane workplaces, not because of their belief that workers in a free society deserve to more fully develop and express their talents and ingenuity, but because they can no longer compete in today’s demanding marketplace without intelligent, motivated, highly trained workers. At the bottom of American capitalism is the competition for survival—survival of the fittest. And as Abraham Maslow points out, when our survival is threatened, we are simply incapable of paying attention to higher needs and concerns.
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1. Robert L. Heilbroner, The Worldly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers, 6th ed. (New York: Simon & Schuster, 1986), 20–21.
2. Heilbroner, Worldly Philosophers, 38.
3. Heilbroner, Worldly Philosophers, 41.
4. Gordon S. Wood, The Radicalism of the American Revolution (New York: Knopf, 1991), 104–5.