Forecasts & Strategies
by Mark Skousen
“Unbridled avarice is not in the least the equivalent of capitalism, still less its ‘spirit.'” — Max Weber
Recently I heard free-market economist Walter Williams speak at a local college about capitalism. He quoted approvingly from Gordon Gekko, the fictional character of the film Wall Street, “Greed is good.”
I normally agree with most everything Walter Williams says, but not this statement. Too often, defenders of capitalism go overboard in defending pejorative phrases, such as “greed is good” or, in the case of Ayn Rand, her book title The Virtue of Selfishness. But selfishness is not a virtue, nor is greed, whether in business or finance. Selfishness leads to unethical behavior — deceptive advertising, fraud, and even theft. It often means taking advantage of another person. Greed and selfishness could land you in jail.
Adam Smith’s Model of Enlightened Self-Interest
Adam Smith, the father of free-market capitalism, did not write approvingly of selfishness or greed. He favored enlightened self-interest and industriousness. He believed that his “system of natural liberty,” his phrase for capitalism, would actually reduce greed, selfishness and fraud. Commercial society, he said, encourages people to be educated and industrious. It “cultivates patience, industry, fortitude and application of thought.” The fear of losing customers “restrains his frauds and corrects his negligence,” Adam Smith wrote in The Wealth of Nations. In contrast to political societies, which depend on flattery, favoritism and deceit, capitalist societies foster self-control, cooperation, punctuality, benevolence and deferred gratification.
Financial Advice: Don’t Get Greedy!
In the financial field, we know that the two greatest enemies to profits are fear and greed. Contrarians take advantage of inexperienced investors who panic when prices are dropping and often sell out in desperation at the bottom. Unseasoned investors also tend to buy heavily at the top, only to see their investments disappear. In short, greed is a disaster for investors. This is a vital lesson given the high-wire act Wall Street is following these days, especially with regard to Internet stocks.
The Real Significance of the Millennium
A friend of mine wrote me saying that the year 2000 was no big deal, and this new millennium was nothing unusual in terms of other calendars: For Moslems, it was 1420, for Jews it was 5760, for Buddhists it was 5119, etc. Well, he’s wrong. There is no universal celebration of the Moslem, Jewish or Buddhist calendar, yet on New Year’s Eve, what did we witness on television? Magnificent celebrations across the globe even in China, Israel, Africa and other places that are not Christian. Why? Western capitalism, which uses the Christian calendar, has captured the world — in business, in dress, in culture.