decision last February to abandon plans for a second corporate headquarters in
New York City was met with mixed reaction from both sides of the political
aisle. Many backers of the proposed project pointed the finger of blame for
Amazon’s change of heart at Congresswoman Alexandria Ocasio-Cortez (AOC). Her
opposition to the company’s plan was clear. AOC stated that “corporate greed” was
the reason to reject the project, noting that proposed tax subsidies Amazon was
to receive from New York were an example of “worker exploitation.” AOC’s comments
reflected the kind of socialist commentary one would expect to hear from the
progressive Left. They have become far too proficient at extolling the
so-called “evils of capitalism” and how the greedy 1% need to share more of
their wealth with the rest of us.
Putting aside the merits of Amazon’s proposal for the moment, what about this idea of greed? Is capitalism based on greed? Those of us who have seen the movie Wall Street recall the lecture from the villainous Gordon Gecko who told a room full of stockholders that “greed… is good.” Was it really “greed” that Gecko should have been advocating, or is capitalism based on something else? Given capitalism’s long track record of generating prosperity and lifting millions around the world out of poverty, this question is worth answering.
Sanders, Elizabeth Warren and other socialists have joined with AOC in trying
to convince us that our capitalist system is rigged by the wealthy to exploit
the rest of us. In their minds the notions of greed and exploitation go hand in
hand with capitalism. Unfortunately, this outdated view of our capitalist system
ignores the underlying morality of free-markets and how they are designed to
elevate our social interaction as well as our standard of living.
First, it is worth noting that everything we do when relating to others in society is a transaction. Some transactions are moral and therefore beneficial to society, and some are not. Recognizing this, there are only three types of transactions that individuals can engage in within a free marketplace. It is useful to examine these transaction types against the progressive notion of greed to better understand which are moral and which are not.
two parties come together in the hopes of a beneficial exchange, and both come
away without any benefit, the result is a lose-lose transaction. We saw an
example of this earlier in the year when President Trump went to Vietnam to
hold his second summit meeting with North Korean leader Kim Jong-un. Both met
with the stated intention of negotiating a nuclear arms treaty, and both left
empty-handed. However, there can still be a positive moral outcome in this type
of transaction, even when value is not created through exchange. This happens
when a personal relationship is established between the parties, thereby
creating the possibility of forming a beneficial exchange in the future.
two parties come together in an exchange and only one obtains value at the
expense of another, the result is a win-lose transaction. We saw a plethora of win-lose
transactions created during the 2008 financial crisis. They occurred because federal
regulators incentivized market makers Fannie Mae and Freddie Mac to
lower mortgage underwriting standards. These ill-advised standards further incentivized
banks and mortgage companies to originate as many subprime loans as possible,
loans that were purchased by Fannie and Freddie to meet their regulatory quotas.
Unfortunately, when mortgage interest rates began to rise and housing markets dropped in 2006, many homeowners found themselves with property values worth less than their outstanding mortgage debts. Others found themselves at risk from sub-prime balloon payments that kicked in five years or more into the term of their mortgage loans. As a result, many homeowners who took on subprime mortgages faced bankruptcy, foreclosure or both. Banks, Fannie, Freddie, and mortgage companies all made money on these transactions, but many subprime homeowners did not. What resulted were countless examples of win-lose transactions.
Finally, when two parties come together to complete a beneficial exchange and both benefit, both participate in a win-win transaction. Such a transaction would not occur unless both parties are receiving greater value in the exchange than they are giving away. Most of us engage in win-win transactions every day without even thinking about it, even when buying a cup of Starbucks. Wealth is created because both parties now have greater value as a result of the exchange. Greed has no part in such a transaction because free-market exchange is completely voluntary.
is the selfish pursuit of power, money or property. Relationships based on greed
always result in win-lose transactions where one party gains by exploiting
another. Progressives see capitalism as inherently exploitive, thereby explaining
their interest in government control over most free-market transactions. But
progressives confuse greed with self-interest, and it is self-interest that is
an inherent requirement in achieving a win-win transaction. After all, how can
a win-win transaction be completed unless both parties believe their self-interest
has been served?
if you think only big corporations are greedy, think again. No one would argue
about the need for fair and efficient regulation of corporations that create
incentives to operate on the win-win model. However, as economist John Maynard
Keynes once reminded FDR, “it is a mistake to think that… [businessmen] are
more immoral than politicians.” What Keynes understood is that government bureaucrats
can also serve their own interests by exploiting parties involved in public
transactions. This is the essence of crony-capitalism, a system that serves as its
own version of political greed.
Walter Williams of George Mason University once told us how capitalism has
injected greater morality into our relationships. He spoke of the biblical admonition of Jesus
Christ when he said, “It is as difficult for a rich man to get into Heaven as
for a camel to go through the eye of a needle.” Progressives will reference
this quote as a basis for condemning what they see as the immorality of
capitalism, implying we have a moral obligation to redistribute wealth held by
the rich. Williams offers us a different observation. He reminds us that Jesus
spoke these words prior to the industrial age when wealth was most often
acquired by plunder and theft. He notes that free-market capitalism has enabled
the creation of new wealth through service to others. True service is only
provided through win-win transactions. This is true even when we look at the
wealthiest entrepreneurs, like Steve Jobs who founded Apple. Hopefully we can
all see that Jobs’ invention of the iPhone has served society well, even while
making millions for himself and others. And no one had to put a gun to our heads
to buy one.
While there may have been good reasons to reject Amazon’s bid for a new headquarters in New York City, concerns about corporate greed and exploitation are not among them. Progressives who target capitalism as a system based on greed and selfish pursuits are just projecting their own leftist ideological version of morality on others. Their devotion to equal outcomes is what drives their pursuit of coerced market relationships, an ideology that when implemented can only result in win-lose relationships. In other words, socialism.
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Eric BeckEditor-In-ChiefFree Nation Media LLCGreenville, South Carolina