A Note on Greed: Who is Really to Blame for the Financial Troubles?

Michael Walzer: Blame Deregulation–Not Greed

All of our politicians seem to agree that a major cause of the current economic crisis, or even the major cause, is “greed on Wall Street.” But I don’t understand how this could be so, since there has always been greed on Wall Street and the current crisis is only a recent one. Indeed, in the most general view of the capitalist system, greed is its crucial motor. Every individual, according to Adam Smith, employs his capital so as to produce the greatest possible value for himself: “He intends only his own gain.” I call that greed, and though the famous “invisible hand” supposedly transforms all this individual gain-seeking into the common good, it doesn’t alter the individual’s motivation. “I have never known much good done,” says Smith, “by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.”

Bankers are, simply put, money merchants, and they too do not trade for the public good but only for their private good. That is what they have always done. According to Smith, and according to most defenders of free enterprise in America today, we have all benefited from their trading, so it is sheer hypocrisy to denounce them now. Or, worse, it makes Wall Street traders into scapegoats. But scapegoats for whom? Who are the beneficiaries of this hypocrisy?

The truth is that the invisible hand doesn’t always work, and so it requires some help from a visible hand—and that is the hand of the state. There is no other agency capable of protecting us from ruthless or reckless gain-seekers, for capitalist institutions too often reward both ruthlessness and recklessness. State regulation is, therefore, a necessary feature of–even if it is also a social-democratic addition to–the capitalist system. When regulation fails, we are all in trouble. Deregulation is the major cause of the current crisis. And the cause of deregulation is what? Well, we might say that the cause is greed, which certainly motivates political as well as economic behavior. But that won’t do, since greed was no less prevalent when the regulative regime, which we have been dismantling since the 1980s, was first put together in the New Deal years. The difference was that the political forces that believed in greed, and in the free market, and in the invisible hand, were less dominant then. The ideology of laissez faire had fewer true believers.

If we are looking for people to blame for the current crisis, the right people are the market ideologues and the politicians they seduced. They are the ones who will benefit from scape-goating the bankers. And the appropriate response to them is political, not moral. We don’t have to abolish greed (good luck!), but we do have to find our way to a better understanding of the role of the state in the economy. We have to take state power away from people who despise the state. We have to defeat the champions of deregulation. The place to begin is in the debate over the bailout, but this is a long political struggle.

Michael Walzer is co-editor of Dissent. Homepage and Feature Photo: Lehman Brothers headquarters at Times Square (David Shankbone / Wikimedia Commons/ GNU).