Legitimization of Greed
More Material on GENEROSITY VERSUS GREED, and empirical evidence that generosity is built into human beings is given in the linked pages.
THE BIG IDEA:
History of Thought: How did morality get taken out of economics in Europe.
Islamic Economics: How to put morality back into economics. Only we can do this job at this time, because Muslims have consensus on what morality means, while such consensus has been lost in the West. The dominant moral theory is the social contract, according to which whatever we agree to as a society is moral. Thus homosexuality was immoral in the 70’s but became moral in the 90’s and it became immoral to speak against it.
SUB-THEME A:
Trace the evolution of “Invisible Hand:” Selfish behavior leads to Social Benefits
PARADOX: Selfish Actions lead to Social Good. è Intentions don’t matter.
Note contrast with Islam:
Innamal Amal bil Niyyat. Intentions are all important. Of course this could be interpreted as referring to consequences in the Akhira, but as a practical matter, consequences occur according to Niyyah in this world. The event of Masjid Zarar in the Quran shows that the founding of the masjid in bad intentions made it necessary to destroy the masjid.
SUB-THEME B:
Greed and Pursuit of Wealth are good for society, since accumulation of wealth will lead to paradise on Earth.
SUB-THEME C:
Decline of Morality in the West: Both in practice and also in terms of philosophy.
OUTLINE FOR A PAPER COVERING SUB-THEME A:
Evolution of the Invisible Hand Idea
Section 1:
Original idea of Adam Smith is not too harmful. He is distinguishing between enlightened self-interest and greed and does not approve of the latter. Flesh out the concepts which occur in Adam Smith but were lost later, so as the clarify the contrast.
Dr. Salim Rashid is the author of The Myth of Adam Smith, and has studied Smith extensively, so he might be able to help us with this part.
Section 2:
A radical transformation occurs between Adam Smith and modern concepts. Two sources for understanding and describing this transformation are the following:
Tawney has traced this transformation in: Tawney, R.H. (1926) Religion and the Rise of Capitalism, New York: Harcourt, Brace & World, Inc. A sampler of quotes showing how he has treated this transition in thought is attached at the end of this article.
Karl Polanyi in his classic book: The Great Transformation: The Political and Economic Origins of Our Times. A review which gives a bird’s eye view of the argument is given: http://eh.net/bookreviews/library/polanyi
Manicas: A History and Philosophy of the Social Sciences. This traces the emergence of modern social sciences and historical events in Europe and how they impacted on these developments. It also describes some aspects of the invisible hand doctrine and its development
Section 3: Selfishness/Greed as an unpleasant means to a useful end.
Max Weber and Keynes both argue that while greed itself is bad, it is means to achieve a good end. Many other authors thought that greed could be HARNESSED to serve useful purposes. I have seen quotes to this end but can no longer recall where I saw them. A little research should turn up more authors who have had this idea. I provide the relevant quotes from Max Weber and Keynes below:
For example, Weber (1930, Chapter 2) writes that the “spirit of capitalism” is the pursuit of wealth as an end in itself, to the point of being “absolutely irrational”.
It is worth quoting Keynes in full:
When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall be able to afford to dare to assess the money-motive at its true value. The love of money as a possession — as distinguished from the love of money as a means to the enjoyments and realities of life — will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease ... But beware! The time for all this is not yet. For at least another hundred years we must pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight” (Keynes, 1930 cited in Skidelsky, 2001).
An important reference here is Nelson:
Thus the answer to the fundamental economic question of what is to be done with surplus wealth became ‘use it to generate more wealth’. Even though this answer is patently absurd, it is nonetheless deeply believed by many. Economics as Religion by Nelson (2001) provides many illustrations of how deeply held this type of belief has become and also how economic theory is described in theological terms by many leading economists.
Nelson argues that economics theory is based on a two-tiered concept, sort of similar to Plato’s Republic. On the one hand there is an elite class (government, justice, etc.) who set up a fair playground and act in the social good without self interest. In the public we have this vicious competition among purely selfish agents, regulated by this purely service oriented elite. In this model, the greed serves as an engine for growth. Many authors have remarked on this two tiered nature, and have argued as to how an institutional framework is necessary for competition to function in a beneficial way. Again some reference lookup appears necessary.
Section 3:
The Genie gets out of the Bottle
This attempt to harness selfishness for beneficial ends led to disaster. The pursuit of wealth, selfishness, greed, cut-throat competition was legitimized and considered as the optimal means to social good – the extreme example being Hayek, but many others can be found. Friedman’s article: “The Only Business of Business is Profits” was very influential and argued that it was immoral for business to pursue social benefits. Legitimization of greed slowly led to the dissolution of the framework (government, justice, other supporting institutions) which all started acting in self-serving ways. Regulating agencies, accounting and auditing firms, and all the guardians and safety factors got eroded by the spirit of greed. The formalization of government and firms as collection of self-serving individuals led to the realization that perfect competition would no longer have the beneficial effects assumed. The 2008 global financial crisis was just one instance of the many collapses caused by selfish behavior, not adequately monitored because, even though the institutional structure was in place, the incentives were not there for selfish individuals to monitor. Again, I have seen lots of readings making this type of argument, but will need to do some searching to come up with the relevant literature.
CONCLUSIONS:
It is not possible to build a society out of self-serving individuals. The ancients who encouraged cooperation, sympathy, sacrificing self-interest for the sake of society had the right idea. This idea is embodied in literature (praise for heroes who sacrifice for others), methods of bringing up children, traditions & religion, and in social norms. Changes on all four fronts have occurred in the West and have led to the current disaster which has destroyed family institutions and other social structures which encouraged the formation of communities and the development of community spirit. Again ample documentation is available. For Muslims, the solution lies in developing community and re-vitalizing the concept of the Ummah.