Gekko Echo

A closer look at the "Decade of Greed"

David Kelley & Jeff Scott from the February 1993 issue

(Page 4 of 4)

So there is such a thing as greed, and it is, as another common definition says, a reprehensible form of the desire for money. But what makes the desire reprehensible is not a matter of degree. If our standard is human life and happiness, we cannot set any arbitrary upper limit on permissible levels of material comfort–any more than there can be too much knowledge or beauty in our lives. It is not greed for a person with expensive tastes to work hard for the wherewithal to satisfy them. It is not greed for an entrepreneur to seek the capital he needs to make his vision real–even if the sums involved are huge.

A third factor that supports the view of the ‘80s as a decade of greed is an implicit sense of fairness about the distribution of income. Although egalitarians are guilty of considerable statistical subterfuge on this issue, there is no question that the income gap between rich and poor has l widened recently. According to l the standard Census Bureau measures, the share of aggregate income received by households in the upper fifth of the income scale increased from 44.2 percent in 1979 to nearly 47 percent in 1989. Gains by the upper tenth and the upper I percent were even more pronounced. The broadest measure of inequality, an index known as the Gini coeffcient, began rising slowly in the mid’70s and then rose more steeply in the last decade.

Press reports rarely bother to mention what ought to be obvious–that the poorest fifth in 1979 and the poorest fifth in 1989 are not the same class of individuals. Census figures indicate that real income in a given quintile changes by no more than I percent from one year to the next, whereas annual turnover in the composition of the quintiles is 20 percent to 40 percent. Thus the commonly reported statistics on income distribution do not measure the economic fate of individuals over time. They measure changes in the value that the market places on various productive functions–various "offices" in the economy that are occupied by different people at different times.

The real question of fairness is whether individuals are free to exploit the opportunities available to them in the effort to improve their condition. A mixed economy like ours places many constraints on such freedom, from the income tax to the regulations that control entry into many businesses and professions. But longitudinal studies that follow individuals over time show there is still a great deal of social mobility. The Treasury Department’s Office of Tax Analysis analyzed a random sample of people who filed tax returns during the decade from 1979 to 1989. Only 14 percent of those in the bottom quintile in 1979 remained there 10 years later; everyone else had moved up the income ladder as they got older. Indeed, more of them (15 percent) made it all the way to the highest quintile than remained at the bottom.

A similar study by the Urban Institute covered two 10-year periods: 1967-77 and 1977-87. In each case, those in the bottom quintile at the beginning of the decade increased their incomes by an average of 75 percent over the next 10 years. Those in the top quintile at the outset had an average increase of S percent. As the authors put it, "when one follows individuals rather than statistical groups defined by income, one finds that, on average, the rich got a little richer and the poor got much richer over the decades." The study also showed that the rate of mobility was about the same during these two decades. Contrary to the impression one gets from the media, the transformations of the ‘80s did not diminish the prospects of moving up the economic ladder.

The last and the deepest of the cultural premises we need to consider pertains to self-interest. A market is a system of exchange among individuals pursuing their own purposes, largely for their own gain. But moralists have always looked askance at the motive of self-interest. In the 18th century, when an understanding of the market system began to emerge, writers like Bernard Mandeville felt they were asserting a moral paradox: that private vices could produce public benefits. Ever since, the pursuit of self-interest has carried the burden of proving that it serves the public good.

Yet as Ayn Rand has observed, this attitude is incompatible with the liberal principle that individuals are ends in themselves–the principle that lies behind the legal system of individual rights. If the individual is an end in himself, he is morally as well as legally entitled to be an end for himself. He has the right to the pursuit of happiness, which includes the right to regard his own happiness as a self-sufficient end, requiring no further justification in the form of service to God, society, the biosphere, or whatever.

Of course the pursuit of happiness does not entail selfishness in the conventional meaning of that term: the vain, self-centered, grasping pursuit of pleasure, riches, prestige, or power. The ethics of individualism, backed up by abundant psychological evidence, holds that happiness is the product of achievement, of stable relationships with friends and family, of peaceful exchange with others, and of the kind of self-esteem that is above the need for comparisons. The pursuit of self-interest in this sense requires that one act in accordance with moral standards of rationality, responsibility, honesty, and fairness. But it does not require self-sacrifice or "service above self."

In his recent book about leveraged buyouts, George Anders gives a disapproving summary of the spirit of the ‘80s: "The important thing was to join in the getting. Growing rich no longer required an apology; it was a point of pride." Why should any apology be required? The assumption is that wealth reflects the unseemly pursuit of self-interest.

These four premises–that financial activity is noncreative, that production in general is materialistic, that income should be distributed as equally as possible, and that the pursuit of self-interest is unseemly–served as filters blocking out the real story of the ‘80s. The successes of that era remain invisible because they violate these popular assumptions.

Capitalism has always labored under a cloud of moral unease, from which a sense of outrage precipitates during periods of stress or change. The motives of those who prosper in the market have always been regarded with suspicion. At the end of the last century, men like Andrew Carnegie, John D. Rockefeller, James J. Hill, and J. P. Morgan made millions by building railroads and steel mills, drilling for oil, and financing a fabulous burst of economic growth. Economic historians have shown that they earned their wealth by production, not predation. Many of the allegations made about them have been shown to be complete fabrications. Yet they are still routinely described as "robber barons." Myths that confirm our moral premises have remarkable staying power.

It is said that history is written by the victors. That may be true of military conquest. But the history of the last decade is being written by the losers. In the ‘80s, capitalism won its ideological battle with socialism and unleashed an epoch-making burst of creative energy. But unless we reexamine our ethical assumptions, the history of the decade will be written by those who never liked capitalism and do not wish it well.

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