The secret to capitalism's success is its ability to take one of mankind's most powerful emotions - greed - and harness that emotion to drive economic progress. By greedily pursuing our own individual self-interests, the theory goes, each of us contributes almost accidentally to greater prosperity for everybody.
And for the most part, that's how it has worked. The innovation and risk-taking encouraged by capitalism have given billions of people a quality of life and security that would otherwise be unimaginable. If there is a better, more productive system for meeting the physical needs of human life, we haven't found it yet.
But then comes a year like 2008, a year in which capitalism has faltered and the security of millions of Americans is threatened. Trillions of dollars of wealth has disappeared in a remarkably short time, along with millions of jobs. Fear rather than optimism dominates the landscape, and everyone from economists to hairdressers to members of Congress is wondering just what went wrong and how to fix it.
There are technical explanations, political explanations and folk-wisdom explanations. There are explanations that attempt to get down into the nitty-gritty details and those that offer a big-picture analysis.
My own one-sentence assessment? Capitalism works by getting the best out of greed; it fails when we let greed get the best of us.
And that is a constant, never-ending problem. We have always known that greed is dangerous. Going back into time as far as the written word can take us, every major religion, every major culture has warned against the dangers of greed.
In a capitalist system, the knowledge of greed's dual nature - its power when harnessed, its danger when it is not - sets up a permanent, enduring tension. The trick is to give greed enough play to reap its benefits while minimizing greed's danger. In that sense, a greed-powered economy is like a nuclear-powered submarine. Both are driven by a potentially boundless but destructive source of energy that must be kept within bounds to operate safely.
But greed by its nature is seductive. Greed always seeks more, a little more, just a bit more, please. And greed can cause us to rationalize things that cannot and should not be rationalized.
SCROLL TO CONTINUE WITH CONTENT
Never Miss a Beat.
Get our best delivered to your inbox.
(As one measure of its power, for example, greed has helped to transform a religious celebration of the birth of a poor, humble baby in a manger into a festival of consumerism and consumption. But I digress.)
As the economic crisis continues to play out, a lot of attention is being focused on the failure of legal and regulatory controls on greed. How can a $50 billion Ponzi scheme go undetected for years? How can rating agencies give their most-secure rating to high-risk bonds? How can Wall Street financiers collect hundred-million-dollar bonuses on profits that weren't really profits in the first place?
The short answer is that people who know better begin to not know better. They convince themselves - or allow themselves to be convinced by others - that a little lighter touch on the reins will produce even more riches, that previous controls on greed are really unnecessary or counterproductive.
And in the end, legal and regulatory controls on greed will always be subject to manipulation. That's because laws and rules are merely formalized expressions of the underlying and unwritten cultural, moral and ethical attitudes toward greed.
And it is those attitudes that have changed so profoundly in the past generation or so.
Left unchecked, greed overwhelms any sense of proportion, fairness or morality. We as a culture and as individuals came to believe that if greed is the engine that drives progress, any attempt to curtail greed thus curtails progress. We thought that since greed is good, unrestrained greed must be an unrestrained good.
What we've discovered - yet again - is that when properly harnessed, greed makes an effective, productive servant.
But it makes a terrible master.