A One-Word Explanation? Try 'Greed'

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.

(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.