General Question

stanleybmanly's avatar

Is greed a necessary requisite of capitalism?

Asked by stanleybmanly (6448 points ) May 9th, 2014

Isn’t the cardinal directive of “maximizing profits” a roundabout declaration that “greed is good”?

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51 Answers

janbb's avatar

Yes, I think capitalism is predicated upon greed.

ARE_you_kidding_me's avatar

No, of course not. The drive to maximize profit happens a lot and rewards the greedy but you can do honest business and not be greedy. This happens more often than you may think.

bolwerk's avatar

I don’t even see how capitalism is necessarily about maximizing profits, as it is often very bad at doing so. Its defining trait is “private” ownership of production (the capital).

Greedy people are attracted to capitalism because it grants them arbitrary power over others, but capitalism is a pretty textbook idea with a wide range of applications. Norway uses state capitalism to exploit is oil resources, for instance. I believe French and German national railroads are similar – state owned, privately operated, and profitable.

funkdaddy's avatar

Only if you believe freedom (as a word, not as a campaign promise) always leads to abuse.

CWOTUS's avatar

The idea behind capitalism is not “maximize profit”, despite what others may say about it.

Capitalism means “private ownership”. Not more, not less. From capitalism.org

“Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.

Under capitalism the state is separated from economics (production and trade), just like the state is separated from religion.

Capitalism is the system of laissez faire. It is the system of political freedom.”

Not a word about profit, if you’ll notice.

LostInParadise's avatar

I have seen economics defined as the study of incentives. The incentive may not necessarily be to maximize profits. As an example, consider the following case from the book Freackonomics.

A daycare center was having a problem with parents who arrived late to pick up their children. To deal with it, they issued a small fine for tardy parents. The result? Parents arrived late at a greater rate. The parents now had a way of assuaging their guilt by paying a fine. They found it worth the extra money, though if you asked them they would not likely give that as their motive.

As another example, advertisers know that consumers are driven by product image as much as by product value.

ragingloli's avatar

@CWOTUS
That is the most disgusting piece of propaganda I have read in a long time.

Dan_Lyons's avatar

Not only is greed a necessary component of capitalism, so is slave labor also necessary (of course one might argue that slavery [free labor per se] is also pure greed).
And yet, as the world is run right now, it seems the best system we have, although socialism minus tyrannical rulers might be a far better system.

I do like the idea of individual freedom (at least for the middle – upper classes) inherent in capitalism. The lower class is cannon fodder and slave labor.

As for private ownership, well yes, private property (and the taxes raked in ) is the thing that holds the capitalist system together.

bolwerk's avatar

If we aren’t going to smash the state, I prefer things like the capitalist social-market economy to authoritarian socialism.

Laissez-faire capitalism is a pipe dream. Capitalists use state coercion to dismantle competition at the first opportunity.

CWOTUS's avatar

The faux outrage is noted and ignored, as usual in these cases.

ragingloli's avatar

Class division

Capitalism is the social system which now exists in all countries of the world. Under this system, the means for producing and distributing goods (the land, factories, technology, transport system etc) are owned by a small minority of people. We refer to this group of people as the capitalist class. The majority of people must sell their ability to work in return for a wage or salary (who we refer to as the working class.)

The working class are paid to produce goods and services which are then sold for a profit. The profit is gained by the capitalist class because they can make more money selling what we have produced than we cost to buy on the labour market. In this sense, the working class are exploited by the capitalist class. The capitalists live off the profits they obtain from exploiting the working class whilst reinvesting some of their profits for the further accumulation of wealth.

This is what we mean when we say there are two classes in society. It is a claim based upon simple facts about the society we live in today. This class division is the essential feature of capitalism. It may be popular to talk (usually vaguely) about various other ‘classes’ existing such as the ‘middle class’, but it is the two classes defined here that are the key to understanding capitalism.

It may not be exactly clear which class some relatively wealthy people are in. But there is no ambiguity about the status of the vast majority of the world’s population. Members of the capitalist class certainly know who they are. And most members of the working class know that they need to work for a wage or salary in order to earn a living (or are dependent upon somebody who does, or depend on state benefits.)
The profit motive

In capitalism, the motive for producing goods and services is to sell them for a profit, not to satisfy people’s needs. The products of capitalist production have to find a buyer, of course, but this is only incidental to the main aim of making a profit, of ending up with more money than was originally invested. This is not a theory that we have thought up but a fact you can easily confirm for yourself by reading the financial press. Production is started not by what consumers are prepared to pay for to satisfy their needs but by what the capitalists calculate can be sold at a profit. Those goods may satisfy human needs but those needs will not be met if people do not have sufficient money.

The profit motive is not just the result of greed on behalf of individual capitalists. They do not have a choice about it. The need to make a profit is imposed on capitalists as a condition for not losing their investments and their position as capitalists. Competition with other capitalists forces them to reinvest as much of their profits as they can afford to keep their means and methods of production up to date.

As you will see, we hold that it is the class division and profit motive of capitalism that is at the root of most of the world’s problems today, from starvation to war, to alienation and crime. Every aspect of our lives is subordinated to the worst excesses of the drive to make profit. In capitalist society, our real needs will only ever come a poor second to the requirements of profit.
Capitalism = free market?

It is widely assumed that capitalism means a free market economy. But it is possible to have capitalism without a free market. The systems that existed in the U.S.S.R and exist in China and Cuba demonstrate this. These class-divided societies are widely called ‘socialist’. A cursory glance at what in fact existed there reveals that these countries were simply ‘state capitalist’. In supposedly ‘socialist’ Russia, for example, there still existed wage slavery, commodity production, buying, selling and exchange, with production only taking place when it was viable to do so. ‘Socialist’ Russia continued to trade according to the dictates of international capital and, like every other capitalist, state, was prepared to go to war to defend its economic interests. The role of the Soviet state became simply to act as the functionary of capital in the exploitation of wage labour, setting targets for production and largely controlling what could or could not be produced. We therefore feel justified in asserting that such countries had nothing to do with socialism as we define it. In fact, socialism as we define it could not exist in one country alone—like capitalism it must be a global system of society.

It is also possible (at least in theory) to have a free market economy that is not capitalist. Such a ‘market economy’ would involve farmers, artisans and shopkeepers each producing a particular product that they would exchange via the medium of money. There would be no profit-making and no class division—just independent producers exchanging goods for their mutual benefit. But it is doubtful whether such an economy has ever existed. The nearest that may have come to it would have been in some of the early colonial settlements in North America. Some Greens wish to see a return to this kind of economy. We do not think that it is a viable alternative for modern society. Such a system would almost inevitability lead to capital accumulation and profit making—the definitive features of capitalism.

http://www.worldsocialism.org/articles/what_is_capitalism.php

JLeslie's avatar

I don’t think capitalism needs greed. I think of greed as a selfish desire or act to take more than what is fair. Making money is not always unfair in my book. I think people should be compensated fairly. I guess it depends what you think is fair. Many small towns functioned on fair business trade where communities worked together and small business owners did not look for huge profits, but to sustain themselves and their families and the people they employed. The people cared about the community as a whole. We have historical examples of great discoveries and hard work for the greater good without the pursuit of financial gain. The polio vaccine is the example very commonly used to demonstrate this.

The pursuit of money certainly helps make the economy go round. We can pursue profit without going to such an extreme that it crosses a line.

Extreme greed I believe causes bubbles and bursts in the economy. It also can seriously harm people. An example is the medical care and pharmacetical industry charging outrageous prices, which puts treatment out of reach for some, and bankrupts others. The fairly recent Q about Gileads Hepitis drug is a perfect example to me of greed that is unscrupulous. $84k for the treatment and they will make billions with a B in a fairly short time frame. Even if the drug is miraculous, which I hope it is, I will never feel ok with that much profit. I pay for it, even if I don’t have hep C, we all do.

ragingloli's avatar

To answer the question, yes it is.
The first duty of every capitalist is profit.
Wether it is profit by exploitation, or profit by slavery, or profit by crime.
It is the guiding principle on which capitalism is based.

Unbroken's avatar

No I think capitalists that do display greediness are display short sightedness that is over all unhealthy to the future.

Capitalism is a very good way of creating incentives that fuel innovation and is usually self regulating in an open market. It is known to be a good way of regulating the use of limited resources and maximizing efficiencies. It is not the perfect system but the more we adjust it, i.e. buying excess crops to keep the price artificially low etc the more unbalanced it becomes. The more waste their is. Even if there is a need for it. The problem is not everyone wins in this system and so there is more failure and personal cost. But failure does not have to end at that, people are capable of self adjusting too.

janbb's avatar

If you change the word greed to self-interest, I think that is clearly the basis for a capitalist system.

jerv's avatar

Yes, but the real difference is how much collateral damage you allow your greed to cause, and how much sustainability you will sacrifice for short-term profits.

funkdaddy's avatar

Capitalism is apparently too loaded a word to discuss meaningfully, everyone seems to have their own definition.

Crazydawg's avatar

@ragingloli IMO from a socialist POV I can see your point but from a true capitalist POV you are not even in the ball park. As much as you wish to color the world to suit your views, Capitalists can and do make profits legally and without malice or exploitation.

Here in America it is our Congress that are the true greed mongers and will bend over and grab their ankles at every opportunity to get elected and then re-elected. Read the Walmart threads and there is ample evidence at how hard Walmart lobbyists buy these politicians to make their ability to pay low wages and re-zone property so they can strip town after town of their mom and pop businesses. Walmart is not to blame here…it is the politicians who don’t have the balls to stand up to their bully tactics. Walmart can do what they do in a kinder, gentler and more philanthropic ways, but no one is willing to stand up to them and consumers continue to drink their Kool-Aid and line their pockets with billions in profits.

Capitalism is a good great thing and allows people the freedom to do and work as they please. People just need to stop bitchin about it all and vote with their votes and their dollars and all wrongs can be righted.

Coloma's avatar

Greed vs. earning a profit are two different things.
If I buy a $20 item wholesale and mark it up 50% to make a 50% profit, no problem.
If I buy a $20 item wholesale and mark it up 500% I am being greedy.

JLeslie's avatar

@Coloma Thank you for summing it up in a very precise way. I couldn’t agree more.

jerv's avatar

@Coloma I see the first example as also greedy, but in a controlled fashion. If you weren’t greedy at all, then you’d sell it for $20. Greed isn’t always a bad thing.

@Crazydawg Theoretically, yes. In reality, it’s more coercive than that, with too many non-choices to really be considered a free market.

Coloma's avatar

@jerv Then selling for the price paid wouldn’t warrant buying in the first place. An exercise in futility. Moot.

JLeslie's avatar

I don’t understand why people call wanting any profit at all greedy. You all now I am building a house. The greed of the builder has made me absolutely miserable. One example is I wanted fewer cabinets in my laundry room and more in my bathroom. If I took out a 30” cabinet they gave me a $300 credit, and then they charged me $700 for the same cabinet in the other room. That is not only greedy, it is theft to me. They make money on my cabinets even if they stay in the first locations. I don’t mind the initial profit they make from my cabinets, but I mind what feels like a gouge, because they think they have me over a barrel.

Now I am going through it with the granite. The level D granite on their list is one price. The two I really want after going to see the slabs are priced almost double for level D, now that they know what I want. One granite owner said he gets around it by calling the one I like the name of one of the builders standard level D. He sells it for the same amount, it’s a level D, and helps me trick the builder. My husband and I are completely uncomfortable signing something that says the wrong granite. If the builder was not so greedy, and just would be happy with an honest, reasonable profit (which I don’t think is greedy) I would not have shortened my life with so much stress and not hate them so much.

I did not pay those prices for the cabinets by the way, and I still have to fight abut the granite.

jerv's avatar

@Coloma Exactly! Therefore, capitalism requires greed. Get it?

@JLeslie You make it sound like being greedy is a bad thing. Have you ever wanted anything you didn’t absolutely? Anything at all? Then you’re greedy.

Selling a $20 item for anything between $20.01 and what you consider “a reasonable amount”, I would also consider greed. The seller wants to send their kid to college, or set something aside from retirement at, or otherwise benefit from the sale; no matter what, they want something. While you may not consider the desire to improve your life “greedy”, I do. It’s self-serving. But we tolerate a certain level of greed from others because we ourselves are greedy.

The key words there are a certain level.

Crazydawg's avatar

@jerv You totally lost me. Yes free market can be manipulative but can you provide one maybe two examples of “non-choices” in a ”free” market?

dabbler's avatar

The end-game of unregulated capitalism is monopoly, complete control of the resources in question. As others mention, oligarchy is the result politically and economically. If this is in the hands of a democratic state then you’ve got a chance at everyone benefiting from the advantages of monopoly (e.g. Norway’s energy companies). Otherwise the benefits accrue to the ownership class, often to the detriment of everyone else.

Capitalism certainly has the motivation of self-interest at its root. Some self-interest is necessary for us to function as human beings, but like any cancer when self-interests grow out of harmony with their contexts, unsustainable conditions arise.

Philosophy throws a wrench into the works as what people consider self-interest can be very narrow (e.g. Walton family billionaires who pay their workers so little that large portions of them have to rely on welfare to survive), or broad (people of socialist countries who believe that the interests of all the human beings around them are shared with their own).
What you view to be your own self-interest affects what you value from your efforts.

JLeslie's avatar

@jerv From what I have experienced greedy people by my definition don’t go for just a penny more. The line is not thin and black, it is grey, wide, thick, and fuzzy, but some people are so across any line they in my mind can’t be called anything but greedy. It’s easy to do when you have a monopoly or someone who has no other choice but to buy your product for some other reason.

There are very few things I have wanted so much that I would want to charge someone else so much that it might harm them. That would be the pharmaceutical example.

On a smaller scale, I would not try to someone well over retail price just because I have them on the hook. That is the builder example. They want 30%-100% over retail, retail, when they are getting a discount to begin with on the retail price. I haven’t been able to sleep because f their greed.

jerv's avatar

@Crazydawg I would, but @dabbler beat me to it in his first sentence.

@JLeslie Then we have different definitions.

Coloma's avatar

Here’s a great example of “greed.”
I have been pow wowing with a highly successful realtor who owns millions in real estate and he wants to exploit my int. decorating and home staging services in exchange for “mentoring” me is real estate. Hell no!
He is an arrogant prick and a self described tightwad.

He wants my help and expertise for nothing more than some lip service that I could research and learn on my own.
Sorry pal, if you want me to travel all over the place evaluating your staging needs, organizing furniture deliveries, shopping for art, rugs, and all manner of decorative items, you WILL pay me my value. THAT is greed, not making a reasonable profit.

JLeslie's avatar

@Coloma I’m glad you didn’t do it for free.

Coloma's avatar

@JLeslie Pfffft! The balls out gall of some types. He can keep his millions and choke on his pinched pennies in his counting house. lol

jerv's avatar

@Coloma Are you sure you’re not the greedy one for putting a high price on your services? Or is it something you’d do for less-rich people for less? Should I start charging $50 a pop to answer computer questions? Look at what computer repair techs often charge and get, so that’s still fair market value, and Fluther owes me some serious coin.

Coloma's avatar

@jerv How could you possibly know what price I charge? You assume it is “high”, it is the competitive going rate for such services regardless of ones income and based on the job. A smaller space is less costly than some mega-mansion.
I find your response rather insulting.

This is a biz. I have been in for over 7 years and it involves a LOT of work and my services command a decent compensation, thank you very much. :-p
By all means, if you want to start your own, pay for Jervs advice, well…go for it. haha

JLeslie's avatar

I just saw a Shark Tank episode that was recapping former shows and they featured the Tree T-Pee. This guy who invented it is not looking for huge margins, but he will still make millions I’m sure. It’s basically a plastic cover you out over the base of a young growing tree so you use significantly less water, fertilizer, and it helps protect the tree from freezing in bad weather. It’s so simple, but so smart. I wish I could find the entire spot to show it to, but here is a part of it.

I should write him a letter regarding how much this meant to me today when I watched it.

Coloma's avatar

@JLeslie That is very cool!

jerv's avatar

@Coloma I find your’s equally insulting. I try to illustrate a point about greed having degrees and you go for the personal attack!.

I see how you are. You’re not here for discussion, so there’s no reason to continue trying to educate you or expand your mind.

funkdaddy's avatar

When you establish your own definition for words, sometimes you won’t be understood.

If you establish your own personal definition for “greed”, and start calling people greedy, maybe you could foresee someone taking offense to that?

Coloma's avatar

@jerv What personal “attack?” and don’t yell at me. lol You aren’t seeing very clearly at all it appears. haha

jerv's avatar

@funkdaddy Quite a bit of truth there since I consider greed to be a desire for anything beyond the utter basics for life, which is actually pretty much the dictionary definition, while others use a more colloquial definition in an attempt to turn a neutral word describing a natural thing into an insult, whether to hurt others or to play the victim when they’re accused” of being a human being. I guess I need to forget etymology and start using Urban Dictionary instead of Merriam-Webster.

funkdaddy's avatar

From Marriam-Webster

greeda selfish and excessive desire for more of something (as money) than is needed

Selfish and excessive.

From dictionary.com’s synonym section, which gives guidance towards tone as well (emphasis mine)

Greed, greediness denote an excessive, extreme desire for something, often more than one’s proper share. Greed means avid desire for gain or wealth (unless some other application is indicated) and is definitely uncomplimentary in implication.

jerv's avatar

@funkdaddy To my mind, that covers a lot of ground though; enough for most people to qualify. Anyone who has ever traded in a still-drivable car for a newer one is greedy. Anyone who moved because there was something about the new place that their old home lacked is greedy. Anybody who has ever wanted anything for comfort or entertainment is greedy.

In that regard, humanity is generally at least a little greedy. We want things we don’t absolutely need; that’s excessive.

But is just a little greed really a bad thing? Am I evil for preferring a nice meal over a bowl of tasteless gruel with the minimum nutritional content to sustain life? No, just a bit excessive and selfish, therefore greedy. See where I’m coming from there? It’s all about degree.

JLeslie's avatar

@jerv Most people in America don’t live at the basic level, so I don’t think it makes sense to use greed as wanting slightly more than the basics to sustain life. I think excessive and selfish is more than just a little bit.

stanleybmanly's avatar

@funkdaddy The key term in that definition on which this entire discussion turns is “one’s proper share”. The really defining characteristic of capitalism is that no matter “your” share, IT’S NEVER ENOUGH. There are only 2 acceptable realities. You are either growing, or on your way to extinction. The idea that I’ve got enough is NEVER acceptable. Now with these dictates in mind, it becomes clear that whatever is necessary to grow the business, increase market share, generate more revenue, etc.—- is justified and in fact REQUIRED. If company “A” can gain an edge by looting it’s pension fund, you MUST follow suit. And here we come to the ultimate consideration. The social ramifications resulting from capitalism are IRRELEVANT to the model. And we all bear witness to where it is taking us.

jerv's avatar

@JLeslie In other words, use a higher threshold by measuring in relative terms rather than from absolute zero? To me, that’s counterintuitive. That’s like saying small things don’t even exist. Once you get into defining something based on a relative term, you get subjective enough that it’s not even having a definition. I find it easier to believe that humans are all slightly greedy than to think a word has no definition that can be agreed upon well enough to justify using it when attempting to communicate.

Or maybe I’m just weird for not basing all of my perceptions on the American concept of “normal” :/

Crazydawg's avatar

@jerv you pooched on your answer as anything @dabbler opinionated on still leaves a door open for a choice you can make to make it clearly known you do not agree with that position…that is if you truly have issue with it and are willing to take action against it. This is the hypocrisy I see behind any and every bitch fest that gets presented here and on many media outlets. Choose a point of view and validate it with more than words…Get up off yo butt and DO SOMETHING about it! What pray tell have you done to make change?

jerv's avatar

@Crazydawg For starters, decided not to stay where I’m not welcome. I’ve had enough of being a punching bag around here, so I’m going to find somewhere else besides Fluther. Maybe I’ll comr back after I cool off, maybe not….

BTW, while I may not agree with @dabbler‘s post in it’s entirety, I do agree with the first sentence; unregulated Capitalism leads to monopoly, and the death of free markets.

Crazydawg's avatar

@jerv You have a thicker skin that this. You are smart, you have heart felt opinions and I respect that and I believe many here at Fluther are attracted to the words you voice as the truths as you see them. If I or anyone challenges that, it is certainly not time to break camp and leave, the internet is a forum for debate and you posses intelligent thoughts we I should be party to.

funkdaddy's avatar

@stanleybmanly – if you already had this undeniable truth laid out in your mind, why did you ask this question?

dabbler's avatar

In an innocent form, capitalism can be considered a philosophy of optimization.
Nobody wants to waste [time|money|effort|chi|prana|attention]. So this is completely sensible.

How an ‘person’ interprets that depends of course on what what it is and what it values.

A corporation-type person is a genuinely heartless self-interested wealth-extraction machine built to create profit for the owners, just like an automobile engine is designed to provide torque at its driveshaft. Anything that doesn’t contribute to optimized performance can and might as well be engineered out. The kinds of decisions that capitalist corporations make are all to the bottom line.
Externalized costs be damned, this quarter will look great. (pipeline leak, coal air pollution)

Human being type person typically has additional values involving things that are hard to quantify on a bottom-line spreadsheet – beliefs are among these, and any other kind of know ‘em when they see ‘em type decision-makers. “Family Values” – whatever your family believes them to be – motivate a lot of people more than money for example.
Even the most self-centered individual will value the welfare of some of the other people around because they need them for labor or support, and even because it’s more pleasant to be around happy people than to be around miserable ones.
Really enlightened individuals seem to be grateful for their bounty and enjoy the shared vibe when all the folks around are as happy as possible. That’s what they value.

dabbler's avatar

@JLeslie love that link !
That’s exactly what I mean about the values behind ‘capitalist’ decisions that human persons make. Instead of just maximizing his profits, he decided what level is enough for him personally, and he values the idea that more people can get his product if it is less expensive.

JLeslie's avatar

@dabbler I’m glad you liked it. I wish I could have found the longer version that I saw on TV. If everyone was like him I think the fabric of our society would be woven much tighter.

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