by John Stossel
Greed May Well Be the Most Powerful Win-Win Exchange We Have
The wailing about “corporate greed” goes on endlessly. Protesters sneer at the “selfishness” of capitalism.
From the press, we learn there are two worlds: the nonprofit one, where everything warm, caring, and devoted to the “public good” happens; and the for-profit one, where opportunists cruelly exploit the weak. And in the movies, the person most likely to be portrayed as a murderer, child molester, or destroyer of the environment is not a Nazi, or a member of al-Qaida; it’s a businessman. According to a study by media watchers Lichter, Lichter and Amundson, businesspeople represent 12 % of all TV characters but commit 32% of crimes – and 44% of murders.
And reporters equate capitalism with greed. They look down on it as bourgeois, and point out that free markets produce dramatic inequality. When Ralph Nader says America has “an apartheid economy” where “corporate greed” exposes poor consumers to “frauds and hazardous products,” reporters nod in agreement.
Let’s calm down here a moment.
I’m repulsed by greed, too. I hate the wretched excess of the avaricious. People whose materialism knows no bounds and those who try to get ahead by stepping on others deserve condemnation. But what do we mean by greed? I make a lot of money and
I’ve never turned down a pay raise. I don’t think that makes me greedy.
The truth is that greed, when exercised in the private sector, is useful. Yes, the inequality can be gross; some business executives make a hundred times what their subordinates make. But there’s usually a reason for it. Those managers’ decisions make a huge difference, and they can create more wealth than other workers create.
A company’s directors don’t pay the executive big bucks out of generosity. They pay it because they think he can make shareholders (and them) the most money. If big bucks are what they have to pay to get that executive’s services, they’ll hand over big bucks.
It’s hard to believe a manager’s contributions could be worth so much more than the rank and file’s, but they often are, Presumably, John Sweeney is worth $200,000 to the AFL-CIO. Ford Motor Company wouldn’t be worth anything were it not for Henry Ford’s innovative use of the assembly line. I envy my boss’ compensation, Disney CEO Michael Eisner has taken home over a billion dollars. That seems ridiculous and yet, after Eisner took charge, Disney’s net worth climbed from $2 billion to, as I write this, $42 billion. Forty-two billion dollars is $41 billion more than Eisner has been paid. Not every CEO’s contributions are valuable – there are clueless and venal boards of directors who shovel money to their friends. But they are the exceptions.
Governments don’t enlarge the pie. When government doles $1 million to a favored group, the rest of us do have $1 million less. If a country’s rulers can use the power of government to feed their greed, then greed is nasty indeed. In Haiti, Jean-Claude “Baby Doc” Duvalier’s tax collectors funded his shopping sprees. His wife had the nerve to tell Barbara Walters, “I don’t believe the money was badly spent.”
In the Philippines, Imelda Marcos spent her loot on thousands of shoes. She needed them, she said, because she had to change clothes a lot. This kind of greed takes pie away from the poor. But only governments can do that, because only government can use force. To get our money, they have to persuade us, entice us to buy – willingly. If the transaction doesn’t benefit both of us, it doesn’t happen. It’s why everyone wins under voluntary capitalism. Unless someone cheats.
Cornelius Vanderbilt and his fellow tycoon John D. Rockefeller were often called “robber barons.” News- papers said they were evil, and ran cartoons showing Vanderbilt as a leech sucking the blood of the poor. Rockefeller was depicted as a snake. What the newspapers printed stuck – we still think of Vanderbilt and Rockefeller as “robber barons.” But it was a lie. They were neither robbers nor barons. They weren’t robbers, because they didn’t steal from anyone, and tl1ey weren’t barons – they were born poor…
Vanderbilt got rich by pleasing people. He invented ways to make travel and shipping things cheaper. He used bigger ships, faster ships, served food onboard. People liked that. And the extra volume of business he attracted allowed him to lower costs. He cut the New York-Hartford fare from $8 to $1. That gave consumers more than any “consumer group” ever has.
It’s telling that the “robber baron” name-calling didn’t come from consumers. It was competing businessmen who complained, and persuaded the media to join in.
Rockefeller got rich selling oil. First competitors and then the government called him a monopolist, but he wasn’t – he had competitors. No one was forced to buy his oil. Rockefeller enticed people to buy it by selling it for less. That’s what his competitors hated. He found cheaper ways to get oil from the ground to the gas pump. This made life better for millions. Working-class people, who used to go to bed when it got dark, could suddenly afford fuel for their lanterns, so they could stay up and read at night.
Rockefeller’s greed might have even saved the whales, because when he lowered the price of kerosene and gasoline, he eliminated the need for whale oil. The mass slaughter of whales suddenly stopped. Bet your kids won’t read “Rockefeller saved the whales” in environmental studies class.
Vanderbilt’s and Rockefeller’s goal might have been just to get rich. But to achieve that, they had to give us what we wanted.