I watched The Secret of My Success last night while on the treadmill and it’s a pretty good movie if you can get beyond the David Foster anthems and cheezy hair styles of the 1980s – what were we thinking?
After reading about the LIBOR scandal and all the other corporate malfeasance we see these days its nice to watch a movie that – while tackling bad corporate behaviour – still at its core is about the importance of ambition, hard work and capitalism.
One of the foundations of our society is the assumption that we operate on a widely agreed upon moral platform. This concept goes back to John Locke (and likely before). It means that we all more or less agree to the rules of the road and that people that violate these rules get punished. Specifically, we all agree that some stuff is wrong – morally wrong – regardless of its legality. It doesn’t matter what legal framework you have – if everyone is going around killing people – laws become irrelevant. You have to live in a society where the vast – vast majority of folks believe that it is morally wrong to kill people and just won’t do it. For the 0.01 percent that don’t agree, there needs to be laws in place to deter and punish.
The same applies to the rules of the role on the economy. If a wide swathe of people believe the only rule is ‘don’t get caught’ – we will end up with a dysfunctional system. We need bankers and business leaders (and government leaders) with a moral spine – they will do the right thing regardless of whether or not they can ‘get away with it’.
Imagine if our engineers decided to move off this principle and worked on the premise of ‘everything goes as long as you don’t get caught’. I have seen collapsing buildings in the third world as a result of that principle.
Imagine if doctors didn’t have a broad code of accepted conduct.
It now seems quite laughable that those big US business schools introduced the ‘code of conduct’ for graduates.
We need business leaders and finance professionals with a moral basis underpinning their business activities. There will always be bad apples but 99% of people need to play by the rules.
I refuse to believe in the narrative that says the money motive is just too powerful and that people will always do whatever it takes to maximize their wealth. Greed is a powerful motivator but it can eat away your soul.
If you haven’t been following the LIBOR scandal – you might want to take some Gravol before reading about it.
At the end of the day, I still believe in the merits of market capitalism where cronyism is limited by free markets and we take some proceeds from the market activity to pay for public services and the social safety net. For those who disagree, they have yet to propose a model that makes sense. A model that is 90% government dominated (directly or indirectly) is also open to deep corruption not to mention inefficiency. A model that is dominated by oligopolies – also leads to sub-par outcomes.
We need honest entrepreneurs focused on creating new value for consumers and then taking that into the market. Firms that can’t compete fall away. New firms emerge. The legal framework needs to be in place to discourage those who prefer to find an easier way to make a buck.
3 thoughts on “One-and-a-half cheers for capitalism”
> I still believe in the merits of market capitalism where cronyism is limited by free markets and we take some proceeds from the market activity to pay for public services and the social safety net. For those who disagree, they have yet to propose a model that makes sense.
The alternative of one dollar-one vote is one person-one vote. The alternative to market capitalism is democracy. The two systems often cooperate, but they often operate at cross-purposes. When this happens, we need to make a choice: capitalism or democracy. My inclination is to opt for democracy. I suspect that yours is not.
Someone sent me an email saying the fear of getting caught is the only thing that motivates bankers. I don’t buy that. Imagine if we felt that way about engineers or doctors. That’s my point. We need a system where the vast majority of people know what is right and wrong and do their business accordingly. The law should be there for the exception – the person who has lost (or never had) this sense of right and wrong.
Dude, take this down, this is the kind of stuff that kills credibility! Its one thing to be the numbers guy and the place to go to get good economic information-but its confessions like this that make people laugh hysterically when you delve into public policy-
“of course a gas company is going to protect our water supply”
“why wouldn’t we believe the government that NBPower is going to be bankrupt in two years?”
“what could possibly go wrong with somebody from california buying local companies?”
Mind you, your a good balm for Charles Leblanc’s “we’re living in fascism, we’re all gonna dieeeee”
But seriously, anybody SURPRISED by LIBOR obviously reads NOTHING but the MBA course outline notes and the Globe and Mail. Gosh, Toto, you mean canadian telecoms may actually be colluding to give us the highest cell prices in the industrial world? You mean maybe gas prices don’t just go with the laws of supply and demand? And the Royal Bank has had operations in the Caribbean for other reasons besides executives wanting a sunny place to visit in January?
As for designing ‘systems’, that’s just more silliness. We don’t even have any control over the political processes that govern us, and deciding what is ‘right’ and ‘wrong’ is something philosophers and religions can’t even agree on, so applying it in business is pretty spurious. It goes without saying that those who BREAK LAWS should be punished, something that isn’t done now in finance, so when you can’t even get that accomplished, idealized systems are pretty remote possibilities (bankers are motivated by LOTS of things, but ‘going to jail’ certainly isn’t one of them-quick, name a banker who has gone to jail in this country? Heck, the canadian government wouldn’t even touch Conrad Black even though most of his crimes were done from this country).
On that vein, you should watch “Enron: The Smartest Guys in the Room”-my ‘favourite’ part is when Enron took control of California’s power grid and LEGALLY started shutting down power plants and selling power out of state to cause brownouts in California and run the price up-all while traders joked to one another about the ‘grandmas freezing in the dark’. And again, check out “Thieves of Bay Street” for a closer look at this stuff in Canada.
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