The New Capitalists

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Now-retired U.S. Federal Reserve chairman Alan Greenspan wrote the obituary for bottom-line thinking, unknowingly perhaps, in 2002. As Congress debated its response to Wall Street's book cooking, Greenspan criticized the architects of the scandals. "An infectious greed seemed to grip much of our business community," he told the Senate Committee on Banking, Housing, and Urban Affairs. "Our market system depends critically on trust. Trust in the word of our colleagues and trust in the word of those with whom we do business."

In the world of free-market, bottom-line capitalism, the underlying logic driving Greenspan's comments is radical: It opens the door to an entirely different way of seeing business -- one that allows room for values other than self-interest.

Free-market capitalism rests on the creed that the supremacy of self-interest makes the market the only "realistic" method of organizing our society. The Economist, for example, in January 2005 ran a lengthy critique of CSR, which argued that "for strictly selfish reasons," corporations do the right thing: "The goal of a well-run company may be to make profits for its shareholders, but merely in doing that -- provided it faces competition in its markets, behaves honestly, and obeys the law -- the company, without even trying, is doing good works."

The illogic is typical: Either the company is acting out of "strictly selfish reasons," or it is balancing that selfishness with honesty and lawfulness.

Inevitably, the Economist article conjures the ghost of Adam Smith, whose "invisible hand" theory is a favorite of the free-market-at-any-cost set. Merely by pursuing our own interests, Smith posits, we advance the interests of society as a whole. "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner," he wrote in The Wealth of Nations, "but from their regard to their own interest."

Introduce an imbalance in power, however, and Smith's theory collapses and powerful elites become ruthless in their pursuit of self-interest, as they did in the Stalinist labor camps and the slave plantations of the Old South.

Moreover, self-interest is only one facet of human behavior. The butcher throws scraps to his dog -- where's the self-interest in that? He might give a bargain to a customer out of pity or plain old friendliness. In fact, the entire theory represents such a diminished view of humanity and is so disprovable in practice that it's surprising anyone believes it. Or would be, if it didn't rationalize greed.

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