A genealogy of greed

The financial system has gone berserk,but the means and staff to control and monitor financial acts and facts are more sophisticated than ever. How did we come this far and what can we do? An historical analysis. Since the outbreak of the financial crisis many analysis have been made trying to explain how this all has happened and what factors have led to the present situation. Most of them have pointed to some flaws in the present capitalistic system or to some unfortunate events that have caused the problems. If we could only adjust these the dream of unlimited free enterprise and wealth for all good men would finally become real. Criticism of the structure of capitalism has since long not been taken seriously, like in the days when books of the Frankfurther Schule or Jean Baudrillard were widely read on the campuses and in the public libraries. Lately all over the world the man in the street has become ever more convinced that there is something utterly wrong with the current financial system, without however being able to pinpoint precisely what really is causing all the problems. Especially the Occupy movements are opposing the financial system because they see it as the main cause of inequality and injustice. The slogan is 'we are the 99%', meaning only one percent of the population profits from the system. However there is no clear cut alternative, the Occupy movement is pure resistance against the existent. Being far from the well known Marxist criticism of bourgeois or classical capitalism, Occupiers refrain from taking political sides. This not without good reason. Marx has undoubtedly quite accurately predicted the present problems. He could not foresee the development if the IT industry, which plays a dominant part in all present financial traffic, but he knew that globalization was imminent and he could foresee most of the problems that it would bring about. The Occupy movement is however not just another communist group, as the bankers would like to have it. Firstly because Marx did not invent communism. This was done by Wladimir Iljitsch, better known as

Lenin, who turned the economy of Marx into a political system. Secondly the Occupy movement does not agree with most communist and Marxist ideas. Nobody needs another resuscitation of historical materialism, even more so because it has been rejected by recent social critique. The Occupy movement is a rebellion against establishment. Occupiers do not accept the status quo, they do not take it anymore and they have a deep but wordless feeling that something is terribly wrong with the political economy. Banks and brokers do not bother. They do business as usual and hope that the freezing nights of the winter season will push the Occupiers back to the central heating. But the general public takes the side of the Occupiers. Apparently there is a wide gap between the generally shared public feelings of right and wrong and the modus operandi in the financial field. How did this happen? What caused it? How do we explain that the broker who invests without blinking in weapon industries, environmental hostile technologies and companies who take most of their profit from child labor, is at home a decent guy who washes the dishes and has serious talks with his son because the latter failed to keep his room tidy? The virtues of vice In order to find the root cause of this gap we have to go a long time back in history. In the year 1714 a booklet appeared in London written by a Dutch physician: Bernard Mandeville (1670, Rotterdam 1733, Hackney). It was called 'The Fable of the Bees, Private Vice, Public Benefits'. The fable tells the story of a beehive, where the bees complain time and again to their god Zeus about the high rate of criminality and the low standards of public morals. Zeus gets annoyed by all this complaints and changes the hive overnight into a model society. Everybody suddenly is honest and of good will. There is no theft, no cheating, no burglary and people only die natural deaths. The consequences are disastrous. There is a massive unemployment and everybody is bored to death. There are no police anymore, no locksmiths, no insurances, no lawyers or judges. Life has lost all meaning. Nobody gets really rich, because people do not

want to make big profits. So there is no wealth, no jewelry and no big art. The bees become desperate and eventually beg Zeus to restore the original situation. The message of this pastiche of Thomas More's Utopia is clear: vices are good for the economy. You cannot make money in heaven and all those moralists are unworldly idealists. So it is wrong to try to improve one's low and mean character and become a better person. Man is a mean bastard this is God's will. If God had willed us to be saints He had created a different society. It is God's will that only a society of mean skunks is prosperous. This is a very Calvinist message that Mandeville would also send to the present Occupy Movement had he known about them. The fable arouse quite some turmoil and has been even banned for some time. Mandeville must however been very proud of his idea, because he wrote several versions. In 1755 it had it's ninth print and even in the twentieth century the economist Frierich Hayek admired the book. Some elements were used by Adam Smith in his book 'The wealth of the Nations' (which appeared in 1776) and have become a standard assumption in the science of economy. All this support does not mean that we should accept Mandeville's conclusions at face value. Let us look at the facts. Societies with high moral standards are in general very prosperous. It are the poor societies that have high rates of criminality and low moral standards. A high public moral does not lead to general ennui and depression. It generally means more celebrations, sports and art. In regions with severe winters farmers do not steel or slide each others throats because of boredom. They make handicrafts like wooden statuettes and cuckoo clocks. This enhances tourism and prosperity. These are facts we know from the real world and they cannot be proven wrong by Mandeville's phantasies based on his very limited view on a human society. His objection that an extravagant billionaire provides many jobs, is contradicted by the fact that the amount of money the billionaire spends can also come from a large group of people with an average income. A public pool generates more jobs (and fun) than a private one.

God in business A milestone in the history of economics is the already mentioned work of Adam Smith, where he shows among others that free competition in certain circumstances leads to a more or less stable balance between demand, price and supply. Smith thought that he had discovered the laws God had installed in human economy. Only if the administration does not interfere, entrepreneurs will automatically produce the very products consumers want and sell them for the price that is best for all. The entrepreneur who sells the wrong products at a wrong price will be pushed aside by the competition. It seems like the economy is conducted by 'an invisible hand'. Smith does not agree with Mandeville's thesis that vices are in general the driving force of the economy. He wants citizens and in particular entrepreneurs to behave decently, but he does not deny that the economy runs on self-interest. We do not expect to get our food because of the goodness of the butcher, the brewer or the baker, but because of their wellunderstood self-interest. The optimal balance is only possible if everyone just has his or her own profit in mind. The administration is not to interfere, but has the task to see everyone behaves according to the rules of the competition game. This means no monopoly and no common interest, as is the case with cartels and similar deals. Smith's so called natural laws are a significant step towards the formation of the modern commercial field, where no human factors are involved and business is business. The events within this field are determined by a calculus, a mathematical model. The Italian philosopher Macchiavelli (14691527) advised kings to leave their conscience in their bedrooms, because it impedes efficient government. Mandeville repeated this advice to the economists. Smith introduced the structure of the economical calculus of desire. He considered himself to be the Newton of the economy. He thought that he had discovered the laws with which God has set-up the economy like Newton had discovered the gravitational structure with which God has created the universe. It did not occur to him that competition is something man has

invented and that a lot has to be organized in order to make the supply regulate the price. He did not realize that prevention of monopoly and vertical or horizontal deals and the organization of a field with equal players where the price is determined by competition is a highly artificial situation. Smith was convinced he had found a kind of natural law that has been intended by God. That is why interference is wrong. It is against God's will. The commercial field where doing business takes place is an autonomous area where only the economic calculus rules. This always has been the basic dogma of all conservative politicians. Economists like Hayek, Friedman and Stiglitz have an almost religious belief in the beneficial influence of the free market in any circumstance. Human interference comes close to sacrilege. The consumer as a prisoner The ideology of desire was confirmed by the mathematician John Nash, winner of the Noble Price and main character in the film 'A beautiful Mind'. He invented the prisoners dilemma. This is a situation where two individuals or groups depend on each other in order to find the best solution. The classical example is the situation where a bank robber and his mate are caught by the police. There is not enough evidence. Each has the option to cut a deal or to deny any involvement. This gives four possibilities: 1. both deny 2. both confess 3. the mate cuts a deal 4. the robber cuts a deal. Let's assume that cutting a deal means one year in prison for the robber and four for his accomplice. Confession means two years. If the robber cuts a deal, outcome 2. and 4. are possible. This makes a total of one plus two is three years. If the robber denies then 1. and 3. are possible outcomes, which is a total of zero plus four is four years. What should the robber do? Well, Nash's mathematical game theory shows that cutting a deal and betrayal of his mate is the most advantageous strategy, because that amounts to three years, while being loyal to his mate amounts to four years. Nash concluded that betrayal is almost always the most advantageous strategy and this means

again that this world is made for unscrupulous egoists. Compassion and solidarity are for utopists and intellectuals. A businessman has to deal with the real world. Nash's mathematical formulas proved that the profit seeking competitive businessman acted like was meant by God. The more because Nash could prove that a world with competitive egoists would ultimately come to an optimal equilibrium. Hobbes's original state, where a man is a wolf to man, is the best possible situation. Of course experiments showed that most human beings where not aware of this and opted for cooperation instead of betrayal. This proved again that economists and politicians needed science to do their jobs well and that Andy Cap is ignorant and sentimental. Again 'universal laws' have come out of the magic hat that are in favor of a free market economy, and again it is easy to see the flaws and unnaturalness of these so called laws. The best strategy in the prisoners dilemma depends on the numbers which are stipulated. It is quite easy to change the numbers of prison sentence so that cooperation gives the best outcome. Besides in the real world a lot of other factors are involved. Your mate is not a complete unpredictable variable. Perhaps you know he never talks or perhaps you both have already agreed not to talk in case of an arrest, or perhaps he knows that he will be despised by friends and family if it comes out that he has cut a deal. More important even is the outcome of a series of prisoners dilemmas. When you play this against a computer a hundred times or more, it appears that another strategy called 'tit for tat' is the best. This means that you cooperate at first and subsequently mirror the moves of the opponent. If he betrays, you betray and if he chooses to cooperate you do likewise. Nash's false analysis caused a lot of mischief. It lead among others to an insane nuclear arms race, because the cold war had the structure of a prisoners dilemma and so the best strategy for both the U.S.A. and the Soviet Union was to strike first. To neutralize the threat it was necessary to keep enough counter force ready to make a massive retaliation possible in order to scare off the adversary. There were constantly nuclear bombers and submarines on

patrol and the reserve of nuclear weapons was enough to make the whole earth many times inhabitable. In economics it caused companies to adopt an aggressive marketing strategy with a deadly competition. Every businessman was roaming the earth for profit and exploitation, no matter the consequences. Even when signs of global warming appeared and it had become clear that the supply of raw material is limited, multinationals knowingly ignored this, only to continue the race. Profit before people. From cathedral to shopping mall So prosperity is founded on desire and success is rooted in egoism. The icing on the cake came when many psychologists (among who anti-psychiatrist Robert D. Laing) came to the conclusion that man is by nature a hard boiled egoist who is in continuous pursuit of power over his fellow beings. If anyone thinks differently he or she is a hypocrite or just fooling himself or herself. That is why officials never work. They have nothing to gain for themselves by working. If they work hard all benefits go to the boss. All they have to do is just keep their noses clean, this and only this is in their best interest. The only way to motivate a person is by reward and punishment. This is why trade unions do not fit in the picture, they make punishment, read sacking lazy employees, almost impossible. The more important a job is the more crucial it is that the worker is well motivated. The best way to achieve this is to reward the worker. In the beginning managers rewarded themselves and their coworkers with shares, but it did not last long before huge bonuses went each year each year into the already well filled pockets of top managers and CEOs. Even when business did not go well, there was reason enough for a substantial bonus. Doing business was making money and making money was useful. So working for the government was not useful. This was an extra reason to minimize all tasks for the government and privatize as much as possible. The administration had to been lean and mean and above all cheap. And if you happened to work for the government you had to follow as much as possible the business model. Officials claimed that also they had a right on bonuses.

Another reason was that since WW II politicians had seen the dangers of huge crowds. It had become clear that democracy is not fully immune for dictators. Hitler for instance had been elected and Mao had the support of the majority. The crowd is an uncertain factor, it had to be controlled. Elections are time consuming and the outcome is uncertain. Many (among who Sigmund Freud who wrote the book 'Civilization and it's discontents') feared the bestial drives of large crowds run amok. In order to safeguard a country against this it was necessary to find out what was going on in the streets and to control it. A good method was the polling of opinions of the man in the street. This had already been developed by companies to find out whether their products were appreciated and they could get more people to buy them. So it would be far more easy to replace elections by polls. The outcome of the polls could show how to keep the crowds content and this would prevent riots and political turmoil. The official name for this was crowd control. A happy consumer is no troublemaker. Part of crowd control was what Edward Bernays called 'public relations'. He implemented the theory of his uncle Sigmund Freud of the unconscious drives for commercial ends. In 1929 he staged a happening where young American women lit up cigarettes in public during a parade. He called the cigarettes 'torches of liberty', making them a symbol for women independence. It was a huge success and from then on every brand needed an advertisement campaign. Bernays even got a president reelected by organizing parties where popular movie stars were photographed together with the president by journalists of all important newspapers. So the myth was created that with the right tricks one could change the public discourse and with this decide upon the value of things. With enough money and the right public relations magician you could become God. This was an important contribution to the professional attitude problem of most capitalists. They were the manipulators, the men and women in the streets were merely their objects. Consumption, crowd control and public relations, this was the American model of the brave new world and some writers like Francis

Fukuyama even thought this was the end of political history. Nothing would ever change, utopia had been realized. Critical philosophy, also called the Frankfurter Schule is since long outdated. Baudrillard and Foucault are hard to find within the campus. Morals and values are not shared anymore. The only value that is generally recognized is market value and that changes by the day. Most of the time the media preach the gospel of consumerism. Success is achieved by advertisement and media training which can be bought. There are trainers and coaches everywhere. The truth is that it is all about money, but money is not worth anything anymore. This is hidden behind the facade of expensive suits and fancy cars. It is a separate artificial world, very remote from real values in the lives of people, that are about sickness and health, birth and death, love and friendship. Even these have been commercialized in soap series, but they always escape the market values when they really happen. They are shared in pubs and cathedrals, mosques, tea houses and temples. People read books about them and try to learn how to cultivate them. Philosophers even wrote that the art of being human is the art of being a true friend. But according to the managers this is all child play for the ignorant. Now we are modern and civilized and we live our lives between the shopping mall and the garbage can. Prosperity is consumerism and live in debt. This is the kind of poverty that is called wealth, at last if poverty is understood as the constant need for things. The man in the street goes along, what else can he do? He is however not convinced and cannot explain the grudge that is eating him. The advertisements make him think about the newest tablet computer rather than about the way he leads his life. Loyal to the earth So how is it possible that the manager who is making this world inhabitable and poisons society with indifference and greed, is such a nice and decent guy? What makes him speak with a split tongue? Where do these Jekyll and Hides come from? The whole financial field is grounded on the belief in the intrinsic absolute value of money. This is pure metaphysics. We

saw how this metaphysics was constructed. By means of Mandeville's fable, Smith's invisible hand, Nash's prisoners dilemma and Bernays's public relations a game was created that isolated itself from the lives of people and at the same time was considered to be something of a higher order. The Christian rituals were replaced by the rituals of the financial market and the shopping malls. It is not more credible or logical to suppose that money makes a person happy than to believe that one's soul is saved because roughly 2000 years ago a son of a carpenter died on a Roman torture instrument. Both are equally absurd. Both myths are kept alive by time consuming rituals and both have estranged themselves from daily life. Banks turned the stock exchange into a casino by the production of derivatives. Computer programs exchange values automatically, faster than any human being can imagine. The financial system is close to mathematical chaos, which means that very small changes can cause massive unpredictable consequences. (The internet is also heading in this direction.) And finally this monster takes so much energy and is creating so much inequality that a possible environmental breakdown and a global 'Verelendung' appears at the horizon. The Chinese utopist Kang You Wei () predicted a world government, perhaps this is a bit farfetched and it is not likely to happen in the near future. We cannot fall back into an isolationist nationalism either. So we have to revert to peace meal engineering and learn as we are proceeding. Many people are in favor of more regulation, which is a curse in the eyes of the financial high priests and a sacrilege of their 'metaphynances', but it seems an obvious thing to do. Games need to be corrected, like the soccer game that became more interesting because of the introduction of the offside rule. Money is a useful tool to make life more convenient, it should not be the opposite meaning that life makes money exchange more convenient. We should wake up from the dream that is called capitalism. We honor scientists and artists who offer their best efforts to the human race, why should we honor those who just make human life miserable through their exchange game? For this we do not need a new spiritual leader or a

new religion, we need to become more practical. The philosopher Friedrich Nietzsche called this being loyal to the earth. The earth is what feeds us and what supports our being. Plato focused on the sun as the symbol of the universal absolute good, beautiful and true. Many humans however have drowned at sea or in the moor while the sun was brightly shining. The sun is useless when the earth does not support you anymore. And what is a better symbol of resistance and hope to sit and lie down on the earth in front of the buildings where metaphynancial rituals take place? The Occupy Movement is making an excellent point!
Erik Hoogcarspel Rotterdam november 2011