The market and morality

[ribozyme]

Many people here detest the means on how George Soros made money.

BRANCACCIO: Does it worry you, for instance, that maybe some of your actions in the past would have hurt some people, when you withdrew capital from certain countries?

SOROS: Yes. No, you see you can’t… as a market participant, if you want to be successful, I think you just have to look out for your own interests.

BRANCACCIO: It sounds amoral.

SOROS: Pardon?

BRANCACCIO: It sounds amoral.

SOROS: It is amoral. Now, it’s very often understood and understood as immoral. And that is a very different, being immoral. If you hurt people deliberately or you know, that’s immoral. If you break the law, that’s immoral. If you play by the rules, that is the market itself is amoral.

If you impose morality on it, it means that you are actually with your hands tied behind your back and you’re not going to be successful. It’s extremely hard to be successful.

BRANCACCIO: Do you think, on balance, that your philanthropic work counteracts the more ruthless decisions that you had to make when you were a financier?

SOROS: It is no connection whatsoever. I’m not doing my philanthropic work, out of any kind of guilt, or any need to create good public relations. I’m doing it because I can afford to do it, and I believe in it

pbs.org/now/transcript/transcript_soros.html

I think Soros is quite correct that his actions as a hedge fund manager were amoral. Why do you think his actions (he made his large fortune by using a global macro strategy which sometimes utilizes currency speculation) are immoral? To the contrary, some ethical systems regard capitalism as moral as opposed to amoral (such as Objectivism.) I regard Soros’ actions as amoral because if I were in his position, I would try to maximize my profits too.

 

[Newbie2]

Many people here detest the means on how George Soros made money.

pbs.org/now/transcript/transcript_soros.html

I think Soros is quite correct that his actions as a hedge fund manager were amoral. Why do you think his actions (he made his large fortune by using a global macro strategy which sometimes utilizes currency speculation) are immoral? To the contrary, some ethical systems regard capitalism as moral as opposed to amoral (such as Objectivism.) I regard Soros’ actions as amoral because if I were in his position, I would try to maximize my profits too.

Methinks you need to find another god than George Soros.

 

[JimG]

Markets in themselves are amoral, in the sense of being neither moral nor immoral. But they do a good job of allocating capital. People like Soros, Bill Gates, Warren Buffet, even ultra-capitalist Carl Icahn and others make efficient use of markets to generate capital, and frequently end up establishing charitable trusts. So it would appear that the free market generation and allocation of capital ends up being a good thing both for the markets and for charity.

 

[FRATER_PAVLVS]

Market is the fairest thing known to man.

 

[strugglingalong]

I suggest Fanfani’s book on Catholicism and Capitalism. It’s not immoral to want to make a profit but it is immoral when one tries to find unlimited profit with no restraint. Economy is to be based on charity not greed and money and the means of production belong to all.

Pax Christi tecum.

 

[JimG]

“Money and the means of production belong to all” is not quite accurate as a summary of Catholic social teaching.

 

[strugglingalong]

“Money and the means of production belong to all” is not quite accurate as a summary of Catholic social teaching.

What I am saying is that the needs of life, and the means to obtain such needs, belong to the entire human community and each person has a responsibility in charity to care for his brother - which is why unlimited profit gaining is immoral, because it means a ton for me at the expense of someone else. There is not an unlimited ceiling because of this need to care for all in charity.

Pax Christi tecum.

 

[JimG]

What I am saying is that the needs of life, and the means to obtain such needs, belong to the entire human community and each person has a responsibility in charity to care for his brother - which is why unlimited profit gaining is immoral, because it means a ton for me at the expense of someone else. There is not an unlimited ceiling because of this need to care for all in charity.

Pax Christi tecum.

I would agree that everyone has a right to an honest living. The particulars can get pretty complex, and it’s good to remember the economics is not a zero sum game. It’s not necessarily true that profit for one must come at the expense of someone else.

As one example, when Bill Gates started up his untested and speculative software company, no one knew whether or what profit was possible. Early investors took a real risk of losing everything. Now he’s a billionaire, but along the way, the net welfare of many has been substantially inreased–stockholders, employees with good benefit packages and wages, suppliers, and interconnected business. It was not a zero sum game.

Likewise, there was a woman who was hired on to do some administrative work for Google early in the company’s life. They couldn’t pay her much, but gave her some stock options. She did OK.

 

[strugglingalong]

I would agree that everyone has a right to an honest living. The particulars can get pretty complex, and it’s good to remember the economics is not a zero sum game. It’s not necessarily true that profit for one must come at the expense of someone else.

As one example, when Bill Gates started up his untested and speculative software company, no one knew whether or what profit was possible. Early investors took a real risk of losing everything. Now he’s a billionaire, but along the way, the net welfare of many has been substantially inreased–stockholders, employees with good benefit packages and wages, suppliers, and interconnected business. It was not a zero sum game.

Likewise, there was a woman who was hired on to do some administrative work for Google early in the company’s life. They couldn’t pay her much, but gave her some stock options. She did OK.

Yes and while Mr. Gates is a billionaire other people go without food and the basic necessities of life.

Pax Christi tecum.

 

[JimG]

Yes and while Mr. Gates is a billionaire other people go without food and the basic necessities of life.

Pax Christi tecum.

Yes, but it wasn’t the fact of his becoming a billionaire that deprived others of basic necessities. His charitable foundations have helped reduce those numbers, while his company has provided others with jobs and benefits, and provided pension funds of other people with dividends and capital gains, while providing Uncle Sam with tax income. (And his company has a higher net profit margin than the big oil companies.)

I quite agree that coming into great wealth carries with it responsibility to the poor. Whether or not simply taking money from the wealthy and giving it to the poor, by, say a 98% tax rate would be economically useful is a different matter, since it might incline the rich or potentially rich simply not to bother with wealth creation. And if they don’t bother to create wealth, all those who might have benefited, don’t.

The same considerations would apply whether the person involved is Bill Gates or a neighbor who wants to start a small business. If successful, both will be involved in wealth creation, which is a benefit to others besides the entrepeneur.

 

[Peregrino]

Yes, but it wasn’t the fact of his becoming a billionaire that deprived others of basic necessities. His charitable foundations have helped reduce those numbers, while his company has provided others with jobs and benefits, and provided pension funds of other people with dividends and capital gains, while providing Uncle Sam with tax income. (And his company has a higher net profit margin than the big oil companies.)

I quite agree that coming into great wealth carries with it responsibility to the poor. Whether or not simply taking money from the wealthy and giving it to the poor, by, say a 98% tax rate would be economically useful is a different matter, since it might incline the rich or potentially rich simply not to bother with wealth creation. And if they don’t bother to create wealth, all those who might have benefited, don’t.

The same considerations would apply whether the person involved is Bill Gates or a neighbor who wants to start a small business. If successful, both will be involved in wealth creation, which is a benefit to others besides the entrepeneur.

This is an interesting point but seems to assume that wealth creation must be a function of self-interest. Is it conceivable that someone would “create wealth” out of altruism? Is this not what we do when we create and pass on an inheritance to our kids and grandkids?

 

[Maxply]

Reading this, I think here and in other places, posts, newspaper items, etc., a person is just banging his head in talking with the “Market, Market” folks.

They just don’t listen or refuse to consider other possibilities and variables.

Or even silly things such as moral concerns! How 19th century sounding in this, our brave new Free Market World.

I, for one, very much despise how the “Market, Market” corporate apologists ALSO support reducing government protections and regulations, leading to such things as pollution, corrupt corporate leadership, fanciful accounting practices, busted banks, and so forth.

And then, after dumbing down regulation, expect taxpayers to clean up the mess! I’m a Republican and dismayed.

 

[strugglingalong]

Reading this, I think here and in other places, posts, newspaper items, etc., a person is just banging his head in talking with the “Market, Market” folks.

They just don’t listen or refuse to consider other possibilities and variables.

Or even silly things such as moral concerns! How 19th century sounding in this, our brave new Free Market World.

I, for one, very much despise how the “Market, Market” corporate apologists ALSO support reducing government protections and regulations, leading to such things as pollution, corrupt corporate leadership, fanciful accounting practices, busted banks, and so forth.

And then, after dumbing down regulation, expect taxpayers to clean up the mess! I’m a Republican and dismayed.

I wholeheartedly agree. Thank you for posting such a wise and astute post. Capitalism and the Free Market is not the best alternative and it is not the only alternative. People should learn of the system of Distributism put forth as the Third Way by such Catholics as Belloc and Chesterton. Here is a great place to learn about it: distributist.blogspot.com/

Pax Christi tecum.

 

[JimG]

This is an interesting point but seems to assume that wealth creation must be a function of self-interest. Is it conceivable that someone would “create wealth” out of altruism? Is this not what we do when we create and pass on an inheritance to our kids and grandkids?

Yes, you are right that wealth creation need not be driven solely by self-interest. Yet it is driven by some interest. There are many charitable trusts whose function is to create wealth and income for charitable operations. Educational endowments are designed to provide income for educational purposes without using up their underlying principal. Many dioceses have endowments to support seminarian training or religious orders. And these are just a few. But they could not meet their goals without the underlying markets which are used to generate income, even if it’s as simple as buying government or corporate bonds.

Passing on an inheritance itself involves risk—not to the giver but to the recipient. If the grandkids just go out and spend the money it will soon be gone with no additional wealth created. Lottery winners sometimes find themselves bankrupt a few years later.

Financial self-interest, however, does provide a strong motivation for wealth creation, which when successful, usually benefits more than just the initial entrepreneur.

Markets are and ought to be regulated. Regulation, however can often have some unintended side effects. One example would be the Community Reinvestment Act which requires lenders to provide credit to their entire marketing area, with adverse consequences for those who fail to comply. Trying to meet those CRA goals led many banks to make risky loans within their community that were not repaid.