Capitalism Alone (5) Outsourcing Morality

In his book called Capitalism Alone, Branko Milanovic says that economic success made more acute the discrepancy between the ability to live better and longer lives and the lack of a commensurate increase in morality, or even happiness.

But this external polish was achieved at the cost of people being increasingly driven by self-interest alone, even in many ordinary and personal affairs. The capitalist spirit, a testimony to the generalized success of capitalism, penetrated deeply into people’s individual lives. Since extending capitalism to family and intimate life was antithetical to centuries-old views about sacrifice, hospitality, friendship, family ties, and the like, it was not easy to openly accept that all such norms had become superseded by self-interest. This unease created a huge area where hypocrisy reigned. Thus, ultimately, the material success of capitalism came to be associated with a reign of half-truths in our private lives (p. 197).

An alternative that would preserve the acquisitive spirit needed for the of commercialized societies but would keep that spirit in check was to internalize certain forms of acceptable behavior through religion... The internalization of desirable behavior, was possible thanks to the constraints of religion and the tacit social contract. It is not clear if societies so dedicated to the acquisition of wealth, by practically any means, would not explode into chaos were it not for these constraints.

Milanovic explains that neither of these two constraints (religion and a tacit social contract) holds in today’s globalized capitalism. Part of the problem is the decline of Christians churches. The other problem is that people have lost connection with each other and are unmoored from their social settings.

Actions are no longer “monitored” by the people among whom they live. Adam Smith’s baker’s immoral business actions would have been observed by his neighbors. But the immoral actions of people who work in one place and live in an entirely different one—with the world of coworkers and that of neighbors and friends never interacting—are inobservable... The doctor can be seen as an upstanding member of the community, quite rightly, from what his neighbors know of him, while in reality he is a criminal.

As the internal mechanisms of constraint have atrophied or died or do not work in a globalized setting, they have been replaced by external constraints, in the form of rules and laws. I do not mean that laws did not exist before. But while internalized constraints on behavior mattered, both laws and self-imposed limits affected people’s behavior. The present situation is characterized by the disappearance of the latter. In cases where we cannot expect the rich to behave ethically or with sufficient discretion so as not to inflame the passions in those who have less, reinforcement of laws is obviously a good thing. The problem is that instead of two handrails to help keep the actions of the rich (or anyone, for that matter) on the right path, we now have only one—laws. Morality, gutted out internally, has become fully externalized. It has been outsourced from ourselves to society at large.

The drawback of outsourcing morality is that it exacerbates the original problem of the absence of internal inhibitions or constraints. Everyone either will try to walk the fine line between legality and illegality (doing things that are unethical but technically legal) or will break the law while trying not to be caught. Breaking the law is not unique to today’s commercialized societies. But what is unique is for people to claim that they have done everything in the most ethical manner possible if they have remained just on the right side of the law, or, if they have strayed into illegality, that it is the business of others to catch them and prove they have broken the law. Internal checks, stemming from one’s own belief in what is moral and what is not, seem to play no role whatsoever.

Outsourcing morality through reliance solely on the law or on rule enforcers means that everyone tries to game the system. Any laws that are introduced to punish new forms of unethical or amoral behavior will always stay one step behind those who are able to find ways around them. Financial deregulation and tax evasion provide excellent examples. There is no internal moral rule, as we have amply seen, that would check the behavior of top banks and hedge funds. Their objective is to play the game as close to the rules as possible, and if the rules need to be bent or ignored, to try to avoid being caught. And if caught, to try, by using a phalanx of lawyers, to find the most recondite and specious nations for this behavior. And if that fails, then to settle (p. 183).

Criticizing the rich or the banks for what they are doing is futile and naïve. Futile because they will not change their behavior, since doing so would risk losing their wealth. Naïve because the origin of the problem is systemic and not individual. A bank might become a most ethical and careful actor, but it would then lose the commercial race with its competitors (p 184).

People who write about the need for more leisure do not realize that societies the world over are structured in such a way as to glorify success and power, that success and power in a commercialized society are expressed in money only, and that money is obtained through work, owner of assets, and, not least, corruption. This is also why corruption is an integral component of globalized capitalism (p. 187).

Laws and regulations cannot make up for lack of morality. In my book God's Economy, I explain how Gods Instructions for Economic Life internalise economic morality to each Kingdom Community.