If this past week presents any single lesson, it’s the social costs of greed. Capitalism is premised on greed but also on guardrails – laws and norms -- that prevent greed from becoming so excessive that it threatens the system as a whole.
Yet the guardrails can’t hold when avarice becomes the defining trait of an era, as it is now. Laws and norms are no match for the possibility of raking in billions if you’re sufficiently ruthless and unprincipled.
Donald Trump’s tax returns, just made public, reveal that he took bogus deductions to reduce his tax liability all the way to zero in 2020. All told, he reported $60 million in losses during his presidency while continuing to pull in big money.
Every other president since Nixon has released his tax returns. Trump told America he couldn’t because he was in the middle of an IRS audit. But we now learn that the IRS never got around to auditing Trump during his first two years in office, despite being required to do so by a law dating back to Watergate, stating that “individual tax returns for the president and the vice president are subject to mandatory review.”
Of course, Trump is already synonymous with greed and the aggressive violation of laws and norms in pursuit of money and power. Worse yet, when a president of the United States exemplifies — even celebrates — these traits, they leach out into society like underground poison.
Meanwhile, this past week the S.E.C. accused Sam Bankman-Fried of illicitly using customer money from FTX from the beginning to fund his crypto empire.
From the start, contrary to what FTX investors and trading customers were told, Bankman-Fried, actively supported by Defendants, continually diverted FTX customer funds … and then used those funds to continue to grow his empire, using billions of dollars to make undisclosed private venture investments, political contributions, and real estate purchases.
If the charge sticks, it represents one of the largest frauds in American history. Until recently, Bankman-Fried was considered a capitalist hero whose philanthropy was a model for aspiring billionaires (he and his business partner also donated generously to politicians).
But like the IRS and Trump, the S.E.C. can’t possibly remedy the social costs that Bankman-Fried has unleashed — not just losses to customers and investors but a deepening distrust and cynicism about the system as a whole, the implicit assumption that this is just what billionaires do, that the way to make a fortune is to blatantly disregard norms and laws, and that only chumps are mindful of the common good.
Which brings us to Elon Musk, whose slash-and-burn maneuvers at Twitter might cause even the most rabid capitalist to wince. They also raise questions about Musk’s other endeavor, Tesla. Shares in the electric vehicle maker dropped by almost 9 percent on Thursday as analysts grew increasingly concerned about its fate. Not only is Musk neglecting the carmaker but he’s appropriating executive talent from Tesla to help him at Twitter. (Tesla stock is down over 64% year-to-date.)
Musk has never been overly concerned about laws and norms (you’ll recall that he kept Tesla’s factory in Freemont, California, going during the pandemic even when public health authorities refused him permission to do so, resulting in a surge of COVID infections among workers). For him, it’s all about imposing his gargantuan will on others.
Trump, Bankman-Fried, and Musk are the monsters of American capitalism — as much products of this public-be-damned era as they are contributors to it. For them, and for everyone who still regards them as heroes, there is no morality in business or economics. The winnings go to the most ruthless. Principles are for sissies.
But absent any moral code, greed is a public danger. Its poison cannot be contained by laws or accepted norms. Everyone is forced to guard against the next con (or else pull an even bigger con). Laws are broken whenever the gains from breaking them exceed the penalties (multiplied by the odds of getting caught). Social trust erodes.
Adam Smith, the so-called father of modern capitalism, never called himself an economist. He called himself a “moral philosopher,” engaged in discovering the characteristics of a good society. He thought his best book was not The Wealth of Nations, the bible of modern capitalist apologists, but the Theory of Moral Sentiments, where he argued that the ethical basis of society lies in compassion for other human beings.
Presumably Adam Smith would have bemoaned the growing inequalities, corruption, and cynicism spawned by modern capitalism and three of its prime exemplars — Trump, Bankman-Fried, and Musk.
Congressional Wake-up Call
It’s time for Congress to get their ACT TOGETHER before we do lose our Freedoms!
I’m a 69 yr old with a high school education. January 6th 2021 was obviously as close as we have come to losing our Democracy! I watched the Jan 6 Select Committee’s final hearing on December 19th. What worries me is that our members of Congress are working against each other
Instead of working together for the American people. Common sense tells me that the division in our country is the result of the partisan division in Congress!
A hi light that was aired during the hearing was that members of the Republican Party ignored subpoenas to appear in front of the Select Committee. In January 2023 the Republicans take over House. They say when they do they will be investigating Hunter Biden’s laptop, impeaching President Biden etc…. How do you think this will affect the American people when they send out subpoenas to Democrats, in a Tit for Tat, that most likely will be ignored!
That sends a message loud and clear to the American people that the Rule Of Law only pertains to the less fortunate!
The most obscure but also most pertinent comment in Adam Smith's "The Wealth of Nations" is (paraphrased) that left to its own devices, a capitalist system will degenerate into cartels and monopolies. The value of capitalism comes not from the profit motive alone but from a free market, a market free of corruption, mainly fraud and collusion, not one free of policing as Republicans wrongly portend. Bernie missed the target with democratic socialism. What we lack is democratic capitalism, because in a democracy, the consumer majority would control the marketplace banning criminality and anti-competitive consolidations of industry. We were that under FDR, but starting with Reagan, Republicans, with the cooperation of foolish Democrats like Clinton, have torn down those protections. The corporatocracy, led by Charles Koch and a team of billionaires, have staged a successful coup and captured the courts, mainly by first corrupting enough of Congress focusing on the Senate. The captured court then cemented their power by blessing perverse interpretations of the Constitution and voiding righteous laws. (The Trump coup provided effective distraction from the coup that captured SCOTUS adding the worst of the worst. We lost most of our democracy before January 6 but still haven't realized it.) Too few candidates can win without subjugating themselves to the money people, so we now have a government of, by and for the corporations suborning growing monopolies, the goal Peter Theil openly called for. In conclusion, if we had a working democracy, the capitalists would be reigned in rendering their sociopathic greed irrelevant. Capitalism without democracy isn't real capitalism because it devolves into oligarchy, or socialism by proxy under government sanctioned monopolies and cartels. The Republicans are the real socialists! Trump, Bankman-Fried and Muk are symptoms, not the cause. OUR message should be a return to 'democratic capitalism' from today's oligarchy, cartel capitalism, or what I'd call proxy socialism by corrupt government sanctioned cartels. We cannot win this battle while a captured SCOTUS rewrites the Constitution to put "democracy in chains" as author Nancy MacLean explained it. The root of this evil is the capture of the courts and Congress by the money cartel. The voices of dark money now out shouts the voices of the people. Greasing the skids of our downfall is the pervasive civic ignorance of the voting public that makes them gullible to vote against their own interests, which is something we could address more effectively.