Greed and Markets Do Not Go Together

Critics often cite greed as a motive of markets at work. Some critics of Adam Smith accuse him of preferring ‘selfishness’ and ‘greed’ as a motive, and of decrying ‘benevolence’.

As often, on Lost Legacy, I deny these assertions emphatically, and I assert to the contrary that markets are about the mediation of the self-interests of the transacting parties to the mutual benefit of both, the actual proposition of Adam Smith in Wealth of Nations (Book I, chapter 2) and, incidentally also in his ‘Moral Sentiments’ (Book II, chapter 2). In markets we serve our self-interests by serving the self-interests of others.

In disputes between critics of Smith and his legacy, as published in his books, both critics and myself often quote his famous passage from Wealth of Nations (p 25) about the ‘butcher, the brewer, and the baker’ and the customer looking for items for his dinner, but with different understandings of it. The only way each is likely to succeed in serving their self-interests is by addressing the self-interests of the other through finding an outcome to which they can both agree, summed as the ‘price’.

If we are ‘bound together by the agreeable bonds of love and affection’ that is great for us all; but if not, because we are anonymous strangers, we can still transact peacefully by ‘a mercenary exchange of good offices according to an agreed valuation’ (Moral Sentiments, pp 85-6), summed as 'price'.

Well, we have been treated over the last few days to a test of the ‘markets are about human greed’ propositions versus my ‘no they are not; they are about ensuring harmonious human relationships and civilised societies’.

A 62,000 ton merchant ship, ‘Napoli’, has been beached at Branscombe bay on the Devon coast, south-west England, following severe storms that fractured the ship’s stability and threatened to sink it in deep water in the English Channel. When beached in shallow water, 123 of the ship’s 2,323 containers slid into the water and the wind blew some of them (the others sank) onto the beach at high tide, where they were stranded from Friday onwards.

A few hundred, later many hundreds, of people, seeing the news items vividly on tv, arrived at the beach for a look at the scene, the beached containers on shore and a few hundred yards away the stricken ship, listing to one side, oil leaking from its engine room, and on the verge of breaking up altogether if the severe weather continued. Fortunately, the weather abated a little (though its due to get worse tomorrow).

The beached containers held, variously, 1200cc BMW motorbikes (priced upward of £9,000; or $17,000), small tractors, books, barrels, Nike trainers, bottles of perfume, car steering wheels, bottles and barrels of fine French wine, beauty cream, Bibles, dog food, camcorders, complete engines for vehicles, oil paintings, and scores of boxes of nappies (diapers). Some containers on the ship held hazardous cargo.

Now Branscombe beach was not a market. There were no property rights on that beach recognised by the looters, though property rights clearly existed in the owners of the goods in the containers. The outcome: theft on a large scale from the locked containers, opened by individuals carrying heavy bolt cutters, brought by them to the beach (premeditated), their cars and vans parked along the road (probably locaked too), many with young children left to play in the sand as darkness fell, and the tide rushed in. Fortunately nobody entered the water, and the containers on the beach did not include the ones with hazardous chemicals.

One ‘scavenger’ (read: thief) told the media: ‘As far as I’m concerned, it’s anybody’s. They’re trying to say it still belongs to the shipping company but half of its ruined. It’s only a few bits and bobs and if all they lose is the odd steering wheel, they should be grateful. It’s the spoils of war’.

Please understand, I am not preaching against sin, or of being a ‘Holy Willie’; I’m not even saying the thieves should be ashamed of themselves. People are what people do (‘let him without sin, cast the first stone’, etc.). Take away property rights, any minimal probability of being caught and sentenced in the justice system, and what Smith called graduating from the ‘school of self-command’, and the outcome for harmonious society is predictably bleak.

Markets are one human solution to the problems of distribution of things that people want beyond what they can do for themselves. There are other human solutions with as long, if not longer, pedigrees than markets. Plunder is the main alternative to exchange by trade, and for many millennia plunder and violence were the prevalent choice of our ancestors. Unknown individuals, aeons ago, stumbled on primitive forms of peaceful exchange, probably in isolated acts amidst reversions to plunder. Humans are not perfectible – and certainly not all of them perfectable at the same time.

But, as other pairs of individuals found peaceful exchange useful on occasion, along with isolated incidents of what anthropologists called ‘Gift’ behaviour, reciprocal beneficial gestures, and non-violent persuasion, the propensity to ‘truck, barter, and exchange’, slowly and gradually became prevalent, until in market economies it became dominant. It defines market transactions.

At Branscombe beach, for several thousand people over two days (and nights) there was a reversion to the alternative of markets. That is the real lesson from watching the greed-inspired ‘scavenging’ of thievery on a grand-scale. Sure, you can quip about Proudon’s cry of ‘property is theft’, which as a juvenile intellectual idea and a useful topic for contemplation at student parties, but if the vast majority of people around you came to believe that they had a licence to ‘liberate’ your property for themselves (and that includes the clothes you are wearing, the trinkets you carry, and even your body parts and use of them) you might reflect that whatever the weaknesses of markets as a human device for distributing items for voluntary exchange, property rights are all that separates us from the far worse consequences of living in societies without property rights.

You can test that proposition by migrating to countries where property rights are tenuous. All such countries, without exception, are among the poorer and poorest countries in the United Nations. It may also be sobering to consider that there is a connection between the absence of property rights and the abject poverty of the majority of their citizens, outside the upper elite, and it is but a short step even in a civilised market economy like the UK, that people in it – you and your neighbours – are not immune from behaving in a disgusting, greedy and selfish manner, given the opportunity, when tempted to go outside the ‘propensity to truck, barter, and trade’ and the ‘mercenary exchange of good offices’.

A safer test of the above proposition is to cast your eyes over the scenes at Branscombe beach these last three days. Greed is the absence of markets, not their driving motivation.