Assholes

by Aaron James

  HOBBES BEATS MARX

  Asshole capitalism, so described, is merely a disquieting possibility. It is a further question whether any real-world capitalist society, such as Japan, Italy, or the United States, should worry about the rise of asshole capitalism and its own decline. As we will elaborate later in this chapter, asshole capitalism is what social scientists call a “model,” which will approximate reality only as a matter of degree. It is all-important not to mistake models for reality—however often professional economists do just that. Yet the important practical question is not whether we can be sure that the model is perfectly realistic but how confident we are that we are not already or soon to be on the road to decline the model describes. Our main task in this chapter will be to describe how a capitalist society may be undone. Our larger suggestion, however, is that we should be genuinely concerned about the capitalist societies we actually have. We should worry about whether our societies are already or might soon become asshole capitalist systems set on a potentially irreversible path of degradation and decline.

  These things are difficult to estimate, but here is my own sense of the score, as of the early twenty-first century. Japan has little reason to worry, because its “collectivist” culture keeps people on a cooperative footing. Italy is already an asshole capitalist system and is contemplating routes of escape (the overdue ouster of Berlusconi being a start). The United States stands at the precipice: chances are fair to good that it has already reached a tipping point into asshole capitalism and perhaps irreversible decline. It could in theory return to its non-asshole capitalist glory days. But the shrewd gambler would not take that bet. Americans are therefore right to feel dread.

  According to Karl Marx, capitalism is unstable but inevitably gives way to something better. The proliferation of assholes suggests that Marx was wrong: capitalism is unstable but can give way to something worse. Thomas Hobbes, that great student of the human condition, has a better nose for the asshole in human life. Hobbes argued that society was so inherently unstable that only an absolute monarch (such as the English king) could keep it from devolving into a “war of all against all,” a hellish state in which, as Hobbes famously put it, “the life of man [is] solitary, poore, nasty, brutish, and short.”4 Hobbes turned out to be wrong about the need for an absolute sovereign; the stable success of constitutional democracies with divided governmental powers, such as the United States and France, have proven as much. Yet the social dynamics of assholes may confirm his gloomy view of the risks. Cooperation is fragile. The prospects for any society depend to a large extent on circumstance and fate. And so cooperative people must remain vigilant if decent society is to last. Cooperative vigilance is the only bulwark against decline, especially in capitalist societies.

  THE WAYS THINGS FALL APART: COLLAPSE, DETERIORATION, CRISIS, SYSTEMIC DYSFUNCTION

  Social arrangements can come apart in various ways. Considering several of them will help to clarify the particular type of decline we mean to focus on.

  Collapse. The now barren Easter Island once had a significant forest that sustained a vibrant society. The forest was gradually cut down, because each individual profited from cutting trees down but lacked assurance that if he or she didn’t, others would likewise refrain. Largely as a result of this one “tragedy of the commons,” the society died out.5 Likewise, there’s a fair chance that global warming will spell our collective doom (if not for all of humanity, then for vast numbers of people).

  Deterioration. In other cases, we see degradation of something valuable without complete collapse. In one study of day care centers in Haifa, for example, fines were imposed upon parents who picked up their children late. As a result, tardy pickups doubled (as compared with control groups). Moreover, they never returned to before-fine levels even after the fines were removed.6 It seems the fine put people in a self-interested frame of mind (people were willing to pay for the extra time) that replaced a general sense of the obligations of cooperative child care. Or consider Richard Titmuss’s famous study of blood donations. When people were paid to donate blood, overall donations declined. People were more strongly motivated to donate blood by charitable impulse than the profit motive. Here, too, market incentives displaced preexisting ethical commitment.7

  There are also larger ways virtue can be “crowded out” by vice. The “crowding-out” effect in day care or blood donations can combine with the tendency for “markets to economize on virtue.” The less markets depend on centralized decisions (about the allocation of resources, for instance), the less they depend on virtuous governors to make them. As Hayek puts it, the liberal market economy “is a system in which bad men can do least harm.”8 Taken together, the two tendencies can induce a mutually reinforcing downward spiral of market expansion and decreased reliance on virtue. As Samuel Bowles explains:

  The comparative advantage of markets over other institutions in governing interactions among self-interested actors [as set by decentralized decisions about relative costs, etc.] may set in motion a spiral of market-induced erosion of other-regarding and ethical values, which in turn prompts greater reliance on markets, which in turn further erodes values, and so on.9

  We thus see a downward shift from a virtue-infused society to a more “virtue-efficient” end point.

  Many have argued that this tendency is characteristic of capitalism and liberal institutions per se. Markets animated by self-interest, it is said, depend for their very existence on traditional familial or religious culture that encourages the personal and civic virtue needed for market-based society to work. And yet those same market relations endanger that very culture by displacing rooted ethical commitment with market values of self-interest. This, as the point is sometimes put, is the “cultural contradiction” of capitalism.10

  Crisis. If these are cases in which something of value deteriorates, one could argue that the loss of value is nevertheless justified by gains for some greater value. Crises tend to be different in this regard: many crises do sweeping, irreparable, and largely unnecessary harm. Examples include a classic bank run or the global liquidity crisis of 2008. In both cases the destructive outcome results mainly from uncertainty about whether loans will be repaid. Most parties were fine lending as long as enough other parties were lending as well. Without assurances that enough others are doing likewise, however, each faced an increased risk of default and so had a powerful reason not to lend or to recall debts. If there had been greater “confidence” that they would have been repaid, the crises could have been avoided, with little or no damage done.

  Systemic Dysfunction. It is possible for a whole system to work in a way that repeatedly causes unnecessary destruction. The untoward outcomes are not simply a “forty-year flood” or “black swan event” but rather a predictable result of the way a system is set up and could be but isn’t adjusted or reformed over time (if you like, a “white swan event”). Economist Hyman Minsky argued that capital markets are inherently prone to debt crises.11 The tendency, however, is potentially manageable, and the development of central banking, for example, in fact dramatically reduced the crises that continuously befell unregulated private banks in an earlier era. Each era requires its own precautionary adaptations. In recent decades, however, we have mainly refused to take serious action. On a global scale, the Bretton Woods institutions adopted after World War II successfully limited and managed systemic risk for more than two decades; there were very few financial crises, not even a handful, before the system was abandoned in the early 1970s. But as capital became increasingly mobile across borders, as banking and investment were desegregated, and as confidence in laissez-faire rose (which allowed firms to make imprudent bets and shift risks off their balance sheets and so on), crises have increased dramatically in number and severity, culminating in the global crisis of 2008–9, the ensuing Great Recession, and crises in the euro zone.

  CAPITALISM’S VALUES

  Now compare asshole capitalism. It involves a kind of deterioration rat
her than complete collapse. The (perhaps gradual) process of deterioration results from dysfunction in the way things are set up or not adjusted and reformed. But this needn’t be the result of a “cultural contradiction” with traditional values and the institutions and culture that instill them, such as the family or religion. As we will see, any and all dampening systems, traditional or otherwise, can be overwhelmed by the powerful incentives created by asshole capitalism’s entitlement message.12

  Our claim, specifically, is not that asshole capitalism leads to the end of capitalism or of society, but that it causes capitalism to take a degraded form, a form that is worse by capitalism’s own standards of value than what came before. Does capitalism have standards of value?

  Perhaps not, if you ask John D. Rockefeller. He’d presumably say that the point of capitalism is for him to get rich (or for God to have a way of giving him his riches).13 Or perhaps he’d add something about the hardworking, risk-taking, exceedingly talented, ever-deserving, heroic entrepreneur. But we shouldn’t ask an asshole what the point of capitalism is, since we can safely presume he’ll simply advocate for asshole capitalism—at least assuming he’s feeling sure he’s in a good position to take advantage of it (and perhaps not otherwise). The value of capitalism is better settled by people who are not assholes, who have to do the work of upholding the practices and institutions needed for a functioning society, often at a cost to themselves. Why should they be willing to adopt capitalism instead of some other way of organizing economic and social life? The answer offered to us over the past two hundred or so years is that capitalism promises various desirable things, including freedom, opportunity, and general prosperity. It is supposed to advance the “general welfare” and create a “rising standard of living” in which “a rising tide lifts all boats,” the yacht and dinghy alike. Capitalism, we have been told, advances these values as well as or better than alternative social forms.

  Now, assuming for the sake of argument that this is right, it is extremely important that those grand promises can’t be fulfilled without supportive social practices and institutions. The idea of a large-scale, self-sustaining, self-organizing “perfectly competitive” and “efficient” market is an intellectual fiction; it bears little relation to any actual real markets.14 Large-scale exchange is possible, for example, only within a system of property that demarcates different things as “mine” and “thine.” That will in turn require any institutions of security, law, contract, adjudication, taxation, and politics needed for the system of property to generally not fall apart (because of rampant theft or corruption or constant endemic conflict and so forth). If those practices and institutions aren’t upheld, because cooperative people aren’t willing to bear the cost of sustaining them, then the social promises of capitalism will not be fulfilled.

  How might that failure look? In general, it might mean that living standards increasingly rise only for a fortunate few, that the “rising tide” of capitalism lifts the yacht but swamps the dinghy. The growth of gross domestic product year after year may increasingly become like everyone in a bar getting “richer,” on average, because Bill Gates just walked in; average per capita wealth spikes, but most aren’t personally richer for it. In more concrete terms, this might show up in various ways: maybe people become increasingly uncertain about their prospects for stable employment and eventual retirement, even though they have “worked hard and played by the rules” their whole lives; or perhaps people are increasingly unable to afford to stay in school, try as they may, because their increasingly vulnerable family needs them to work to pay urgent bills; or it could be that average people are increasingly unable to get the basic protections of law in an increasingly cash-strapped police or judicial system, even as the well heeled get the best justice money can buy; and maybe any or all of these trends result from political power being increasingly concentrated in the hands of an influential few, who steadily change the rules to further entrench that influence. In short, in one way or another, people increasingly see “liberty,” “opportunity,” or “prosperity” in name only, in a form that isn’t especially valuable for them, that doesn’t make good on the promise of capitalism in their eyes.

  Here we should emphasize that we are not necessarily assuming deeper egalitarian ideas of social justice about how the outcomes of capitalism should be organized. I myself am a progressive in the style of John Rawls, which calls (roughly) for (1) equal basic liberties; (2) fair equality of opportunity in access to positions of greater reward and power, which dramatically mitigates the effects of fortunate birth; and (3) limits on the inequalities in income and wealth we allow in order to create incentives for hard work, risk taking, and so on, so that they must work out, over time, to the greatest advantage of the least well off social class.15 But for present purposes, we can assume that no such requirements of justice apply. We assume only capitalism’s own basic social promises. These do require advancing the general good but may not place any basic limits on the size of the gap between rich and poor. A yawning gap in wealth between richer and poorer might be problematic but for different reasons, say, because it means that too few are seeing real gains, because wealth is not being generally spread around, or because growth is not “broad based.” Here we assume certain values but only conservative values. We assume only that we have reason to value the capitalist societies we have and so we have reason to prevent them from sliding into a degraded form.

  Our remaining question, then, is how asshole capitalism makes things worse according to the values just described. Why, more specifically, would asshole capitalism devolve?

  ENTITLEMENT CAPITALISM

  Any capitalist system will create powerful incentives for personal enrichment. This is how it gets people to do things that otherwise wouldn’t be done. But the argument for a capitalist system needn’t say anything more about such incentives, except that they do indeed work in getting people to do things that fulfill capitalism’s larger social promises. Yet capitalist systems only work within a larger framework of social cooperation. So we should say some further things about the moral status of incentives and the conduct they induce. We should add, for instance, that people who respond to such incentives are potentially making a contribution, doing their part, and as a result do indeed have certain entitlements, for instance, to be paid what they were promised for services rendered or work done.

  Crucially, this is not to say the entitlements are absolute. What one is entitled to, we may assume, is fair treatment by the system of social cooperation overall. Any specific entitlements one has are then subject to adjustment as needed for cooperation to be fair to all. So if the social promises of capitalism require increasing teacher or trash collector pay, then teachers and trash collectors will have a moral entitlement to a pay increase. And if those same promises include things like well-maintained roads and schools and refuse services, where this requires things like capping or heavily taxing banker or CEO bonuses, then bankers and CEOs have no moral entitlement against this change in the rules. All is fair if needed for capitalism to actually do what it is supposed to.

  Now compare what we might call an entitlement capitalist system. Its very different message is of basic expansive entitlements, for instance, to an ever-greater share of the fruits of cooperation (e.g., parking spots, usable air, wealth), regardless of social rationale and regardless of what may be a significant social cost to others. Here we might think of bankers who profit from huge risks, knowing that their firms are “too big to fail” and that they will be bailed out in a crisis at the taxpayer’s expense. Or, more pointedly, recall the dark fall days of 2008, when the U.S. and world economy was about to fall off a cliff, and U.S. treasury secretary Hank Paulson gathered the top bankers together to tell them that they were being forced to accept $125 billion, with no strings attached, in order to shore up their troubled balance sheets and buoy market confidence. To which John Thain, Merrill Lynch CEO, piped up and asked, “What kind of protections can you give us on
changes in compensation policy?” This is a stunningly clueless asshole move. The taxpayers were in effect being forced, for the good of the country and the world, to protect the bankers from their own recklessness, at a huge cost. And yet the bankers’ main concern was their bonuses.16

  As this example suggests, the message of entitlement capitalism is of expansive entitlement (the bonuses are enormous). The message doesn’t tell one to claim some specifiable share of goods, but rather that one can rightfully demand the most one can get, or at least more than others are getting, and certainly as much as or more than one got last time. One can’t be expected to take a loss or even simply gain less for the sake of others. The message, moreover, is of basic entitlement, in the sense that one is entitled to ever more even when this has no further justification in terms of larger social purpose and perhaps despite significant costs for others. Because the entitlement is basic, no further such justification is required. Those who accept the entitlement message will of course cite platitudes that look a lot like further justifications—for instance, about the special role of people in their position (e.g., as “job creators,” the “best and the brightest,” “savvy businessmen,” or “tops in their field”). But these are invoked more to bolster their moral confidence and silence those who complain rather than to open an honest discussion about whether the proposed benefits really are justified. Here moral confidence derives not from the merits of particular arguments but from the basic sense of entitlement itself. The sense of entitlement explains why those who have it are disposed to indignantly and aggressively defend it ever more as their right.