Greed is boring

Matt Taibbi, the man who once called Goldman Sachs a "great vampire squid wrapped around the face of humanity," is not done with America's highest-flying financial firm:

Morally, however, the Goldman Sachs case may turn into a final referendum on the greed-is-good ethos that conquered America sometime in the 80s – and in the years since has aped other horrifying American trends such as boybands and reality shows in spreading across the western world like a venereal disease...

[F]ew people [understand] that the [financial] crash had its roots in the lunatic greed-centered objectivist religion, fostered back in the 50s and 60s by ponderous emigre novelist Ayn Rand...in America Rand is upheld as an intellectual giant of limitless wisdom. Here in the States, her ideas are roundly worshipped even by people who've never read her books or even heard of her...In the Randian ethos, called objectivism, the only real morality is self-interest, and society is divided into groups who are efficiently self-interested (ie, the rich) and the "parasites" and "moochers" who wish to take their earnings through taxes...

Rand's fingerprints are all over the recent Goldman story...The SEC's contention is that Goldman committed a crime – a "failure to disclose" – when they failed to tell the suckers about the role played by the vulture betting against them on the other side of the deal...

Even if he stands to make a buck at it, even your average used-car salesman won't sell some working father a car with wobbly brakes, then buy life insurance policies on that customer and his kids. But this is done almost as a matter of routine in the financial services industry, where the attitude after the inevitable pileup would be that that family was dumb for getting into the car in the first place. Caveat emptor, dude!...

Much of America is going to reflexively insist that Goldman's only crime was being smarter and better at making money than [others], and that the intrusive, meddling government (in the American narrative, always the bad guy!) should get off Goldman's Armani-clad back. Another side is going to argue that Goldman winning this case would be a rebuke to the whole idea of civilisation – which, after all, is really just a collective decision by all of us not to screw each other over even when we can.

A couple points here. First of all, as much as I despise the moronitude that is Randism, I highly doubt that this philosophy is a major cause of our financial woes. Yes, Goldman Sachs and other financial firms regularly claim that making money itself is proof of having been productive. But this was the claim in 1929, long before anyone ever heard of Ayn Rand. It didn't take some special "greed is good" philosophy to create a bloated, scam-filled financial sector then, and I doubt it did this time either.

That having been said, let's turn to Taibbi's main point about greed and its place in our society. He would have us believe that the Goldman case is another round in an ongoing battle between two titanic, diametrically opposed forces - greed vs. the restraining power of social norms. Taibbi places his faith in the collective morality of society. Hand in hand, possibly singing cheery folk songs of brotherhood and decency, we will march against the vampire squid and demand that it refrain from screwing people over.

Um...no.

Yes, social norms exist, and can be important in an economic context. But people's morality is not quite so simple as "making money is good" or "making money is bad." Most people, being more sophisticated than Taibbi's Manichean caricatures, would probably agree that productivity deserves a monetary reward, and gaming the system does not. Even if, before the crisis hit, people were divided on whether Goldman deserved the profits it was making, the debate was between people who thought Goldman was really being productive and people who thought Goldman was just making "paper profits" and gaming the system.

In other words, the problem was not, as Taibbi seems to think, that there were a bunch of brainwashed Randites out there saying "Goldman deserves to make money even if their operations are scams, because people deserve whatever they can get by any means whatsoever." The problem was that A) it was very hard for even very smart people to tell whether Goldman was being productive or not, and B) a lot of regulators and ratings agencies had a vested interest in letting Goldman keep doing its thing. The opacity and poor regulation of our financial system made public morality - what Taibbi calls "civilisation" - irrelevant.

And as for the morality of Goldman Sachs employees themselves...is Taibbi really willing to place his hopes in that? Dang, I hope not. No matter how moral the overall society, there will always be an unscrupulous greedy few. Clucking "for shame" at them, or calling them vampire squids, will not outweigh the lure of sports cars, mansions, and girls who love sleeping with finance guys.

The key to "civilisation" is not to produce such good public morals that no one is willing to be a sleazy dishonest finance dick. Nor is it to encourage the public to convince ourselves that anyone who makes money must be running a scam - that's not morality, that's just stupidity. The key to civilization is in setting up institutions that make it so that scams don't pay. If scams don't pay as well as being productive pays, then greedy people will channel their energy into being productive, and we will all benefit as a result. In the finance world, that means better regulation and enforcement. For example, sensible regulation of derivatives, which is in the current finance bill, would reportedly cut Goldman's profit by 41 percent.

In the end, greed, like boy bands and reality TV, is not horrifying, but merely boring. Greed is the natural human condition - if not for all of us, then for enough of us that we cannot merely wish it or shame it or snark it away. It is a thing not to be reviled, not to be praised, but merely to be yoked, channeled, used for our benefit, like any force of nature. I know that solution is less exciting than the self-righteous crusade Taibbi has to offer, but hey, that's why I could never do his job as a staff writer for Rolling Stone.