Over and over again, I see smart people make the mistake of blaming capitalism for the behavior of greedy people, as if capitalism is somehow responsible for their greed. As if their greed wouldn’t exist in a communist or pre-capitalist or post-scarcity society.
Now, to be clear, there are systems within our capitalist society, such as consumerism, that appeal to our greed and exacerbate the problem. But that’s a distinct claim from the idea that capitalism creates greed.
It doesn’t.
The greed was always there; in horror movie terms, it was in the house the whole time.
Greed
What is greed, and why are humans greedy?
Let’s define greed as:
Greed is the desire for a great deal more than one needs.
Why are humans greedy? In short, and without the reams of evidence one would want to support such a sweeping statement:
Human greed has two sources: hedonic adaptation and fear.
Hedonic Adaptation
Hedonic adaptation is the phenomenon whereby lottery winners and paraplegics wind up about as happy as they were before, six months after they win the lottery or become paralyzed, respectively.
Basically, the human brain maintains a ‘set point’ of happiness, a sense of ‘standard’ or ‘normal’ that adapts over time to one’s circumstances. If you are moderately happy in your own life right now and were asked to rate your happiness on a 10-point scale, this might equate to a ‘7’.
Winning the lottery might bump that up to a ‘10’ for some finite amount of time, but eventually you’d adjust - having lavish wealth would become the new normal for you, and if asked to rate your happiness on a 10-point scale, you might once again answer ‘7’.
This is a similar process to habituation - how drug addicts need larger and larger hits to get the same effects. The human body and human mind adapt, and happiness is measured not in absolute terms but in relative ones. When one’s standards go up, the amount of wealth or power or drugs or whatever needed to make a relative change also goes up. A millionaire doesn’t much react to finding a $20 bill on the street; someone who’s homeless might be ecstatic.
Hedonic adaptation creates greed the same way Spuddies (Pringles) do: enough just isn’t enough. There’s no point at which a pile of treasure or power or whatever becomes ‘enough’ and satisfies a person for the rest of their life. That’s not how satisfaction works. Hedonic adaptation means that eventually, more money/power/sex/whatever will feel the same as when you had less of it, so in the end you always want more.
Fear
Fear is one of the most powerful human motivators. Greed is often motivated by a fear of not having enough, which can be internalized in traumatic experiences.
Consider a child who grew up hungry, poor, or otherwise deprived: their formative experiences are going to be that of not having enough. When they become an adult, if they do wind up making money, that money won’t heal the wounds they suffered as a child. It won’t erase the trauma or overwrite the lessons they learned. That’s not how humans work. That child learned to fear not having enough, and that fear isn’t eliminated by having enough any more than a fear of heights is eliminated by living on the ground floor.
Then there’s the fear of losing what one has. Many surprise expenses, especially medical expenses, can be quite ruinous. Do you really have enough money to get by if you were diagnosed with cancer tomorrow? And so on.
And what about the fear of missing out? With more money, you could do more, travel more, experience more of the world and everything in it. Even if you’re not interested in travel, money buys freedom - freedom from having to go to work every day, freedom from the fear of losing your job, freedom to have what you want when you want it.
There’s always something to fear, no matter how rich you are, and more money always feels like it’ll solve that problem. And more money might even solve that specific problem! But then there’ll be new problems to solve, which require even more money…
And to be clear, these fears exist in humans regardless of the existence of money or capitalism. They’re just expressed in terms of money because money is what we use to trade for whatever we’re really after, which is why capitalism isn’t at fault for greed.
The Economic System Doesn’t Matter
Capitalism is defined as:
an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market
In a capitalist society, money is the universal means of exchange that translates into whatever else people may actually want: power, security, luxury, etc. So people who want more of something must first (generally) get more money.
In a non-capitalist society, money is no longer the medium of exchange, but there is always a medium of exchange. In communist societies the medium of exchange might be loyalty or fanaticism or being friends with powerful people. In a hunter-gatherer tribe the medium of exchange might be one’s personal relationship to the chief.
But there is always a medium of exchange. There is always some way of distributing finite goods, and things like power and fame are by definition always finite, because they are zero-sum. We can’t all be famous; we can’t all be president or chief.
Capitalism distributes these things through (among other methods) money, which one gets by (mostly) creating value for others. There’s a lot of corruption and crap in the system, but there’s a lot of value created there too.
Non-capitalist societies distribute these things in other ways, but they’re no more immune to greed than capitalist societies because greed isn’t fundamentally about money and capitalism is.
Importantly, people who get rich in capitalist societies often do it by creating new things, and they don’t capture 100% of the value they create. Capitalism works in large part because it creates the incentive (riches) for people to do things that have positive social effects (invent the iPhone). This creates enormous consumer surplus. Other economic systems don’t have these incentives, and so create far fewer new things.
Capitalism works because it transforms the greed that was already there into surplus for society. The greed was always there.