Goldman Sachs, Self-Interest, and Greed
The Institute for Faith, Work, and Economics recently wrote:
On March 14, Greg Smith, an executive director at Goldman Sachs, announced his resignation in the pages of The New York Times. He described a culture that had become “toxic” and outright callous to the interests of the firm’s clients.
The Institute for Faith, Work & Economics (IFWE) saw the news of his resignation as a teaching moment. Without taking sides, we sought to point out the important and often misunderstood difference between greed and legitimate self-interest.
Their visiting scholar, Jay Richards, and Vice President of Economic Initiatives, Anne Bradley, did this in a very helpful and brief op-ed for The Washington Times. Here’s an excerpt:
On Wednesday, Greg Smith, an executive director at Goldman Sachs, announced his resignation in the pages of theNewYorkTimes. His reasoning: The company’s employees and culture have morphed into a gross entity that sidelines the interests of the client in favor of making a quick buck. By his account, Goldman Sachs‘ culture has become “toxic and destructive.” Mr. Smith no longer wants to be associated with the Wall Street giant. “People who care only about making money,” he argues, “will not sustain this firm — or the trust of its clients — for very much longer.”
Amen! To care only about money is not only unbiblical; it is also — contrary to what many people think — out of sync with capitalism. Contrary to the 80′s movie “Wall Street,” greed isn’t good, and never has been. Greed does not drive the free market, but actually ruins it. What drives the free market is legitimate self-interest — which is very different from greed. Richards and Bradley explain:
This paradoxical biblical principle, that self-denial is in our self-interest, is also an important economic principle. The greedy miser who hoards his wealth closes himself off to greater economic gains. And in a free market, the greedy merchant who swindles his customers is not likely to maintain profitability.
On the other hand, if we seek to meet the needs of others – whether we are hedge-fund managers or plumbers – we are likely to reap personal benefit. Great entrepreneurs who risk their wealth, delay their gratification and successfully anticipate the needs of others can become fabulously successful as a result.
This is the beauty of the free market: It harnesses our narrower self-interest for the common good. Markets bring together the most willing suppliers with the most willing demanders, and exchange takes place. You freely pay the grocer for groceries, he freely sells them, and you both end up better off than you were before.