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Greedy Bastards May 18, 2009

Posted by Kate Ryan in Economy, George Will, Greed, National Politics, Politics.
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Ralph Bellamy and Don Ameche in 1983's "Trading Places"
Ralph Bellamy and Don Ameche in 1983’s “Trading Places”

In the 1983 comedy classic “Trading Places”, brothers Randolph and Mortimer Duke (Ralph Bellamy and Don Ameche) make a bet that affects the lives of con man Billy Ray Valentine (Eddie Murphy) and blue-blooded investment counselor Louis Winthorpe III (Dan Ackroyd).  In a famous exchange from the film, the brothers are discussing their attempts to corner the frozen orange juice market:

Randolph Duke: Money isn’t everything, Mortimer.
Mortimer Duke: Oh, grow up.
Randolph Duke: Mother always said you were greedy.
Mortimer Duke: She meant it as a compliment

I thought of the Dukes this morning when I opened the local paper to see a piece by my “favorite” Conservative columnist, George Will.  Headlined, “Greed’s Saving Graces”, Will’s article snarkily chastises those of us who are laying the blame for the current financial crisis at the feet of the wealthy class in America.  In his best Gordon Gekko imitation, Will pontificates, “…everyone knows we are in our current economic pickle because greed, which slept through the Clinton administration, was awakened by the Bush administration’s tax cuts and deregulation.”

O.K., George, you got me there.  There were greedy people during the Clinton administration.  I agree with Will’s impatience at partisan shame when he says, “Greed grows when Republicans hold the presidency.”    Truly, greed is sort of the human condition – there are few of us that have lived our lives unaffected by it.   But even George Will can not explain the destruction of the American middle class, growing wealth inequity, and rising economic hardship (since the “Reagan Revolution”) by mere market forces alone. 

Will states that we find it difficult to define greed, but like pornography, we know it when we see it.  He explains that our common definition is, “That person is greedy who earns, or wants to earn, more than is seemly.” 

Like all Conservatives – especially the hoity-toity ones like himself – Will believes that we great unwashed just envy those hard-working rich people.  So we satisfy ourselves and explain away our inability to create wealth as the other man’s greed.   If we were smart like him, we would realize that “…when markets are allowed to operate, greed generates its own punishment.”  To prove his point, Will uses an example from an economist that studied ticket sales on Stubhub, an internet site for ticket-scalping.  The economist found that “deregulated markets punished greed”, in that prices to tickets went down as a large supply of them remained as an event drew near.  Any seller intent on gouging a customer on his asking price had to lower it or be left holding the bag on an unsold ticket.  Ergo, says Will, a greedy seller is punished by having to lower the price for his tickets.

The Stubhub story is an example of perfect supply and demand economics, and it could be said that the marketplace here controlled greed, but is it a true analogy to the meltdown of the world economy?  Not exactly. 

Stubhub is a near-perfect capitalist marketplace.  Individual sellers market their product at a price they’ve set based upon the demand for the product, the supply available, and the quality of that supply.  Sellers generally do not collude prices with other sellers.  Every buyer coming into the site is free to comparison shop and decide what – if anything – suits his needs.  Buyers are also free to try to obtain their product by other means.  This way, the marketplace does control price – and can tamp down price gouging and greed.

This is not the way, however, that the world marketplace actually works these days.  Take the credit card industry for example.  A consumer is generally not free to not have a credit card.  The ability to produce a credit card for a whole host of products or services is the only way to get things done.  The issuing companies, however, do not have to follow any type of contract they signed with you.  They can change your interest rate, apply it to your entire balance (not just new purchases), double or triple your minimum payment, and charge exorbitant fees for any or no reason at all.  The only real “competition” among credit card issuers is the tease they use to get you to sign up with them.  How is this an example of a free market?  These banks – that are borrowing money at less than 1% – are charging customers 29.9% interest for being late on their electric bills.  Sorry, George, that’s greed.

As defined by Webster’s, greed is “an excessive desire to acquire or possess more than what one needs or deserves, especially with respect to material wealth.”  Excessive. 

I have nothing against rich people – I would sincerely love to be a rich person some day – but greed is a danger of wealth.  It is when you can buy everything you need and everything you want, but you still want more.  Greed is marked by excess.  It is the idea that you charge excessive fees, you cut corners to make excessive profits, you pay your executives excessive bonuses – because you can; because there is nothing there to check you – like regulation. 

Greed has no saving graces.  It is a lust that can never be satisfied.  As the ancient Roman poet Horace said,  “He who is greedy is always in want.”

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