Looming large among the vices constituting the Seven Deadly Sins is invidia, that is, envy. It belongs there. A human being infected by the virus of envy becomes a mean-spirited individual, incapable of heeding St. Paul’s admonition to “rejoice with those who rejoice.” The triumphs and good fortune of others elicit not pleasure but bitterness, a bitterness warping and twisting the soul.
Nearly five decades ago, Joseph Alois Schumpeter, an Austrian-born economist who became a permanent professor of Economics at Harvard University, penned a volume touching upon the evil that is envy. Entitled Capitalism, Socialism, and Democracy, the work analyzes the workings of a market economy with rare subtlety and sensitivity. The unprecedented success of such an economy in improving the material situation of the masses is convincingly documented. The crucial role of the entrepreneur in driving such an economy forward – an insight foreign to many of Schumpeter’s peers and their successors – is cogently analyzed. The dynamic nature of real-world competition, a reality utterly unlike the abstract, bloodless concept of “perfect competition” utilized by many economic theorists, is brilliantly depicted. The vital importance of “creative destruction” in the market process is unforgettably described.
All too few economists have understood as profoundly or valued as highly the market economy as did Joseph Alois Schumpeter.
Yet Schumpeter was a pessimist. He asked a simple question, “Can capitalism survive?” To that question he proffered a no-less-simple answer: “No. I do not think that it can.” Whilst thoroughly disliking socialism, he sorrowfully described socialism as capitalism’s “heir apparent.”
It would be easy to assert that the disastrous economic track record of socialist states, and the collapse of such states in Eastern Europe, Central Europe, and the USSR falsify Schumpeter’s pessimistic predictions. Such an assertion would, however, be simplistic. The fatal flaw that, according to Schumpeter, could well lead to capitalism’s demise, cannot casually be ignored.
The argument developed in Capitalism, Socialism, and Democracy cannot fully be outlined in a brief article. Nevertheless, the essence of this argument can be briefly stated.
The market economy generates unprecedented material abundance. Such abundance makes possible the existence of a “class” of people far removed from the processes whereby such abundance is created. Essentially, this “class” of people – the intelligentsia – lives by ideas. It numbers many academics, teachers, journalists, and indeed clergy.
Such people sooner or later focus their attention upon individuals enjoying greater market rewards than do they. Numerous industrialists and businesspeople accrue enormous wealth and attract staggering incomes, yet at least some of those so enriched by a market economy are “vulgar” people. Their tastes lack finesse. Their life-styles are ostentatious. The goods they produce and services they provide frequently are of little cultural or moral or aesthetic merit.
Envy is born. Resentment is fostered. In time that resentment spreads from the “unworthy” favorites of the market economy to the market economy itself. An economic system rewarding allegedly trivial activities and shoddy tastes more lavishly than in rewards “important” activities and elevated tastes is to be deplored. So concluding, the intelligentsia uses its power base – ideas – drastically to reform or utterly to destroy the market economy. Ironically, by so doing the intelligentsia is undermining the very economic system that makes their own existence possible.
So, in essence, argued Schumpter.
At one point the anti-capitalist intelligentsia is indubitably correct. The market is no indicator of moral, aesthetic, or cultural excellence. The eminently forgettable writings of Jackie Collins outsell and out-earn the works of Fyodor Dostoevsky. A rock-singer rendering the all-but-tuneless “music” of Johan Sebastian Merely-Modern earns vastly more for his noise-polluting efforts than a gifted organist earns for performing the miraculous music of Johan Sebastian Bach. Yet the market economy is no more the cause of this sorry state of affairs than are wet roads the cause of inclement weather. The market simply reflects the tastes of the masses, be those tastes depraved or elevated, tawdry or refined. The market, to change the metaphor, is a cultural thermometer, not a thermostat; it registers, but does not control, what men and women in truth value.
This being so, envy of those greatly rewarded by the market is singularly inappropriate. The market’s rewards are determined by the decisions of ordinary people to buy or to abstain from buying. If more people purchase the writings of Jackie Collins than those of Fyodor Dostoevsky, the publisher of the former will earn more than will the publisher of the latter. Those relative earnings indicate nothing whatsoever, however, as to the relative literary merits of the works in question.
It may be – indeed, probably is at times – rational and even responsible to lament the tastes and values informing the choices made by market participants. The intelligentsia, not inappropriately, might feel called to play a role in refining and improving those tastes and values. But that is that. Intervening in the market to “correct” the market and by such fiddling coercively imposing allegedly – perhaps actually – superior values upon the masses is an exercise in cultural fascism. Persuasion, yes; coercion, no.
Ironically, a Soviet friend of the author – Anton Borishenko – recently argued that envy flourishes in an administrative command (that is, socialist) economy. The topic of discussion was the transition in the USSR from an administrative command economy to an economy largely or totally coordinated by free markets.
Anton prefaced his argument with a sad little joke. A genie grants a Russian peasant one wish. A catch obtained. Whatever the genie granted the Russian in question would be granted twice over to that person’s neighbor. The request was simple. “Blind me in one eye.” “Envy is rampant here,” sighed Anton, “and capitalism cannot afford envy.”
Anton’s argument had been anticipated by Charles Murray in his volume, The Pursuit of Happiness. It was simple. In a capitalist economy an individual can earn funds sufficient to purchase a car. By so doing, he or she can “innocently” acquire a car. At the worst, such a purchase might be criticized by others as foolishly extravagant or (given, say, family commitments) irresponsible. In a socialist state such a purchase invites very different reactions. “Whom does he know that I do not? How did he manage to jump the queue? Why should he be granted a privilege denied me? What has he done to deserve a car when I do not?”
In a free market economy, the income an individual earns is a function of nothing more and nothing less than the diverse ordinal rankings of the values of the masses. In a free market economy, the income an individual earns is in large measure a matter of luck. To be sure, that is not the entire story. Financial success in the market demands sensitive awareness to people’s needs, imaginative alertness to new opportunities, persistent application better to serve consumers than do actual or potential competitors, flexible adaptability to changes in consumers’ tastes, and so on. Yet some are “naturally” more gifted in these and other capacities than are their fellows. Some “happen” to be in the right place at the right time. A “chance” element – luck – is involved.
Typically, luck is not envied. An individual “hits the jackpot” and wins Lotto. “Good for you!” that individual’s friends say. “Half your luck!” Yet should some self-styled expert decree that person A’s labors are “objectively” worth one dollar an hour more than the labors of B, envy enters the picture. As do demarcation disputes between rival trade unions.
One could continue ad nauseam. Many envy the person who, as they say, through no merit or worth of his or her own, inherits substantial wealth. Their focus is in error. What is at stake are not any mysterious “rights” of “lucky people” to inherit but the vital “right” of those possessing property to dispose of that property as they choose. The market values an asset in terms of its future earning capacity. If the owner of an asset can pass it on to his children, the chances of his refusing to jeopardize the long-term value of that asset by short-term profit-creating strategies that reduce that long-term value are decreased. The politically determined “owners” of a farm in a socialist state have limited time horizons. All that matters is the voting at the next election or the immediate popularity of “the” Party. The private owner who can pass on his or her possession to his or her children operates with distant horizons, reaching into the far future.
Again, frequently envied income differentials serve a vital function. They signal information otherwise inaccessible, namely, where labor should be deployed if a person is with minimal waste to use what it has to acquire what it wants. Indeed, when income levels are artificially determined, or downward or upward mobility of such levels is artificially precluded, the scarce resource of labor is misallocated and long-term massive involuntary unemployment is guaranteed.
But enough. Envy long has been perceived as an evil. It is envy that is forbidden by the last of the Ten Commandments: Thou shalt not covet. In a socialist economy such a commandment might be difficult to keep, for in such an economy the privileged favorites of (to use a Marxist term) the “ruling class” end up the “winners.” Yet in a free-market economy, envy has no logical place. It is discouraged rather than encouraged, curbed rather than intensified. That such is so is cause for a heartfelt Deo gratias!