Analysis of current crisis of capitalism due to promotion of greed. Explain the reasons why greed was promoted in the West, and explains how the outcomes were not in line with expectations. Suggests how East can try to avoid falling into the same trap; For slides with embedded audio, see: http://asadzaman.net/online-lecture/economics/capitalism-in-crisis/

1. Capitalism in Crisis:
Causes & Consequences
Dr. Asad Zaman
Islamic Banking Forum, Bandung, Indonesia
26 December 2011, Location: University Padjadjaran
Slides+Audio available from:
http://asadzaman.net/online-lecture/economics/capitalism-in-crisis/

2. Crisis on Many Fronts
 Global Financial Crisis & Consequences
 Extreme & Increasing Income Inequality.
 Massive Ecological and Environmental Problems
 Crisis of Knowledge – Economic, Social, Political
Theories
 Corrosion of Character in Market Society.

3. Root Causes of Crisis are Deep
 Mortgage CrisisGreed Encouragement of Greed.
 A failed experiment spanning two centuries.
 Solutions no longer available in West
 Islam offers solutions & opportunity to lead the way.
 But leadership requires vision & courage

4. Root Cause: Promotion of Greed
 BIBLE: “Love of money is the root of all evil”
 Shaw: “Lack of money is the root of all evil.”
 How did we get from BIBLE to Shaw?

5. Why & How Greed became Good
HISTORY:
 Corruption in Catholic Church
 Martin Luther: The Reformation
 Bloody, Interminable Warfare between Protestants &
Catholics
 Emergence of Secular Thought.

6. Needs of a Secular Society
 No common goals. Society requires commonalities:
 FREEDOM to pursue their own religion.
 FREEDOM to pursue Wealth – means to all ends.

7. Needs of a Market Society
 Market Societies generate surplus, creating power,
search for consumers, exploitation, conflict, wars.
 Centrality of Markets requires strengthening
motivation of greed.
 Division of Labor, Specialization contrast with self-sufficiency.

8. Societas versus Polis
 Polis: Society is an organic whole, united in a
common purpose.
 Societas: No agreement on goals, values and
purposes in a secular society. Political and social
organization is a means of regulating conflicts and
allowing people with disparate and conflicting goals
to live together in peace.

9. Why Greed is Good: I
 “The modern conservative is engaged in one of man's
oldest exercises in moral philosophy; that is, the
search for a superior moral justification for
selfishness.”
 Attributed (perhaps incorrectly) to: J K Galbraith
FIRST ARGUMENTS:
 Passions versus Interests
 Religious Fanatics cause a lot more bloodshed then
greedy traders. Greed is counterfoil to Fanaticism.

10. Why Greed is Good: II
SECOND ARGUMENT:
 Invisible Hand Paradox:
Selfish actions lead to social benefits.
What is the need for such an argument?
 Hobbes: people are brutes; powerful government
 Locke: society will self regulate - government role to
ensure level playing field and protect property

11. Greed is Good: III
Early 20th Century Arguments
Max Weber defines The Protestant Ethic as:
the earning of more and more money, combined with the
strict avoidance of all spontaneous enjoyment of life… It is
purely an end in itself, (with no relation to) the happiness of,
or utility (of) the individual. It appears … absolutely
irrational. Man is dominated by the making of money, by
acquisition as the ultimate purpose of his life.
This reversal of … the natural relationship (money for
satisfaction of needs), so irrational from a naïve point of
view, is definitely a leading principle of capitalism.

12. IV: The Keynesian Argument
 When the accumulation of wealth is no longer of high
social importance, …(morals will improve).
 The love of money … is a disgusting morbidity
 .. But beware! For at least another hundred years we
must pretend to ourselves and to everyone that fair is
foul and foul is fair; for foul is useful and fair is not.
 Avarice and usury and precaution must be our gods
… For only they can lead us out of the tunnel of
economic necessity into daylight

13. V: Friedman & Hayek
 Hayek: Individual Freedom is the HIGHEST goal.
 Friedman: Business should only pursue profits –
SHOULD NOT pursue social goals.
CONSEQUENCE ONE:
 Boesky: Greed is Good.

14. RECAP: The Great Hope
To SUMMARIZE:
 Greed is a powerful force.
Allow it freedom in the LIMITED domain of trade.
 Wealth will accumulate, and lead to HEAVEN on Earth.
 Freedom from all needs and wants.
 Luxury for all.
 Excellence in Morals as well

15. The Consequences
 The Jinn of “Greed” comes out of the bottle.
 Does not remain confined to trade.
 Penetrates ALL social institutions.
 Reversal of ALL social values, and catastrophic
consequences.

16. Dashed Hopes:
Traders Are Worse Than Fanatics
 Iraq War:1 million killed, 40 million lives destroyed –
for oil
 Debt kills. Some 11 million children die each year
around the world, due to conditions of poverty
and debt.
 Unfair trade (Oxfam) US 1 billion per day of aid to
farmers in rich countries, affects lives of 2.5 billion
poor farmers.

17. Dashed Hopes:
No Trickle-Down

18. Dashed Hopes
No Prosperity
Hunger, Homelessness, Unemployment are at Record
Levels:
USDA reports for 2009
 Record 15% = 50 million people hungry
 Record 1 million individuals, 170,000 families homeless
Bureau of Labor Statistics:
 Record: 15,000 or 9% unemployed, highest since 1950

19. Dashed Hopes:
No Happiness
 Highest Divorce Rates: 50%
 Lowest Marriage Rates: Half couples just “live
together” – no commitments
 33% USA, 50% UK, Children living in broken homes.
 Loneliness: 33% one person households, up from 10%
 Is there anyone you can talk to about your problems?
Majority say NO.

20. Corrosion of Character
 Everything for sale in market society – humans,
wombs, kidneys, pollution rights, etc.
 Josephson Institute Surveys.
 All is fair in love and war.
 Hiroshima, Nazi death camps, Dresden

21. Why talk about Problems of the West?
 Why not our own difficult problems in EAST?
 ANSWER: The train we are on is headed West
 All of these problems are “COMING SOON”
 We must get off & change directions.
 A propaganda machine glorifies the West.
 Creating the will for change requires learning
the TRUTH about the West.

22. Illusion: Money buys Happiness
Reality: The Easterlin Paradox
 What is true for an individual is not true for society.
 Every person is happier with more money.
 Not true for society as a whole.

23. Reality: Richness is Contentment
Simple Lifestyles lead to global happiness.
Pursuit of Luxury leads to global unhappiness.
Greed is self-destructive.
Lane: Loss of Happiness in Market Economies.
Barry Schwartz: "The Costs of Living: How Market
Freedom Erodes the Best Things in Life.“

24. Illusion: World is Richer
 GNP per capita is increasing
 Science & Technology advancing
 Inventions, Gadgets, etc.
 Computers, Rockets, etc.
 Knoweldge Explosion

25. Reality: World is Poorer
 Countries & Societies destroyed for profits.
 Species of Flora and Fauna destroyed.
 Ozone Layer, Rainforests, Lakes, Rivers – dead &
dying
 Costs of resources used up more than growth.
 Loss of Wisdom.

26. Illusion: Humans are Better Off
 Vacuum Cleaner, Referigerators, Washing Machines
 Rockets, Genetic Engineering, Nano-Technology
 Internet, Computers, Social Networking
 Medical Advances
 Increased Life Expectancies.

27. Reality: Moral Degeneration
 Selfishness, Pursuit of Luxury  broken families
 Children in broken homes: 33% in USA, 50% in UK
 Higher crime, alcoholism, depression, suicide, etc.
 Universities provide no moral training.
 Happiness depends on virtue: generosity,
compassion, love, sacrifice.

28. Analysis & Stock-Taking
 The West is lost – they don’t have the social/cultural
resources to recover from social collapse.
 Our turn is next – we are rapidly headed the same
way.
 Greed, pursuit of pleasure/luxury, selfishness are
being rapidly promoted.
 Hollywood present a charming picture of a cruel
reality.

29. Solutions: How to Fight Back
 Promote Generosity
 Promote Concern for Others, Compassion
 Promote Trust
REVERSE MBA:
 We do service to earn profits
 We make profits to provide service.

30. The Most Important Fronts
 Promote Families
 Building Character – the literature of the East
 Money is to be spent on others, not to be hoarded or
accumulated.
 Promote SIMPLICITY and reduced standards of livings