Tuesday, February 8, 2011

Commerce as "Social Good"

A friend of mine just brought attention to recent column in The Atlantic by Alexis Madrigal discussing the, arguably stupid, "GroupOn" ad that aired during the Superbowl. He quotes some "rising star blogger" (uh... what?) named Aaron Bady:
"Reading people's complaints about Super Bowl commercials, I'm struck by the feeling that what people are really upset by is the basic fact that the capitalist profit motive is an amoral drive. Yet since that can't register as a scandal -- capitalism, you see, is good! -- we instead use vague, almost meaningless sentences like "in poor taste. The joke of the Groupon commercials, after all, is the foolishness of people who think commerce can be a form of social good. The joke makes no sense unless you accept the disconnect between selfish-desire (purchasing) and social good (charity)."
Now... I saw the ad. It's stupid.

It makes an utterly non-sequitur connection between "saving Tibet", and using GroupOn to get better deals on Tibetan food in Chicago. It makes little to no sense, and it's certainly rather tasteless in the sense that it's exploiting people's (strangely irrational) emotional attachment to the quaint, beautiful, primitive - and almost entirely mythologized - image of Tibet and its people to sell people on some coupon website.

So... If you honestly think that this is an offensive ad, don't use GroupOn's services. Problem solved... I don't really care about that. What I do care about, however, is Mr. Bady's ridiculously misinformed view of capitalism and commerce in general.

First of all, seeking profits isn't "amoral", it's entirely and amazingly "moral" - and much more importantly, an extremely crucial component of material production. I've written about this topic before, and of course, produced this video about Profits:

Profits do many extremely positive things for people. They inform producers what their customers want, and what they don't. They are the basis for economic growth and expansion of capital. That means they are the basis for jobs and prosperity.

Seeking profits by honest competition and innovation (which certainly seems to be the case with GroupOn, although it is obviously not for everyone) is a wonderful thing.

Secondly, commerce is historically one of the greatest social goods imaginable, because trade fosters mutual respect and interdependence. This fosters cooperation and peace, and is why countries (and individuals) who trade with each other almost never fight or go to war with each other.

Bady's ignorance is all-too-common, but it's always depressing. Let's start with some indisputable premises, shall we?
  1. Assuming that we wish to survive physically & mentally, people need material inputs like food, clothing, shelter, art, music, etc.
  2. Those goods do not appear magically. Thus, they must be produced by human labor.
  3. Most people are capable of doing a few things, but not everything. This means that some people will produce some things, other will produce different things.
  4. Individual people act, not groups. And... "Action is an attempt to substitute a more satisfactory state of affairs for a less satisfactory one." (Mises) 
  5. We all seek profit, and we all must - as the alternative is loss
Now... Because people must produce goods if they want to survive and thrive, and because division of labor is key to producing those goods efficiently, properly and in enough quantities to meet the demands of most populations, people will need to get some of the things they need from other people.

So... There are fundamentally only two ways in which people can deal with each other to get the goods & services they need, but which they cannot (or do not wish to) make themselves.

A. Violence.

Like most other animals, we can wait for someone else to produce something - and then we can beat them up or kill them, and take what we want. I hope that it's obvious why this is not a good way to deal with other people.

B. Trade.

We can trade with each other, engage in commerce, and offer goods & services that we produce in exchange for the goods & services that we want from other people. Non-violent exchanges happen if people agree to the terms of the exchange, and thus trade happens when both parties believe that they will stand to gain from the trade.

Commerce is by itself, the essence of social good, as the alternative to commerce is violence and theft.

There is no other option here... We can subvert the violence and pretend it doesn't exist by getting other people to do the dirty work for us. We can, for example, get government to pass laws backed by men with guns to take the productive effort of some people and give it to someone else. Any time we do this, we are still choosing violence - we're just asking someone else to hold the club.

So, Bady is quite wrong. Commerce is a wonderful thing.

It produces the prosperity people need to thrive. It provides people with jobs, with goods & services, with increased standards of living and with the means to pursue their own personal goals. Once people are able to produce enough surplus goods to live without worrying about their basic survival needs, they can actually turn their attention to other concerns...

Like "saving Tibet". For the record, I put that in scare-quotes because Tibet, like all cultures, can either grow & change or it will disappear. People who expect Tibet to forever remain the primitive, isolated society that looks so good in Richard Gere movies are deluding themselves for the sake of aesthetics. There's nothing noble about that, and honestly, nothing particularly respectful.

Where do people like Bady, or his obsequious biographer at The Atlantic, think that the money and resources for charitable donations comes from?

As rhetorical as that question might seem, I think the real answer here is that... They simply don't have a clue.

And while we're on the subject of "charity", the fact of the matter is, it's ironic that Bady talks about commerce as if it is just one-sided "purchasing" - by which I'm sure he means "consumption". Commerce isn't consumption. Commerce is trade. It's both production and consumption.

Charity, which Bady considers to be the only social good, is - in fact - purely consumption.

I have a feeling that he doesn't really grasp this point very well, though. Charity is fine, of course, but frankly it's not really the greatest solution to most problems. For one thing, it's pure consumption. It's expending resources without producing any resources... and that is a great way to lead to long-term loss.

Bady's view of what's in society's best interest is ultimately the thing which would bankrupt and impoverish everyone. Sounds like a great plan, doesn't it?

So what's the alternative to charity?


Poverty Cure - Short Promo from ColdWater Media on Vimeo.

Charity can help get people by in times of crisis. It can be a good way of helping people in the short term, and  if it goes into capital development - be that machinery, education, or goats - it can be a decent way to start long-term help.

But investment is better. It's better because it expects and requires returns to continue. It's not pure consumption. Production and commerce, when supplying people with what they want, earn profits and generate returns on that investment.

As Walter Williams said:
"One of the wonderful things about free markets is that the path to greater wealth comes not from looting, plundering and enslaving one's fellow man, as it has throughout most of human history, but by serving and pleasing him."
Charity may make you feel good, but it doesn't necessarily do good.

This is why I encourage giving to groups like Heifer International, or Kiva, if you want to be charitable. And it's most importantly why I don't begrudge anyone legitimately engaging in voluntary commerce. It's the way to long-term prosperity, and that is what helps people for real.

Commerce is most definitely the route to social good. Trade is moral. Violence is not. Production is good, consumption is necessary and an essential part of a quality standard of living. But consumption for the sake of consumption is just wasteful... If you want to help the poor and make the world a better place, then don't consume for its own sake, and use that money instead to help people become entrepreneurs & producers.

I want to see more of that, and less of the nonsense spouted by Alexis Madrigal & Aaron Bady.


zero reference said...

Somewhat related to your argument, where is the philosophical argument that something _necessary_ (which, after a cursory reading, seems to be closer to what you're arguing than 'good') must be good.

Death is necessary and inevitable.
Killing animals to eat is necessary.
Sometimes, killing in self-defense is necessary.
And so on, etc, etc.

Calling something "good" or moral, I think, requires additional qualification beyond its necessity.

Or, I could be wrong. If you know any economists (or more likely, philosophers) who address this issue, please bring them up! It could be a great blog post.

Sean W. Malone said...

You may have a point there... Certainly from a philosophical stand point I can say that on the basis of human life as a primary value, anything that is necessary for humanity to survive & thrive is by-definition a moral "good".

At the very least, it cannot be considered an evil - as is unfortunately often done (especially by religious or Malthusian zealots).

That said, I think its fair to call commerce a "social good" in the moral sense based on the fact that to succeed in commerce - at least to do so without government coercion on your side - you need to offer other people goods & services that they value. In other words, you must increase the wealth available in the world, and that by definition, makes human beings better off than they were before.

If we cannot consider the improvement of the living conditions of man-kind a "social good", I'm not sure what we could at all.