Warren Buffett: Practical Philosopher of Capitalism

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7 Responses

  1. Larry Sheldon says:

    Warren Buffet is no more a “capitalist” than I am the King of Siam.

    Buffet is a Big Government Socialist.

  2. Matt says:

    For what it’s worth, the characterization of Mill here is, at best, highly contentious and almost certainly wrong. Mill argued for a version of socialism, held the belief that essentially anything that could be done well by a “joint stock company” (i.e., a corporation) could be done at least as well be the government, and that there were circumstances when essentially any activity should be undertaken by the government. Perhaps he was wrong on those things, but if he’s going to be invoked, it’s worth getting his ideas right.

    Even in the area where he is most “libertarian” (in a loose sense)- the idea that people are generally the best judge of what’s good for them- there’s reason to think the domain where this is true is a pretty fair amount smaller than what Mill thought. And, when that condition didn’t hold, Mill was all in favor of regulation.

    His views are really quite different from those of Smith, Hayek, and Friedman (who, in turn, all have significant differences from each other.) I’ll suggest that this sort of lumping might be of some rhetorical use at times, but is of no intellectual or analytic value.

  3. I second Matt on Mill (and Kwame Anthony Appiah’s 2005 book, The Ethics of Identity helps us see precisely whey Mill is a far more complex thinker than that canalized in the portrait of him as a libertarian democrat, let alone apologist for capitalism). As for Adam Smith, again the picture is far more nuanced and interesting than current ideological employment of the man and his ideas than one that, say, places him alongside Hayek and Friedman. First, see my post on the man here: http://ratiojuris.blogspot.com/2011/04/getting-adam-smith-wrongand-getting.html And then, see this from someone with far more economic expertise than I’ll ever possess: http://logosjournal.com/2013/pack/

  4. For the record, I don’t think historical truth is best propagated in the proposition that “whole societies practiced socialism,” for that to be the case we would have witnessed something far closer to democratic socialism than what was found in the motley Party-State regimes that enforced their unimaginative, authoritarian conceptions of socialism from above sans little or no democratic dialogue and participation throughout the society. In any case, the historical record is not testament to the moral, political or economic exhaustion of the possible meanings of what socialism might entail in would-be democratic societies.

    I think a Marxist economist, Meghnad Desai, has given us succinct yet nuanced and accurate assessment of some of the virtues and vices of the capitalism:

    “Capitalism is not a kind or a benevolent system. It is the most effective mode of production discovered so far in wealth creation [despite its endemic ‘cycles, with their manias, crashes, and panics’]. It has no overarching objective, since it works through the profit-seeking efforts of millions of capitalists. It generates economic growth, prosperity, and employment as side-effects. It also causes much misery and destruction in its tendency towards incessant change. But over the last two hundred years, it has achieved the largest gain in well-being in all previous millennia. For one thing, many more people are alive now than in 1800 (around six times as many), and they live longer on average—between ten to twenty years longer—than they did then. [….] If length of life can be taken as a crude measure of potential well-being, a billion people living, say, forty years on average in 1800 compared to six billion people living sixty year today speaks volumes for the success of capitalism. In 1800, perhaps two thirds of that billion were poor; today, at most a quarter of the six billion are poor. Yet the reduction of poverty is neither automatic, nor to be taken for granted. [….] Adam Smith was not wrong, however, in saying that the new system of natural liberty imposed the cost of inequality while delivering a universal betterment of living standards. More people have been brought out of poverty in the last two hundred years, especially since 1945, than ever before in history. The very idea that poverty could be eliminated could not have occurred in any precapitalist stage. Capitalism provides the means for eliminating poverty, but these means were not directed immediately, or evenly, in the course of its development.”

    Both China and India of late provides compelling contemporary evidence that capitalism can make enormous strides in addressing the question of poverty, but it has been purchased at the price of inequality (regional, income, and otherwise). The creation and persistence of new forms of “relative” poverty and inequality, the system’s “manias, crashes, and panics,” and the ecological and environmental problems we face today, are among the more prominent reasons we have to begin, once more with Marx, to look beyond (in an Hegelian dialectical sense) this system (although Marx had comparatively very little to say about socialism and communism, his analytical prowess being devoted to capitalism). Capitalist-inspired Neoliberal austerity programs around the globe may yet sow the seeds of destruction from within the system itself.

  5. Excellent article! Warren Buffett has certainly done more for capitalism than any of the self-proclaimed defenders of capitalism on the right. While the latter have, if anything, hurt the public’s perception of the benefits of capitalism, Buffett has in his down-to-earth, folksy way made capitalism respected. He has done so not only in the U.S. but, perhaps more importantly, around the world.

    Buffett may have as much as any one individual to do with countries like India and China turning toward capitalism. He is the perfect role model — succeeding hugely as a capitalist while leaving most of his personal rewards to those who need them most.

    Isn’t that the ultimate vision of a successful, self-healing capitalism system? Buffett’s vision leaves the prospect of huge riches firmly intact for anyone willing to work hard, invent, and embrace personal initiative. Yet, he also signals that it’s okay to be a “do-gooder” once our personal needs and wants are fully met. In this respect, he departs firmly from Ayn Rand, whose vision of capitalism may offer something to the purists but is hardly palatable to the rest of us.

  6. Ken Shubin Stein says:

    Fantastic Essay! Compassionate and fair capitalism, not unrestrained Darwinian capitalism, is the only stable version of free market capitalism that works.

    Too often members of our society with significant wealth ignore the role that luck plays in all our outcomes, and the structural advantages that start to accrue to those with lucky early starts, or entrenched positions of power.

    Buffett acknowledges these realities, is appropriately grateful for them, and advocates for a system that partially addresses them. In doing so, he combines the best aspects of capitalism, competition and fair-play in a way that appeals to our sense of basic fairness and and our ambitions.

  7. It’s hard to imagine anything “fair and compassionate” about human beings in an economic system which necessitates their assuming a primary identity as subjects, and therefore objects, of commodified labor, in effect, chaining themselves to the whims and caprices of labor markets. It’s hard to imagine what is fair and compassionate about an economic system in a democratic society in which owners of capital are, by definition, structurally positioned to exercise more individual and collective power than those who do not own capital (the fact that some workers themselves may become such owners does not alter these structural facts). It is hard to see what is fair and compassionate about an economic system that is adept (by virtue of the nature of consumption practices it generates, among other things), in engendering cognitive illusions among its laboring subjects, to wit:

    “Outside the factory gate [so to speak], no one can tell the worker what to do. He can purchase the goods he wants to, within the limits of his wage. He can change employer, within the limits of alternative employment. He may even try to become self-employed or an employer himself, and sometimes succeed. That freedom, while ultimately a danger to capitalism, has useful short-term ideological consequences, since it creates an appearance of independence not only from any particular capitalist, but from capital itself.” (Jon Elster)

    But of course most workers, most of the time, will never be “free of capital,” that is, they will always be subject to the decision-making of capitalists and those in government who support them (out of fear, for instance, of a ‘capital strike’), whether or not those decisions are in their best interests as they might come to understand and cherish them. The best workers can do for themselves is to organize into unions, but even then their bargaining power is subject to the sorts of systemic constraints which cannot alter fundamental economic facts about the system itself.

    A capitalist society systematically encourages and entrenches the view that the best life for the individual is one of consumption (broadly understood), and that it is consumption that creates (in other words, is responsible for) both happiness (or well-being) and welfare. The principles of distributive justice in such a society are, in the end, determined by the “producers,” that is, in its own terms, the owners of capital, and their possession of the requisite motivation and information. The most popular economic theory (this or that version of neoclassical economics) in this society promotes the view that the motivational and informational consequences of this private ownership of capital by capitalists results in an economic system superior to all existing and imagined alternative economic arrangements. First and foremost, the system propagates the view, through means both crass and insidious, that the best life or “the good life,” is one of passive consumption.

    Historically, capitalism has tended to undermine those reference groups and communities that believe life should be lived under the “authority of the Good” (variously conceived), rather than the “aristocracy of Capital.” In a society ruled by an economic system in which our defining power or attribute is our “labor power,” in any conflict between our moral values or conceptions of the Good and the economic interests of capitalists (or Capital), it is the latter that will have the final word: in the end, its interests (e.g., the profit motive) trump all other interests. Nothing can thwart the eventual realization of the fundamental goal of the system: the maximization of profit. Sundry individual and societal goals, ends, values, standards, and principles are distorted by or subordinate to the market criteria of capitalist success (e.g., its criteria for economic efficiency).

    It is hard to understand what is fair in a capitalist democracy in which the control of investment “the satisfaction of the interests of capitalists is a necessary condition for the satisfaction of all other interests in the system,” which means “the welfare of workers remains structurally secondary to the welfare of capitalists,” a fact we conveniently forget in times of economic abundance and low unemployment (the trickle-down effects) but is resurrected in the wake of the cycles, crashes, and panics endemic to capitalism. The decisions of capitalists are directly responsible for the well-being of workers, and thus we see the “interests of capitalists appear as general interests of the society as a whole [while] the interests of everyone else appear as merely particular, or ‘special.’” As for the articulation of those interests inextricably tied to basic human and political rights:

    “In a capitalist democracy the exercise of political rights is constrained in two important ways. In the first place, the political rights granted to all citizens, workers among others, are formal or procedural, and not substantive. That is, they do not take into account in their own form and application the inequalities in the distribution of resources, characteristic of capitalism, which decisively affect the exercise of political rights and importantly limit their power of expression. [….] Capitalist democracy also tends to direct the exercise of political rights toward the satisfaction of certain interests. The structuring of political demand, or what we call the ‘demand constraint,’ is crucial to the process of consent. [….] [C]apitalist democracy is in some measure capable of satisfying the interests encouraged by capitalist democracy itself, namely, interests in short-term material gain.”

    This “demand constraint” canalizes the articulation of the interests of working people into the exclusive pursuit of economic advantage, in part owing to the ubiquitous conditions of “material uncertainty” for all but the wealthy classes: “There is a characteristic economic rationality to the actions of workers encouraged by capitalism. In the face of material uncertainties arising from continual dependence on the labor market under conditions of the private control of investment, it makes sense for workers to struggle to increase their wages.” One well-known consequence of this state of affairs is that it dramatically lessens the likelihood that workers will spontaneously awaken the requisite energy and craft the collective tools necessary for critiquing and transcending the system as such, in other words, for playing a formative role in the creation of a society in which their primary identity is not one of wage laborers (think, for instance, of the question invariably asked at parties and other intimate social gatherings: ‘So, what do you do [for a living’?’) See Joshua Cohen and Joel Rogers, On Democracy: Toward a Transformation of American Society (Penguin Books, 1983).