Type X or I Motivation
By Elgin Hushbeck, Jr.
One of the common criticisms of those on the left, particular the religious left, is that capitalism is an evil system because it treats individuals as commodities of momentary worth, rather than as people made in the image of God. This is really just a self-serving definition that tells us more about the person making the claim than about capitalism itself.
One reason for this is that at its core capitalism is based on a mutual giving among individuals that is, at least ideally, freely chosen. There is nothing in this that demands greed or exploitation. Granted we live in a fallen world where people are not always driven by the highest motives, but this is a problem with all systems, from sports to science, movies to teaching, the private sector, government, and yes, even socialism. It is hardly limited to capitalism. People are people, regardless of where they are. One of my favorite quotes is by Victor Frankel from his book Man’s Search for Meaning (If you have not read it, you should do so now). Frankel, from the perspective of one who had recently been freed from a Nazi Concentration Camp, wrote,
From all this we may learn that there are two races of men in this world, but only these two — the “race” of the decent man and the “race” of the indecent man. Both are found everywhere; they penetrate into all groups of society. No group consists entirely of decent or indecent people.
There is nothing inherent in capitalism that makes men greedy or teaches them to exploit others, in fact if anything it is the opposite for capitalism simply seeks an exchange that is best for both sides, where what is best is determined by each individual. Since it is based on mutual consent, it encourages people to be concerned with the needs of others, which I believe is one of the reasons those supporting capitalism are on average more charitable than those supporting socialism. If someone were driven by greed and a desire to exploit others, unless there was some mechanism to restrict choice, they will find it difficult to find those who will freely want to be exploited.
You will notice that I have talked about a generic “exchange” instead of money. While money is required for most transactions, this requirement is not inherent in capitalism. Capitalism, for example, functions just as well in a barter system where no money changes hands. It is only economic conventions, and in some cases laws, that require the use of money.
Nor is there any requirement to accumulate great wealth, though this might be the result of one or more exchanges. Again each side decides what is of value to them. While for some profit is important, it is also often only a means to a different end, and not an end in and of itself. For many companies profit is just a means of staying in business, for if there is no profit, the business fails. For many profits are reinvested back into the business so it can better serve customers, open new locations, and yes, even hire more employees and to pay them better.
[ene_ptp]Many may find this strange, particularly given that there are some sections of the economy that are more profit focused than others. For example, the stock market is very profit focused, but is this really greed? When you combine households, mutual funds, pension plans and government retirement plans invested in the market, you are looking at about 70% of the total market. Insurance policies’ holdings that protect people from risk make up another 7%. Is it really greed that is driving people to save up for retirement?
Add to this the growing number of purpose driven companies, companies where profit is seen as simply a means to other and often more noble goals. Again, to many it might seem strange, but the companies that focus less on profit and more on a purpose often do much better.
This is because there is a growing body of evidence that the traditional carrot and stick approach to motivation, what is called Type X motivation, is of limited value, and may not be a very good fit for a 21st century economy.
Extremely briefly, for thousands of years societies have been based on extrinsic rewards and/or punishments to motivate people. While these worked in some situations, they become increasing ineffective and even counter-productive the more a task requires creativity or originality, something a growing number of modern jobs require. For example in one study, some artists were commissioned to produce a work of art while others were ask to contribute a work without pay. Later a group of judges, without knowing where these pieces came from, ranked the works of equal quality, but consistently ranked the art works that had been commissioned to be lower in creativity.
Where all this enters into capitalism is that the motivation behind an exchange is left to the individual. Sure a person could seek a higher wage because they are greedy, but they could also seek a higher wage as it allows them to travel to third world countries on their vacation to spend that time helping those in need. The motivation is up to them and capitalism works either way.
Intrinsic or Type I motivation is much more powerful than type X, which is why purpose driven companies often do better than those who seek only profit. While we are in a transition to purpose driven, like the transition into the industrial age it will not be easy. Intrinsic motivation is driven by Autonomy, Mastery, and Purpose. People must believe in what they are doing, spend the time and effort to master what they are doing, and be free to determine how they do it.
Since capitalism does not care what motivates a transaction, only that it is freely entered into by both sides, both forms of motivation are consistent with capitalism, though the freely-entered-into part requires at least some autonomy. Intrinsic motivation strongly conflicts with socialism, at least in its current form, as socialism requires a strong central government. While mastery might still fit, purpose is questionable. It would be fine if your purpose just happens to line up with the Government’s but if not, you have to try and find a way around the government. The biggest problem however is autonomy. Government by its very nature is based on the older extrinsic motivation model. Do one thing and you pay a fine, or even go to jail. Do another and get a tax break. Classic type X. Government restricts autonomy, at times even the ability to freely enter into a transaction. The bigger government is the more laws and regulations it passes the less autonomy people can have. This is a big mark against socialism, and in favor of capitalism. It also to some extent helps explain the success America, with its emphasis on Liberty (autonomy) and until recently limited government, has tended more towards Type I.
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I did feel that I might possibly be a target of this, so have replied at http://eyrelines.energion.net/?p=1015
Chris
I was not targeting you, at least not as I remember. Given this post was written several month ago, I only have a vague recollection, but it primarily came from a management book by Dan Pink called Drive that I had read, which focus on motivation and I wanted to comment on how this view contrast with the normal characterization of capitalism. (http://www.danpink.com/books/drive/)
As for the comment about it telling me more about the person than Capitalism, I think that is generally true for “those on the left, particularly the religious left.” I do not see capitalism as grounded on greed and exploitation. Such pejorative terms in a definition is by definition slanting and the expression of an opinion more than an objective definition. Thus when I hear such language I know the person is probably going to be on the left side of politics and the more strident the language the farther to the left, normally. Thus the statement does tell me more about the person making the statement than the subject of the statement.
Of course, this is general statement not a universal one, and to take it as a universal statement is incorrect. In fact, I think you took this far too personally, as I was making a very general point about capitalism and motivation and how that was transforming the market place. But you are correct that I had not read your four articles, but will try to do so in the near future. So I will not comment on many of your statements defending your views from charges I did not make. I will however address a few of your comments as they touch on what is and is not capitalism.
As for whether what I support is properly called capitalism or not, I think it is important that we not get so tied up in a debate over a term that we miss what I am actually arguing for. There is clearly a difference between what you are objecting to and what I and other supporters of capitalism are supporting.
You wrote, “Elgin writes of an idealized (I’m tempted to say “fantasy”) capitalism, suggesting that greed and exploitation are not at the root of a free market capitalist economy, but this is not what conventional economic theory says;”
As for traditional economic theory, that may be a major difference between us. I do not see capitalism as a static institution that was developed by Adam Smith, and has not changed since. It is a dynamic system that continues to grow and adapt. I also reject the notion we homo economicus. It is a nice theory but one that is not born out in practice.
Can one find examples of greed and exploitation from capitalist? Sure, people are people, but I would argue they are more the exception than the rule, and you can find examples of greed and exploitation in Socialism as well. I think it would be very hard to argue that workers in communist states were always treated as individuals. Millions were starved to death in the Soviet Union, but that hardly makes starvation a defining characteristic of communism, even if it is often a tragic result.
Whatever Capitalism may or may not have been in its early years, recently it has come to focus much more on people, be they employees, or customers. After all, where are all the management books on how to be greedy and better strategies for exploitation? Instead we see lots of books on how to treat employees and customers better, Dan Pink’s book Drive being just one of them. Another I recently read was a three volume set by the Arbinger Institute: Leadership and Self-deception, the Anatomy of Peace, and the Outward Mindset. I would defy anyone to read these or any of the many other such management books and try to show how they are teaching that greed and exploitation should be at the core of how managers and businesses should operate.
I would agree that my description is idyllic if not frankly utopian, but then so are the competing description of Socialism, and the descriptions of the benefits of a larger government protecting individuals form corporations. I believe the big difference is that as we move incrementally closer to my idyllic version, the better things get, the more wealth is created, the more people are concerned about win-win transactions the more freedom people have.
History is pretty clear that the more we move towards the Socialist vision, the worse things get, less wealth is created and various groups get pitted against one another to divide up a decreasing pie, or at least a pie that is not growing fast enough. Again I cannot speak to the situation in the UK, but just look at the current Democratic Party here which is built on dividing people into groups (rich, poor, white, black, etc) and then pitting them against each other. Things are so turned upside down that to believe that all lives matter or that the color of your skin should be irrelevant is considered racist.
Yes you are correct that I am “fond of saying that taxation is bad, because it holds back ‘wealth creation’.” But this is not because I see people only as units of consumption and production. This is because I see people as individuals with wants, hopes and needs. I believe people should have the opportunity and ability to fulfill those wants, hopes, and needs and that takes wealth. In short I take it as a given that people in the 1st world are generally better off than those in the 3rd world, because there is more wealth in the first world.
I also do not believe that we have sufficiently reached a state where all people have a surplus. Far too many people are in need of basic necessaries of life, but before wealth can be redistributed, it must be created, and so yes, I like to see more wealth creation, and am concerned when it is limited, because that mean that at least some will have a lower standard of living.
You said at one point, “It tells you that I’ve encountered (and advised) large companies governed by cost accountants, balance sheets and share prices, I’ve encountered (and advised) individuals ground down to unsustainable wages and then continually pressured to make more and work harder and faster for no extra benefit to them than that they keep their jobs while the capitalists they work for grow rich, and others thrown on the scrapheap of society as unemployable and therefore worthless, and somehow also morally reprehensible.”
It may surprise you, but I agree, and in the past have written about, many of the problems you list here. While I am unclear the to the exact causes in the UK, here I see this being caused by an increasingly powerful and controlling government sector that benefits the large and well connected companies at the expense of smaller companies and individual. A classic case in point is the recent Dodd Frank Banking bill, loved by the left, and opposed by the right, which despite all the rhetoric and promises has protected the largest banks while smaller community bank being pushed out of business. Yet I do not see this as a problem of capitalism, but of crony capitalism. The solution is not to be found in even bigger government, but in less.
As for “It tells you that I’ve seen societies in which the size of your bank balance is the main indication of your worth as a human being (and on both sides of the Atlantic that is increasingly true)” while true, as my article tried to make clear, this is not an inherent characteristic of capitalism. My values are not derived from economics, and to derive values from economics is a form of materialism which I would oppose.
You wrote that “Most typically this change is seen in the case of small retailers who have almost all fallen to the supermarkets and chain stores, which, of course, operate purely for profit; these may try to make their customers happy, but this is at the expense of their producers and their workers (and in the celebrated cases of Wall-Mart and others like them, the expense of the taxpayer who subsidises the workers’ poverty wages).”
I have always found such argument puzzling. Chains stores succeeded in the market place because they were able to provide a better value to consumers. Consumers chose them. Now part of the problem is that government rules and regulation often make it very hard for small businesses to compete, but there is also an economy of scale that makes it easier for a chain store to provide more value.
You wrote, “the second because if they raise any objection they can be fired and instantly replaced by one of the millions of jobless.” For me the problem here is not that they can fire anyone instantly, but that there are millions of jobless. That there are millions of jobless is a failure of the economy, unless there are external factors such as uncontrolled immigration. Instead of adding even more burdens that make it even harder to hire someone, I would rather see an economic focus that makes it easier to start a business and hire people, an economic focus that allows the economy to grow to the point where there is a labor shortage, that drive wages up and were employers need to compete to get employees.
As for monopoly, I would make three points. A monopoly is antithetical to the system I am arguing for, which is driven by choice and competition. Second, however desirable they may be for those who want to set up a monopoly, a monopoly must be projected, lest competition arise, and this protection normally comes from government. Again, this is one of my major complaints with government regulation as it normally sets up many barriers to entry that limit competition while doing very little in the way of effective control. (The BP rig that exploded in the Gulf of Mexico had just been given clean bill of health by Government Safety inspectors).
Finally, I would also point out that at least here, the only ones actually arguing that a monopoly is a good thing are those on the left as they want to set up government monopolies in a number of areas, and are actively seeking to stamp out competition from the private sector.
As for concern over short term vs long term, this is much more a factor of the economic environment than the system as a whole. For example, at least here in the US, a great deal of the push to short term over long term thinking has come as a side effect of the push limit CEO salaries and tie them to performance, in this case the stock price. But this is not an inherent feature of capitalism but of values.
All that said, labels aside, I do not think there is fundamentally that much difference between you and myself. If you actually had your way, i.e., you could design and put in place the system you wants, it would not be that much different from the one I am arguing for. Both of us see a problem with big, be it big government or big business.
What I ultimately want is to limit government to some basic functions such as enforcing contracts, ensuring choice and completion, and then let individual decide what is best for them. And yes there would be a safety net.
Elgin,
Sorry it wasn’t still fresh in your mind – I confess it took me nearly a month from first putting down some reaction to actually posting it; various other things kept intervening and it nearly didn’t get posted at all – but I didn’t want to waste the work…
Let me start with where we agree. As you note at the end, we agree that there is a problem when organisations get too big, and this goes for both companies and governments. It also goes for Labour Unions, which I think are a good thing unless they become too large and powerful (i.e. significantly more powerful than the organisations they are negotiating with). We definitely agree that a government in the pocket of large companies is an extremely bad thing, and that we have moved towards that over the last 50 years.
We also agree that a bargain between individuals is an extremely good way of establishing an equitable result, as long as the parties have a fair level playing field, i.e. neither has any duress applied to it to close the deal, neither is unable to walk away if a deal cannot be struck, and both parties are in full possession of all the facts (there may be more caveats on further reflection).
We also agree, I think, that when purely financial considerations drive an organisation, that organisation becomes toxic. I have had quite a bit of experience of organisations driven by cost accountants and MBA’s of the Harvard school (happily mostly from the outside), and they are every bit as nasty as I’ve described.
However, I don’t see the problems of short-termism and intolerable pressure to keep on producing more for less as flowing purely from the payment of performance bonuses, as you do; I think the root problem lies with a stock market which can respond within milliseconds to any perceived opportunity or risk, and where you have a market which works to a timescale of milliseconds, you are likely to be forced to think short term. Performance-based incentives for CEO’s just makes things that bit worse. The system itself forces the actions of individuals; even if managers wish to be long-sighted, the demands of finance make them short-sighted.
That is, however, just an intensification of a tendency already inherent in the idea of a market in shares in large limited companies. Ambrose Bierce (one of your better American sceptics) said that the limited liability company was the greatest instrument of fraud ever invented by humanity; I would add that it is the second greatest instrument for dissociating an organisation from its ownership (the greatest being a representative democracy with a strong party system).
We also agree that attempts to create pure socialist societies have been, to a large extent, failures; we agree that they come up against the problem that people are not all paragons of civic virtue, and some of them will game the system, some of them will grab and hold power. However, you do not concede that moving closer to the idyllic concept of socialism would produce a society far better than the ones we live in, while you do maintain that moving closer to your idyllic concept of capitalism would do this.
This is where we completely part company. I don’t think that moving too far in either direction would be a good thing, and in particular I am absolutely convinced that removal of all restraints on capitalism would make things far worse.
The thing is, we have seen societies which have been substantially less regulated by government than either of ours now is, and indeed have seen some where there was absolutely minimal regulation. What results is the development of larger and larger organisations, the concentration of wealth (and power) in fewer and fewer hands (both of which Karl Marx observed would occur), the cartels and price-fixing which Adam Smith warned were a feature, as I quoted: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” , and the increase of influence of corporations over government, which both of us have observed and deprecate. It is the system itself which tends to monopoly and cartel, and not any particular failing of individuals beyond normal human nature.
Incidentally, the replacement of small shopkeepers by chains here has nothing to do with government regulation (which is far lighter on small businesses) and everything to do with economies of scale and cartels involving the chains and suppliers, i.e. the negative effects of an imbalance of power.
Yes, such societies can indeed “produce wealth” – indeed, it is the whole objective of their economic systems (and frequently of their governments as well). Without redistributive taxation and strong curbs on the power of corporations, however, in the absence of a labour shortage this wealth largely stays in the hands of a very few people and is of no benefit to the wider population. Both of our societies were far less regulated in the days of our respective industrial revolutions, and both saw the absolute degradation of labour and the rise of super-rich individuals until governments started to limit the power of the industrial concerns and provide for the mass of the population both by providing a safety net, by restricting the ability of the employers to make use of their disproportionate bargaining power and by legislating as to the conditions in which they were asked to work. Both produced appalling living and labour conditions for the workers, frequently worse than those they had had before moving to work in cities. I for one do not want us to go back to the systems of the early 19th century.
We definitely agree that monopolies are in principle a bad thing; where we disagree is that I see the likelihood of monopolies growing as regulation decreases, and you see competition as being a sufficient mechanism to stop that happening and even think that deregulation assists competition. While we agree that government-sponsored and protected private monopolies are a bad thing, we are not agreed, I suspect, that there are no areas in which a government monopoly is beneficial.
I have in mind there that there are going to be natural monopolies in some areas – it is, for instance, inconceivable that it would be sensible for me to have two entirely different sets of wires connecting my house to two different electricity producers – and in those cases, if private companies are supplying my electricity, they need to be extremely strongly regulated. In fact, we now have here a rather artificial “market” in which a number of middlemen companies contract with individuals on the one hand and with electricity generators on the other, and “compete” with each other (which would never have happened without government intervention – without that, there would have been local monopolies and possibly a national one). I am unconvinced that this system actually delivers any benefits over and above the previous government-owned and run electricity monopoly. Rail transport is another area in which I am not convinced the current privatised system works as well as the former British Rail, which had to be formed when the previous private railway companies became insolvent and incapable of providing a reasonable service. The theory behind both these moves was hugely convincing, but the outcome has been fairly bad.
And, of course, I have not come across any advocates of privatising the defence of the country – though it could be argued that the USA has experimented with this with several private military contractors. I do not envy you that piece of privatisation!
This is a position I could well have reached (and in fact did) without years of reading the scriptures, and in particular the synoptic gospels, and within them the injunctions of Jesus to his followers. It is not too dissimilar from your own – that market forces are the basic way in which human commerce is best organised, and government should intervene primarily to ensure that competition is fair, though I think far more needs to be done by government than you do to ensure that fairness.
However, I see a different set of injunctions from Jesus. In particular I see a clear identification of the pursuit of wealth as evil; “you cannot serve God and money” (Matt. 6:24), which is underlined by Paul “the love of money is the root of all evil” (1 Tim. 6:10). Jesus enjoins those who would follow him to sell all they have and give it to the poor (Matt. 19:21) or at least half of it (Luke 19:8-9) and asks followers to abandon their small businesses in order to follow him (Matt. 4:18-22).
Now you think that socialism taken to its extreme doesn’t work, I think that capitalism taken to its extreme doesn’t work (and largely agree with you as to socialism); I think both of us would have substantial problems thinking that following Jesus’ economic injunctions would work. If we did follow them, we would probably end up as itinerant beggars – but that is, I am wholly clear, what following Jesus demands when taken to its extreme. I can’t do it myself, and setting aside all arguments that it isn’t practical, that I have responsibilities I’d be abandoning and the like as self-serving excuses, at the root I am too scared to do it and lack the faith to trust that God would see that I was all right if I did.
So Jesus is suggesting that money is an alternative to God, i.e. a demon, and Paul is reinforcing that; Jesus then suggests that we renounce Satan in renouncing wealth and its pursuit (to paraphrase him).
Pope Francis put it this way in a recent address:- “Friends: the devil is a con artist. He makes promises after promise, but he never delivers. He’ll never really do anything he says. He doesn’t make good on his promises. He makes you want things which he can’t give, whether you get them or not. He makes you put your hopes in things which will never make you happy. … He is a con artist because he tells us that we have to abandon our friends, and never to stand by anyone. Everything is based on appearances. He makes you think that your worth depends on how much you possess.”
This all leads me to the position that free market capitalism, at least in the form it’s developed to, is an inherently satanic system. However, it’s the one we’re stuck with; the alternatives are perhaps theoretically attractive but can actually be worse in practice – it’s much like the Churchilian comment about democracy, which he said was a bad system, but better than all the others which had been tried.
I could, however, also point to a set of injunctions of Jesus which militate against putting faith in governments (or nation states); these too are at least potentially satanic. What I advocate is not to let either have free rein, but to balance the one with the other and in the process always have in mind that both are flawed, both are man-made, both are fallen.
I have copied this reply on my blog at eyrelines.energion.net.