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DECEMBER 21, 2014 A Tale of Two Capitalisms
It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way . . .
These are among the most famous opening lines in all of literature, probably rivaled only by “In the beginning God created the heavens and the earth.” They are, of course, the first lines from A Tale of Two Cities by the great nineteenth FAITH & BUSINESS century English novelist, Charles Dickens. Interestingly, they could serve equally TIM WEINHOLD well as the introduction to another popular work of fiction — It’s A Wonderful Life by Frank Capra . . . a mid-twentieth-century film that is now almost as much a part of our American Christmas holidays as Santa Claus himself.
Tim Weinhold serves as Director of Eventide's Faith The two cities to which Dickens’ title alludes are London and Paris. More than & Business Initiative, and has served in a faith and Alexandre or Lucie Manette, more than Charles Darnay or Sydney Carton, it is business/investing thought leadership capacity these two cities that serve as the story’s principal protagonists. Together, they with Eventide since its founding. Since relocating provide the motive power for Dickens’ meta-narrative about social justice: that from Boston to Seattle a few years ago, Tim has the bloody and brutal French Revolution was an all-but-inevitable consequence served on the Executive Advisory Council of the of the aristocracy’s oppression of, and indifference toward, the poor and working School of Business and Economics at Seattle Pacific University, and on the Executive class . . . and that London risked following Paris down that same fatal pathway. Committee of the school's Center for Integrity in At its most straightforward, Capra’s film seems entirely different. It tells the story Business. of George Bailey, an everyman torn between ambitious longings and compassionate instincts. George wants to see the world and, just as much, longs to leave his mark on that world. He has big plans and bigger dreams. But he also can’t help but respond to his neighbors in need. By the end of the film, George’s story imparts at least two heart-warming lessons: that the life of even an ordinary individual can accomplish much good (much more than might be obvious), and that, rather than finances, it is family and friendships that constitute true riches.
But, like Dickens, Capra has a larger story to tell. And, like Dickens, he uses two different communities or, to be precise, two different versions of the same community — Bedford Falls and Pottersville — as protagonists for his own social justice narrative. But where Dickens’ target was an oppressive and corrupt aristocracy, Capra’s is a version of capitalism that he found equally destructive and distasteful. Capra’s meta-narrative is, therefore, both a tale of two cities and a tale of two capitalisms. In turn, it has much to say to anyone interested in practicing a biblically-enlightened version of business.
A great deal of foolish commentary flows from the idea that when it comes to economics there is only capitalism or non-capitalism, i.e., only capitalism or, alternatively, socialism or communism. From this vantage point, any critique of contemporary capitalism is automatically viewed as pro-socialist, or pro- communist. Frank Capra sees through such naive nonsense. He understands that
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just like there are good and bad marriages, and good and bad governments, so Frank Capra sees too there are good and bad capitalisms. Business, in Capra’s view, can be practiced in ways that bring either blessing or blight, in ways that cause humankind to either flourish or flounder. It’s a Wonderful Life puts both on vivid through such naive display. nonsense. He George Bailey is a businessman. He runs Bailey Bros. Building & Loan Association, a firm originally founded by his father and uncle. His ‘good ole Building & Loan’ seems to be (modestly) profitable, providing a middle-class living for George and understands that just a few employees. And it provides real benefit to the community, particularly by making mortgage loans to blue-collar working people, something the local bank is loathe to do. As a result, the Building & Loan gives poor workers a toehold like there are good and toward the middle class, and toward their own little piece of the American bad marriages, and Dream. Henry F. Potter is the film’s other main character. He is a businessman as well — president of the local bank and also a landlord, though clearly of the slumlord good and bad variety. Interestingly, he is entirely reminiscent of Charles Dickens’ most famous literary creation, Ebenezer Scrooge. And like with Scrooge, for Potter profits are his absolute priority — and, as a result, often come at others’ expense. Potter’s governments, so too approach to business is clearly predatory, in marked contrast to George’s version where profits come from helping others prosper. there are good and bad Capra paints a vivid picture of the radically different outcomes that flow from these alternative versions of business. Bedford Falls, where most of the film takes capitalisms. place, is Capra’s vision of the good society. Here there is a palpable sense of community — a sense of ‘neighborliness’ and that ‘we’re all in this together.’ There is, as well, a modest but growing prosperity as more and more working people escape Potter’s slums for home ownership in Bailey Park, made possible by mortgages from the Building & Loan.
Despite the fact that he still longs occasionally for travel and grand achievements, as the film progresses, George’s life, and the lives of his Bedford Falls neighbors, prosper nicely — filled as they are with family, friends, and an economic trajectory that points gradually upward. There seems to be good reason for George and his fellow citizens to view the future with optimism. Suddenly, though, catastrophe looms. Just as the bank examiner arrives, Uncle Billy loses a large cash deposit needed to keep the Building & Loan solvent. As a result, George faces bankruptcy and prison — and, in despair, wishes he had never been born.
Enter Clarence, a bumbling but benevolent guardian angel. Clarence allows George to see what Bedford Falls would be like had he never lived. Renamed Pottersville, the town is barely recognizable. It is a place where, to quote Nick the bartender, they “serve hard drinks . . . to men who want to get drunk fast.” In fact, most of the business establishments serve that same escapist impulse — Main Street is now an unbroken strip of saloons, dance halls, burlesque theaters, sleazy nightclubs, strip joints, pawn shops and the like. Neighborliness has all but disappeared, replaced by relationships that have a harsh and mercenary edge. Cynicism and desperation abound — whether in the feverish entertainments of those with money or the feverish survival efforts of those without.
At first blush, Capra seems to be making his points about good and bad capitalisms none too subtly. For Potter, profits are paramount, and people are simply a means to that end. Pottersville portrays just how predatory and toxic is
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that greed-driven version of business. It makes clear that the trajectory of that When business does a capitalism is a downward spiral of social decay and disintegration.
George Bailey practices an entirely different capitalism. The effect of his business good job of loving its is that ordinary working people can, for the first time, afford a car, a house . . . can grab hold of that oh-so-important bottom rung on the ladder to a better life for neighbors, it both sows themselves and their children. The Bailey Bros. Building & Loan adds real value to the lives of many — so much value, in fact, that Capra shows us Bedford Falls and reaps blessing — would be a bleak and brutal place without it. OK, it’s Christmas-time and it’s always good to be reminded of the biblical view that business (and all other forms of human endeavor) can be practiced in ways the Bedford Falls that either fulfill or violate the ‘Love your neighbor’ First Principle of God’s moral universe. And to be reminded, as well, that when business does a good job of outcome. loving its neighbors, it both sows and reaps blessing — the Bedford Falls outcome. But when it prioritizes profits over people it sows and reaps blight — and we end up in Pottersville instead.
There is, however, more to why I wanted us to reflect together on Capra’s message about good and bad capitalisms. It’s a Wonderful Life, for all its seeming simplicity, embodies a deeper and more nuanced understanding of the divide between beneficial and harmful business than appears at first glance. In particular, Capra gives insight into the crucial distinctions between selflessness, self-interest, and selfishness in the practice of business. These are distinctions economists and business people have been misunderstanding ever since Adam Smith published The Wealth of Nations in 1776 — misunderstandings for which we continue to pay a very high price.
Smith famously wrote, “It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own self- interest.” Smith further argued that the market’s ‘invisible hand’ transformed these self-interested behaviors into outcomes of maximum economic and social benefit. This has provided the foundational rationale for business and free markets — in other words, for capitalism itself — ever since.
Unfortunately, in the ensuing years a great many economists, business people, and commentators have misinterpreted Smith’s pronouncement about the beneficial role of self-interest in business. They have done so because they believe that there are only two behavior choices — selflessness or selfishness — and, therefore, they conclude that to act in one’s self-interest is the same thing as acting selfishly. This has led to the widespread misconception that Smith’s foundational dictum is that free markets magically transform selfish business behavior into socially good and beneficial outcomes.* It is this misunderstanding that motivated John Maynard Keynes to write “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” This same misconception motivated Gordon Gekko’s famous “greed is good” claim in the movie Wall Street, and it continues to infuse a great deal of contemporary business thinking and commentary. Such thinking, though prevalent, is utter nonsense . . . and entirely anti-biblical.
Let’s first think about this from the viewpoint of simple common sense. No one is foolish enough to argue that marriages would be better, and families more successful, if everyone involved would abandon concern for the others and just act selfishly. Similarly, no one asserts that medical care would be improved if we could just get doctors and nurses to dispense with altruism in favor of selfishness.
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Or that education would be enhanced if teachers prioritized selfishness over In George Bailey, service. Or that the more selfish our politicians, the better our government. In every other arena, we instinctively understand that selfishness leads to blight, not benefit. So why do so many business people and economists espouse the therefore, Capra gives nonsense that acting selfishly in business is actually a good thing? Crazy. us a man who Now back to our film. Just as Capra is not taken in by the simplistic view that there is only capitalism or non-capitalism, neither does he hold to the naive view that there are only selfless or selfish business behaviors. Capra does show us that embodies a nuanced Henry Potter’s every inclination is selfish. He has no regard for anyone other than himself. Human sympathy, a concern for his fellow man — Potter believes these have no place in the hard-nosed world of business. Confronted with the needs of (and entirely biblical) others, one easily imagines Potter joining Scrooge in an emphatic “Bah! understanding of the Humbug!” But Capra’s George Bailey is not the polar opposite to Potter. George’s every inclination is hardly selfless, nor is he impervious to the siren song of self-interest. relationship between In fact, he is (almost fully) captivated by self-interested aspirations — he longs for world travel and grand accomplishments. George wants to “build things, design new buildings, plan modern cities . . . I want to do something big, something selflessness, self- important.” And not principally for the benefit it might bring to others. His motives are much more self- serving. Capra shows us, in fact, that from childhood interest, and on George expresses a recurring refrain, “I wish I had a million dollars.” Potter would no doubt nod approvingly. And though George appreciates the good his father and uncle are doing through the Building & Loan, he wants no part of it. selfishness. He has bigger, better, more important things on his agenda.
And yet Capra shows us an entirely different side to George as well. When those around him are in need, George consistently responds with sympathy and self- sacrifice. More notably, when his own self- interested agenda conflicts with what would be good for someone else, George sets his own desires aside in favor of the outcome that will be best for the other(s).
In fact, Capra shows George making this very choice over and over again. First George gives up his trip to Europe to help straighten out the affairs of the Building & Loan after his father’s death. Then he postpones college to save the Building & Loan from Potter’s clutches. Next he sacrifices his honeymoon savings (albeit at his new wife’s initiative) to keep the Building & Loan afloat during a bank run. Later he almost takes Potter up on his lucrative employment offer — until he realizes what the loss of the Building & Loan would mean to the town’s residents. In George Bailey, therefore, Capra gives us a man who embodies a nuanced — and entirely biblical — understanding of the relationship between selflessness, self-interest, and selfishness.
James tells us that “Love your neighbor as yourself” is the royal law of Scripture (2:8). God could have instead commanded, ‘Love your neighbor rather than yourself’ or ‘Love your neighbor more than yourself.’ These would have made pure selflessness the moral imperative. To meet that standard, we would all have to constantly sacrifice our own good to better the lot of others.
Worldly wisdom, of course, takes the opposite tack. It’s essential message is ‘Serve yourself, period. In fact, serve yourself regardless of the cost to others.’ It is an appeal to naked selfishness.
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But “Love your neighbor as yourself” charts a more nuanced middle course. On The base lead of the one hand, it prohibits selfishness, i.e., the exercise of self-interest to the detriment of others. But it does not ask us to abandon self-interest per se. Rather, we are free to care about and pursue our self-interest when, and to the extent selfishness never that, our self-interest proves beneficial, or at least benign, for others. We are required to set self-interest aside only when our benefit would come at the transmutes into the expense of others. ‘Love your neighbor as yourself’ envisions, therefore, two behaviors inextricably gold of beneficial social tied together: 1) a normative pursuit of outcomes where both we and others benefit, coupled with 2) a willingness to act self- sacrificially in those cases where to do otherwise would impose harm or hardship on another. Put in outcomes. Selfishness contemporary vernacular, ‘Love your neighbor as yourself’ means we forego win- lose outcomes, seek win-win outcomes instead, and stand ready to choose lose- always harms, period. win outcomes when to do otherwise would diminish the lives of others. It is precisely this sort of win-win pursuit of self-interest that Adam Smith had in mind — and that the market regularly turns into beneficial outcomes. But when business acts selfishly, when it pursues self- interest to the extent of harming others (win-lose outcomes), the market offers no magical redemption. The base lead of selfishness never transmutes into the gold of beneficial social outcomes. Selfishness always harms, period. It is the foundational behavior of the ‘kingdom of this world’ and it necessarily brings about the hallmarks of that kingdom — decay, disintegration, death. Despite Gekko’s self- justifications, this is as true for business as for any other realm of human endeavor.
Frank Capra’s villain is Henry Potter and, more broadly, all those who practice a selfish and exploitive version of business — and foolishly imagine that Adam Smith has given them permission to do so. Capra’s hero, George Bailey, also feels the tug of self-interest. But his response is an enlightened self- interest, one that aims for win-win outcomes, yet is ready to set aside his own interests when they would come at the expense of others. Capra’s business hero, therefore, understands what so many business people and commentators do not — that self-interest turns toxic when it passes beyond win-win outcomes into the win- lose realm of selfishness. And so George aims for win-wins, but stands ready for self- sacrifice when necessary for the good of his neighbors.**
In Capra’s tale of two capitalisms, good-neighbor self-interest leads to Bedford Falls, greedy selfishness to Pottersville. For everyone other than the Henry F. Potters of the world, it is an easy choice.
* Smith himself would have found this idea distressing since, in his other great work, The Theory of Moral Sentiments, he emphasizes the importance of sympathy (concern, regard) for others.
** Lest we miss Capra’s point, even angel Clarence makes clear that his primary motivation for saving George is a self-interested desire to earn his wings. When necessary for George’s good, Clarence does act sacrificially — e.g., he throws himself in the river in the absence of a better plan to keep George from killing himself. Generally, however, Clarence is intent on a win-win outcome — gaining his wings while simultaneously saving George. Adam Smith, and Scripture, would entirely approve.
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