A few years ago, the company I was working for decided to move its headquarters from Tulsa to Bakersfield, CA. I didn’t want to make that move, but I could work until the move was completed. By then I would be old enough to take early retirement. Even though I wasn’t emotionally ready to retire and not financially quite where I wanted to be, I felt I was in a position to start a second career on my own as a consultant. One day I said to a friend of mine that while I was not where I wanted to be financially, we – my wife and I – could probably still put food on the table even if I never earned another dime. My friend had left his corporate job to go on his own a few years before. His reaction to my comment was that there was a downside to not having to worry about the next meal. He said that there were days that he knew that he should do things that he did not want to do, but the fear of not having the next meal is what made him do those things anyway.
Fear is a great motivator. In fact, many people would say that the two best motivators of human behavior are fear and greed. Fear is understood by most of us as being normal, but the term “greed” has bad connotations. Greed is one of the seven Cardinal Sins as defined Catholic Church. Greed is defined as an excessive or insatiable desire for more material wealth. Most of us have a desire for a better life or some reward for a job well done, but not necessarily an excessive or insatiable desire. So I like the term “rewards” better than greed. People are willing to take risks if the rewards are attractive enough, and there is no sin in that. Most human resource managers would also tell us that the rewarding good behavior is a more effective motivator than punishing bad behavior. They would also tell us that success of a team, or an organization, or any group is dependent on individuals taking initiative and exercising personal ownership of their responsibilities.
One of the difficulties of a pure socialist economic system is that there is no individual ownership allowed. And everyone gets the same rewards regardless of their contributions. The good news – and one of the great attractions – is that there is no fear of not having the next meal regardless of one’s contribution either. But where does the individual motivation to work hard and take risks come from? And if the individuals are not motivated to take individual responsiblity and ownership, what happens to the success of the group?
In the previous installment of this post, we talked about the political difficulty of the government of a socialist economy not becoming dictatorial because of the need to concentrate power in a few. But that may not be the biggest problem. The bigger problem may be the lack of individual motivation to work hard and take responsibility. In our visits to several former soviet states, the universal comment from people we met is that things were not kept up or maintained well. It also seems that although things were equal, they were made equal at the lowest common denominator. When East and West Germany were unified, one of the major problems was that the East Germans standard of living was so far below the West. The tendency is to blame a corrupt and hypocritical government, but the real problem may be the lack of motivation of the individuals in the population to work hard, take risks and be productive. After perestroika, my company had the opportunity to go to Russia to help manage the Russian oil production operations. My friends who went came back with many stories of the attitudes and approaches of the Russian workers. If, they said, there was an easy way to do something that was less work for them, they would do it, even if it could end up causing damage or ruining the equipment. If equipment was destroyed, they seemed not to care – it wasn’t theirs. If they followed written procedures, they weren’t going to get in trouble even if it were obvious that exceptions were needed in certain situations. No one was willing to take individual initiative to make the obviously needed exception.
Many people tend to blame the lack of productivity and poor maintenance of facilities on the government. But is that the fundamental problem? I played football in school. I enjoyed the games, but football practice was not fun. Every coach tells every team, “show up for practice every day and work hard and you give yourself a chance to play and the team a chance to win.” Football rules committees set the rules and referees enforce them, but neither plays the game. The objective is to give each team an equal opportunity to win. Imagine if they decided that every team should have equal results – that all should have the same record at the end of the season, or that every game would end in a tie. And perhaps every player would get the same amount playing time regardless of how hard he worked. How many players would show up at every practice ready and willing to work hard?
Whether its rewards or greed, we can probably live with that. But there probably needs to be individual motivation for economies to succeed. The best thing that one might say about a socialist economic system is that it eliminates another of the seven deadly sins – Envy. Envy differs from greed in a significant way. Whereas greed is the desire for more for oneself, it does not necessarily want others to be deprived of what they have. Envy on the other hand, is wanting to take away from others what they have. If no one has more, then there is nothing to envy. We can all be miserable together.
With perestroika, and the changes in the Chinese economy, there is not another pure socialist economy of any consequence left. However, neither is there a significant form or a pure free-economy system left either. Western Europe and the U.S. have what’s called a democratic welfare state. The political system is a form of democracy, but the economic system is somewhere between a pure socialist system and a pure free competitive economy. My thoughts on the benefits and dangers of this will be discussed in the next installment.