SPIEGEL Interview with Tomas Sedlacek: 'Greed is the Beginning of Everything'

Part 2: 'Marx Probably Wouldn't Recognize Need for a Revolution Today'

SPIEGEL: Communism, under which your generation grew up, didn't achieve this form of self-sufficiency in half a century.

SedlŠček: Because it wasn't viable. In truth, it isn't communism but capitalism that drives the permanent revolution. It drives people to work harder and harder, because it presents them with the very credible possibility of success. Communism could never do that. Karl Marx thought and wrote in the world of Oliver Twist. If he were alive today, he would probably not recognize the need for a revolution.

SPIEGEL: So in our part of the world, we all essentially live in societies shaped by social democratic ideas?

SedlŠček: We are clearly not communists by nature, but we are definitely communitarians. Only a truly egomaniacal person can live happily in a society in which he is the only rich one. Man has a need for fairness and, therefore, for a fair distribution of wealth.

SPIEGEL: So greed and empathy offset each other as balanced forces?

SedlŠček: Yes. In his "Theory of Moral Sentiments," Adam Smith, the founder of modern economics, defines sympathy as the basis of morality and as the driving force of human activity. The suffering of one person also affects someone else.

SPIEGEL: But Smith is more famous for his most important work, "The Wealth of Nations," in which he questions the effects of human self-interest and the "invisible hand" of the market.

SedlŠček: Self-interest guides human behavior, but Smith knew that man cannot be explained by the egoistical principle alone. He clearly distanced himself from his contemporary Bernard Mandeville and his theory that private vices generate public advantages, and that the general welfare stems from the self-interest of the individual. Contrary to his effective history, I believe that Smith's legacy consists in the incorporation of moral questions into economics -- in fact, that they are precisely what constitute its core. For modern economists, on the other hand, the question of good and evil is practically heretical.

SPIEGEL: If the invisible hand of the market alone were capable of transforming self-interest into the common good, we wouldn't need government regulation at all.

SedlŠček: When self-interest exceeds certain limits, it threatens the market economy. A functioning society rests on three columns: morality or decency, competition and regulation, or basic government conditions. The weaker morality is, the stronger the state must intervene. The Eastern European countries, which depended entirely on deregulation to create markets after the fall of communism, learned this lesson after painful experiences. A society that focuses on egoism without morality descends into anarchy.

SPIEGEL: The laissez-fair ideologists and the Tea Party movement in the United States still want to keep the government out of things.

SedlŠček: The interdependence between capital and the state became obvious during the crisis. The financial system would have collapsed without government help, and then the governments would have been finished. Regulation may be a loaded concept, so let's talk about coordination instead. But you need two players. You can't play tennis alone.

SPIEGEL: Does this interplay between the market and the state shape the field of social morality?

SedlŠček: The most positive, descriptive economic models have approached the question of how the market economy functions with complicated mathematical models for decades, but they are simply wrong or pointless at best. The real question should be: Is the economy working the way we want it to?

SPIEGEL: But it isn't up to economists to set ethical standards.

SedlŠček: Yes, it is. Ethics forms the core of economics. It leads straight to the question of the good and right way of living, or Aristotle's concept of eudemonia. For him, maximizing benefit without maximizing good would have been pointless. A market economy without morality is a zombie system: The robots function perfectly, but in the end they leave behind a trail of devastation. We have to return to our origins and talk about the soul of the economy.

SPIEGEL: Such quasi-religious impulses must be quite foreign to both your fellow economists and the politicians you have advised.

SedlŠček: The belief in progress is an eschatology used in the secular realm. There is no such thing as value-free economics. To claim that economics is value-free is a value judgment in itself -- an ideological position. Every purchase decision is also a moral decision.

SPIEGEL: So economics is a cultural phenomenon, not mathematics?

SedlŠček: Numbers alone are meaningless. Here's a simple example: How high was the rate of inflation in Germany in February? This leads us directly to the next question: What does this mean? Is it good or bad? The truth lies within its context, which is shaped by cultural, ethical and social factors, and it cannot be portrayed by a formula relating to the money supply.

SPIEGEL: Economics can't answer questions about the meaning of life. That would be absurd. And it gets dangerous when politicians attempt to do so.

SedlŠček: Questions of meaning only thrust themselves upon us when meaning has been lost. Modern economists behave as absurdly as the people in Douglas Adams' novel "The Hitchhiker's Guide to the Galaxy." The supercomputer Deep Thought is supposed to answer fundamental questions about life, the universe and everything else. It computes and computes, and then it spits out the final answer to the ultimate question: a number, 42.

SPIEGEL: And what's your answer, if not to the ultimate question, but to the crisis and debt trap?

SedlŠček: Let me answer that with a question: Is a greedy life a good life? Is that what we want? The answer is self-evident. I'm sticking with Aristotle. Economics ought to be the science of happiness. And according to Aristotle, a happy life is a satisfied life.

SPIEGEL: Forgive me, but that sounds both banal and naÔve. Aren't you worried that your fellow economists will deride you as a moralizer?

SedlŠček: The attention that my theories attract suggests the opposite. I believe that politicians, especially the pragmatists, have understood this. Of course, it's difficult to convince them that painful reforms are necessary, especially in good times, and that something is wrong with the system, even though the gross domestic product is still growing.

SPIEGEL: So we need the crisis to come out of it strengthened, as they say?

SedlŠček: Times of crisis are good for asking the right questions. We have to abandon the obsession with growth in economics. We have to get out of the manic-depressive cycle within which our economic everyday reality operates. And to do so, we have to pay more attention to the manic than the depressive phase, and we have to change the general goal of economic policy. Instead of maximizing the gross domestic product, the goal should be to minimize debt.

SPIEGEL: How is the one thing supposed to work without the other?

SedlŠček: In a free-market democracy, politicians should be deprived of the right and the authority to incur debt, just as they have already lost the right to print money.

SPIEGEL: But the temptation to pay for government debts by printing money still exists.

SedlŠček: I propose a new stability pact: In any given year, growth and the budget deficit together cannot exceed 3 percent of GDP.

SPIEGEL: Meaning that the budget has to be balanced at 3-percent growth, while new borrowing has to increase to 3 percent at zero growth?

SedlŠček: Exactly, and surpluses have to be set aside in boom years. Let's remember the biblical parable of the seven fat and seven thin cows, and the advice Joseph gave to the pharaoh. An economic policy that only pursues growth will always lead to debt. And debt is a dangerous journey through time, while interest is a sinister weapon. Those who don't know how to handle it end up in a medieval debtors' prison, as the Greeks are experiencing today. The next crisis could be deadly.

SPIEGEL: You support an existential view of economics, a sort of meta-economics. How does it feel to be a philosopher among bankers?

SedlŠček: Like a colorful bird, but not without respect. People listen to me. I appeal to something in the public consciousness. Our time lacks moderation. We have to try to achieve more self-control. The English poet John Milton put it brilliantly: "He who reigns within himself and rules passions, desires and fears is more than a king."

SPIEGEL: Mr. SedlŠček, we thank you for this interview.

Interview conducted by Romain Leick; translated from the German by Christopher Sultan

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