The CEO of Bank of America, Brian Moynihan, found it necessary to make a clarification to his shareholders in his last annual report: “We are capitalists.” Apparently, this clarification was necessary due to a question that they receive very frequently. “Are you capitalists?” What might be obvious and self-evident now needs to be clarified. Because the world of investors has become very confusing. Lately, the “idiosyncratic investor” has emerged. This is an investor who uses his money to promote social, environmental or political causes. Which implies that, to a large extent, profit has passed into the background. I mean, for the investor, making money is no longer the priority.
Of course, the Bank of America thing happens within a very particular context. This is a debate that has been formed around the monitoring of the ESG criteria. This criterion excludes or includes many companies due to the imposition of non-financial guidelines. For example, a company can generate a lot of money in a highly profitable business. However, the investor may be exhorted not to invest in it because the company in question may not comply with some standard imposed by some social, environmental or governance criteria.
Now, we must clarify that all this is an initiative of the private sector. It’s not a government thing. So, now you have to comply with the laws. And, additionally, you must also follow the criteria of a private entity. Let’s say that it is a kind of (private) morality police that tells the investor where to place their money.
In practice, the most affected sector has been energy. These are very profitable companies and companies that comply with the law. However, they do not always comply to the letter with all the guidelines of the ESG criteria. Because they do not meet these criteria, many investment funds do not invest in them. Which, in these cases, implies that idiosyncrasy has been placed above profit.
All of this is done in the name of the greater good. In other words, what is being asked is that private money be used to promote social, environmental and political causes. Investing only for money is not enough anymore. Apparently, private vice is no longer public virtue. In many ways, we are returning to a pre-capitalist world.
What is capitalism? We can define it in many ways. However, I would say that capitalism is a system that defends the rights of the owner. That is to say, the capitalist can use his capital to make money. In other words, make money with money. Economic life revolves around private property. And the owners of that property can benefit from that property. In short, private property for private purposes.
The European guild system prior to the rise of capitalism was based on cooperation and planning. Craftsmen of the same trade grouped together to define almost everything. Competition was jealously restricted for the good of the group.
Of course this scenario began to change gradually from the Italian Renaissance. Money, individual initiative, and competition began to grow in importance. The decisive stage of modern capitalism actually occurred later in the Reformation period due to the ideas of the Protestant reformer John Calvin whose influence spread throughout Switzerland, Holland, England, Scotland and North America.
Calvinist doctrine was characterized by self-discipline, renunciation, and a methodical attitude. Work and savings are basic principles in the Protestant ethic. Material gains were no longer accompanied by regrets as in the Catholic faith. Professional success was interpreted as a sign of Divine Grace. Eventually, capital grew and became concentrated in the hands of the “saved.” Over time, Great Britain and the Netherlands established themselves as great economic powers, while the Catholic power of Spain fell into decline. Later, the United States of America flourished under the same principles. Finally, the pursuit of personal gain ceased to be a sin.
Early liberalism was born in England and Holland after the population tired of religious wars to turn their attention to commerce and industry. People got tired of looking for utopias and dedicated themselves to work. He got tired of being “right” and dedicated himself to work. Accumulating wealth is no longer immoral. Individual gain ceased to be a sin. Over time, It was shown that “private vice” increases productivity and ends up becoming a “public virtue” by increasing supply.
Of course, that “private vice” has a limit. Obviously, it’s not profit at all costs. Profit is not above everything. But, to impose these limits, there is the Government. After complying with a democratic process, laws are created that we all must comply with. The investor, however, should not feel pressured to meet the criteria of a private morality police.
So much the left as well as the right have their respective morality police. And, in the crypto space, for example, these faith keepers are particularly foolish. The libertarian current insists on imposing its dogmas and values on the entire community. This noisy minority dominates the narrative on social media. And all too often, they speak for the entire community. However, there is a silent majority that invests in non-idiosyncratic ways. They are investors, speculators, opportunists, traders, venture capitalists, entrepreneurs, and retailers who are just looking to make money. They see a financial opportunity in Bitcoin. Is that bad?
Adam Smith said: “It is not from the benevolence of the butcher, brewer, or baker that we will get our dinner, but from their concern for their own interests.” It is “the invisible hand of the market”, which makes the whole society benefit from the fact that individuals seek their own particular benefit. Can’t invest just for money anymore? Why should you invest with great ideas? Why should I promote the libertarian utopia? Can’t buy BTC for speculation? Can I no longer be a capitalist?
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