Blog: Dave LeggettThoughts on greed

Dave Leggett | 15 November 2004

'Greed is good' said Michael Douglas's voracious capitalist in the 1980s movie Wall Street. And it can be a great motivator that has a very positive role to play in the context of market forces. I guess it comes down to a definition of the word 'greed'. My dictionary seems to associate it with the word excessive, as in excessive consumption or excessive desire. So there's an implication that you can have too much of something. Okay, that's not exactly rocket science but where does excess begin? Mmm. Monday morning and my brain hurts.

Economist Wilfredo Pareto was responsible for the term 'Pareto optimal' which means a change that leaves some people better off and, crucially, no-one actually worse off. There's a net welfare gain and no-one has lost out, so stop complaining. But it is only human to feel that if the gains for some are enormous and disproportionate, that even a solution that satisfies the conditions for Pareto optimality leaves a bad taste.

And so I come to my point. MG Rover. A lot of people are grateful for the fact that they have jobs and that the firm was rescued from the Alchemy clutches in 2000. And despite the obvious shortcomings, keeping Rover going as an industrial concern is no mean achievement. Indeed, taking our old Italian economist's definition, we appear to have a Pareto optimal solution. Thank you Phoenix for keeping people in gainful employment. Under the Alchemy alternative, thousands would have lost their jobs and that fact should not be forgotten.

But how did the Phoenix people manage to lose the moral high ground quite so comprehensively? It's quite amazing when you come to think of it. No-one is saying that they don't deserve to have reward for taking risk, of course they do, but what they have been taking out of an ailing company just sounds a little disproportionate, to say the least. I'd like to hear a robust defence coming out of MGR - like maybe a directors' remuneration comparison with other companies - rather than a simple refusal to discuss it. The questions will just go on.


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