This year, the link between shopping and Christmas has become even more important, with Western governments praying the consumer will continue to spend, propping up a rapidly crumbling economy. The strange thing is that this festive season we’re also hearing a lot of voices calling for a return to moral values. The pundits have suddenly discovered that greed is not good.

Nobel laureate Paul Krugman, writing in The New York Times, says that there’s really not much difference between Bernard Madoff’s Ponzi financing scam and the business activities of Wall Street’s investment banks. US President-elect Barack Obama has vowed to crack down on “greed and scheming" on Wall Street.

It begs the question: Is greed limited to Wall Street?

Alan Greenspan certainly didn’t think so—not after the revelations of the Enron and WorldCom scandals. Here’s what he had to say at that time: “Why did corporate governance checks and balances that served us reasonably well in the past break down? At root was the rapid enlargement of stock market capitalizations in the latter part of the 1990s that arguably engendered an outsized increase in opportunities for avarice. An infectious greed seemed to grip much of our business community."

Greenspan, the guru of financial markets, didn’t believe that Wall Street alone was culpable—he blamed the entire business community. But why blame only businessmen? Doesn’t the belief that greed is good lie at the heart of free market ideology?

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Consider one of America’s iconic movies, Wall Street, made in 1987 at a time when the rapid growth of the financial markets was just beginning. The famous “greed is good" quote is by Gordon Gekko, a swashbuckling corporate raider played by Michael Douglas, who got an Academy Award for the role. But what’s interesting is the rest of Gekko’s speech, given to the shareholders of a company called Teldar Paper that he wanted to take over. This is what he said: “The point is, ladies and gentleman, that greed—for lack of a better word—is good. Greed is right. Greed works. Greed clarifies, cuts through and captures the essence of the evolutionary spirit. Greed, in all of its forms—greed for life, for money, for love, knowledge—has marked the upward surge of mankind. And greed—you mark my words—will not only save Teldar Paper, but that other malfunctioning corporation called the USA."

Greed is here elevated to the level of a social virtue.

How did it make this transition? It wasn’t so long ago that people classified it as one of the seven deadly sins. But that was before Adam Smith wrote his paean defending self-interest. “By pursuing his own interest," wrote the father of capitalism, man “frequently promotes that of the society more effectually than when he really intends to promote it".

How so? An invisible hand would make sure that would happen. That may not have been what Smith really meant, but it was seized upon by vested interests eager to justify their actions. To be sure, self-interest is different from greed, but there’s a fine line dividing the two.

Naturally, religious leaders have been quick to condemn the immoral nature of markets. Pope Benedict XVI has pointed out that a moral consensus is needed to make the markets function properly. Rowan Williams, the Archbishop of Canterbury, has gone further and said the doctrine that the market knows best is a form of idolatry. “Ascribing independent reality to what you have in fact made yourself is a perfect definition of what the Jewish and Christian scriptures call idolatry," he said.

But perhaps the most scathing indictment of values on which capitalism has been built has come from an economist who did much to save the system. Writing about the prospects for a future where capitalism would be unnecessary, John Maynard Keynes said: “We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for 200 years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues."

But isn’t greed essential to the system? Many argue that all that is needed is strong rules and regulation that will ensure self-interest doesn’t become greed. What if the problem is more deep-rooted and what if the system encourages greed? What would happen to profits if new wants and needs were not created every day and people encouraged to consume more and more? What if the reason why the Wall Street model became dominant was because globalization and financialization was the only way for capitalism to reinvent itself after the Keynesian solution had stopped working? Which Wall Street firm would have grown and prospered if it didn’t peddle the latest in financial “innovation"?

Gekko had a point. Greed may be a necessity.

As Keynes put it so admirably, “For at least another 100 years, we must pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still."

To be sure, he seems incredibly naive in believing we could change these gods in 100 years. The spirit of Christmas is nothing but a pre-capitalist relic.

Manas Chakravarty looks at trends and issues in the financial markets. Your comments are welcome at