Character and Capitalism

Yves Smith worries about "Character and Capitalism".

Steve Waldman is on a roll. He has an excellent piece today arguing that despite contemporary notions otherwise, capitalism and character (meaning moral fiber) have not and need not be contradictory.

Although Waldman makes a good case, the barriers to the return of character in commerce are more profound than he lets on.

...

... Waldman meant character in a narrower Victorian sense, as being a person of one's word. But even then, the drive to efficiency that has become pervasive in American businesses has made it well-nigh impossible for that to be operative. The reliance on FICO scores in place of more nuanced credit decisions is merely the logical result of processes that have been in play for many years.

...

So why, when we have had a resounding failure of impersonal methods of assessment, am I pessimistic about the revival of interest in character? Because it appears our society is unwilling to go back on the false economy of preferring anonymous, rule-based approaches. These methods do broaden the market of possible counterparties, which is seen an entirely beneficial, when there are hidden costs in having only superficial proxies about the people you interact with. If anything, I see ample evidence this attitude is becoming more pervasive.

Emphasis Mine

What Smith is describing is the alienation of the service provider due to the conversion of services into commodities.

In the example given by Waldman, J.P.Morgan was personally involved in the credit process. It was his money and he was evaluating the customer because he knew him from other parts of his life.

Now we have workers lending other people's money to complete strangers. There is very little personal involvement in the credit evaluation. If the loan goes bad, someone else gets involved in the collection process.