Almost all of the liberal and conservative commentators on the
Great Recession and Financial Collapse/Bailout of 2008 have
neglected the cultural and moral reasons for this economic mess.
Unless those causes are addressed, all the finger pointing and
all the proposed "solutions" will be like putting band-aids on a
tumor. Let me be as specific and concrete as I can.
In the 1980s, Michael Lewis wrote a comedic book called
Liar's Poker that depicted the excesses of Wall Street
at my old firm, Salomon Brothers. He recently updated it with an
article entitled, "After the Fall, Greed, Stupidity, and Really
Bad Luck: How Wall Street Did Itself In." The bottom line is Wall
Street learned next to nothing, from the past, the scandals,
schemes, downturns and the criminality. The materialism and
culture of greed was just too addictive. To quote Lewis' last
line, "Something for nothing. It never loses its charm."
Certainly macroeconomic weakness, heightened economic imbalances,
over-leverage and extreme credit risks have contributed to the
unbelievable levels of market volatility we have witnessed in
this downturn, now become a near collapse. Almost all financial
experts and many policymakers have started to cry out for
financial reforms, greater financial transparency and measures to
rebuild confidence. Trust is needed in the financial architecture
and institutions, regulatory agencies among them, that underlie
our now highly interconnected global economic system. Yet this is
why the sage market advisor, David Smick spells out so explicitly
in his book, The World Is Curved, "The distasteful
reality, is that there are no quick fixes for the global credit
system's dilemma, which is why the world has become a dangerous
place with so much economic heartache."
Let's be completely honest since so much is at stake. Why did the
financial giants: investment banks, hedge funds, ratings
agencies, large investors for that matter, get us into this
"risky business" and dangerous situation in the first place? The
answer in a word, actually a deep-seated and virulent vice, is
greed.
The outcries for punishment, heads rolling, massive government
regulations and bureaucratic solutions are only now beginning.
There will be dozens of plans and much hand wringing. Congress
will over-react and yet more firms and perhaps half of all hedge
funds will fail, hurting yet more people and dragging down the
economy as a whole. No one can even predict what will happen to
the credit default swap market, which totals just shy of a
quadzillion dollars (do the math).
It is characteristic of the age in which we live to see the
"moral dimension" as a matter of following yet more rules or
dictated regulations. The ancients, however, seldom referred to
rules or even principles. For them a moral life was not a matter
of what you do but of what you are. The fundamental
notion was not duty but virtue (Latin virtus, Greek
arête) and the task of the moral person was to describe
the virtues that we should emulate and teach. This is how
Socrates, Plato and preeminently Aristotle conceived of the moral
life. St. Thomas Aquinas synthesized it into Christianity. The
words of the Roman, Cicero closely correspond, as do those of the
great sage Confucius, in China. Like him, the Greeks, Romans and
Christians all attempted to find a basis for moral conduct in
human nature. They all believed that the core idea is virtue.
Today "virtue" is literally and figuratively missing from our
public vocabulary and the idea of "the moral" has been either
trivialized or totally relativized. No training session or quick
executive briefing can revive ethics and morality because they
are habituated over years and years not in some late afternoon
consultants' PowerPoint presentation or a touchy feely weekend
retreat. At the very root of our financial crisis is a moral
vacuum, which can only be filled with true virtue. Virtue can be
defined as "moral excellence," which is gained on the grounds or
basis of reason. It is a core positive quality that advantages
both individuals and society.
Capitalism, the goose that laid our golden eggs over the past
decades, brings about immense transformation, particularly in its
globalized form. It is in nature as Adam Smith reminded us in his
first book, The Theory of Moral Sentiments, written long
before his better-known work, The Wealth of Nations, all
about what he called "the moral sentiments." He himself
distinguished between self-interest, which he promoted, and
greed. Self-interest is both good and essential. Greed is always
wrong and bad. The key difference is the former uses
self-restraint, which obviously requires a moral code and a moral
compass. There are moral preconditions in a market economy: the
sentiments of sympathy, benevolence and compassion, of approval;
disapproval and indignation, which underpin the social order and
make it possible to engage in business in the first place. Human
beings are not just profit-maximizers. They have moral scruples,
personal commitments and the desire for happiness. These set
limits to their plans for personal profit, and also stimulate
them to pursue profit in ways that honor their higher values and
generosity. Many companies, large and small, exhibit these; they
live and conduct business by these values, in every industry and
on every continent. I collected sixty examples in my recent book
but there are thousands upon thousands.
Those nations, peoples, and businesses that neglect the moral
ecology of their own cultures, especially corporate cultures, and
financial firms' cultures are most noteworthy, cannot enjoy the
fruits of capitalism. Because that system must essentially be
moral or it falters, declines and fails. What we need to
rediscover and renew today at this time more than any other in
modern memory is spiritual enterprise, which is capitalism in its
most profound and important virtuous form.
Spiritual capital is the fund of beliefs, examples, and
commitments that are transmitted from generation to generation
through a religious, moral or spiritual tradition, and which
attach people to the transcendental source of human happiness.
Without rediscovery of the virtues we cannot understand or
resolve the deepest roots of this financial and, ultimately,
moral crisis.
That moral crisis cannot be dictated by governmental power or
throwing money at "problems." One of the paradoxes of the
"progressive movement" is that it has spawned public policies
that have had as their collective consequence an end totally
opposite to the one intended. Instead of offering temporary help
to a needy few, we have expanded the ranks of those perpetually
in need. Where communism failed to create "new socialist
man" behind the former Iron Curtain we are succeeding in America.
Instead of creating a society of free and responsible
individuals, we have created the entitlement generation(s). Ever
since we proclaimed that we should be free from fear, we have
been afraid to be free.
There is, lest we forget in this era of Obamanomics, a very
corrosive and morally corrupting influence of government which
stimulates the "something for nothing" mentality more than
anything else in our present culture. The latest episode in
so-called "stimulus" is mostly a series of government giveaways
or payoffs to interest groups now in power. There is nothing
virtuous about such bailouts to any and every constituency that
screams loudest or turns out the vote. Quite the opposite, such
actions inevitably destroy freedom, cripple the market, and like
drug addiction lead to a need for more and more without regard to
effect. At some point we will wake up and there will be hell to
pay, i.e., hyperinflation and a worthless currency.
topics:
Financial Crisis
