“Amid all the difficulties and hardship we are about to undergo, I see one silver lining. This crisis has -dramatically , vengefully-forced the United States to confront the bad habits it has developed over the past few decades. … Since the 1980’s, Americans have consumed more than they produced-and they have made up the difference by borrowing. … We put it on a credit card, took out a massive mortgage and financed our fantasies.” (Fareed Zakaria, There is a Silver Lining, Newsweek, 20 October 2008)
On several occasions over the past years I have found the comments of NEWSWEEK’s Fareed Zakaria to be engaging, thought provoking and worth considering. His recent comments on the economic crisis make sense to me.
He is critical of the way we Americans as individuals have excessively borrowed money to ‘finance our fantasies.’ And he notes that governments at every level in America have been even worse at over spending and over borrowing. The national debt has exceeded $10,200,000,000,000.00 (10.2 Trillion). The government continues to offer incentives for Americans to consume even more – to go further into debt, while trying to stimulate the economy by offering further tax cuts and bailouts which will increase the national debt. Somehow the belief continues that we can over spend and over borrow our way into prosperity.
Zakaria says debt itself is not a bad thing and is “the heart of modern capitalism.” It is the irresponsible use of debt which is the problem, and “hiding mountains of debt in complex instruments” leads to irresponsible behavior.
Our own parish council of St. Paul Church thought it would be a good witness to parishioners especially to our young couples to show a responsible use of debt. We built a brand new building by first raising 80% of the needed funds and then paid off our mortgage this past July only 7 years into the mortgage. As St. Paul the Apostle said, “Owe no one anything, except to love each other, for the one who loves another has fulfilled the law” (Romans 13:8).
Zakaria’s solutions include the government offering incentives for Americans to save money, offering stimulus packages which invest in our country’s infrastructure and energy projects rather than encouraging even further consumption and borrowing, and especially controlling government spending so that the government’s expenditures do not outstrip its revenues.
Among the contributing factors to the crisis: 1) politicians who never want to give voters difficult or painful news and who used borrowing to soften or hide ever pain by pushing it into the future while simultaneously avoiding taxes; 2) the Fed’s decisions to cut interest rates as a solution to every problem and in so doing keeping the money flowing which ultimately tempted brokers to ignore common sense; and, 3) the fact that borrowing can often mask serious problems as those who used more leverage and risk for years proved. As Zakaria says it, “The United States-and other overleveraged societies-have now gotten the wake-up call from hell.”
For Zakaria the careless, extravagant, profligate, undisciplined and uncontrolled spending and borrowing spilled over into the U.S’s attitudes towards just about everything. He writes:
“Ever since the collapse of the Soviet Union, the United States has operated in the world with no constraints or checks on its power. This has not been good for its foreign policy. It has made Washington arrogant, lazy and careless. Its decision making has resembled General Motors’ business strategy in the 1970s and 1980s, a process driven largely by a vast array of internal factors but little sense of urgency or awareness of outside pressures. We didn’t have to make strategic choices; we could have it all. We could make blunders, anger the world, rupture alliances, waste resources, wage war incompetently-it didn’t matter. We had more than enough room for error-lots of error.”
Zakaria however is hopeful that America can learn from its mistakes. The silver lining in the economic meltdown according to Zakaria is it might wake up Americans to the need for discipline and self control in all aspects of our lives, and to living in reality rather than in an unsustainable fantasy.
“It’s a fundamental American belief that competition is good-in business, athletics and life. Checks and balances are James Madison’s crucial mechanisms, exposing and countering abuse and arrogance and forcing discipline on people. This discipline will be painful for a country that has gotten used to having it all. But it will make us much stronger in the long run.”
It is a conservatism that makes sense to me.