Paying for the Free Market

I read in the Winter 2016 issue of THE WHEEL (a new journal of Orthodox literature and thought) the article by Anthony Artuso, “On Dominion and Progress: Sacramental Action in a Secular World.”     Artuso makes a few interesting claims that I piqued my interests.  He says that …

“The original political idea of the  Enlightenment was to create a religiously neutral public sphere where governments supported by the will of the people, would make decisions to enhance  overall welfare.”

The proponents of the 18th Century European Enlightenment and their successors felt some oppression from the existing religious structures in Europe and the wars between Christians which were frequent at that time.   The movement toward separating church and state was an effort to disentangle society, government and religion in the hope that people might behave more rationally and less passionately in disagreements.  By pushing religion to a more private sphere, some thought people would behave more rationally.  The reality is that people don’t need religion to become passionately driven on issues as a number of communist atheist tyrants have shown.  Religion does not automatically lead to irrationality, nor does the absence of religion guarantee humans will be reasonable.

But relying purely on human reason, allowed them to imagine that commerce/ the market/ capitalism would serve the people by keeping individual greed in check.  The market had an interest in a moral order and in spreading the benefits it brought about to a wide range of people (or so they believed).   Artuso says the market was to be

“always under the guidance and management of the state, which alone was entrusted with safeguarding the interests of all.”

The state was in their idealist view the preserver of reason.  This may have been the ideal, but this ideal  in the 18th and 19th Centuries for Enligtenment advocates, but it must not have been working which led President Reagan to identify the government as the problem, not the solution to the problem.  But then, even under Reagan, the government grew and the national debt doubled.  The government may have been the problem, but his policies enlarged the problem.

Artuso says the drive for deregulation of the market was a response to a feeling that the government wasn’t in fact a benevolent guide for the free market but could be turned into a monstrous tool of political interest groups.  So the new idea came to be to free the market from government oversight.  Artuso puts it this way:

“We have entrusted ourselves to the invisible hand of the market which we vaguely conceive as being wielded for our benefit by the god of progress.”

Therein is a dilemma.  Adam Smith, the patron of the free market, apparently thought the government was to manage the market for the public good.  But in modern America, the government came to be viewed as part of the problem because the government proved not to be a neutral force in the free enterprise system.  It was a huge force that could be manipulated by interest groups to carry out agendas other than the general welfare.

But, the market freed to move as it wishes without government oversight becomes a large and largely undirected force.   What or who guides the market and for what purpose?   Perhaps we are to think that the unguided force of commerce is always benevolent, but what would make us believe that is not clear.  The market can be manipulated by organized forces with particular agendas.  Is it too big to allow it to go where it will?  Or in fact  will some clever folks be able to guide it to their own benefit without regard to the general welfare?

The market is driven by greed if by anything, and certainly does not want to keep greed in check.  The market imagines unbounded growth which, at least in recent years, certainly has benefited the wealthiest people.  Unbridled growth in the market (as well as in the government!) seems to fit the American attitude that wealth is a god which we should always serve.

Our money says on it, “In God we Trust“, but perhaps the god we trust in is money itself.   St. Paul warned that “the love of money is a root of all kinds of evil” (1 Timothy 6:10).  We tend to think on the other hand that money is THE solution to every problem.  [Think also about how much money gets invested in our elections – some do think money can influence the direction of governement].   Wealth and more wealth are assumed to be always a good, the more the better.   The notion of any kind of self-control by individuals, commerce or the government is out of favor these days, or perhaps in America always is.

Wealth of course is not a god, is not infinitely wise and can, as we have experienced throughout history, suddenly disappear throwing the world into depressions and recessions.    Wealth is not a neutral force unaffected by the greed and powerlust of people.   It certainly is a major force in human life and history, but it never claims to be benevolent towards humans.   It is always being pushed and pulled in various directions.  And to imagine that ever increasing wealth can only produce more good, we might ask: Would an infinitely rich Hitler have created a better world?  To imagine that wealth or the market are simply neutral, and unmanipulable is to ignore history where people were always striving to use the market for their own goals.

Besides all of this, studies have continuously shown that increasing wealth does not automatically equate with people being  happier.   Certainly it doesn’t guarantee people being wiser, kinder, more generous, more humane, more civic minded.  Money can be a good servant, but it is a bad master.

People are attracted to power, and the free market represents a huge power in the world.  People have and will continue to attempt to use government, wealth, the market, for their own ends  This is the fact that we have to be aware of and prepare for.

Business and Religion: Choosing God

“In business, the custom of the trade must be understood by both contracting parties, else it can have no place, either as law or excuse, with the disciple of Jesus. The man to whom business is one thing and religion another is not a disciple. If he refuses to harmonize them by making his business religion, he has already chosen Mammon; if he thinks not to settle the question, it is settled. The most futile of all human endeavors is, to serve God and Mammon. The man who makes the endeavor betrays his Master in the temple and kisses Him in the garden; takes advantage of Him in the shop, and offers Him ‘divine service’ on Sunday. His very church-going is but a further service of Mammon.” (George MacDonald, Life Essential: The Hope of the Gospel, pg. 82)

In one children’s story I read many years ago, one of the many versions of the story of the baker’s dozen, the woman tells the baker, “You’ll never get rich because you are greedy.”  Christians are always faced with this choice and not just as customers.  Everyone of us who works also faces the same idea in the phrase “a day’s work for a day’s wages.”   Do we give to others what they are paying us to do?  In a capitalist world we are always facing this challenge no matter which side of the exchange we are on.

Ethics and Economics

I’ve been slowly reading through John Medaille’s TOWARD A TRULY FREE MARKET: A DISTRIBUTIST PERSPECTIVE ON THE ROLE OF GOVERNMENT, TAXES, HEALTH CARE, DEFICITS, AND MORE.    As I’ve acknowledged in previous blogs I have no formal education in economics, so it often is incomprehensible to me, and I will not here defend or critique the book.

Medaille offers a rather somber evaluation of modern economics and thinks the ongoing economic crisis worldwide is not an aberration but really the end result of modern economic, capitalistic policies.  One thesis of the book is that in an effort to make economics a hard science (rather than a mere social science) economists jettisoned ideas of morality.  Economics void of morality becomes a strange animal indeed creating many of the problems we see all around the world.  Some people defend as the greatest good whatever is “good for the economy.”   But of course exactly what constitutes the economy is not completely accounted for (is it people or businesses?  citizens or corporations?), nor is “good” defined especially in a system of thinking which wants to avoid moral judgments.  Medaille for example points out that while current economic thinking assumes the existence of labor, it cannot account for the existence of labor because it totally ignores the existence of families.

Modern economics does not account at all for what it costs to produce a labor force, thus families are left to scramble on their own to earn enough to survive meanwhile “the economy”  (economic leaders and forces) feel no responsibility for the survival let alone thriving of families.  So economic policies often ignore what is good for the family.    Additionally the labor force is also the consumer force – the rich get richer off the labor and consumption of these people.   But those leaders of economic ideas see no connection between the cost of producing a labor force and their own profitability.    Medaille offers many ideas about how to correct some of the problems that beset the world economy today, ideas based in distributist economics.  Some of his ideas would resonate with conservatives (especially he advocates a significantly smaller federal government) but his arguments on the moral issues of economics might not make conservatives feel so comfortable.  The keystone to his ideas is the notion of the just wage (you can read more on distributist ideas at http://distributistreview.com/mag/)

I suppose because I’ve been thinking about Medaille’s ideas connecting ethics to economics, I paid attention to a 20 December 2011 NY Times Op-Ed piece by Charles Blow, Deep Pockets, Deeply Political.   Blow is sounding a recently familiar alarm:

 A tiny number of wealthy Americans are playing an ever-increasing role in financing our politics. This is not a good thing for a democracy.

Last week, the Sunlight Foundation, a non-profit, nonpartisan organization dedicated to making government “transparent and accountable,” issued a report, which said:

In the 2010 election cycle, 26,783 individuals (or slightly less than one in ten thousand Americans) each contributed more than $10,000 to federal political campaigns. Combined, these donors spent $774 million. That’s 24.3% of the total from individuals to politicians, parties, PACs, and independent expenditure groups. …

The report also pointed out that “overwhelmingly, they are corporate executives, investors, lobbyists and lawyers” and that “a good number appear to be highly ideological.” In the 2010 election cycle, the report revealed, “the average one percent of one percenter spent $28,913, more than the median invdividual income of $26,364.”

But perhaps even more disturbing was this:

The community of donors giving more than $10,000 (in 2010 dollars) has more than quadrupled, from 6,456 in 1990 to 26,783 in 2010. In 1990, they accounted for 28.1% of all itemized (over $200) donations. By 2010, that number had risen to 44.1%. These donors are also accounting for an increasing number of all donations. And they’re giving more, too. In 1990, the average donation was $13,443. By 2010, it was more than double: $28,913.

James Madison

That the top  1% of  the well-to-do are financially more influential in politics than the rest of the country is not new.  Certainly Jefferson’s call that “all men are created equal” was not really a declaration of the equality of every human being but rather a demand that the limited number of landed gentry should be considered equals with the king.  The founding fathers envisioned some sense of the upper class ruling the country (as I recall James Madison even made mention at one point that the wealthy actually constitute a minority in the country and they had to be protected under minority rights against majority rule!).   There seems to have been in fact some notion among America’s creators that the well-to-do get to retire from work early and then can nobly serve the country in political office (This was an idea entertained by Ben Franklin).   So the wealthy being more influential in government than the majority of people is part of our democracy by and for the people from the beginnings of these United States!

I find myself connecting the statistics which Blow mentions to the ideas of morality in economics raised by Medaille.  People who are willing to drop nearly $30,000 down to influence politics are the ones who are fighting against paying taxes.  They would rather give $30,000 to political parties to promote their own interests (though this political donation is a form of a tax – the price to prosper in America) than to give that same amount of money to the government for the common good.  And they will give that same amount of money year after to year to political causes to avoid paying even less than that amount in taxes.

In the ancient Roman republic the imperial family and their slaves staffed the government at no public expense.  Senators and the equestrian class did the same out of a sense of duty – it was they who paid out of their own wealth for public buildings and services.  The landed elites of the provincial cities in turn paid for public services out of a sense of their own responsibility for the public good.

Is this civic sense, the sense of the common good,  what is so lacking in the current process of the wealthy paying for the politics of America?  Now, sadly people are willing to pay only for their own self interest – which often means exactly avoiding contributing to the common good.  A civic pride seems to be lacking.  The Romans thought patriotism meant working for the common good of all citizens which entailed spending their own money to build up (=edify) society.   Belonging to the wealthy class and owning property was considered a privilege which carried great responsibility for the common good of every citizen.  They believed all citizens should benefit from prosperity of the empire and of the wealthy.

Americans love to criticize entitlements – generally of any subgroup of Americans to which they don’t belong.  But entitlement thinking exists in the upper echelons of wealth too – it is entitlement which says the wealth is mine alone and no part of it is to be used for the common good.   It is entitlement thinking which fails to see the land on which we stand as a natural resource which is a shared good which profits all Americans.

George Washington

The common good does not mean socialism.  Medaille certainly opposes socialism which he actually thinks is really a necessary offshoot of capitalism because  current capitalism fails to consider that all economic issues are ethical issues as well.  Patriotism as valuing all citizens and working for the common good is in short supply in America these days.   Patriotism which values civic duty  is not a nationalistic exclusivism or exceptionalism.  It is a virtue which the founding fathers did embrace as they imagined citizen statesmen and citizen soldiers.   These same founding fathers thought the wealthiest Americans would come forward and support the common good for all citizens – such were their ethical beliefs.

None of this means we cannot question the size of the federal government, or work to reduce its size.  Certainly the size of the government is a question worth debating – and for Medaille this is part of the ethical discussion which needs to take place.  The issue I raise is whether our extreme individualism doesn’t in the end hurt the very basis of civil society as we cease to have any sense of responsibility for others.

ECOnomics

Whenever I blog on economics or statistics, I know I make some folk uneasy with my comments.  But the joy of blogging is commenting on things I read or think about for which I don’t have to be right.  That appears to be the job of the rest of the world, who lets me know where my economic thinking goes astray.

Super Committee inaction

First a comment on the failure of the “Super Committee” to come up with a budget reduction plan which supposedly now will trigger mandatory cuts in government spending, including mandatory cuts for the military (this last phrase,  I think, is always thrown in to make conservatives nervous).

In our pluralistic society, the “consent of the governed” is going to mean that those who govern have to come up with compromises so that they can form majority coalitions to approve of legislation.  But in America this also has come under criticism as “business as usual” and Americans politically are perpetually in favor of change.    So the legislators can’t compromise and they can’t get anything done (which means they can’t govern reasonably either).  So  mandatory cuts in government spending are the only kind of cuts that are going to be agreed upon.  Americans are fed up with this political gridlock as well, at least based upon polls rating Congress (I heard one commentator note that communism gets a higher approval rating in America than Congress – 11% to 9%).

Cutting both the annual deficit and the national debt seem like proper goals to me.  The deficit can be cut/eliminated by cuts in spending, but to reduce the national debt, I believe, is going to require some tax increases (even if temporary).   Since I favor a balanced budget for the government and a reduction in the national debt, I believe we have to talk both spending cuts and tax increases.     I think that means talking about how to make Medicare and Social Security solvent as well.  Apparently none of these ideas is very popular with our national legislators and so they cannot come up with a reasoned planned and only seem to be able to acquiesce to a mandated reduction in spending (and even at that some are not comfortable with the mandatory reductions and seem to want to avoid them as well).    It seems obvious enough that continuing on the current path is not going to reduce the national debt, so the legislators decided to take those decisions out of their own hands and allow mandatory cuts to do their work for them.  But it is also true if we send our elected congressional leaders to Washington and tell them not to compromise to resolve the deficit and debt we are going to get what we got: an inability to govern reasonably.   In a democracy, compromise is not always a bad word as it means bi-partisan.   We might remember that ‘partisans’ from one point of view are ‘terrorists’ from another point of view.  Governments are said not to negotiate with terrorists.

What isn’t needed is more blame, but there always seems plenty of that around; a super  abundance of blame will not reduce the national debt or deficit one penny.  We waste our money when we send to congress people who have nothing to offer but blame.

My intent in this blog is not to belabor our government (“we the people”) and our inability to reasonably solve problems because of our ideological rigidities.

Instead, I want to comment on was a graph I saw in the 14 November issue of TIME with an article by Stephen Gandel titled “The Deregulation Myth.”   The gist of the graph is that despite a popular notion in the US that government regulations are hurting economic growth, worldwide the statistics show a different picture.  For the five years ending in 2010, the US is ranked 4^th out of 183 countries as being the most business friendly (Singapore is 1^st, Hong Kong 2^nd, New Zealand 3^rd).   In that time period the US had an increase in GDP of 15%.   But in that same time period China had a GDP increase of 160%, Russia of 94%, Brazil  135%, and Indonesia 147%.   These are countries in which businesses  are more regulated than US businesses.   Being more business friendly and government deregulation of business do not automatically create jobs or economic growth.  Capitalism moves money to where capitalism believes there is money to be made.   It is an oversimplification for politicians to promise Americans significant economic growth by further reducing government regulations.  America is already one of the most business friendly nations on earth.

The reality is America cannot control all of the economic factors in the world.   Politicians have limited powers as to what they are able to do to improve the economy.

If America cannot control world economics, what is our best strategy for living with, in and as part of the family of nations (which maybe we can influence even when we can’t control them)?   If politicians really have limited power to change the American economy, what are our best domestic strategies for creating sustainable economic growth?

Things to ponder.

For me there are also ethical questions regarding the relationship between profit and greed and the balance between sustainable economic growth and environmental stewardship.  We are after all not merely consumers on earth, but stewards of the earth.   God so loved the world, we believe, and we too are to love His creation, not just greedily use it for profit but for the benefit of all.   We Americans certainly believe that no tyrant anywhere on earth should control its resources.  So too, we have to abide on earth in peace with the rest of the world sharing the earth’s resources following that same principle as well.

See also my blog America and Capitalism: Dr. Frankenstein’s Demonic Lesson

Chri$tma$ $hopping for Chri$tian$

 

Mall of America

In America the “Christmas season” begins with consumer shopping – Black Friday and Cyber Monday.   The news about the season and throughout the season is all about how much money people are spending, borrowing, consuming and how happy or worried retailers are.

St. John Chrysostom writing in 387AD makes his own interesting comparisons and analogies of Christian economics and consumerism when he talks about the Christian life in terms of buying and selling.  For Chrysostom Christian consumerism and “retail trade” however have to do with giving charitably to the poor which according to the scriptures makes God a debtor to us.  Writing about repentance, Chrysostom says on the final Judgment Day, we will not be able to bribe God to give us a favorable judgment – His judgment will be just.  But then St. John mentions that we improve our standing before God through financial means – giving to the poor and needy.

“The same with God: you cannot persuade the Judge during the time of the tribunal. … He is not corrupted by money; and His righteous judgment is awesome and unpersuadable.  Here, therefore, let us beg and win Him over; here, with all our strength, let us frequently supplicate Him; but not with money. Or, better yet, to tell the truth, the Lover of Man is persuaded with money, although He does not accept it Himself but through the poor.  Give money to the poor and you have appeased the Judge.  And I say these things out of concern for you, because repentance without almsgiving is a corpse and is without wings.  Repentance cannot fly high without the wing of almsgiving. …  Today, therefore, the marketplace of almsgiving is open, because we see the captives and the poor; we see all who walk around in the marketplace; we see those who cry out; we see those who weep; we see those who sigh.  Before us is a marvelous festival, and the festival has no other purpose, and the merchant has no other thought, than to purchase the merchandise cheaply and to sell it expensively.  Is this not the purpose of every merchant?  …

God has such a festival before us; buy righteousness at a small price so you can resell it in the future at a great price, if someone can call repayment retail-trade.  Here, righteousness is purchased at a small price, with one insignificant morsel of bread, with a cheap piece of clothing, with a glass of cold water.  ‘He who gives one glass of cold water, truly I say to you,’ says the Teacher of spiritual commerce, ‘will not lose his reward’ (Mt 10:42).  One glass of cold water brings a reward; clothes and money, which are given for beneficence, do not grant a reward?  On the contrary, they bring a reward and, indeed, a big one.  Therefore, why did He call to mind a glass of cold water?  Almsgiving, He says, costs nothing; for cold water you neither spend firewood nor consume anything else.  If beneficence has such grace wherever the gift is inexpensive, how great a reward should someone expect from the Righteous Judge, when He gives clothes abundantly, when He provides with money, when He gives other surplus goods?  As long as the virtues are found before us and are sold cheaply, let us take form the Munificent One, let us grasp, let us purchase.  ‘You who thirst,’ He says, ‘Come to the water; and all who do not have money, go and purchase’ (Is 55:1).  As long as the festival lasts, let us buy alms, or, better yet, let us purchase salvation through almsgiving.  You clothe Christ when you clothe the poor.  … Whoever has mercy upon the poor lends to God.  Let us lend to God almsgiving so we may receive from Him clemency in exchange.  Oh, how wise is this statement! ‘Whoever has mercy upon the poor lends to God’ (Prv 19:17).  … Since God borrows from us, then, He is our debtor.  How do you want to have Him, as a judge or debtor?  The debtor is ashamed before his lender; the judge does not put to shame the one who borrows.”   (ST. JOHN CHRYSOSTOM ON REPENTANCE AND ALMSGIVING, pp 103-105)

St. John Chrysostom

Chrysostom might agree that Christmas is an excellent shopping season for Christians – time to purchase gifts for the poor and needy while simultaneously buying favor with God.  He sees the marketplace as a festival – it is of course filled with poor, the needy and the destitute – but what we should have eyes to see is how it is through these same folk that we make God our debtor through charitable giving; each opportunity to give charitably thus adds to the festival of salvation – that heavenly banquet to which we have been invited.

Remixing Lawrence Lessig’s REMIX

I read Lawrence Lessig ‘s  REMIX: MAKING ART AND COMMERCE THRIVE IN THE HYBRID ECONOMY  to learn something about copyright law and what constitutes “fair use” of material.  I am specifically interested in what this means for blogging, though probably the issue of biggest concern in our society is the file sharing of movies and music done by so many today because the Internet has made it so easy to do.  Not being much of a consumer of contemporary media, my interest in Lessig is certainly not mainstream. 

I really did enjoy his book and learned a great deal about the issues and problems which the electronic age has caused regarding copyright and fair use.  Lessig’s thoughts on how to reform law and culture in the electronic age made sense to me.  His use of the metaphor comparing a RO culture (read only) to a RW culture (read write – taking cues from modern electronic equipment) shed a lot of light on the topic. 

I intend in this blog  and the next to do a bit of amateur creative remixing – taking from his book an idea that was not his main purpose but which intrigued me to ask a rhetorical question about America’s war in Iraq.   Lessig is writing about the limits of government regulation in dealing with many issues and specifically as it might apply to government efforts to regulate the copying and creative use of copyrighted material (Lessig favors regulation on the use of copy but not so much on the copying itself).  He draws an example from America’s war in Iraq, which is what got me thinking about how Bush led us to war.   What follows is related to what became a mantra for conservatives in advocating smaller government and the deregulation of so many aspects of the economy.   On 20 January 1981, Ronald Reagan said:

“In this present crisis, government is not the solution to the problem, government is the problem.” 

The anti-government attitude was in some ways a mix of 1960’s anti-establisment thinking with laissez-faire capitalism and conservative small government thinking.  It gets embraced in varying ways by Americans of all political stripes (from government should stay out of our bedrooms and leave sexual and reproductive decisions to individuals to government should not run the health care industry thereby socializing 17% of the economy (GDP); and on the other hand from both sides wanting government – legislative and judicial – to support and champion their causes and issues).

Lessig’s rhetorical question, which is not the main subject of his book (“This is not a book about Iraq.” p 282), made me wonder about what was the supposedly conservative Bush administration thinking when it invaded Iraq?   Lessig asks:

What reason was there to think that government power could succeed in occupying and remaking Iraqi society?

… I’m talking about everything that would obviously have to be done after the invasion – from security, to electric power, to food supplies, to education.  It was as if those at the very top simply assumed that the government could do all those things, without ever asking whether that assumption made any sense. (p 281)

The very philosophy supposedly influencing the conservatives was a distrust of the government to do anything right.  So why did they believe they could remake and run a whole society?   If government was not the solution to America’s problems why did they believe that the U.S. government could readily make right Iraqi society?

Of course the question might be faulty.  It is possible that they actually never thought much at all about rebuilding the country they were about to destroy because they saw themselves as only destroying “the government” and didn’t take into consideration that the whole Iraqi society would be the “collateral damage” in such a war.     Or perhaps they assumed in their Reaganesque thinking that since only the government is the problem, eliminate the government and the society will do just fine on its own – vastly underestimating that the total removal of government would push the people toward nihilistic chaos.  (One need only think about the scenes in New Orleans after Hurricane Katrina once it was apparent that the government had vacated the city leaving only flood waters to check people’s activities).

“A parent, an army, a government: they all must be certain that their devotion to truth does not blind them to the consequences of their actions.  There’s only so much a government can do.  Where we find that limit, we must then find other means to the legitimate end.” (p 287)

Next blog:  The War on Digital Piracy: A Cynical Response?

The Ethics of our Economics

In a 10 June 2009  NEW YORK TIMES article about the newly elected Orthodox Patriarch of Moscow, New Orthodox Patriarch Pulls No Punches, Sophia Kishkovsky writes:

Patriarch Kirill also did not mention America, but said immoral economies are doomed to collapse. “An economic system built only on the striving for profit, on indifference to the fate of people, on disregard for moral norms, is deprived of stability and can collapse at any moment, burying the fate of people under its rubble,” he said.

Patriarch Kirill offered these comments at an Orthodox youth rally where thousands had gathered to express their own connection to the Russian Orthodox Church.

Some Americans are offended when foreign leaders criticize anything about America, but this is probably doubly true when the critic is a Russian.  My own reaction as I expresses before is to accept the criticism as opportunity to see ourselves through the eyes of others in the world (see my blog A Foreign but Friendly Critique of America).  It is a good time for self reflexion and to examine our lives and values as Americans.  What is it that we are doing that causes others in the world to see as as they do?

Regarding the current economic crisis facing America and the world, some American leaders continue to do nothing more than play a blame game – always blaming the “other” political party.  The NEW YORK TIMES article America’s Red Ink Was Years in the Making demonstrates the contribution of both political parties to the huge national debt with Obama continuing more than adding to what Bush started.     But how many Americans use this moment as an opportunity to evaluate the morality of our economic structures and decisions? 

Americans are concerned with how bad things are or might get.   They are concerned about encroaching “socialism”, inflation, the recession, taxes, wealth and the stock market.   But how many are concerned about the morality involved with wealth?   How many Christians think that the Gospel has anything to say about economics?  How many are worried about doing through the economy what is pleasing to God?

Was or is our economic system as Patriarch Kirill said based on

the striving for profit?

on indifference to the fate of people?

on disregard for moral norms?

Do we even imagine that any of these things are a problem?   Is in our system “profit” always a good or even the highest good?    Has our system been based in the entitlement ideas of the “well placed” few who believe that their prosperity is always good no matter what the cost to others?   Has our system been so based in an entitlement idea that those who are prospering need never concern themselves with those who aren’t?   Do those who have money (investments and stocks) ever think about anything but their own bottom line – never caring about the fate of others as long as their portfolio is growing even as others lose their jobs? 

We can ask ourselves:  to what extent did our our economic ethics and market place morality contribute to the economic collapse we and the world are experiencing? 

Patriarch Kirill’s comments should give us pause to reflect on the ethics of our economics and the morality of our wealth.   We can ask ourselves, what do we imagine that God would want blessed America to do with its wealth for His world?

The Economic Collapse: It was the software’s fault!

As I’ve continued to listen to stories about the economic collapse, I have as I commented before come across numerous stories in which one group of professionals or one political party blames another group or party for the global economic disaster.  Listening to National Public Radio the other day I heard the story of Michal Osinski, a software developer and his own confession that the softeware he helped develop to make complex financial transactions simpler to accomplish helped smooth the way for the complex banking-lending-real estate-Wall Street crisis to occur. 

His story was intriguing as I had not heard anyone blame computers or the Internet for the collapse, but sure as could be, the economic fiasco probably could not have occurred without the software and Internet to make easy incredibly complex global investments.

Osinski tells his story in the 29 March 2009 issue of the NEW YORK MAGAZINE: My Manhatten Project: How I Helped Build the Bomb That Blew Up Wall Street.    His admission for some responsibility in the mess (though he accepts limited liability) reads in part:

I wrote the software that turned mortgages into bonds. … The packaging of heterogeneous home mortgages into uniform securities that can be accurately priced and exchanged has been singled out by many critics as one of the root causes of the mess we’re in. I don’t completely disagree. But in my view, and of course I’m inescapably biased, there’s nothing inherently flawed about securitization. Done correctly and conservatively, it increases the efficiency with which banks can loan money and tailor risks to the needs of investors. Once upon a time, this seemed like a very good idea, and it might well again, provided banks don’t resume writing mortgages to people who can’t afford them. Here’s one thing that’s definitely true: The software proved to be more sophisticated than the people who used it, and that has caused the whole world a lot of problems.

The first collateralized mortgage obligation, or CMO, was created in 1983 by First Boston and Salomon Brothers, but it would be years before computer technology advanced sufficiently to allow the practice to become widespread. Massive databases were required to track every mortgage in the country. You needed models to create the intricate network of bonds based on the homeowners’ payments, models to predict prepayment rates, and models to predict defaults. You needed the Internet to sail these bonds back and forth across the world, massaging their content to fit an investor’s needs at a moment’s notice. Add to all this the complacency, greed, entitlement, and callous stupidity that characterized banks in post-2001 America, and you have a recipe for disaster.

His article makes for an interesting read.  The Wall Street world appears to be as personally and financially excessive and obscene as many Americans suspect it must be.  In Osinski’s description he encounters traders in a fashion pissing away profits.  You’ll have to read his article to know what I mean.

The world of computers is based in “garbage in, garbage out” mechanics.  There was nothing wrong with the software.  What was being done by these economic decisions makers (who were also making millions of dollars) produces the massive amounts of toxic assets which have been dumped on America and the world.   Osinski writes that some of the abuses and problems can be easily corrected and that much of what was going on was good capitalism.  But then there is that simple fact that we live in a fallen world, a world of sin which infects humanity and not machines.  Osinski calls it human “complacency, greed, entitlement, and callous stupidity.”   The modern world ever doubts and denounces Christian ideas of morality whose foundation is based in an understanding of human sinfulness.  Yet time and again we are confronted by human sinfulness on a massive scale. We’ve seen this before in wars, but also in previous financial crises as Osinski writes:

At Lehman, I began a thirteen-year effort to streamline the process of securitizing home mortgages, as well as other forms of debt. That was 1988, around the time of the savings-and-loan crisis. Remember that one? Lenders had gone nuts with, what else, real estate, and as they went bust, the government was stepping into the breach. Mortgage securitization was the answer.

Folly and sinfulness in one person are dangerous, damaging and deadly.  On a massive scale their effects are exponentially greater.  Despite those facts, modern humans think Christianity has nothing to say to the world.  Yet a simple dose of Christian teaching easily forewarns all of humanity about fallen humanity, original sin, the need for repentance and for that prophetic voice that warns about the ‘profitic’ love of money. 

But those who desire to be rich fall into temptation, into a snare, into many senseless and harmful desires that  plunge people into ruin and destruction. For the love of money is a root of all kinds of evils. It is through this craving that some have wandered away from the faith and pierced themselves with many pangs.”  (1 Timothy 6:9-10)

Bailout: No Avoiding the Pain

According to the dictionaries, the word “bailout” as a term applying to corporate financial rescue was coined in the early 1950’s.  I am not sure what was happening at that point in the U.S. economy that such a term became necessary, but perhaps it was the post-WWII economic boom that created companies that grew too fast and needed then to be bailed out.   An old parental adage which says, “little kids, little problems; big kids, big problems,”   apparently also applies to the corporate world and to the U.S. economy as a whole.

The unprecedented “growth” of the U. S. economy beginning some 30 years ago was enjoyed by many, especially those at the top.   It was based in sectors of the economy who boomed or ballooned and then in recent years we began to experience these sudden growth spurts for what they were – empty bubbles that burst.  Much of the unparalleled spending spree by Americans, which was a driving force in this supposedly robust economy, was actually resting upon an unparalleled growth in personal and corporate debt – the booming economy’s foundation was an ever ballooning debt.  The huge vaporous emptiness which the debt represents was somehow thought of as both our wealth and also was the supposed bedrock on which the entire structure called the U.S. economy was being built. 

Not being an economist, I can’t understand how these things came to be believed, but they were, and the banking, stock market and real estate booms were inflating the voluminous bubble that couldn’t sustain the weight of the skyrocketing economy.   Apparently it was addicting to watch the economy grow in this way because people kept looking up at the unlimited growth rather than down at the foundation upon which this growth was being built.   Too bad some economic structural engineers weren’t called in to offer a safety opinion on whether in fact debt could bear the load of the economic building.

So I found listening to  Morning Edition, February 27, 2009, painful as the title of the story implied:  Taxpayer Beware: Bank Bailout Will Hurt.   The entire 30 year economic boom was a big party to which I did not attend, and yet I am going to be stuck with the bill.  I have no credit card debt.  I have faithfully paid by mortgage.  Admittedly, I have had very few vacations, do not have an expensive car and do not own a brand new spacious home with all of the modern devices others couldn’t live without.  I don’t have a lot to show for the 30 year economic boom – no investments, no savings account, but a mortgage and some college loans I had to take out to keep kids in college.

One of the factors that got us into our current problem is debt, pure and simple.   For most years, the amount of debt Americans owed was about 50% of the value of the entire U.S. economy.  But then between 2000-2008 (where were the fiscal conservatives?), our debt skyrocketed and equaled the value of the gross domestic product of the U.S.:  13 trillion dollars.  The last time that happened was 1929. 

David Beim, a former banker who is now a professor at the Columbia Business School has an explanation for what happened.

We have overborrowed, Beim says: “We’ve been living very high on the hog. Our living standard has been rising dramatically in the last 25 years. And we have been borrowing much of the money to make that prosperity happen.”

In other words, the problem the banks are facing is the problem we, as a society, are facing: We all have too much debt. And getting rid of it is going to be painful.

If you want a solution in which those who bear the most guilt for the financial crisis pay the most to fix it, while the innocent don’t have to pay anything, that’s not going to happen.

It seems that the U.S. economy is way past that point. Americans are going to spend a lot of money. The government may bail out some banks that some people wish it wouldn’t. There is no magical solution where the U.S. gets out of this mess without any pain.

While they might disagree on who will bear the brunt of that pain, all the experts interviewed for this report say the longer the U.S. waits, the worse it will be for everyone.

So whether you participated in the problem or not, you are going to have to pay these economists say.  No wonder web pages such as Stop the Mortgage Bailout have arisen;  for it does seem as if the prudent taxpayer is being forced to pay for the excesses of those who over borrowed, those lenders who promoted over borrowing for their own profit, and those who inflated housing prices and their corporate bottom lines.    The economic boom was based on an economic balloon over inflated  by excessive borrowing and lending.  Now we are seeing the price tag for this.  Who could have known we would have to pay our debt?   I mean as Christians don’t we pray “forgive us our debts”?

States Starving for Cash Look to be Fed

As the economic recession continues to loom large, state governments in the U.S. are also lining up hoping the federal government is going to bail them out of their own economic crises.  Logically, it seems to me anyway, there are two opposing desires in the U.S. that cannot be reconciled:  the desire to have no taxes on the one hand, and on the other, the desire to have a government which can solve all problems (mostly by tossing money at them).   American state governments got into the cut taxes mode, apparently thinking cutting taxes is always the way to stimulate growth.  However, at a time when taxes are pretty low, the growth has not only stopped but the economy has contracted and now the governments have large financial outlays with no way to pay for them.  Cutting taxes even further can neither stimulate the growth nor pay for all the commitments.

I saw in the paper the other day that state governments have gotten in line asking the federal government for a bailout, and the total of requests from the states is about 1 trillion dollars.   Whatever happened to fiscal conservatism?   No state government,  even conservative ones, is willing to wait for prosperity to trickle down – they want the federal floodgates opened and opened immediately.    Belt tightening is apparently never politically acceptable in America.  And we are either an extremely short-sighted people and have forgotten that what we do today will have to be paid for tomorrow, or we are a forever hopeful people trusting that massive federal spending is the answer to a shrinking economy (and every other national or international problem).    We do print “In God We Trust” on the dollar, but is it God or the dollar we really trust to bail us out of our financial difficulties?   It is as if we hope the federal government’s printing “In God We Trust” billions of times will simultaneously influence God like the prayers of a righteous person.   If we print “In God we Trust” often enough, maybe even God will believe we do and so bless America.    That surely would be a lot easier than actually having to change our indebting spending habits and money loving ways.   Jesus may have taugt you cannot love God and mammon, but Americans seem willing to try to prove Him wrong.

Money is a good servant, but a bad master.   So, no matter how the economic crisis turns out, who will we be serving in the end?  Who are we trying to serve right now?

In any case, the crises of the state governments forcing them to ask the federal government for a bail out caused me to think of this headline –   STATES STARVING FOR CASH LOOK TO BE FED.

Our nation recently implemented all kinds of welfare reform to kick a host of “freeloaders” off of the public dole.  Now it is the banks, lenders, the auto industry, and the states themselves who have lined up for the hand outs.  American ethics are such that we are more comfortable with this kind of welfare, even if it is millionaires and the upper class who benefit most from it.   Giving to the poor is giving with no hope of getting someting in return – meaning no benefit to the economy (Is the economy really the god in whom we trust?).

Maybe we will learn some valuable lessons from the current economic crisis.   Maybe we will take a serious look at health insurance and think about a plan that can benefit everyone (the uninsured and medical providers).  Maybe we will look at our dependency on oil and consider a use  tax that will raise money to find other/better sources of energy.  Maybe we will rethink our spending habits, reliance on debt, selfishness, greed, sense of entitlement, wastefulness, lack of concern for the common good, and self-centeredness.  

This all of course assumes we are willing to look into the abyss of the recession as somehow reflecting the true depth of our souls to see if we can find a way to become better people as a result of the crisis we are in.   The recession says something about us as a nation – our values and priorities and character and heart.   What lessons will we learn about ourselves and our relationships to one another and to the world?