We hear that a lot these days.
It sounds correct.
Greed is a sin.
So greed must be the problem.
We hear of companies that gave end of the year bonuses first and went to the government for a bailout right afterwards, and we tax-payers are, rightly, disgusted. We hear of CEO’s with trash cans valued at $32,000 in their offices, and we nod our heads knowingly, irate that while the rest of us barely have 2 pennies to rub together a greedy CEO has a cute little trash can worth far more than the vehicle we drive, and we say, “Yes, greed is what caused this.”
Greed is certainly a necessary condition for the creation of an economic mess such as the US and the world are in right now, but it is not a sufficient condition. Just as oxygen is necessary in order to have a fire, oxygen by itself is not sufficient to cause a fire.*
We have become a "microwave society" of sound bites. Rather than thinking deeply in this fast paced world, if we hear something that makes sense on the surface, we tend to grab it and go - just like fast food from the drive-thru. Ponder for just a moment, slap a label on it, move on . . . and just what fast food does to your body over the long term, microwave thinking does to our society over the long term. The sound bite that seems to be catching on right now is: "We're in this mess due to greed, and we need more government regulation in order to fix it." On a first hearing it sounds right, but we need to go deeper.
The US and the world are in such a dire state economically that we can no longer afford to allow our knowledge and understanding to be a skimming of the surface and a hoping for the best as we blithely leave things in the hands of others - simply rejoicing that there is a new administration, thus good change will automatically occur.**
I recently received the following thoughts from a friend, which, coincidentally and presciently preceded the article I am also supplying a link to:
In recent discussions of the causes of the current economic crises I've noticed an interesting point of view seems to be shared between religious folks and liberals. Both groups preferred explanation tends to be greed. Yes greed; one of the . . . seven deadly sins.
It appears that both groups believe that over the past decade there has been an unexplained outburst of greed regarding the residential real estate market. It's as if the MBAs and bankers suddenly abandoned all of their standards when they discovered this untapped market of previously "redlined" minimum wage workers, illegal immigrants, and "people of color" that they could exploit.
The weakness of this argument is somewhat masked by the well-known fact that humans are indeed prone to greed. No one will argue that given the proper incentives, or absence of disincentives, nearly anyone can be induced to exhibit an excess of "greed".
There was a time when our institutions and rules successfully governed greed and the residential real estate market in the USA. The rules changed, not the human condition.
This is the most difficult challenge that Capitalism faces today; to explain that greed, pragmatically channeled and balanced is best understood not as a sin, but the essential engine behind our prosperity and a normal component of human nature.
Greed is to Capitalism as lust is to marriage.
"The rules changed, not the human condition."
The DEFINITION of INSANITY is doing the same thing over and over and expecting different results!!
Coincidentally my friend's email was followed days later by this parallel column, which I find to be very well-written and insightful: Upside-down Economics
Here is a quote from this article by Thomas Sowell:
What was lacking in the housing market, they say, was government regulation of the market's "greed." That makes great moral melodrama, but it turns the facts upside down.
It was precisely government intervention which turned a thriving industry into a basket case.
An economist specializing in financial markets gave a glimpse of the history of housing markets when he said: "Lending money to American homebuyers had been one of the least risky and most profitable businesses a bank could engage in for nearly a century."
That was what the market was like before the government intervened. Like many government interventions, it began small and later grew.
We can no longer afford to rest in mere hopes for the best.
We can no longer afford to be placated by platitudes.
We cannot afford to think that "change" is good by definition.
We need to stop the microwave mentality.
We need to get real.
We need to learn and understand and to do so at a deep level - rather than just not wanting to be bothered to think too hard. Consider the following from Adam Smith's classic of economics, The Wealth of Nations:
It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantages.
The Wealth of Nations, Book I Chapter II
*I owe the oxygen analogy and Smith quote to my friend Bob.
**I do wish our president only well and pray that God will give him wisdom. I wouldn't want to be in his shoes.