Unity and division in the pursuit of solutions
The current economic crisis is showing no signs of going away. Already drastic measures have been taken, only to be met with erratic lurches and increased global contagion. There is plenty of blame to go around, and the willingness of many to be divisive at this juncture is harmful to all. These divisions harm chances at recovery. These divisions include partisan, US election-season finger pointing, the exploitation of resentment and class warfare, and the myopic approach to the problem through narrowly economic and political elements.
All thinking people capable of reason, uninfected by the blindness of partisan passions know that neither US political party is better than the other in terms of "goodness." We know that neither Republicans nor Democrats are more or less likely to be better human beings than their counterparts "across the aisle." The same is true on the negative side. In neither party are we more or less likely to find "worse" human beings. The difference between parties lies solely in commitment to differing political ideologies (for all sorts of reasons, some downright inane).
In any case, since the only thing you can find in a political party is people, it means you surely will find some who are thoughtful and some not, some who are sincere and some not, some who are reasonable and some not, some who are consistent, clear, compassionate, responsible, constructive, and some not. Some are greedy, devious, Machiavellian, and specious, and others not. Some are arrogant, closed-minded and supercilious, and others not. These concern being human, they do not concern whatever resulted in a person ending up a Republican or a Democrat. If the current global, economic meltdown is in anyway a result of people being "bad," then it is highly probable that members of both parties have participated in, if not perpetrated the problem.
Secondly it should be obvious to all that both parties function inside the same larger political, economic, and social system in the United States. Both parties function under or seek to bypass the same laws. They pursue identical ends (namely power), and they rely on the same lucre in their respective pursuits of power. These two political parties could not possibly approach parity, unless they are both doing approximately the same things.
These reasons above should make us leery of anyone who tries to convince us that one party or the other is responsible for the crisis. Both are very culpable, each in different ways, for different reasons, and due to different impulses, both good and bad.
Those looking for causes and solutions imagining that one US political party bears greater responsibility for the meltdown will not succeed, and given the urgency of forging an immediate and effective rescue should be chastised for sowing confusion and obstructing an important responsibility. Our only hope properly to analyze and prescribe an effective antidote is to approach the problem transcendent of partisan bias. This requires the capacity to understand the strengths and weaknesses of both political impulses and ideologies so as to see how each contributed the problem, as well as to see what resources and insights exist in each party that will provide for us insights and trends for strategies that will rectify the dysfunction that now threatens the global economy.
The second divisive seduction is the invocation of resentment and class warfare when seeking to analyze and solve the meltdown. The phrase to often heard is "those fat cats on Wall Street," as though we woke up to find that a small group of people have stolen our money and kept it for themselves. There are a good many reasons that make this a false starting point for understanding economic meltdown:
Everyone has long known about executive salaries long before the meltdown, and no one had anything to say
Our own age is no different than all other ages. We have always known the power of wealth to create wealth. It is near exponential. Money makes money with every passing moment. This is reality from time immemorial, including from ancient times, the middle ages, the golden age, and all times before and since.
Wall Street maniacs are not alone in the seeking the wild ride of free money, and they are not alone in suffocating themselves in the grotesque glut of wealth and salaries. One need think only of what has happened to entertainers, and sports figures. 50% of (or 52.7 million) of US Households owned equities in some way shape or form in 2002.
Quite simply greed and excess is not best understood or analyzed from the prism of "class." It is better understood as a pervasive phenomenon, and to the extent that the current economic meltdown results from undue greed, the problem and the cure must be approached accurately and sensibly if cures and solutions are to be found.
Again, proposals that describe the problem as originating in the greed of a particular demographic at the exclusion of others are not based in truth (or in some cases in honesty) and cannot by that very fact contribute reliably in effective and necessary analyses.
The final form of division that prevents and impedes the possibility of solving the crisis, and turning back the potential devastation of this economic tsunami might be the most crucial one of the three. This is the propensity to see the problem strictly in political and economic and terms and look only to these sectors for solutions. This can never succeed, and this must be rejected urgently.
Frank Kaufmann is the director of the Inter Religious Federation for World Peace. The opinions here are his own.
16 comments:
I agree with your assessment of human character, as do many thinkers for whom it leads to the conclusion that society does best through a system of checks and balances, division of powers and as equal as possible opportunity. It seems to me that the free market and democracy is humankind's best approximation of such a system. Now, society includes government and commerce. The political right, philosophically, stands for small government and large commerce; the political left for the opposite. Given that people on both sides will strive to grab power, I prefer the right because commerce maintains power through persuasion, whereas government maintains it through coercion. No one was forced to buy a house through Fannie or Freddie, but everyone is being forced to pay for the damages.
Frank, many of your ideas are consistent with my own which you posted earlier, and I agree with Tyler on the importance of checks and balances and a free market. However, the way our government is currently structured Republicans support the Free Market in name only, while in practice they support either a lassez-faire market that gives big business the opportunity to trample over small businesses, or they support subsidies for big businesses that give them favors and advantages. Perhaps Tyler supports the right more out of desperation to avoid the bankruptcy of what the left is promoting or in resignation to the least of two evils. In my view neither are satisfactory choices, and we do not have to choose one or the other. I have written about this at greater length on the Minnesota Legislative Evaluation Assembly website in an article titled A Free Market is neither a Laissez-Faire nor Regulated Market.
Here's an interesting article. Don't know if you saw it. My conclusion, looking at this is that our political system likes good news and abhors bad news. Given the pressures on delivering good news, and the relatively short term (4 years for an administration) there are huge incentives for spinning a rosy picture, and putting off any heavy lifting on the system, if it won't impact on my watch. When the world falls apart, then you are forced to act and try to make it seem like you are exhibiting leadership.
LB
The Woman Greenspan, Rubin & Summers Silenced
Katrina vanden HeuvelThu Oct 9, 11:46 PM ET
The Nation -- "Break the Glass" was the code-name high-level Treasury Department figures gave the $700 billion bailout; it was to be used only as a last- resort measure.
Now millions have been sprayed and damaged by broken glass.
But more than a decade ago, a woman you're likely never to have heard of, Brooksley Born, head of the Commodity Futures Trading Commission-- a federal agency that regulates options and futures trading--was the oracle whose warnings about the dangerous boom in derivatives trading just might have averted the calamitous bust now engulfing the US and global markets. Instead she was met with scorn, condescension and outright anger by former Federal Reserve Chair Alan Greenspan, former Treasury Secretary Robert Rubin and his deputy Lawrence Summers. In fact, Greenspan, the man some affectionately called "The Oracle," spent his political capital cheerleading these disastrous financial instruments.
On Thursday, the New York Times ran a masterful and revealing front page article exposing the culpability of Greenspan, Rubin and Summers for the era of dangerous turbulence we live in.
What these "three marketeers" --as they were called in a 1999 Time magazine cover story--were adept at was peddling the timebombs at the heart of this complex crisis: exotic and opaque financial instruments known as derivatives--contracts intended to hedge against risk and whose values are derived from underlying assets. To cut to the quick, Greenspan, Rubin and Summers opposed regulating them. "Proposals to bring even minimalist regulation were basically rebuffed by Greenspan and various people in the Treasury," recalls Alan Blinder, a former Federal Reserve board member and economist at Princeton University, in the Times article.
In 1997, Brooksley Born warned in congressional testimony that unregulated trading in derivatives could "threaten our regulated markets or, indeed, our economy without any federal agency knowing about it." Born called for greater transparency--disclosure of trades and reserves as a buffer against losses.
Instead of heeding this oracle's warnings, Greenspan, Rubin & Summers rushed to silence her. As the Times story reveals, Born's wise warnings "incited fierce opposition" from Greenspan and Rubin who "concluded that merely discussing new rules threatened the derivatives market." Greenspan deployed condescension and told Born she didn't know what she doing and she'd cause a financial crisis. (A senior Commission director who worked with Born suggests that Greenspan and the guys didn't like her independence. " Brooksley was this woman who was not playing tennis with these guys and not having lunch with these guys. There was a little bit of the feeling that this woman was not of Wall Street.")
In early 1998, according to the Times story, one of the guys, Larry Summers, called Born to "chastise her for taking steps he said would lead to a financial crisis. But Born kept at it, unwilling to let arrogant men undermine her good judgment. But it got tougher out there. In June 1998, Greenspan, Rubin and the then head of the SEC, Arthur Levitt, Jr., called on Congress "to prevent Ms. Born from acting until more senior regulators developed their own recommendations." (Levitt now says he regrets that decision.) Months later, the huge hedge fund Long Term Capital Management nearly collapsed--confirming some of Born's warnings. (Bets on derivatives were a key reason.)
"Despite that event," the Times reports, " Congress (apparently as a result of Greenspan & Summer's urging, influence-peddling and pressure) "froze" Born's Commissions' regulatory authority. The next year, Born left as head of the Commission.Born did not talk to the Times for their article.
What emerges is a story of reckless, willful and arrogant action and behaviour designed to undermine a wise woman's good judgment. The three marketeers' disdain for modest regulation of new and risky financial instruments reveals a faith-based fundamentalist approach to the management of markets and risk. If there is any accountability left in our system, Greenspan, Rubin and Summers should not be telling anyone how to run anything. Instead, Barack Obama might do well to bring back Brooksley Born and promote to his team economists who haven't contributed to the ugly mess we're in.
Jay says...
There is greed, but the solution to this greed is the core of the issue. The Communist way seeks to offer everything through the state and where everyone's income except the leaders is strictly limited. There needs to develop a mentality that money is a public commodity such as air in which we should not pollute it. Once needs of the individual are met, or once luxuries cannot be added without end or without considering global implications, then there should be a limit to how much a person can earn without being publically obligated.
I propose that no one can earn more than the President. This couple should act as a holy couple and an example to the nation. Past presidents and their wives have not all nobly held this role and so there needs to be a division as to who gets to keep the money. Donkeys fight elephants.
This lack of nobility is at the root of the issue of greed. We mistakenly think that money is the sign of success when the deeper success is the family which is the wings beneath daddy's wings.
Currently we are not educated to value the correct things with the mass media screaming over sports stars and shrieking over Bollywood and Hollywood. We need to value the family, and commerce will correct itself once that mentality is initiated, promulgated, encouraged and when leaders demonstrate family behavior in all aspects of government including the legislative, executive and judicial needs of family life.
All of the nation will then become one nation, and the pain of a few will be the pain of everyone. Since the wealthy use other people's time and money to stay wealthy, they mistakenly think that they "own" all the money they made, when they have a misperceived debt to those whom they took advantage of to get there.
Teetering on the brink of starvation, 6.8 billion people create 1-2 million more people every day. The average person in the world makes $5000 or less a year, yet that is what poor American's taxes will pay every month for a foreclosed mortgage of a $500000 house every month. The average house in San Diego, CA is worth about that much on paper, but as the true market value corrects itself, the barons who created the mess have already hedged themselves into the next shady way to dupe the public.
What the story really is, is that so few understand the implications of this, and how this outrageous unfair use of public funds hurts the ones it is advertising to protect, and that the next round in this financial crisis will be much worse when no bailout is possible.
jay can be contacted at justcalljay@yahoo.com
Frank—thanks for sending me the article. I couldn’t agree more. A couple of things to think about:
1—one way to get across the idea that the problem is not just “them” out there, but each of us. We all reached out for cheap credit and moved into houses we knew we couldn’t afford, we sold mortgages to people we knew couldn’t pay, we applauded the wall street whiz kids who devised these financial instruments that we didn’t understand but brought us great stock returns, and we lived over our means just like the government. We have not been conserving energy or pushing the car companies to produce hybrids, we bought all of those SUV’s. So perhaps the answer is to look in the mirror before pointing that finger.
2—when we point the finger at a particular group—be it a political party, an economic class, or a racial group, we get caught up in the world of stereotypes and heightened emotions. It takes energy away from striving to truly understand the real problem (sensemaking) and inventing new ways to cope with a changed world. Also, we get focused on the past and present, rather than on how we can pull resources together to move towards a different future.
3—it might be useful to move away from a “blame game” and instead think about doing an “after action review” like in the military, whereby you look at what has not worked and try to learn from the experience.
4—usually when things get really bad people attribute that failure to leaders—but we have to fight against this tendency. It is too simplistic.
That’s it for now. Nice job. Best,
deborah
Hi, Frank,
First understand, this is the North Dakota cowboy in me talking. Well, I'm still chewing on your observations and think I "git" most of it. I have a simple view of this whole fiasco:
As an individual, you are a real bonehead to loan money to someone who probably can't or won't pay the money back. In the real world, that would be called a gift, not a loan. And worse, if it's not your money, but someone else's that you are "loaning" out, and you are doing it without the owner's permission, you are in fact mismanaging the funds put into your care. In most businesses, people caught committing such acts would be fired or charged with fraud.
If my memory serves correctly, Stalin's infamous quote, "if you kill one person, its a tragedy... kill millions and it becomes a statistic," would have some relevance here. How many millions of people were given home mortgages without having been required to provide valid evidence that they had the ability to pay them off responsibly?
If I was a politician and wanted to steer an unwilling country towards Socialism, this would be a good way to make it happen, so I could then start "spreading the wealth around." I now find myself wondering if this wasn't the Liberal strategy all along.
At the time of President Carter, and then again in 1995, banks were essentially forced/shamed into providing high risk home loans. I feel that we, a s Americans, are much like hapless hijacked passengers watching our "economic bus" get diverted down a Socialist road without any opportunity of being able to debate the issue.
If not criminal, it is at least a very arrogant maneuver on the part of Barney Frank and his buddies. I personally feel, because so much damage has been wrought, an independent prosecutor should be appointed and heads should roll. Let the chips fall, regardless of party affiliation.
You mentioned there is plenty of blame to go around. I agree. For the past 30 years, the American consumer has been a "consumer" first and an American second. We buy $25 shoes made in China before we will buy the $40 shoes made in America. We fall for the hype of grabbing that car and that house that is way out of our price range because, like spoiled children, we get what we want. We are simply living beyond our means.
That's my two cents.
Carl Swearson
Dear Frank,
Sorry for not responding to you earlier.
As you can imagine we are hit by this financial crisis the hardest, or the softest. We already met our doom, where others still hope to survive somehow.
Our church properties are at stake at the moment, but we hope to rescue at least partially. Here is my analysis, you may feel free to partly include it if you think so. Your article was fine.
As I see it with my very limited understanding, since I am not a banker and even they find it hard to figure out what is going on and when we will see the end of this financial tsunami.
In Iceland loans in Japanese Yen became very popular during the past decade and very normal to take (low interest rate and moderate conditions to pay back in 25 or even 40 years periods) The financial lack in liquididy (money at hand) that might have arisen by the loan giver was backed by another financial institution that gave another loan to this bank. This system worked as long as at the end there was always a back up. Whether or not this just ended or took some circles in self betrayal I do not know but, now it became clear, it was destined to perish. The money makers were those who could secure their commission right away. In the case of Iceland the business and loans the banks took oversea ín the end exceeded the finances of the country three times. Here the state should have intervened in time.
Easy loans, especially big loans with only 10% of self added capital and sometimes with zero capital completely financed by the banks were mistakes which we have learned of not to do anymore.
What the governments in the US and in Europe now do is according to my understanding the wrong way of solving this crisis.
They believe that by infusing money into the same sick system which led to the downfall without drastic changes can prevent an economical crisis. If an economic crisis should be avoided the financial swamp has to be dried out. If the governments want to rescue companies then they should directly offer the money through the state bank with some interest. For a while it will not only state controlled finances, but largely a state controlled economy. Since it is our tax money it is the right thing to do. Who on earth salutes a thieve by giving him even more money.
When greed was in the beginning of this crisis, now it is fear that has led to suicide of quite a few here.
From a distant viewpoint it is strange that money as an abstract value controls the life of people even more than concrete things. I think it is about time when we have to think and act on behalf of all people and make sure that everyone has enough to eat, has shelter and lives under acceptable sanitary conditions. If we rebuild our economies under this premise we will not only overcome this crisis, but will be better off altogether in the future.
With kind regards
Rohan
My hat is off to the wonderful people here who have so much wisdom to share. America and the world have a terrific future. The incredible knowledge blessings, both internal and external, in the realms of awareness of the whole, relations among nations, diplomacy, technology, economics and the rest that have made the world so prosperous are still with us. We may have found that the net we are presently pulling in had a hole in it, but thankfully God has taught us how to fish and while the current haul is disappointing, the past has had many full nets as well as an occasional tear and the future will be the same.
Even if, after having stumbled in one direction, America reacts and winds up too far to the left, I believe that too will correct. Winston Churchill remarked wryly that America always does the right thing, after having exhausted all available alternatives. =)
From a strickly financial perspective, stocks are at bargain prices seen just once or twice a generation. The world's central banks can print as much money as they want to keep the system liquid (avoiding deflationary depression), so cash or bonds will do poorly in comparison to stocks in the long run.
With gratitude,
Daniel Hess
I think the financial crisis that we are currently going through here in America is the product of 8 years of a Republican Administration. They just have the wrong ideas when it comes to the economy on the national level. You must take on a utilitarian perspective when it comes to this issue and figure out what effects and is best for the majority of Americans.
Although I think both sides of the aisle have issues that are not with God's program but on this issue on the economy I definitely tend to side with the Democratic party. Their economic policies tend to benefit middle America a lot more which represents the majority.
Thanks,
John Prevost
Thanks for your stimulating article. I have been stimulated to comment.
You wrote: “the only thing you can find in a political party is people.”
I have to disagree. You find ideas, philosophies, and methodologies. There is a big difference between political parties that can be acknowledged without saying one is bad and the other is good. They have different approaches, period. And the people in each of them, well, they are just as different in their composure and nature.
You wrote: “the painfully rich do nothing but become ever more painfully rich with each passing moment.”
Do you really believe that? Most rich people I know contribute to society and have thoughts and feelings like you and I do. What do you mean by “painfully?” Whose pain is it, the one who is rich or the one who is not? I think you’ve used a cliché here that reveals your disdain for, or at least your distance from, the rich.
You wrote: “Wall Street maniacs are not alone in the seeking the wild ride of free money, and they are not alone in suffocating themselves in the grotesque glut of wealth and salaries. One need think only of what has happened to entertainers, and sports figures. 50% of (or 52.7 million) of US Households owned equities in some way shape or form in 2002.”
Have you adopted the adage that money is the root of evil? First of all, money is not “free.” Money follows productive activity, invention, creativity, service, and the common good. Money in stocks is capital, a representation of man’s energy. Money represents the return that such kinds of contribution brings. Second, money in the hands of a selfish person is used selfishly. Money in the hands of an unselfish person is used for unselfish purposes. Please don’t equate this “glut of wealth” as if it were the pot being shaped by the kettle. Man can be good or bad with or without money. It’s not about the money.
Let me ask you a question that might make my point: Can God use a rich man, who lives for the sake of others, more than He can a poor man who lives for the sake of others?
Think about it.
Your article, by the choice of its words, I think, shows an innate bent against wealth, though you attempt to put class envy aside. I am very disappointed in that, and any explanation of this issue of greed you will share later will simmer in lost credibility.
Finally, to Jay, who wants to put a “cap” on what one can earn: such a system as you propose goes against the Godly nature of man to excel and to improve the world around him. Man’s inherent desire is to take dominion over the world, and one way is to improve it. When man follows the laws of nature, when man contributes to the greater good, when man provides a service or product that improves the lives of others, he benefits from his contribution. Sometimes greatly. If the laws of nature abundantly bless this man, who are we to put a limit on that blessing?
Financial Crisis? If people would turn off their television sets, in a month all the worrying over the state of the global economy would die out. It's all in our heads. There is an abundance of wealth out there, it just needs to be taken. Now is an amazing time to start buying, houses are selling for cheaper than they can be built, blue chips haven't been this low for years. This is a time of incredible opportunity for those that have the 'umph' to go out and buy fundamentally sound companies that have been beaten down. This is where the rich get richer and the poor get poorer because they see opportunity where the poor see fear.
"...I've been buying American stocks. This is my personal account I'm talking about, in which I previously owned nothing but United States government bonds," said Chief Executive of Berkshire Hathaway Buffett.
"A simple rule dictates my buying: be fearful when others are greedy, and be greedy when others are fearful."
Just freakin do it, we live once.
Jean Hart
Thank you for your good observation. I modified my article to acknowledge the flaw you identified in my original piece. Thank you.
I did feel a bit of gotcha and hyperbole in the point you accurately identified (negating anything further I might have to contribute on the matter, based on a single sentence), but the essential point (regarding the tone and the carelessness of the sentence that irked you) is taken, and gratefully received.
On the subject however these facts and opinions remain worthy of consideration:
Justice Louis Brandeis: "You can have a democracy and a society sharply divided between the rich and the poor, but you cannot have both for very long."
In 2005, the average income of the top 1 percent of Americans increased 14%, while the average income for the bottom 90% of Americans dropped 6%.
New York Times: Not since the roaring 20's have the rich been so much richer than everyone else. In 2003, the top 1% of Americans received 21.8% of the nation's income, their largest since 1929.
The top 10% of Americans now collect almost 50% of our entire national income, while the remaining 90% receive the other half.
In 2005 the top 1/10th of 1 percent reported increase of 908,000 in income in just 1 year. The top 100th of 1% had an income increase of 4.4 million dollars in one year.
Frank Kaufmann
One more fact to add to go along with my response to Jean Hart:
In 1970 the average CEO made 43 times that of this or her average employee. By 1980 that number rose to 84. In 2005 the average CEO was making 364 times as much as the average employee.
Greetings Frank,
Thanks for your informative opinions.
My personal view on this mess we've gotten ourselves into is a long time in the making.
If you knock two supporting walls out of a house, that house is coming down. Since the eighties we've been shipping our manufacturing capabilities across the world until we no longer manufacture much at all. On top of that U.S. companies have been outsourcing our service industry. With those two metaphorical walls down, it was only a matter of time till this economic collapse happened.
We need to reestablish ourselves as a manufacturer, servicer of our own people, and then we'll see some real growth. Down with the Greed!
Steve
Thanks, Frank, for responding. Appreciate it. I'm not trying to be annoying.
Your statistics are fascinating at least. You are talking about wealth. I’m not an apologist for the rich, but I’d like to know more about your statistical finds.
By the way, there are no poor in America. They have ipods, cellphones, cars, big screens, health care for the children, free milk, housing assistance, etc. Find me some poor people who have none of these things and he probably doesn’t live in America.
I think the real difference with the American rich is their giving capacity. In 2007, private contributions, not including corporate giving, was just shy of $300 billion.
I think education is vital to changing America so that more people can succeed.
As I make relationships with wealthy individuals, I discovery their wealth has been earned by them through tenacious business decisions and efforts, and by the grace of God. I agree the CEO’s pay has shot up exponentially and they have kept the workers pay sort of stagnant. I support ESOPs. And lower CEO compensation plans.
Are you for redistributing wealth? The best way is to support broader more meaningful education and realigning our culture by ridding the beepop sexbop inundation which focuses on self. Multiply the giving opportunities, encourage private organizations, not by creating more government welfare programs, because I see them becoming like a permanent crutch.
Finally. Wealth is not a creator, it’s passive. You said to the contrary, however, that “We have always known the power of wealth to create wealth.” When someone takes hold of an idea and executes it, that creates wealth or generates a return. Money is stagnant as a thing; it must be invested, used, otherwise, it loses value. The wealth that people have is stored energy. It will atrophy unless it continues to work. The money wealthy people have is, in general, being used somewhere. Money does not create money.
all in all, you are tackling a big idea.
Hi Jean
Thanks - Unfortunately you catch me in a swamped time. I look forward to continuing with you toward sound views.
My data is from the book "A Letter to America" by David Boren. Boren is (off the dust jacket) a Rhodes Scholar, longest serving chairman of the US Senate Intelligence Committee, former US Senator, Governor of Oklahoma, and presently (13 years) President of the University of Oklahoma.
I think you will like this book. I like him reject the statist redistribution of wealth. Boren (like you) devotes most of his advocacy to investment in and the reform of education as vital for our nation's future.
More anon. Blessings, Frank K
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