There is something fundamentally wrong with a society that consumes more than it produces. You don’t need an MBA to understand this concept, but the idea of being able to consume without end and reap without harvesting is so intoxicating that even a lot of MBAs allowed themselves to be sucked in. I was watching CNBC during the rise to 14,000, when the money pundits were gushing about Goldilocks and stomping like bulls. They were singing the praises of globalization like overwrought converts at a religious revival. Then the credit balloon got away, and the Dow went haywire. Suddenly the tone turned to panic and there were prayers for the Federal Reserve Board to come and save them from certain destruction. "Lower the interest rates!", they cried. "Add some liquidity!" At the same time, products produced for a big profit in China were increasingly found to be defective. Law suits loom on the horizon to rob investors of anticipated profits and rising stock prices. The very people who were all about globalization and deregulation are now crying for the American government and the taxpayers to step in to protect them.
I was also watching the sad drama being played out in Utah where six miners are trapped and others have died trying to rescue them. In my mind, I made a connection between these two events. There was greed involved in the mining and greed involved in the hedge funds and mortgage markets. Too much coal had been removed to support the mountain above it. Those who stood to gain most from mining it knew they were taking a big risk. When the roof fell in, the owner wanted to blame it on nature, not humans taking so much coal from the mine that the mountain needed to fill the void. They propped up the roof, but you can only defy the laws of the universe for so long. Those who made the plans to do retreat mining and reaped the lion’s share of the monetary rewards from it weren’t the ones trapped and dead when the ceiling collapsed. The owners kept reassuring the miners that the mine was safe, that they were looking out for them. Those who lent credit at high interest rates to poor credit risks knew that these loans were risky, yet government and economic leaders keep telling us that the economy is solid and growing. But when the loans can’t be repaid after years of trying, it will be the American consumers who are left with nothing to show for their years of labor and sacrifice, not the big investors or the government officials that they financed and duped the public into electing . The roof of this economy is being supported on the backs of lower and middle class Americans who are in hock over their heads, and are losing their jobs to cheap labor in foreign countries and exploited illegal immigrants. The Federal Reserve might be able to shore it up by lowering the interest rates again, but we cannot defy the laws of nature forever. When the collapse comes, those who have been making the economic decisions will be counting their profits in some offshore resort while the rest of us try to dig ourselves out of the rubble. It is time for us to develop some respect for nature and learn from it instead of abusing it. We need to look to the TAO for guidance, not the DOW.
When a country obtains great power,
it becomes like the sea:
all streams run downward into it.
The more powerful it grows,
the greater the need for humility.
Humility means trusting the Tao,
thus never needing to be defensive.
A great nation is like a great man:
When he makes a mistake, he realizes it.
Having realized it, he admits it.
Having admitted it, he corrects it.
He considers those who point out his faults
as his most benevolent teachers.
He thinks of his enemy as the shadow that he himself casts.
If a nation is centered in the Tao,
if it nourishes its own people
and doesn't meddle in the affairs of others,
it will be a light to all nations in the world.
Tao Te Ching, 31 Lao-tzu
14 comments:
This is an outstanding post, Cee Jay and yes, it says everything I've been thinking and kind of sort of writing but nearly as well, obviously. Thanks for writing it and sharing it. Please consider submitting it to the Carnival of Ohio Politics this week, please (I'm the curator this edition). It really needs and deserves a broad audience.
The only thing I would add to the notions in the post is that the sense that "it" will happen to someone else also is what fuels those who benefit from the risk toward negotiating with those they need to help them benefit (money-wise in particular) from the riskiness of the endeavor. So Murray never thought it would be him - it will be other mine owners. And folks investing in China and subprime mortgage industry etc. - they too think, well, I would never use those tools - it won't affect me.
Naive doesn't begin to describe it.
The Neocons are hypocrites as we both well know, Ceejay.
Since the the dawn of Reaganism all we've heard from them is the government is evil, the problem and not the solution.
Yet as soon as there are dark clouds on the Dow horizon who do they run to ?
Republicons ask that rates be cut and millions of Treasury dollars be pumped into the economy to keep the credit industry from collapsing.
Government isn't the problem ... Republicons are.
Nice column, btw. :)
Peace,
Cosmic
Cee Jay:
I agree that these two things have a basis in human greed. The question perhaps is what role government has in moderating it.
I am most definitely a 'less government is better' type. Yet, there is a place for government, as the embodiment of the social pact amongst the people, to make and enforce laws which prevent one citizen from harming another. It is also okay to make and enforce laws to require participation in and contribution to government enterprises established for the common good, such as national defense and education.
Somewhere between there is where the conflict lies. When is that taking action for the common good infringes on personal liberty, which includes the freedom to do stupid stuff?
Some will make it an economic argument. For example, I'm a motorcycle rider, and here in Ohio, adult riders are not required to wear helmets. I always do, but I respect the decision many of my friends make when they don't. Yet there is an argument out there that the state has the right to tell a motorcyclist to wear a helmet because if he is injured, the state bears some of the cost of his treatment and support.
For a libertarian, there's just enough truth in that statement for me to yield the point. But my preference would be to remove the state's obligation to provide care, and let the biker and his insurance company work it out. That was the primary mechanism used to kill convertibles, muscle cars and insanely fast bikes in the 1970s. Of course, they're all back.
After the Depression, the government put a great number of controls on the financial markets, for example prohibiting the commercial banks from getting into investment banking and insurance. In the past couple of decades, most of those restrictions have been removed, and the financial industry has consolidated to pre-Depression levels, with a lot more people playing in the stock market.
As we saw when the .com bubble burst, most people in the market were ignorant (not stupid) speculators (not investors) who got burned when things happened they didn't understand. I'd argue that the same ignorant speculators are back in the market, and another big price collapse is before us for the same reason.
But to what degree does the government have a role in 'fixing' that?
Same idea with dangerous professions. There's not a person that goes into a coal mine that doesn't know they're risking life and limb. Same for the guys who climb onto ultra-high voltage power lines, or build skyscrapers. Most get paid well, and accept the risk for the compensation.
What role does the government have in deciding whether that industry has a benefit to the economy which exceeds the risk of injury and death?
My feeling is that individuals should have the right to choose whether to work in those industries and accept the risk. Of course, essential to that evaluation is access to the truth.
If that mine owner was using faulty equipment, defective materials, or unwise technique, then he should bear the consequences. It should include prison time. A friend of mine is now in prison for six years for inside trading. If this mine owner withheld truth from the miners, truth that might have changed their risk-reward assessment, then I'd think it merits a few years in a slammer as well.
But the mode we don't want to get into is restricting free choice and liberty based on perceived intelligence of others. That kind of thinking is the worst kind of discrimination, and has justified slavery and segregation forever.
PL
I've noticed that average grocery store items like milk have gone up close to a $1 over the past several months, due to the fact that China has developed an insatiable taste for it. That's a fact that doesn't often get reported in the media.
As the Chinese economy churns full speed ahead, bloated on American capital, the average American pays more for consumer goods.
I think to some extent this was bound to happen. But the rate at which the Chinese have rapidly industrialized has been a shock to many people.
I see a major recession headed down the pike at us and it is our own greed that has put us in that tight spot.
Jill, thanks! I will submit it, and thanks for directing me to the Carnival. :) I certainly agree with the point you added, people are willing to let others take risks for them when they think that it won't involve them, that catastrophe will happen to someone else.
Paul, I certainly hope that our government does not bail out the investors and the corporations who decided to take these big risks knowing that there would certainly be many borrowers who would end up defaulting on loans after they put up what savings they had and paid high interest rates until they just couldn't do it anymore. I think that government should protect those who are most vulnerable to abuse when they enter a relationship where there is a major power differential. Those who have the money, the property, and the lawyers have the power. The very least people can expect is for the government to expose those who would abuse them and perhaps even make and enforce laws that protect them from false advertising and legalese in fine print. We could also push for personal finance education in our schools. Perhaps some of the fines that are paid for corporate infractions could be used to educate the public via the mass media. God knows there is enough misleading paid advertisement, even whole shows that encourage people to make risky investments trying to time the market, flip houses, borrow when they have bad credit etc.
I do like the idea of using Freddie and Fanny to bail out some of the homeowners who got themselves in a jam. Personally, I think there is an opportunity for legitimate banking institutions to make a decent profit on fixed loans to many of these borrowers if they are willing to do so at a reasonable rate of interest.
I have a problem with the whole idea of loans that change rate after people borrow the money and that includes credit cards. It is too easy for the lender to jack up the rate using some trumped up reason and keep the borrower in debt slavery for the rest of their life. They can also easily pass on the bad debts to other borrowers and avoid the consequences.
Most societies throughout history have had restrictions on usury. Judaism, Christianity and Islam all recognized that abusive usury was a moral and spiritual issue. There is a pretty good discussion of the topic at Wikipedia
It will always be a difficult to find a balance between giving people the freedom to take risks and protecting them from the possible consequences. I think you are right to point out the importance of the individual having access to the facts and the ability to understand them. If the facts are hidden if fine print in the middle of language that it takes a law degree to comprehend, the government needs to step in.
Cosmic, thanks for your comment. :)
We forget that the government is of the PEOPLE, BY the PEOPLE and FOR the PEOPLE. It is time we took our government back and made it serve the collective good.
Kevin, there are laws in economics that will eventually lead to a leveling out of the standard of living throughout the world. I'm not sure most Americans who say they are all for a free market want that. What they want is for the Asian market to produce while the American market consumes way more than our share at a very low price. The cost of milk is also going up because milk cows eat corn, and grain. Farmers are producing more corn for ethanol as our government rewards them with subsidies. They are not keeping fields in hay, and the corn isn't going for feeding cattle. Interesting how we keep trying to find a way to make more energy instead of putting the emphasis on conserving it. When the Chinese and the Indians consume like Americans, we will have a real energy crunch and ethanol won't save us.
Cee Jay:
Another take on this: the more that people come to expect that the government will protect them from harm, the less capable they become to protect themselves. As a country, we become less and less able to make good decisions and fend for ourselves. The government becomes the good shepherd that protects us from the wolves - right up until we get slaughtered.
My family was among the pioneers who came to America in the 1600s, eventually settling in Ohio in the late 1700s. What an amazing life they must have had - being totally dependent on their own ability to live off the land and their own wits.
One might argue that part of what made America what it is was this experience of settlement. Other than a few big cities like New (Amsterdam) York, Boston and Philadelphia, America was a wilderness that had to be built from scratch into a country. Think how different that was from England, Holland, France and Spain, where there was little wilderness and government was present everywhere.
To build our country, people had to take risks, and absorb the total cost of a loss, including loss of life. The chance to have a little land and lot of freedom was worth it.
But we've morphed into a country where risk is something to be pawned off on someone else. We expect the government to protect us from doing stupid things, and for someone else to blame if we do take a risk and come to harm.
I'll suggest that this padded cell we've created is one of the greatest threats to our future as a country. It creates a false sense of security such that we actually take MORE risk (e.g. dumping our life savings into the stock market), and are honestly surprised when the consequences are devestating.
We need to stop characterizing those to build businesses as the bad guys. No one would have a job if these businesses didn't exist, making products that someone else buys. Don't count government jobs - they exist because private industry generates enough profit to pay taxes, not the other way around.
The government should be something the 'People's Union' playing a role through (minimum) regulation and enforcement to keep capitalists from becoming oppressors.
Other than that, government should stay out of the way and let societal 'survival of the fittest' make us all stronger.
PL
Paul,
In a perfect world perhaps one could have a government that was totally neutral with regard to the market place, but that is not the case and has never been so. When the new government of the United states placed a tax on Whiskey instead of increasing taxes on imports to pay the Revolutionary War Debt, they were supporting merchants instead of western farmers. When the government gave grants of land to railroad tycoons they weren't neutral in the market place. That land was taken by force from Native Americans and most of the people who did the fighting and dying on the battlefields were the working class. Your family and mine did not get that land on their own. It took an army.
My family, like yours, came here before the revolution and settled in Ohio early on. The the canals, bridges, highways, railroads, helped to make their farms profitable. Government had a hand in that. Seems to me that the taxpayers are always being asked to help fund something or other that will make someone wealthy. Examples: sports stadiums, Medical Mart, etc. The recent trade agreements certainly benefit large corporations that can afford to outsource, and they have hurt local and regional businesses, and American workers.
These businesses you are talking about exist because someone is willing to do the work as well as having someone risk some money. The people who do the government jobs build the roads so that the businesses can ship their products. They fight the fires to protect them from the risk of burning down. The government police protect their property.
Let's try an experiment in survival of the fittest. I say that all the government workers should just stay home. While we are at it, everyone who works with their hands should just stay home too. Let's see how business deals with that. If the government is to stay out of the market place perhaps they shouldn't expect government to send in the police or the national guard to protect a business when workers go on strike and try to keep out the scabs. Those unessential government employees should just let looters take what they want. Let the big business risk takers protect their own property. Time for them to fend for themselves!
If we are to have survival of the fittest, I'll place my bet with the working class, not the business community. Big government was created to protect big business.
This is a wonderful post.....and the quote you have by MrJudd is so poignant...
Paul,
BTW, I really do not want to go back to the jungle. Humans survived because they were able to cooperate; not because they were great competitors.
Cee Jay:
I'm not advocating for anarchy - there is a certainly a place for government.
But it is a little myoptic to say Big Government is for Big Business. No question it started out this way, but now pigs of all kind are at the trough, including Big Labor.
I don't want the government to bail anyone out. Nor do I want it taking sides in economic transactions just because one party has more power than the other. Let workers organize into unions to bargain with the corporate bosses - that's okay with me. But both sides have to work together to figure out how to compete with the Indians and Chinese or there won't be any businesses to hire the union workers.
Interesting point on the competition vs cooperation spectrum. I think for most communities and societies, there are times when the members cooperate as a group, and times when they compete with each other. But the members of a group may also cooperate in order to more effectively compete with other groups.
I think that last configuration is the norm - to cooperate to compete.
The tough part is the definition of who's US and who's THEM is situational. The New Yorker who would have shoved another out of the way to get a cab on 9/10/01 would have likely shared the cab on 9/12/01.
Most of the time, our US circle is pretty small. Sometimes it's just me, or just my family.
I guess the struggle is that there is always some THEMs who want to make decisions for US. THEMs making decisions for THEMs is okay, especially when the decision benefits US. And US making decisions for THEM is okay too. After all, we're smarter. But none of THEM have any business in the affairs of US.
AG Gonzales resigned today ... FINALLY !
Maybe the stock market will rally on this news. It's the most positive event to happen during this Administration in three years.
The Bush kiss of death SCORECARD:
You're doing a heck've a job, George Tenet --- GONER
You'r doing a heck've job, Brownie --- GONER
You're doing a heck've job, Karl --- GONER
You're doing a heck've job, Speedy --- GONER
Who will be next ?
Let's hope the nation hears these words from the President.
You're doing a heck've job, DICK !
I'm doing a heck've a job !
Goners ?
Peace,
Cosmic
A V.P. resignation would be good. I hope that when people vote for president in 2008, they also realize that they are voting for the person who will make a lot of appointments.
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