Morality & Economics
Without Personal
Responsibility,
No Sound Economy
By Mark T. Mitchell
The emergency bailout has passed
and now Americans, along with the rest of the world, wait for some sign
of good
news. In the days leading up to the passage of the final package,
politicians
from both parties grimly warned that what was at stake was our
“American way of
life” and that, without massive intervention, the country and perhaps the
world would face an “economic apocalypse.” I must admit that I am
skeptical when
powerful folks ask for more power. I’m even more skeptical when they do
so
using fear as a motivation. When the putative choice is massive
government
intervention or world-wide disaster, we do well to ask how we got into
such a
conundrum.
Like most Americans, and the honest
economists, I don’t pretend to understand all the intricacies of the
situation,
but I do have a handful of questions that seem worth asking:
1. Is it a fundamental problem when a
corporation or sector becomes so big that its failure
is
believed to threaten the entire national economy? Could it be that
scale
matters? Can institutions become so large that their potential harm
outweighs
their actual (or occasional) good? If yes, then are there measures that
could
help ensure that economic power is decentralized and therefore less
dangerous?
2. The bailout was ostensibly
necessary to protect our “American way of life.” That such a reason was
offered without
justification
indicates that our way of life is an axiom that must be assumed but
never
questioned. But is it too much to consider, if only for a moment, that
perhaps
our way of life is precisely the problem? Of course, a way of life is a
complex
thing, but insofar as the “American way of life” consists of living
beyond our
means, it is unsustainable. To the extent that consumer credit is at an
all-time high and personal savings is at an all-time low, the “American
way of
life” is irresponsible.
3. Public debt mirrors private debt.
Both publically and
privately, we have become a nation that demands immediate
gratification. Is
such a national disposition healthy? Psychologists tell us that adults
are
capable of delaying their gratification. If so, then publicly and
privately
we are, according to this measurement, behaving like a nation of
children.
4. The best part of the American
tradition is characterized
by a can-do attitude and a willingness to face the consequences of our
decisions. Consider, then, the fact that in many states home loans are,
by law,
nonrecourse. This means that if a borrower cannot afford to make the
payment,
he can simply walk away from the deal. The property returns to the
lender, and
its value may or may not cover the outstanding debt. In essence, the
bank runs
the risk and the borrower runs away. If such laws were eliminated,
borrowers
would take care not to borrow more than they can afford. Does the fact
that it
is legal to walk away from a home mortgage make doing so morally right?
Is a
system based on no-risk credit and legal irresponsibility fundamentally
flawed?
5. In our private lives, we expect that our “standard
of
living” will be higher than that of our parents, and our children will
enjoy a
higher standard than us. But is that expectation warranted? Do we need
a higher
standard of living than our parents’? Exactly how high is high enough?
When will
we be able to say “my standard of living is just fine”? When a society
finds itself animated by a fundamental desire for
more stuff, the analogy to the nursery is hard to miss.
6. We are told that the catalyst for
the current economic
troubles is the housing market. Consider the following: in the 1950s
the
average house had one bathroom and was something under one-thousand
square
feet. Today, the market standard is one bathroom for every bedroom and
the
average square footage has more than doubled. Ironically, the size of
families
declined precipitously during those same decades so that the average
square
footage per person has risen dramatically. How big is big enough? Would
the
current crisis be as acute if the houses we bought were more modest?
7. For years, Republicans championed
tax reduction while
Democrats emphasized government programs. Both sides won the debate.
Today, the
presidential candidates from both parties argue about whose plan will
reduce
taxes the most. At the same time, both candidates promise far more
government
programs than they can afford. The American people want both lower
taxes and
increased government spending. We want it all now and we want to defer
the
payment until later (preferably after we are safely dead). How’s that
for
family values?
8. Many of us have parents or
grandparents who lived through
the great depression (and a few among us remember it). My grandmother
raised a
family during those lean years and the frugal habits she acquired by
necessity
stayed with her the rest of her life. She saved and mended and lived
well
within her means. She was grateful to have a margin between her income
and her
expenses and thought it was wise to live modestly. What would our
grandmothers
say to us now as we struggle to maintain our “American way of life”?
9. Lord Acton’s hoary saying is
pertinent: “power tends to
corrupt.” If so, then we should make efforts to decentralize power.
Such a
sensibility is behind the separation of powers written into the fabric
of the
U.S. Constitution. We should be concerned, then, when big corporations
get into
bed with big government. The offspring will be ugly and, we can rest
assured,
it will be big. This bailout represents a stunning consolidation of
corporate
and government power. Of course, we are promised that the government
will
regulate the corporations, but the conflict of interest is glaring.
Could it be
that the problem is not de-regulation but regulations that favor big
corporations
over small businesses?
10. In Greek drama hubris plays a key
role. This is the
fatal pride that brings down even the greatest of men. Is hubris at the
heart
of this crisis? Hubris is the
failure to acknowledge limits. It is the
failure
to live within the bounds proper to human beings. Ultimately, it is a
failure
of virtue. When we delay payments rather than our gratification, we
reveal our
ill-formed character. When our demands for more things are limited only
by our
insatiable imaginations, vice is running the show. When our leaders
tell us
that they can solve any crisis if only we grant them more power, hubris
has taken
center stage.
The complexities of the current
situation are beyond most of us. Rather than petulantly demanding a fix
to
sustain our profligacy, perhaps we should soberly look for another way.
There
is an alternative to our current way of life that is deeply rooted in
American
history and culture. It is characterized by reverence for the past,
responsible
action in the present, and care for future generations. This
alternative is
accompanied by ideals that are not foreign to the American way of life
even if
they have in recent years been drowned out by the fervent demands for
more,
bigger, and now. These are ideals like moderation, frugality, humility,
and
thrift. They sound old-fashioned, but perhaps it is time to dust them
off and
try them on for size. The American way of life is sustainable only if
we
acknowledge that publicly and privately we are called to lives of
responsibility. Hubris is
only countered when we recognize limits.
Could a
recovery of modesty be the real fix?
Mark T. Mitchell is Associate Professor of Government at
Patrick Henry College and a James Madison Fellow at Princeton
University. Another version of this article appears at The Center for a Just
Society.
