The one thing everyone from Jim Wallis to John McCain seem to agree on is that rampant greed is a main cause of the financial collapse.
I don’t buy it. I’m not saying greed is good, just that greed is. It’s a constant. It’s part of human character and I find no evidence that the intensity of this basic human instinct suddenly increased in the last ten years.
What’s changed is that the checks on greed have dissipated.
Yes, that partly means government regulation. One of the things that pure free marketers rarely understand is that government regulation enables capitalists to be whole-heartedly greedy. If the regulators are watching, business people can push the envelope to make more money – and that often is a source of great economic creativity. We don’t want a system in which we’re relying on the internal ethical code of investment bank presidents to balance growth with national interest. The government should say: you go ahead and be greedy. We’ll make sure that your greed helps, not hurts, the rest of us.
But it goes beyond government regulation. Another traditional check on greed is the belief that if you go too far, you’ll get burned. Why didn’t that happen this time? As I understand it, these new financial products like derivatives chopped up the risk and spread it around. Investors no longer had a clear sense how much risk they were taking on. Fear no longer restrained greed.
Most important, this crisis results from a failure of memory. On my office wall, I have some cover stories I wrote for Newsweek in 1990: one called “Bonfire of the S&Ls” and the other called “The Real Estate Bust.” Sound familiar? Business schools should spend less time on business ethics and more on business history.
And it’s not just big-shots who do this: everyone who took out a sub-prime mortgage was making a bet that real estate and their incomes would keep appreciating.
Which brings me to religion. When I asked Dilshad Ali, one of our editors who is Muslim, how her faith affects her finances, she said that because of Islam’s strong cautions against debt and usury, “we try so hard to pay credit cards on time, not take loans, etc — it’s a challenge, but it also keeps us financially stable and on our toes.”
But isn’t Dilshad the exception? Historically, all of the faiths have warned against greed. Greed was not only listed as one of the seven deadly sins, it’s often thought of the mother of all of the others. But combating greed is hardly a focus of American spirituality these days. You have The Secret, whose message that if you visualize that house you can get it (never mind whether you should get it.) Prosperity Gospel ministers teach that if you’re rich, it’s because God is favoring you. At a minimum, pastors are focused on other things. Do a search at SermonCentral.com for sermons about sex you’ll get 252 results. On greed? 37 results.
Greed is not worse than ever. The problem is that we’ve surrendered our best anti-greed weapons.