Were Greenspan and Bernanke Right, Is it all Capitalism’s Fault?

In House testimony before the last election in 2008, Alan Greenspan stunned the world in answer to a question by Henry Waxman, that much to his surprise, capitalism did fail in ways he’d never predicted. Rush Limbaugh was apoplectic. I was a little sad, but also understanding. After all, Alan is getting on his years, and I suspect he could lose what few num-nums he’s still getting from the handsome Andrea Mitchell unless he caved into the inevitabilities of the Left. Empires have fallen for less, so cut him some slack.

Then Bernanke in essence said the same thing when he he authorized a third round of quantitative easing (QEIII).

So, are they right? Well, Limbaugh says not only “No” but “Hell no!”,  and in the philosophical sense, I agree. But internally, inside the corporate culture, including banking and certainly Wall Street, they have a point. For no longer is capitalism, top to bottom wrapped in an enterprise, protected by the common purpose of self-interest as laid out by Adam Smith. Middle and upper level managers routinely risk well beyond what would normally be called prudence in a for-profit business, and they do it, well, with indifference to the corporate mission and ethic, and most often for a personal selfish purpose…with other people’s money. (Sound familiar?)

It’s one of the reasons we, and the Constitution (I’d wager) has always favored small business, where capitalism now struggles to stay alive.

Today, just like Big Government and Big Labor, and Big Bad Mama, I don’t like Big Business and Big Banking. They all live in the same time warp.

I actually wrote a letter about this in the late 1970s, after I left private law practice to enter the corporate manufacturing world…as a manufacturer in the factories, and not as a front office gigolo. I was in my mid-30s, and was stunned to find in this Fortune 500 company’s front office; Planning, Finance, Marketing, a complete detachment to the original purposes of the enterprise, which was making and selling a thing well. (Simple, huh?) The word “manufacturer” was used as an epithet in most front office circles…out of earshot of the soon-to-retire senior execs who built the company to the billion dollar status they were just chomping at the bit to inherit…so they could get a corporate box when a pro team would finally come to town.

That letter in 1979 was to a New York Times columnist, and ended with “wait til these guys move into upper management in their forties and fifties.” His reply, I recall, was “Ho-hum.”
Well, they did, as we saw with Skilling and Fastow of Enron, who took a great company built by a really fine man, but with the indifferent morals of an horny orangutan, destroyed the lives and fortunes of thousands.

What about Ken Lay? Well, Lay stood vis a vis Skilling and Fastow the same proximity as Chris Dodd did with Countrywide, Fannie Mae, Freddie Mac and their sub-prime lenders. Once he saw he’d been bribed by criminals in the middle of a heist, he had to choose between his reputation and his fiduciary duty to the stock holders. He chose predictably. Dante created the Nine Levels of Hell just so we can differentiate between a Ken Lay and a Jeffrey Skilling, or a Chris Dodd and a Franklin Raines. There are crooks and there are vain facilitators for crooks.

They’re all in hell, but one gets to run through a lawn sprinkler every eon.

The banking mortgage meltdown started out as a swindle, a heist. It wasn’t from a loop-hole, it was a planned theft, and some members of Congress knew it. But worse, it was designed to assist bag men/community action groups, among them ACORN, who were known criminals, and to insiders, known Marxists.  Fannie Mae and Freddie Mac were already wholly owned subsidiaries of the Democrat Party and the Congressional Black Caucus, so it was a perfect political fit. The fly in their buttermilk was the creation of the sub prime mortgage market. That too bore all sorts of fingerprints of ACORN and other Marxist groups, but no one will know for sure until the final book is written or the judge hammers down the final gavel and sends them all to prison (assuming the good guys reclaim Congress). So until then we’re all left guessing as to whether the crash was intentional or just an unintended consequence of typical liberal poor foresight. Obama has added several chapters to what we thought we knew in 2008-2009.

But among the facilitators were also scurrilous men and women in the private sector, carried away not so much by greed as an indifference to their fiduciary responsibilities, and that, my friends, was because they had come up through the system knowing how to game the system. There were no longer any moral or ethical ties to hold them back, only legal. This was what I (inarticulately) warned about in 1979, when they were all just pups.

Adam Smith wrote quite a bit about the ethics underneath the pursuit of self-interest. And he had Anglo-Europe, not China, in mind when he wrote. If you want naked capitalism, with no bonds of ethical behavior, go to Albania. (per PJ O’Rourke)

When corporate business was reduced to a template to be learned, it became little more than a board (or today, video) game. Compartmentalization meant that no manager really knew much of the corporate mission until he had a “need to know.”

The Reagan years were surprisingly naive and innocent on this account. We were still under 40 and our bosses of that post-war (greatest) generation of managers who knew so very, very much about so very, very many different things in their companies’ histories and objectives (“whole men”, Aristotle might have called them) was already being viewed as quaint. An anachronism to modern management of the new generation. Still, theirs was coined an age of greed…followed by what would be the Clinton years of the 90′, where real greed emerged. Only by then corporate managers were aware their bloomers were showing so someone came up with the “mission statements” that read like the old police academy “to protect and serve” catechism. As one VP told me, “Sincerity is the key. If you can fake sincerity, you’ve got it made.” They all put the “slick” in Slick Willy.

By 2000, that classical generation of post-war managers had all died or retired. What honor and ethics remained out there in the corporate world was due to the lucky ones who went to Sunday School or graduated from some mid-western or southern school, instead of Wharton. We can also blame public schools. Seriously, how can you teach ethics when the public school system will not allow there to be a firm notion of right and wrong…except that you can’t call Rolley-Polley “Fatso” or pull Jennifer’s pigtails? How else can you expect the corporate world to fare when the first time those students looked at an ethical conundrum was on a final exam in a third year Business course?

And while it remains to be seen whether the financial meltdown was an accident or intentional, the public school meltdown and its consequences are intentional.

I’m not writing this to complain, just to let you know that it isn’t capitalism’s fault. Capitalism is a fully grown moral and ethical code for building economic opportunity for the broadest possible spectrum of people. And it has a resume to prove it, which, under the intense light of academic scrutiny, can be proved and proved and proved. (This offered as a dare to those of you who disagree on this point.)

My generation and the next (God help us!) is fully in charge now, and quite frankly, we are generally incompetent in all the ways that matter for the survival of a company, an industry, or even a nation. As much as he disappoints me at times, I’m happy to know there are men and women of my generation who can see things larger than themselves, and understand the Big Picture, in which ethics and reason play a key, even universal role in survival. I am speaking of Mitt Romney here.

This is not a call to action about teaching ethics again in college. In the first place, you can’t teach ethics unless you can also link it to a general understanding of our roots in western civilization, and our roots in American history. Yes, both should be required for every college student in the US. And this should be taught “with enthusiasm,” as Moses Sands liked to say. (He actually could make the Constitution sound like an old time Methodist tent meeting.)

But in truth, 18 is a little late to start on kids, I’m afraid. Oh, 50 years ago, it might have been just fine. But today kids are cynical about any sentiment by the time they reach 8th Grade. So you gotta get to them earlier, 4th-6th grade, and since most kids don’t go to Sunday School, we can suggest some fine old textbooks. I just ran across one this week, which put me in mind for this piece: 1902, Guide Right, Ethics for Young People, by Emma Ballou…written to be taught to 4th and 5th graders. Wow! Watch the Oakland School Board squirm over that one.

Seems we need more of this, and I wish someone would pick up the copyright, bring it up to date, then publish it for public schools and home-schoolers alike.

You may be wondering about that old plate of Moses watching the Children of Israel march into the Promised Land from Mount Pisgah?

This is how we turn the train around…in another 15-20-30 years. Not overnight. We have to be committed to the long haul, planting trees that will outlive us.  I’ve often written that hopefully God will never turn His back on America or Americans, but he does turn His back when Good turns Bad. While a lot of us begged for that Come-to-Jesus-moment in our country, when the film drops from our eyes and collectively we all begin to see once again, (that may be happening now) like Moses, my generation may only be granted that Mt Pisgah perch, from where we get to see our children and our grandchildren marching into the new promised land…a land we’ve been denied for our past sins.

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