The Crusade Against Greed: Government's Scapegoat
Despite the fact that this economic crisis is unfolding exactly the way that the Austrian economists predicted it would, along with the impending police state that Hayek predicted over 60 years ago, the American people show absolutely no sign of figuring out the CAUSE of this crisis. The most discouraging aspect of the whole debacle is the propensity of the American people to take the government bait by blaming this financial and economic collapse on “greed.” This plays right into the government’s hands.
As platitudes go, those warning against greed are the ones that people should be most suspicious of. Anyone that seems overly interested in making you feel guilty about accumulating too much property probably has an interest in acquiring what you leave behind. If nothing else, the fact that both Republicans and Democrats are vilifying greed should make people think twice about whether they may be burning the wrong witch when they seek to blame greed for our present troubles.
Webster’s defines greed as “a selfish and excessive desire for more of something (as money) than is needed.”[1] Any student of economics should be suspicious of this vice. While “selfish and excessive” certainly conjures up distasteful emotions, those are little more than prejudicial adjectives accompanying the real substance of the definition: desire for more of something than is needed. Does this mean that anyone with a savings account is greedy?
While one could counter that some savings are actually “needed,” a moment’s reflection should have one questioning what the real motivation for vilifying greed might be. Who do we find denouncing greed the most vehemently? The rich and powerful. Does this bother anyone besides me?
Let me be clear. Greed had nothing to do with causing this financial crisis, no matter how many times you are told that it did by the media and politicians looking for votes. In economics, the goal of every market participant is to acquire “more than is needed.” If the truth be told, acquiring more than is needed is what Jefferson really meant when he talked about the “Pursuit of Happiness.” Property – the fruits of your labor – is the means by which you sustain your existence and provide opportunity for intellectual and spiritual enrichment. Those who must work every waking hour just to provide the basic necessities of life have time for neither quiet meditation nor for reading Dostoevsky. By acquiring more than you need, you create leisure time to pursue your other interests and enable yourself to provide for your children or to give to charity. In this life on earth, acquiring more than you need is the means to happiness and security for yourself and those that you love. It is also your unalienable right, as our founders repeatedly told us.
The whole point of participating in a free market is to acquire as much property as you possibly can. Not only is there nothing wrong with this, it is actually vital to the health of the market. With every participant acting in their rational self interest to maximize their wealth, the minds of all participants are leveraged and society as a whole reaps enormous benefits.
One of the key mistakes that critics of free market capitalism make is failing to understand that there is only one way to acquire great value in that system: to offer great value in return. Listening to the proponents of socialism, one might be led to believe that one can only gain at another’s expense. This is not true. In a laissez faire capitalist system, economic agents trade to their mutual benefit. Every exchange is perceived by both parties to be an EQUAL exchange, or it does not occur. That is the nature of VOLUNTARY exchange. No one deliberately causes themselves harm. While they may not always trade wisely, more often than not they do, and in every case they make an exchange that they believe is in their best interests. One can only consume great wealth by producing great wealth.[2]
Thus, it should be clear that there is no such thing as acquiring “too much” in a free market. Only by supplying enormous value can any economic agent acquire enormous value. Acquiring property in a voluntary trade by offering equal value in return is the essence of “earning.” In a free market, all transactions are voluntary. Therefore, all wealth must be earned.
A second reason for wrongly perceiving a threat from greed in a free market is the failure to acknowledge the role played by risk. There is always some amount of wealth that can be acquired with very little risk. However, in order to achieve greater amounts of wealth, economic agents must accept greater amounts of risk. Risk acts as a counterbalance to what is commonly referred to as greed. If an economic agent seeks to acquire value far beyond the value he is offering in return, he can only do so by taking inordinate risk, and will virtually always fail. While the attempt to acquire value with this type of speculation might not be admirable, others certainly have no right to forcefully stop him from doing so. The risk is his, as are the gains or losses he realizes as a result. In a free market, there is no moral or economic justification for attacking “the speculator.”
That brings us to our present crisis and its real cause. It was not greed – the desire to accumulate more than one needs – that caused the crisis. What caused the crisis was government removing the risk of lending to sub-prime borrowers by guaranteeing mortgages through Fannie Mae and Freddie Mac. With no fear of losing their investment, lenders had no reason not to take inordinate risk in lending to sub-prime borrowers. In fact, Fannie Mae CEO Daniel Mudd told the New York Times that he was actually pressured by the government to continue increasing the risk that Fannie was exposed to. According to Times reporter Charles Duhigg,
“Capitol Hill bore down on Mr. Mudd as well. The same year he took the top position, regulators sharply increased Fannie’s affordable-housing goals. Democratic lawmakers demanded that the company buy more loans that had been made to low-income and minority homebuyers.”[3]
Whatever the true intentions behind creating these government-sponsored enterprises (GSE’s), they violated moral and economic law with predictable – and predicted – results. This intervention into the market and suspension of market forces was the direct cause of the sub-prime crisis, not greed.
This was more than just a bone-headed mistake by government. It was a crime. Governments are instituted to secure individual rights, including property rights. Instead of protecting the property of its citizens, government stole it to guaranty sub-prime loans. Now that its ill-advised program has failed, government is looking for a scapegoat. Enter “the greedy financier,” and the real culprit walks.
None of this is meant to absolve the lenders, who knowingly made loans to people who could not pay them back. However, the guilt should be shared equally between the lenders, the borrowers, and the government. It was not greed that they were guilty of, it was stealing. They stole money from the taxpayers to make the loans possible. All three parties benefitted by passing risk onto taxpayers without their consent. The problem was not the desire for too much wealth. It was the desire for wealth THAT THEY DID NOT EARN.
This is an important distinction, because we will soon be subject to a government “solution” to this supposed problem of excessive greed. Blaming greed for the crisis plays right into the government’s hands, as it allows government to respond with measures that will limit the amount of money that can be earned, even legitimately. Already we are hearing calls for more regulation. This amounts to a further violation of our rights and will continue the destruction of our markets. On the other hand, if we recognize the true cause of the crisis, we can demand less regulation and an end to government intervention into the marketplace, which is what our markets actually need. One cannot prescribe the medicine until one has accurately diagnosed the disease. Don’t let the government off the hook by buying into their crusade against greed. Instead of free markets, let’s punish the truly guilty for once.
[1] http://www.merriam-webster.com/dictionary/greed
[2] It should be noted that this applies to truly free markets. In the U.S. mixed economy, government privilege allows some to accumulate great wealth because of that privilege, rather than any great value they offer the marketplace in return. Of course, the solution to this is to eliminate government privilege, not restrict the market further.
[3] Duhigg, Charles “The Reckoning: Pressured to Take More Risk, Fannie Reached Tipping Point” The New York Times Oct. 4, 2008 http://www.nytimes.com/2008/10/05/business/05fannie.html?pagewanted=1&sq...
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So the government believes the housing market to be, for all intents and purposes, a semi-restricted Commons in the old English sense. You pay a few bucks and graze your herd. Many of your fellow citizens have responsibly used the Common for decades, being careful not to exceed its carrying capacity (the citizens make agreements among themselves based upon knowledge and reason). So far so good.
Now our friendly neighborhood progressive liberal state planners devise a plan whereby their most needy constituencies are given a free pass to graze their herds, en masse, 24x7x365 with no consideration to those who have played well together to date. Now it gets ugly quick. Over grazed Common becomes unable to recover and everyone gets to share the pain. Hmmmm?
Anyway, this crossed my mind and I thought I'd bounce it out here. Something to consider in the mixed economy we are in, eh!
http://www.econlib.org/library/Enc/TragedyoftheCommons.html
Environmentalism plays right into this concept of greed. The central issue for environmentalists is the idea that resources are finite, which allows them to frame consumption as a zero-sum game, and to get people to focus on curtailing the greed of others. "Sustainability" becomes a major concern, giving the collective permission to pry into, and ultimately to control, what should be people's private lives and personal decisions.
Nothing illustrates this better than the way the state uses children as tools of propaganda, pitting them against their parents. One of the overt missions of public schools is to "teach the community about environmental sustainability" by first indoctrinating their children, then sending them home to criticize their parents. Many parents are now familiar with that lovely little ditty: Reduce, Reuse Recycle, which seems to have taken the place of the original 3 Rs. Never mind that recycling does nothing for the environment; the main idea is to get children used to placing the authority of the state above that of their parents.
Environmentalism was necessary to the left when the economy was going well and it was difficult for them to stir up envy and resentment of the rich. Since the economic crisis this task has become a lot easier, as evidenced by Obama's recent success and his unabashed rhetoric about redistribution of wealth.
What I should have put into the article more clearly is that this line of thinking logically leads to a point where the state is telling you that you can only keep what you need, and they will decide how the rest that you produce is distributed. THat is the goal of the socialist wing of the environmentalist movement (which seems to be most of them these days), as well as the entire political left, which includes much of the Republicans, it would seem.
Tom Mullen
www.tommullen.net
www.myspace.com/skepticsongs
"Question with boldness even the existence of a God" - Thomas Jefferson
I have been thinking a lot about the concept of greed. Greed is not a problem unless material gain becomes a zero-sum game. And when does this happen? When resources are pooled, and people have to fight over how they get distributed, everyone feels the same amount of ownership of the common property, and one person's gain becomes another person's loss. In this kind of situation everyone ends up becoming obsessed with the greed of others, which leads to intrusive investigations into people's personal lives as the collective attempts to determine exactly what everyone needs. Ultimately every want, every desire has to be justified and vetted by the collective.
In win-win situations, on the other hand, it doesn't matter how much you accumulate because your gain doesn't harm others. No one worries about greed. No one cares by how much what you have exceeds what you need, no one pries into your personal life or sits in judgement of how much money you earn, or how you choose to spend it.
In my opinion, all this talk about greed is a sign that we have swung very far to the left in this country. People are eyeing each other's property with feelings of entitlement. Obama talks about "spreading the wealth around". I think we are facing a long dark night of oppressive statism. Why aren't sensible people feeling more alarmed about this?
[sorry about the bad writing-- I'm tired. Hope you get my point]
I liked what you wrote regarding the tactics of the monied elite to distract and redirect the focus "for the people." You also did a good job of peeling back the onion on the nefarious actions of the state which are disguised as the only remaining course of action. Obviously these clowns have an end state in mind and it certainly doesn't take into account the precepts of capitalism or, as importantly, those of legal constitutional powers.
Like to hear more of your thoughts regarding the tools and levers available to the remainder of us who, like Carl Schurz, still believe "Our country right or wrong. When right, to be kept right; when wrong, to be put right."
The following are interesting from certain perspectives:
The Problem:
"Give me control of a nation's money and I care not who makes the laws."
- Mayer Amschel Rothschild (Banker)
The Analysis:
"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling the money and its issuance."
- James Madison (Politicial)
The Fix:
"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks."
- Lord Acton (Enlightened Statesman)
Choose your weapons - the fight is nigh! Never submit!