The documentary film
Inside Job, the movies
Money
Never Sleeps (the sequel to
Wall
Street), and the
Big Short, tried
to teach us lessons about the danger of excessive gain. Yet, they failed in
their main educative goal. Instead of showing us the folly of an excessive
appetite, the desire for more profit to the point of destruction, they showed
us that it works as the main players within the various scandals have
succeeded. The main players and even most of the major players have kept their fortunes,
avoided
prison, and continue to run their firms. Even though some firms, like Lehman
Brothers went bankrupt, most involved in the crisis continued to operate
despite the crash.
The cautionary tale became a how to manual for greed, excess and
instability.
Both Oliver Stone and
Michael Lewis, the author of the Big
Short, were concerned that their cautionary tales, their jeremiads, had
become instruction manuals for others to emulate. Instead of being seen as a
villain, Oliver Stone’s character Gordon Gecko, the predatory trader, became
lionized as a Wall Street icon to emulate. I know when I was at university many
students in the senior year economic seminar (I was an economics graduate) saw
the film as a template for what they wanted to achieve. Even 25 years and two
stock market crashes later, viewer still remember Gordon Gecko. He has come to
epitomize the tantalizing potential of financial system. Charles Ferguson, by
contrast, had a more direct goal. He wanted to explain "the systemic
corruption of the United States by the financial services industry and the
consequences of that systemic corruption." In this, he partially
succeeded, yet the final lesson, though, appears to be that if you are big
enough, financially or politically, you can get away with it. Even if the firms
corrupted the public, they ensured they appeared to work within the greater
public morality the rule of law. Even when they did fall afoul of the law, they
ensured they appeared to comply by sacrificing “rogue traders” to satisfy the
public and legal outrage. What all three films miss with their focus on the
symptoms is the cause. The regime has become corrupted not by the financial
system or the desire for financial gain, but by America’s educational system.
The American regime has become habituated to a disordered love of gain. We are
now educated to pursue gain no matter the cost to others so long as we benefit.
It is not so much that gain occurs or even great gain occurs, it is that the
immoderation that drives the gain beyond its beneficial limits has become
celebrated as normal behaviour.
Gain is good but greed is bad.
To start to understand
the crisis and its effect on the regime, we need to understand the difference
between good and bad gain. For that we turn to Plato’s Hipparchus or the
profiteer.
We could stay on the surface and express our
indignation that excessive gain has been made by Wall Street and the individual
executives.
We
could look at that gain as shameful, excessive, and potentially fraudulent.
Yet, that would only leave us on the surface without an understanding of the
deeper threat to the regime. We miss the deeper connection between a love of
gain that drives the pursuit of money and the love of gain that drives the
pursuit of wisdom. At a crude level, the two loves of gain are connected within
a regime. When they are mismanaged, which is increasingly the case in the
United States, will lead to corruption, decay, and ruin. The love of gain is
necessary for markets and for life to succeed. In that sense, gain is good,
although greed, its perversion, is not. We have to understand what is good about
gain and what can make it bad. What Plato’s dialogue helps us to consider is
that the gain pursued on Wall Street is a crude, or low, form of gain which
needs to be moderated, or restrained, or guided by a higher form of gain. As
Plato’s Socrates intimates in the dialogue, philosophy is a love of gain. What
distinguishes them, though, are the ends to which the gain serves. The love of
gain has become distorted and because it has been distorted, the regime is in
danger. Yet, what is the source of the crisis?
Education: has the love of knowledge become the love of corporate
sponsorship?
The regime is only in
trouble to the extent that our young are educated to pursue gain as love of
money, a lower form of safety and comfort, rather than higher, noble, goals in
public service as public virtue. To the extent that the educational
establishment has encouraged our best and brightest to go to Wall Street, to
pursue private gain, rather than Washington, a public service, then it has
failed the regime. Even when it does encourage them to go to Washington it is
based on the love of a lower gain, power, so that the goal is less the common
good than the private interests. “What can I get for being in public service becoming
a well-paid lobbyist?” We are in danger of having generations that are no
longer being educated to the good or even the noble. Instead, they are being
educated to a lower goal, the pursuit of profit to achieve safety and comfort,
or simply the pleasant. In themselves, these goals are not problematic. They
become problematic because they have replaced the higher, nobler goals for a
republic serving the public good. We have become corrupted; the regime has
become disordered by the pursuit of wealth without limit. The love of gain is
in danger of becoming a love of tyranny.
Having been left almost empty
of the noble and the good, their understanding is such that the high is only
now understood and pursued in terms of the low. In particular, the brightest
minds are attracted to money, status, and celebrity rather than fame through service,
and duty to the republic. Students, but more importantly their teachers, appear
to have forgotten moderation of an education in republican virtue. They have
been seduced, because their teachers have been indoctrinated in it, by a
Machiavellian immoderation that replaces virtue with a tyrannical virtu. Instead of a healthy thymos needed to sustain the republic
freedom, we see an immoderate pursuit of profit without regard to the public
consequences.
Wall Street’s excess where bad gain has replaced good gain
The financial crisis
revealed a pursuit of profit has become shockingly immoderate even by Wall
Street standards. For the firms operating within the financial system, there is
no deal too big, there is no profit too large, there is no financial instrument
too complex to pursue, there is no law that cannot be bent or changed to enable
a deal. The immoderate ethos is expressed in the use of Collateral Debt
Obligations (CDOs) and associated financial instruments. The instruments were
designed on Wall Street for Wall Street because of the need to deal with risk
to protect one’s profit. The underlying reason for the instruments was to
create something, a compact between financial houses to avoid suffering loss
(an injustice), yet, the parties involved did not believe that justice was
desirable (explaining the risks) and thus gave a decent veneer to what could be
called a swindle. In this, the parties were involved not to gain, or to show
their clients the best gain and how it was achieved, but to avoid loss and
insulate themselves from any loss that may be inflicted upon themselves. They
ensured that someone, preferably someone else, would have to take the loss
(suffer the injustice). In such a transaction, there is no common good only the
desire to ensure that the loss is inflicted on someone else. All of this was
done with the appearance that the risks had been controlled so that the
investment, as any investment can be, was “safe”. Built on a risk foundation that was becoming
increasingly tenuous, the market became increasingly unstable, but the demand
for these “risk free” instruments increased.
How much is too much for the stability of democracy?
The question haunts
America because the financial crisis is not simply about unemployment, jobs, or
economic growth. The financial crisis reveals a crisis within the regime. The low
gain, the one pursued by Wall Street can no longer be separated from the
political health of the regime. The ethos that has infused Wall Street has
influenced the political regime. In this, the nexus provided by the educational
system within universities becomes important. As Montesquieu warned, Republics
fail when they become gorged on luxury and consumption in which status is
related to celebrity and measured by wealth.
We have moved from the pursuit of happiness to the pursuit of hedonism
The love of gain has been
diverted from the ends of the regime. The issue is more than going beyond the
pursuit of happiness. It is that the regime’s definition of happiness has been
corrupted. The love of gain has become an end in itself it no longer serves the
common good. The higher end of virtue or the health of the regime has been lost.
The challenge is not about protecting Main Street from Wall Street’s excesses
through increased regulation. Such an approach is treating the symptom. Americans need to reconsider how they became ruled
by love of gain which is less than love of wisdom or at least love of wisdom as
practices by political men. Americans cannot find political men guided by a
teaching instil a love of wisdom (good gain) over gain simply. To reverse the crisis,
we need reform. America needs reform within the education system is paramount
because it is what shapes the young. The lessons from history are there, the
question about their future is there for Wall Street and Main Street; will they
do the right thing? More deeply, is America’s future Wall Street or Main
Street? Does anyone have the courage to reform the system?
