We’re asking the wrong questions.
In our haste to figure out what went wrong with the economy, how to fix it, how those banks and other financial institutions could have been so stupid in the first place, and how they can morally accept taxpayer bailouts with a straight face and without apology, we’re overlooking a more fundamental question.
How did so much economic power get concentrated in so few men?
And they were men. Women haven’t yet achieved the basic human right of equal pay for equal work nor have they achieved the basic human right of running elephantine banks. It is an interesting question whether a woman would have joined all those men-lemmings in the rush off the cliff to buy “securitized mortgages.” A woman might have said, “That’s a cliff. I’ll wait here.”
Surely she would have been suspicious of that awful “verbing” of a perfectly good noun “security”. That should have been warning enough, but we’ve gotten lax with the English language and look what a mess it led to.
Think about it; the world’s economy is in ruins because a few men, maybe no more than a thousand or so, controlled trillions of dollars of assets. Just for fun, they started buying mortgages, putting them in nice vellum covered packages and selling them to each other. Apparently it never occurred to these geniuses that the housing market might decline or that house values were artificially inflated.
They controlled so much money, these financial titans, that no one was insulated from their stupidity. Not that it ever occurred to them that they were stupid. How could you be atop the world’s financial system and be stupid?
Well, nothing rises so fast or is as dumb as a feather.
But we’ve always known that the top echelon of corporate heads can be stupid. They brought us the Edsel, asbestos, nicotine, telephone trees, oil addiction, and the Great Depression.
So how did so much power end up in so few hands?
As satisfying as it is to be angry at the stupidity and immorality of these men we must answer that question.
But before that, let’s take another moment and examine the morality of these men who, as George Packer notes in his New Yorker blog, haven’t even apologized. Packer theorizes that all of them have child-like morals. Those are the morals of “I’d better behave or I’ll get in trouble with the grown-ups.” Packer says,
The moral code of these Wall Street executives corresponds to stage one of Lawrence Kohlberg’s famous stages of morality: “The concern is with what authorities permit and punish.” Morally, they are very young children.
In private life, extreme indebtedness, bankruptcy, the ruin of those close to you, and dependence on the government dole are generally thought to be causes for anguish, self-denial, and a degree of shame. But if you’re a financial executive with an exalted title, a big enough salary, a deep enough debt, and a vast enough handout, these same disasters entitle you to go on living and feeling about yourself much as you did before.
Packer wants them to apologize. I want to take all that power away from them. I want the engine of capitalism decentralized. I want somebody to enforce the antitrust laws.
The antitrust laws are like the Kingston Trio — people have heard of them but can’t quite place them. Here is a quick primer. In the 1890s a lot of financial power was centralized in the hands of a very few men, the Robber Barons we called them. There was a big recession then caused, in part, by the economic power wielded by those few men. Congress passed the Sherman Antitrust Act empowering both the government and private citizens to break up large accumulations of economic power and to stop price-fixing and other nefarious anti-competitive prices. Congress was remembering its Adam Smith, “People of the same trade seldom meet together, even for merriment or diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
The antitrust laws were created and enacted into law to protect us from exactly the kind of concentration of wealth which brought down the nation’s economy in the 1890s, in 1929, and in 2008.
But we stopped enforcing the antitrust laws in the early 1980’s and haven’t really gotten back to it yet. True, Anne Bingaman and Joel Klein, who were in charge of the Justice Department’s Antitrust Division during the Clinton years tried some enforcement, but Bill Clinton was not Teddy Roosevelt nor was he the FDR of the 1930s. President Clinton inherited an antitrust division that Ronald Reagan had closed years before and he wasn’t all that interested in re-opening it.
By that time the University of Chicago School of Economics, in one of the great snow jobs of all time, convinced the policy makers that the antitrust laws get in the way of “efficiency” and so really are obsolete. The idea that great concentrations of wealth was bad for a democracy was just out-of-touch with wise economic theory.
Those professors of economics were just as wrong and just as dumb as the current titans of finance.
We’ll be back with more about the antitrust laws. One of the “prune” jobs awaiting the new president is the Assistant Attorney General of the Antitrust Division, a job once held by Thurman Arnold. Let us hope that President-elect Obama doesn’t install a Chicago-school acolyte in that job.
UPDATE – MARCH 5, 2005
Well. Someone in the MSM, – you know, the grown-ups – finally has asked this question. Here is David Ignatius of the Washington Post on this issue.