Sunday, December 2, 2012

The Guilty Innocents

"A penny saved is a penny earned." Hard work and thrift. Cooperation, creativity, charity, adaptability, and integrity. Proper sleeping habits are supposed to make us healthy, wealthy, and wise. Genius is 1% inspiration and 99% perspiration. This is what we are told.

Did you believe in these principles, work hard all your life, and still end up being retired early so your company could cut your pension? Some have. Maybe these principles are supposed to apply to you, but not to those you work for.

Even so, the rich largely conform to these ideas and firmly believe that they are good for everyone. Personally they almost never treat employees or customers badly and frequently act with real compassion and understanding. They keep themselves innocent.

The people they employ to run their businesses are not so innocent. They often operate by different principles. "Never give a sucker an even break." "If you ain't cheatin', you ain't tryin'!" "The squeaky wheel gets the grease." "No good deed goes unpunished." "Never leave any money on the table." "Behind every great fortune is a great crime." "Genius is 1% inspiration and 99% stealing the ideas of other geniuses."

In your vision of the future, what do you want to see? A society of charity, integrity, and abundance? Or a society of cheating, "squeaky wheels," and austerity? Based on the evidence so far, it seems we are headed for more cheating and squeaking.

The rich remain innocent of this, however, because they are not personally involved. Often they are absentee worklords. They do the best they can and shake their heads sadly at the condition of society. The masses are just not as ethical, disciplined, sensitive, and creative as themselves. They look down on us from their high places and are disappointed.

This way of thinking is a real barrier to change.

The rich choose our managers, and that is where their hands get dirty. They do not realize it, however, because they think that they can delegate responsibility at the same time they delegate operational details. At heart, however, what really matters to them are results – return on investment. Oh, ethics are important, too, they say, but make sure those results are good.

If there is any truth to the idea that the profit motive is bad or wrong, this is where it applies. Managers are strongly exhorted to produce results, but rather weakly exhorted on charity and integrity. A manager making great returns without any serious evidence of wrongdoing is cheered and rewarded. Great returns obscure bad behavior and discourage investigation.

The breakdown of ethics works this way. In a world of ever-increasing expectations, managers eventually run out of ethical options for improving performance. To maintain their position in their peer group, they have to turn to unethical options. All keeping their integrity will do for them is allow them to keep their head up as they are kicked out. What does it profit you to keep your integrity if you become a loser? Economic and social fears tempt managers to cheat. And after all, in our society, "If you ain't cheatin', you ain't tryin'!" Everybody does it.

We can imagine that in the mortgage industry before the Great Recession  managers were encouraged to sell more and more mortgages. As the market started to plateau, it became more difficult for managers to meet their numbers. Economic and social fears started to kick in. Managers began to push their subordinates to take on riskier and riskier applicants. They themselves started approving worse and worse applications. After all, the increasing risks were being managed by AAA-rated mortgage-backed securities and collateralized debt obligations, right?

We know now how badly it ended for all of us, but at the time, those managers were cheating and straining every sinew to keep their world going for just another year, maybe just another quarter.
Only losers refused to cheat. They were kicked out of the system early.

After the fall, the rich, looking down from their high places, sadly shook their heads again and made sure that the government borrowed trillions to save their bank accounts and investments. This had to be done to keep the worldwide credit markets from freezing up.

Hearing reports that so many were losing their jobs and being kicked out of their homes, the rich wept another tear and commented how sad it was that so many people lied on their mortgage applications and showed so little financial responsibility. Those poor people just took on more debt than they could handle.

That is how the rich see it, but another interpretation is that they set a giant trap for the whole country, whether consciously or not. Just let people be the way they are, and some will become hard-driving managers. Their subordinates will do their best to do what the hard-driving managers tell them. Still others can be convinced that houses are guaranteed investment winners. They will buy more house and more houses than they can afford, telling everyone they know how smart they are. Don't be a loser – borrow as much as you can and buy houses.

The rich simply spread their nets and eventually money falls into them. There is nothing particularly wrong with anything they do, but the results can be wrong. No one has economic security but them, and no cheerful platitudes will save the poor from their poverty. In a sense the rich are guilty without having committed a crime. That is what makes their guilt so hard to detect and so easy for them to ignore.

The only way to detect it is with broad measurements of wealth and security. It is when the rich get richer in both good times and bad while the poor go bankrupt over and over again. It is when the poor fall behind and cannot catch up. It is when the rich can bring down the national economy simply by playing with their money, overwhelming and ignoring any warnings or attempts to limit their behavior. It is when self-control is seen as fear – as a middle-brow excuse to limit oneself, avoiding risks. All these things are happening now.

It is hard to punish and deter when there is no crime. The Great Depression was bad enough to teach a lesson even to the rich, but that was a special case. The Great Recession does not seem to have made much impression on the rich. If they will not restrain themselves, the question is whether the government will do anything significant to prevent this kind of thing in the future. So far it appears that the answer is no. All we are doing is more of the same kinds of policies that have failed before.

What we really need is a radical economic re-organization like nothing that has come before. The rich should be given their own currency to play with. The rest of us should have a separate currency that the rich are not allowed to own. They can create a debt crisis and lock up their own credit system if they like without affecting ours very much.

Since they cannot directly pay us, they cannot lay us off. Since they cannot directly own our mortgages, they cannot foreclose on us. Since our managers will not work directly for them, the rich cannot threaten them. Since they cannot own our debt, they cannot bankrupt us. Since they cannot sell directly to us, it will not be so easy to trap us.

It is time to defend ourselves and our nation from those who have power over us but whose interests are worldwide. They exert their power through our own currency, and it is time to take that power away from them. Multiple exclusive currencies are the best means to separate ourselves from them.

Socialism for the socialists and capitalism for the capitalists.

TheOtherSideOfCapitalism (

Copyright © 2012 TheOtherSideOfCapitalism

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