The financial crisis has raised public awareness that corporations deemed "too big to fail" have to be broken into manageable units. And there is widespread anger about colossal CEO salaries. Clearly, big is no longer beautiful. What remains to be seen is how far this understanding will extend. Whether this is a teachable moment where Americans will embrace major social changes.
As investigators study the failures of the nation's largest banks, as well as AIG, Chrysler, and General Motors, it's become apparent there was a fatal combination of greed, guile, hubris, and blind faith. Greed because corporation executives were locked into a deadly competition to see who had the biggest salary. Guile because business leaders manipulated laws to facilitate their pursuit of wealth and power. Hubris because personal aggrandizement supplanted the best interests of stockholders and the public. And blind faith because CEOs believed that if all else failed, the Federal government would bail them out.
Now the Feds are "winding down" AIG and General Motors with Citigroup and Bank of America likely to follow. Meanwhile, Americans have become aware that over the last sixteen years, the wages of corporation executives grew by 393 percent while the wages of working Americans were flat. In 2008, the average CEO's salary was more than 300 times that of the average worker.
American culture is at a tipping point. While there will be blowback against corporate excess and a narrowing of the gap between America's haves and have nots, it's unclear that the lifestyle of the rich and famous will be impaired. For it's not only their salaries that have to be changed, it's their lifestyle. CEOs have to learn to live with less. And so do the rest of us.
If "every problem is an opportunity," America's financial crisis presents multiple opportunities: Corporations can be wound down to a manageable size. The gap between the rich and poor can be narrowed. The social safety net can be repaired. And, substantial progress can be made towards ending poverty.
Nonetheless, the most challenging task will be to get Americans to address their materialistic, myopic lifestyle. While there's anger at corporate excesses executives using millions in bailout funds to redecorate their offices the public has yet to condemn executive lifestyles: multiple mansions, yachts, and profligacy in general. And we have not renounced the zeitgeist of living beyond our means.
Writing in THE NEW YORKER, David Owen observes that if Americans want to solve their financial, energy, and environmental problems, they'll have to change their lifestyles. "Increases in fuel efficiency could be bad for the environment unless they're accompanied by powerful disincentives that force drivers to find alternatives to hundred-mile commutes."
As a result of the recession, America's financial system will be reformed. But will Americans generalize from the crass behavior of corporation executives to the values and attitudes that shape mainstream society?
There's some evidence public behavior is changing in response to the recession. We've begun to save money rather than chronically spending beyond our means. And President Obama understands that the long-term viability of the US economy depends upon fundamental changes in the public psyche. That's why conservation is a major feature of his energy plan. Some of us have stopped driving our cars and instead are using public transportation or riding our bicycles.
In 2001, then Vice-President Dick Cheney observed, "Conservation may be a sign of personal virtue but it is not a sufficient basis for a sound, comprehensive energy policy." Cheney's quip summarized the Bush economic ideology: Americans love their materialistic lifestyle and unwilling to change. Accordingly, Republican policy promoted consumerism and the belief that no matter the social problem, the free market would solve it.
This conservative ideology has failed. What's needed is a clear progressive alternative. President Obama has three challenges: reform our economic system, describe what it will take to get to a just society, and ask Americans to join together in sacrifice to achieve our goals. It's not enough to drive fewer miles or to turn down our thermometers or quit eating imported beef. Fundamental changes are required in American culture. We have to downsize our lifestyle.
American history indicates that in moments of national crisis citizens are willing to sacrifice for the common good. During World War II there was rationing of food, gasoline, clothes, and other items. Citizens accepted this because they understood that survival depended upon everyone doing their part.
Obama's message should recognize this history. America is in the midst of a national crisis where our survival is at stake. We have to work together and all of us must sacrifice. The US financial, energy, environmental, and social problems won't be solved unless Americans radically change our lifestyle.