Conservative writer David Brooks’ recent column, “Two Cheers for Wall St,” depicts hedge funds as necessary financial innovations that smooth out volatility and manage risk. Brooks excludes from his reckoning, however, the negative impact upon us all when neurotic money lovers have so much influence over the economy.
In his fault-free economic model, Mr. Brooks isn’t troubled by Wall Street marauders, financial gamblers, subprime thrill-seekers, hack business writers, or spineless regulators. Don’t worry about the need to rein in these subprime people because, as Mr. Brooks says, “the market corrects itself.”
I’ve counseled hedge-fund managers in my psychotherapy practice. I wish them well and I give them some credit for doing therapy. However, not one of them was interested in growing in moral maturity. Instead, they sought only to escape the excruciating pain brought on by their fear of loss, anticipation of failure, vanity, anger, and compulsive striving for financial gain.
How can people so lacking in self-regulation be expected to contribute to an orderly, sensible, or decent economy?
The excesses of capitalism have been underwritten by ideology, particularly the idea that the market is inherently wise and reliably self-regulating. This conservative idea is an intellectual hoax. We need to drive a silver stake into its heart to terminate it for good.
To function well, every human system (whether the marketplace, governments, or institutions) needs regulation (rules of play) enforced by legitimate authority. Sure, referees and umpires can often be annoying. But as any sensible sports fan knows, a football or baseball game requires regulation.
We know regulation is needed because at a basic level we each require it. We need the wise intervention and guidance of our inner authority (whether that’s the mind, the will, or the self) for successful self-regulation. We are each a unit of a greater whole, and regulation is needed at both the personal and the social levels.
If our personal oversight is weak or non-existent, we’re unable to guide ourselves through the maze of behavioral and emotional pitfalls. Personal intervention (and often the intervention or assistance of others as well) is needed to overcome addictions, compulsions, and other self-defeating behaviors.
The intellectual hoax of marketplace omniscience is exposed in an important and overlooked book by Kenneth Lux, titled, Adam Smith’s Mistake: How a Moral Philosopher Invented Economics and Ended Morality (Shambhala, 1990). The title refers to Smith’s famous 1776 book, An Inquiry into the Nature and Causes of the Wealth of Nations, which to this day remains the bible of capitalist ideology. Capitalists claim that Smith’s book identifies self-interest as the foundation of rational economics. Conveniently, that claim bestows upon them an idealized self-image and sanctions their exploitation of the poor.
As Lux notes, the importance given to self-interest overlooks the fact that the self-interested individual would logically feel justified in being dishonest, cheating others, and writing loopholes in the law that the biggest rats can squirm through. Embracing short-term profits by overlooking pollution, resource depletion, and global warming also appeals to a narrow sense of self-interest.
Lux convincingly demonstrates, as well, that Smith forgot to put a vital word in a much-quoted statement from the Wealth of Nations. That favorite statement of capitalists reads: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner but to their regard to their own self interest.” Lux writes that four sentences in the book immediately preceding that statement make it clear that Smith had in mind to include the word “only,” as in “It is not only from the benevolence . . .” This inclusion dramatically changes the meaning of Smith’s words, and benevolence now becomes a factor in his idea of sound economics.
A sensible understanding of the word “self-interest” includes the idea of the benefits that accrue to each individual, poor or rich, in a just society. A wealthy or powerful individual benefits in terms of personal happiness and moral maturity when he or she is aligned with the common good. But egotists understand the meaning of self-interest only in their limited dimension, and their interpretation of it become irrational because their desire for self-aggrandizement trumps logic. More than anything, today’s capitalism has become the financial support system for those who identify with their ego.
Those conservatives who are the hoax’s main supporters insist that human nature is unlikely to be improved upon or, at best, only very slowly. According to them, self-interest is the realistic and best standard under which humans can be expected to cooperate economically. They believe this mainly because they themselves are most resistant to becoming better people. For instance, they greatly resist giving up the egotism that would enable them to become more generous, compassionate, and wise. They’re not seekers of their better selves.
Conservatives also frame the debate in terms of freedom. “Every regulation reduces people’s freedom,” says economist David R. Henderson of Stanford’s Hoover Institution. “The more regulation we get, the worse we do.” Dr. Henderson speaks of regulation but not of self-regulation. Self-regulation doesn’t infringe on freedom at all. It bestows more freedom. It frees us from negative emotions and self-defeating behaviors. Similarly, wise regulation of the economic world frees us from the tyranny of the corrupt. One such regulation would be stiff jail sentences for corrupt politicians and executives.
Traditional economists don’t want to give up the idea that the market is self-regulating because they’re too attached emotionally to the egotistical satisfaction of being masters of an allegedly all-embracing knowledge. Meanwhile, libertarians oppose government regulation because they’re overly sensitive emotionally to feeling controlled. Their egos manage to be offended by the requirements of social order.
We’re all contaminated by the operations and propaganda of such a system. Though we live in the land of plenty (or did until recently), we experience our lives as if we live in a Deprivation Society. Marketing and advertising’s genius plays upon our fears of deprivation. At their worst, marketing and advertising sustain oral and anal infantilism, thereby cultivating our negative emotions of desire, greed, and envy, which undermines self-regulation. The effect is to inflame the appetites of individualism, undermine national unity, diminish the shame of our participation in exploitation and war, and destroy our will. The common good won’t be enshrined without a common will.