Of Theft And Other Legal Pursuits

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On election night in the US I sat watching the results come in on TV in the company of a few senior company executives, all of whom were registered Republicans.

A couple of them were lamenting the fact that they would have to pay higher taxes under an Obama administration and how this posed problems for paying for college fees and so on. I suggested to them that giving people on lower incomes more money to spend would mean that even people on high incomes now would stand to benefit in the long run, i.e. they would not be burned out of their homes by rioting mobs. I also suggested that the reason for the current economic crisis was a housing bubble that meant people on lower incomes were induced into taking out mortages many multiples their salary, and that given the fact real wages for the majority of Americans had been pretty stagnant for decades, this was a recipe for disaster. Since, for instance, the marginal propensity to consume was higher among people on lower incomes, it made macroeconomic sense for them to have more money to spend, since if you can’t afford a car and a fridge, you can’t drive to the store to fill up your fridge with food, and so on.

It didn’t wash: their own take on things was that the crisis had been produced due to faulty practices in lending institutions, and that many people had taken out loans they had no real prospect of paying. So there were two sets of people more or less equally responsible in their view: the people who took out the loans, and those who provided the loans.

They didn’t see any systemic flaw in capitalism as such, nor for that matter did they see it as an economic crisis: for them, it was a financial one. It was more a failure of oversight, leadership, and so on. I tried arguing that it was capitalism that had produced the lending institutions, the deregulated manner in which they operated, and the conditions under which people believed their interests were best served by getting into potentially crippling debt. But criticising capitalism to them was like criticising drinking water.

The reason I mention this here is that, a few months on, I have been thinking about the crisis in purely systemic terms, in particular about the character of the institutions capitalism produces, and not in terms of the degree of responsibility to be attributed to people within these institutions. My own inclination is to see things in terms of institutional roles: that you can be a nice and charitable person both in and outside your institutional role, but since your fundamental obligation is the pursuit of profit, this will blind you, or you will blind yourself, to the entirety of what it is you are doing and its moral consequences.

The difficulty with this perspective, I think, is that it tends to absolve people within these institutions of their moral responsibilities. It seems to assume that this is the way people are going to act under this system, so what else do you expect? And I think that at the time of watching the election results coming in I may have given too little credit to what my companions were saying: from their perspective, which is one of far greater institutional power than my own, irresponsibiity was the key to the whole thing.

The reason I mention this today is that the other day I heard a prominent speaker on corporate leadership and effectiveness, who is very much concerned with making capitalism work, and who is paid for by corporate funding. He talked about the systematic behaviour of financial institutions in which there was no pricing of risk in lending activities, and gave a technical explanation of how things had developed. But then -and this was the interesting part from my perspective- he spoke about how forcing loans on the poor, as the lending institutions had done, was theft. Those at the top of the pyramid always knew of some mechanism by which they could be bailed out. The risk of pursuing this policy was always going to be a question, for them, of losing out on bonus payments, of minimum impact, whereas those at the bottom would starve and be forced out of their houses. It was, he said, robbery. (The words in italics are the exact words used.)

It’s important to point out that these criticisms weren’t grounded in
anything ethical: his viewpoint was more that of a person concerned
with how big firms maintain long term profitability. If firms by their
actions end up immiserating people and as a consequence obliterating
future sources of capital, they’re done for, assuming you’re taking a
medium term view of things and not, as was the case among many senior
executives, he said, eyeing up how long it takes for you to get
promoted after generating some fat short term profits by, say, not
bothering to reinvest in your plant.

In terms of how the situation could be retrieved, it was a question for him of reforming leadership practices, acting with corporate social responsibility, creating shareholder value instead of trying to meet short term earnings expectations, and so on. To me that sounded like rearranging the deckchairs, but I’m not so much concerned with his ideas for reform as with the language he used: far stronger than anything you would hear in the mainstream press, let alone the government, who prefer to express ‘disappointment‘.

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2 Responses to “Of Theft And Other Legal Pursuits”

  1. 1 David January 20, 2009 at 12:43 pm

    This is quite good…

    Capitalism Hits the Fan A Marxian View


    [Can’t remember where I found it, hopefully not here!]

  2. 2 Hugh Green January 20, 2009 at 2:41 pm

    Cheers for that, will take a look (you didn’t find it here).

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