Capitalist Moral Hazard
by Frederik Engel
Issue 133 - June 10, 2009

I read your recent article, "Capitalist Moral Hazard", with great interest since my own blog's views about our current financial and economic distress also point the finger at our broad based loss of ethical/moral discipline as the fundamental reason for this embarrassing situation.

Embarrassing, because we really knew better. Yet, we allowed ourselves to become too greedy and selfish. Not that this loss of moral self-discipline was a sudden development among some bankers and other money managers. Unfortunately, to me it almost seems as a natural consequence of the broad deterioration of civility, the work ethic, pride in country and its history by our whole nation during the past 60 years.

Your article provides a lot of interesting background about the history surrounding the idea of capitalism and I'm sure we agree on the 2 things which stand out above all else as truly fundamental to the functioning of capitalism: i.e. trust and a political environment where private property is protected, at least to an adequate extent.

In the early days wherever international "trade" existed, it was made possible only because of the very personal ties that had grown over many years between individuals, who frequently had never met, yet became well enough acquainted to profit by extending credit to their merchants for long periods of time. Typically these "bankers" sometimes were members of the Jewish diaspora, sometimes others, operating many hundreds and sometimes thousands of miles apart who understood the critical value of personal trust and were prepared to accept the inherent risks of a transaction. When all is said and done in all the tomes that have been written about capitalism, unquestioned trust, good judgment, was the crucial ingredient that made it possible.

That particular characteristic, trust and personal accountability, once was a fundamental element of our American personal code of honor and conduct. It is no longer. We have seen cheating growing like a weed in many aspects of our daily life and it now is pervasive and to a large extent condoned by parents, faculty, government, business and even scientists. Accountability is almost a dirty word and it should therefore not surprise us now that the house of cards that greed built finally came crashing down, taking the assets of many hardworking people down into the tank. May be we can thank Political Correctness for our travails.

A wealth creating system without peer has been destroyed frivolously which will take years to rebuild, if ever. What's more, an irresponsible and incompetent government now has an opportunity to create a socialistic environment that may even prevent the rebirth of what we had for more than 200 years. And I agree with you that if we cannot refocus and re-adopt our lost moral compass the chances of rebuilding our capitalist system as we knew it are slim indeed.

It all comes down to some cultural basics we completely lost sight of. But it is not Christianity's fault. It's ours, as individuals and as the tribe of Americans. Shame on us.