The inferno of the vanities

In only a matter of days, the bonfire of the vanities has grown into an inferno. Giants of the U.S. financial empire have tumbled, and old presumptions about the free market are under fire.

Seeking government intervention, the high priests of unfettered capitalism have suddenly lost their orthodoxy. There will be a bailout, we are told. The debate is over what kind of bailout Congress will be able to agree on.

Objections are coming from all directions -- from the free-market stalwarts who see a $700 billion bailout as a complete abandonment of principle, to the moderate marketers, who want to restrict a bailout with a cap on executive salaries and stringent regulations and oversight.

Could even the imagination of a Tom Wolfe have foreseen how quickly his masters of the universe, those investors and speculators who fashion the odd models of 21st-century banking, could bring down so many?

Victims’ pain will unfold over lifetimes.

For the moment, we are left to ask how so prosaic an instrument as a mortgage could have been transformed into the fuel that supercharged profits on Wall Street. And how could that instrument then so quickly become the “toxic waste” that has infected the credit markets to the point of near collapse?

Analytical postmortems will certainly follow.

An underlying truth, of course, is that the sub-prime mortgage crisis that precipitated the larger crisis was merely a symptom of a deeper problem. It was the manifestation of economic policy that increasingly freed markets to act in the narrow interests of a relative few in an environment of ever-decreasing regulation.

However this finally gets worked out, those on Main Street must not be forgotten: the small investor, the single mother, those out of work, the underemployed, those on the margins who have the least control and always suffer the most when things go wrong.

The catalogue of gloom -- job losses, unemployment, sinking home values, foreclosures -- has been growing. Pension investments -- and many NCR readers are especially aware of this reality -- have lost as much as 20 percent of their value this year.

As pained as these days might be, it might help to widen the view a bit -- and then we can be reminded that most of us are viewing our financial troubles from the top of the global pyramid.

Consider that only about 1 billion of the world’s 6 billion people live in the developed countries of North America, Europe and Japan, where an inordinate proportion of the world’s wealth is enjoyed.

According to a recent World Bank report, 2.8 billion residents of the rest of the world live on less than $2 a day and of those, 1.2 billion live on less than $1 a day.

In an address to the Asian bishops, Br. Anthony Rogers, executive secretary of the Office for Human Development for that conference, noted that the richest 20 percent of humanity consumes 86 percent of all goods and services while the poorest fifth consumes just 1.3 percent.

Even when our markets are working well, the benefits flow to only a few globally.

The dilemma was captured well by Pope John Paul II: “Our world is entering the new millennium burdened by the contradictions of an economic, cultural and technological progress which offers immense possibilities to a fortunate few, while leaving millions of others not only on the margins of progress but in living conditions far below the minimum demanded by human dignity.”

If reform is inevitable, as it now seems, we might take into account the twin Christian values of human dignity and the common good as we reconstruct our financial system. The change in ethos would be an admission that the arrogant and ultra-individualistic cast of our economics has served the narrowest of constituencies. It would amount to a healthy and appropriate humbling.

Perhaps the severity of our current crisis, which has elicited unprecedented criticism, could provoke unprecedented new ideas about the value of work, about reasonable and collective good. The collective good is not something to invoke only when the system is about to collapse.

The masters of the universe, as it has turned out, oversaw only a portion of a self-conceived, self-contained universe. And they failed miserably.

National Catholic Reporter October 3, 2008