The nation held its collective breath these last weeks as the country waited to see if Congress would finally act on the emergency measures to “rescue” our economy, and what the impact would be. While it was understandable that ordinary Americans were skeptical of what the media termed initially a “bailout,” the majority of their representatives took this one step further. They refused to vote for legislation deemed, by their own party leaderships, critical for avoiding a global financial meltdown.
The reasons for this revolt have been analyzed extensively in the last week, and I am in agreement that ideology, poor communication and the complexity of the issues played a role. However, an erosion of trust—within the system and between the American people and their government—has become evident. Years of zero-sum partisan politics has taken its toll and for one spellbinding week, one could see this in all its transparent horror. “The [no] vote is a reflection of a lack of political capital, not financial capital,” New York University professor Mitchell Moss told the Washington Post on September 30. This week the market brought the problems we are facing into even sharper relief.
Trust is an intangible commodity whose real value becomes evident only when the supply of it is scarce. And without it, as we have seen, the very underpinnings of a system that relies on it can be threatened. But trust alone cannot fully explain the reason the United States has been having such difficulty in coming to terms with the crisis and its remedy. I am convinced that there is a cultural element to this. At the outset of the crisis, many Americans simply couldn’t believe this was really happening to us. As events unfolded they wondered if we had a government of Chicken Littles who had misinterpreted economic acorns for a collapsing sky.
Was this an inability to see the dangers to our system, a form of class warfare or cocky reassurance that we will always come out on top? We do not fully know. But I suspect that some of the responsibility rests with the fact that as a society we have grown unused to significant downturns and in the process have forgotten some of the well-worn truths of the past. Mort Zuckerman, property developer and publisher of U.S. News and World Report, confirmed the crazy thinking: “. . . so much was based on the assumption that housing prices would not go down,” he wrote.
This failure to observe caution and restraint—something Alan Greenspan, we now learn, was counting on Wall Street to do—was a big part of the problem. But one wonders, what happened to erase decades, perhaps centuries, of prudent behavior? During the cold war, for instance, caution and restraint were served up to us in thick, hearty doses. On the personal side we were told that if you had sex you could get pregnant; if you took drugs you would get caught; and if you failed to pay your debts an endlessly humiliating and life-changing bankruptcy awaited you.
In international affairs, we were warned that action would bring reaction. Foolish or reckless moves could lead to all-out war and, after the advent of the ICBM, possibly nuclear annihilation.
But then some attitude-changing things began to happen. The Pill eliminated the threat of pregnancy; lax enforcement and a generation of defiant experimentalists ended the taboo on recreational drugs; and bankruptcy, for far too many Americans, became a financial strategy rather than a personal tragedy.
Even more significant, on the world stage, the USSR’s “Evil Empire” went out “not with a bang but with a whimper”—along with the idea that actions have consequences. What kind of a victory, or even a war, was it if your adversaries gave up without a fight? If the Communists threatened the world, why did they tolerate their country’s dissolution without moving forcefully to save themselves? If they were such pushovers, was the restraint and caution we were taught by our elders outdated and/or bogus? We began to act as if these values simply belonged to another time.
Since becoming the world’s sole superpower, we have operated unchecked, unhampered and arrogant in our belief that we are masters of our universe—and everyone else’s too. Many people believed that the old rules in a “new economy” simply no longer applied. The word “consequences” became, until this month, oh so 1950s.
The depths of the financial crisis have now fully sunk in. On October 6, a CNN/Research Corporation poll revealed that six out of ten Americans now think a “depression is likely,” meaning an unemployment rate of 25 percent and widespread bank failures.
It is not clear if this real-and-present danger will unify this country or rip it apart. But one thing’s for sure: hard lessons are now being relearned by American families and their overseas counterparts. We have rediscovered that choices, and the attitude we bring to them, shape a set of consequences; and before any action is undertaken, a hard-nosed calculation on a range of outcomes must be a part of any initial decision.
Until we have confidence that our policy makers similarly understand the power of consequences—even as they advance new solutions to our current problems—it will be difficult to restore our faith in them as stewards of the public good. Once trust is lost it is hard to re-earn. But the stakes are now clear, and we know that the hard work must now urgently begin.