Commentary: What ever happened to personal responsibility?
This article first appeared in the St. Louis Beacon, Dec. 19, 2008 - As details of financial shenanigans perpetrated by fallen Wall Street gurus become public, the blame game is revving up. The Madoff scandal is quickly engulfing others. From his family to his cronies on Wall Street to Christopher Cox, chairman of the Securities and Exchange Commission, there is plenty of blame going around. And why not? After all, it appears that the losses stemming from Madoff's Ponzi scheme will surpass the GDP of many countries.
We will soon learn how his scheme to defraud investors worked. And to be sure, some will claim that "greed" may define this decade as much as it defined the 1990s. Greed will take its place among the most over-worked words in the English language. Maybe it will surpass crisis and hero.
There is no doubt that greed was a motivating factor driving Madoff to bilk his clients. But what factor led his clients to leave their money with him? Wasn't anyone concerned by the abnormal returns that he and his small shop generated year after? Arguably much blame resides at SEC for failing to adequately investigate claims that something was in fact wrong. But still, shouldn't investors have done some snooping to see why they made out so well?
And where was the financial press? Shouldn't they be the watchdogs of the regulators?
The point is that we can be blind when everything is working well.
If the stock market makes a run back to 14,000, we will all cheer. We really do not care how or why such an increase in the market occurs, we just want our 401ks to returned to their former over-valued heights. We also don't care if the current plans to bail out financial firms or automakers are a really bad idea. We just want to get back to the prosperity that we think is our due.
In the future, after the economy has turned the corner, there will be plenty of time to blame the Fed for the higher rates of inflation created by their actions, or the federal government for the massive deficit used to finance the recovery.
What gave rise to this rush to blame? For one, blaming others is easy and avoids self assessment. We blame the anonymous, sinister subprime lenders for getting us into this financial mess. But we need to question our own actions.
Why did individuals take out loans that they knew they really could not afford?
Why did government officials blindly support policies designed to increase homeownership and push Fannie and Freddie to take on increasingly risky securities backed with subprime loans?
The current turbulent state of the economy empowers those who would throw the idea of free market capitalism aside like some relic of the past. The growing consensus is to let the Obama administration make the tough decisions for us.
- Create a car czar to resolve automakers' bad business decisions.
- Blame oil companies for our use of fossil fuels and propose green policies that will significantly raises the cost of travel, shipping and manufacturing.
- Can't seem to keep your weight in check? The governor of New York has the government's answer: Tax non-diet soda.
And let's reduce responsibility for personal decisions by providing more public services. How they will be paid for is another issue, especially since everyone runs on the political platform of not raising taxes.
The Economist recently noted that merely blaming an individual or a concept like free markets means that "complex failures and hard decisions can be missed or evaded." Instead of dealing with root causes and personal responsibility, will everyone start channeling Flip Wilson's character Geraldine and declare "The Devil made me do it"?
Rik Hafer is distinguished research professor and chair of the Department of Economics and Finance and director of the Office of Economic Education and Business Research at Southern Illinois University Edwardsville.