The self-destruct button

Hilzoy, of Obsidian Wings, gets the essential paradox in the spectacle of investment bankers who lost trillions of dollars feverishly defending their bonuses:

If I were an investment banker making millions of dollars a year, I would be trying to convince the people around me to simply take the hit for a couple of years, the better to preserve our ability to go on raking it in in the future.

This raises the obvious question: why don't they do that? Whether you look on this as a matter of mass psychology, a matter of pure supply and demand, or a simple matter of justice, it doesn't matter. Employees who put their company in what amounts to government receivership can hardly claim to have "earned" large bonuses or even high salaries. The collapse of most of the investment banks on Wall Street means that many more traders need jobs than institutions need traders, so the logic of supply and demand argues for a pay cut. And the men and women of Wall Street made their money out-thinking the market; surely they can grasp the current public mood. So why do something that goes against their education, values, and experience?

A serious challenge to any idea will naturally tend to set up a particular dynamic among those who strongly believe in that idea: a tension between the impulse to allow our ideas to evolve, and a fear that compromise with an opposition will unravel them. Several factors can increase the rigidity with which partisans of an idea hold it: the perception that those who defend an idea derive personal advantage from it, or the perception of a connection between ideas that mean compromising one idea would lead to the compromise of other cherished ideas. Consider, for example, this story. I will credit the Vatican and the Brazilian Bishops with enough intelligence and compassion not to actively want a nine-year-old child to carry twins to term. I can only explain this judgement as an expression of fear, the fear that if the church gives any ground at all relating to abortion, they will lose all authority relating to reproductive rights and morality.

Yet nothing destroys an idea as quickly as rigidity. Rigidity confesses weakness. Strong ideas can withstand challenges. Strong ideas can survive compromise. When upholding the implications of an idea leads to harmful results, we generally insist on compromise rather than accept the harm, and good ideas can survive those compromises. We can take children away from parents who abuse them without compromising the ideal of parenthood. We can arrest corrupt politicians without compromising democracy. If the Vatican we cannot accept the actions of doctors who saved the life of a victim of child rape without having the whole edifice of their teaching on reproductive ethics crumble, then perhaps they should think about the apparent fragility of the ideas they teach.If bankers cannot cut their salaries for a few years to save their institutions and the credibility of the financial system, then parhaps they, and we, should reconsider the whole structure of economic inequity in our society.

New comments policy...

Now that blogger allows for the moderation of comments older than a certain number of days, I have removed the moderation requirement on all posts seven days old or less. As before, we welcome comments from all perspectives, as long as the authors follow two simple guidelines:

1. Avoid all forms of abusive language. That means overtly racist, sexist, homophobic, and ableist language, personal attacks, and plain old profanity.
2. Do not post spam

If you write with reasonable civility and decorum, you can feel free to challenge us on anything. Not everyone agrees with this choice, but I have three reasons for it. First, I want to make this a lively and challenging forum if possible. To do that, I need people to read and comment. If I invite people to write, to add value to this web log, it seems to me that I have an obligation to give something back, and freedom does not seem to me too much to expect. Secondly, I want my ideas challenged. I have every expectation that they will survive, and if they do, I will have more confidence in them, and probably better arguments for them, than I did before. Finally, I believe I have a responsibility to respect everyone I cooperate with, and that doesn't seem, to me, to include trying to control people's ideas.

So, welcome. I look forward to reading everyone's comments.

No more bull market, and no more excuses for cheerleading it...

Yesterday, the Toronto Star decided to run a column by Richard Cohen of the Washington Post. In it, Cohen objected to Jon Stewart's take-down of Jim Cramer. Mr. Cohen, apparently, has concluded that since the CEOs of companies like AIG and Lehman Brothers lost money of their own in the wreck, that nobody could have predicted the disaster.

Well, I have a link right here, to a blog post by a professor of ethics at John's Hopkins University, dated March 2007, just about exactly two years ago. In it, she looks at the subprime meltdown, and concludes, among other things:

Moreover, the whole business of collateralized debt obligations and similar financial instruments looks likely to contract in a pretty major way. If this spills over into the general credit market, as Nouriel Roubini argues that it will, we will have a credit crunch.

If an ordinary, educated observer with only the background in economics that most educated people with an interest in current affairs have, could write something like that in 2007, just what did the supposed legions of analysts and others at CNBC, and in the business press generally, do with their time between 2007 and the fall of 2008? The bloggers at Obsidian Wings did not have some unique insight; a lot of us looked at the numbers for the fundamentals of the American economy and found them worrying.

Mr. Cohen points out that the captains of this industry suffered personal losses, and suggests that this somehow justifies the failure of the business press to dig into the unfolding mess. Let us leave aside that when corporate leaders sell their stocks just before a crash, the government starts investigating concerns about trading on inside information and subpoenas, trials, and prison sentences often follow. Details such as that obscure the big picture: the leaders of the financial community obviously deceived themselves about the risks they took. That doesn't excuse the business press. They don't work for the CEOs, who have research staffs of their own. The business press works, or should work, primarily for the small investor.

I have no doubt Mr. Cohen actually knows this, but I'll say it anyway: a CEO with a (paper) net worth of two billion dollars can live more comfortably then 99.99% of the world's population after losing 1.9 billion. On the other hand, someone with their kid's college fund in the market who loses fifty thousand dollars has suffered a major reverse. So the business press has a more immediate and pressing moral obligation to the millions of small investors than they do to the few big-time gamblers.

And Jon Stewart spoke for these small investors.He spoke for the people who believed that their modest dreams, of educating their kids, of a good life in retirement, would also help fund the economy, and who got a rude shock when the markets collapsed, and a casino they had never heard of took all their money. Mr. Cohen should listen.

Talking about racism: to do versus to be

This also applies to sexism, homophobia, and ableism. Everyone can have a lapse, and in fact, the way our culture works, it gets hard not to lapse into saying something you didn't mean to say. Our culture contains a lot of dark currents, and they get awfully easy to tap into, and then, often before people really know it, they've stepped into a deep dark pool that's lurked just under the surface of our society for generations. And then a lot of ugly assumptions come bubbling up.

For example, our culture has a lot of ideas about people with differences of various kinds as living symptoms of the vices in our society. We have people talking to themselves on the street because we have an alienated culture, or we have turned away from the true path, or we have the genocide of First Nations people in our past. In fact, most of the people who talk to themselves on the street have brains that work differently from those of the rest of us. But accept the idea that difference expresses and carries all the vague guilt so many people encourage us to feel, and some really ugly things can happen.

Or take privilege. We all value the ability to say what we want, and to strive for good things for ourselves and our families and our communities. And we've come to value local activism; in fact, many of us buy the green motto, think globally, act locally. But what many times, we look the other way when what happens globally works to our benefit, even if we would act locally to prevent those things from ever happening in our neighbourhoods. Plenty of people who would "act locally" to shut down an electronics recycling facility near them still buy the newest, greatest computer systems and ignore what happens when a truck takes their old system away.

That doesn't make us bad people, but it does make us people who have choices to make.