Headlines, blogs and talk shows abound with the notion that people unlike ourselves – “they” – are the root of our current financial conundrum.
The urge to rail against a free market system is hardly a new concept. Hating on the very people who turn the wheels of capitalism – the bankers and lenders, the entrepreneurs and industrialists – was in vogue at various other times in history as well.
Just as the notion that the world was flat was generally accepted then, so was the foolish notion that profit-seeking and “greed” corrupted society. Plato criticized money lenders in “The Republic.” Jesus expelled moneychangers and livestock traders out of the temple in Jerusalem, and Solomon warned in the Proverbs that wicked people are “greedy for gain.” The very lowest circles of Dante’s Inferno were reserved for usurers and alchemists.
It wasn’t until 1776 that father of modern economics Adam Smith and his “The Wealth of Nations” came along that an economic principle freeing profit-seekers from guilt and societal scrutiny existed. In other words, capitalism was born.
Smith held that each little player in our economic system, in pursuit of a profit to make a better life for himself, ultimately results in a more prosperous society at large. The “invisible hand” of supply and demand guides us all to participate in an economic system, that if left alone by outside forces, will result in the most efficient allocation of our resources.
In an almost poetic twist of fate, 1776 was of course also the year of independence for the United States, the first nation founded on the principle of capitalism and each individual’s right to pursue happiness.
Yet in current times, at the onset of the financial system’s collapse and the ensuing recession, we’ve regressed back to pointing fingers at those who are “greedy for gain.” Last summer, everyone grumbled vaguely about speculators and oil company executives who were “driving up the cost of gasoline” and making “windfall profits.” Yet I have to wonder how many of those people even know which line on the graph is supply and which demand.
Now we bemoan the high salaries that corporate executives make (all the while handing over our hard-earned tax dollars because we’ve been convinced that these firms are “too big to fail”).
The executives at AIG did little to help better the distorted picture of capitalism when they recently awarded themselves multi-million dollar bonuses right after essentially groveling on their knees to be rescued by the government. This is not what Adam Smith and his contemporaries talked about when they spoke of capitalism.
My challenge with this column will be to get you, my readers, thinking about the economic issues that concern your lives. Just like the laws of physics affect you at every waking moment of your life, despite how little you may care to study the general law of relativity, the basic principles of economics define the world you live in, whether you care to participate in the discussion or not.
When President Obama says that there’s a “consensus” among economists that supports his stimulus bill, is that really true, and if not, what objections are raised by the non-conforming economists? Why should you as a 20-something care about legislation forcing bankers to renegotiate home lending terms? What does the idea of “sustainability” really mean in economic terms? How do increasingly stringent business regulations affect your future career prospects?
I don’t expect you to agree with me on every subject I raise; rather, I hope to start an intelligent discourse on the subject that’s already looking to define our generation.
Marlize van Romburgh is the Mustang Daily editor in chief and a journalism senior with an economics minor. “Business as Usual” is the new business column and will appear in the opinion section every Monday.