It has been fascinating to note the host of premises and beliefs that lie behind the current financial fiasco, many of which are implicit or simply are not noticed. (When I say fascinating I mean akin to the kind we feel when driving by a horrific traffic accident where you can’t resist looking.) Due to the length of the list I’m not going to comment in detail. It would take a book the size of the bailout bill to address all of them.
Here they are in no particular order of importance.
Economic egalitarianism: the belief that government should ensure equal economic outcomes. (I discussed this idea in an earlier post.)
Psychology trumps economics: that greed is a more fundamental and better explanation than the principles of economics and the impact of government policy on economic decisions. Misses the point that most people and businesses are motivated to improve their condition and that this force is always at work. Why did greed suddenly cause this meltdown? What allowed it to get out of control? Answer: laws that encouraged banks to lower their lending standards, plus the role of Fannie Mae’s management who aggressively marketed their company as a safe investment while cooking the books.
Question: if banks were driven by pure greed why do they need to be forced to loan more money?
Answer: because they also have to protect their bottom line. In order to make a profit they need to ensure that the people to whom they lend money will be able to pay it back. Greed therefore is balanced by prudence.
I have issues with using the term greed which I believe is used as a derogatory, emotion-laden synonym for self-interest and the desire to improve one’s situation. The dictionary definition of greed is “excessive desire for having.” What is considered excessive? Who determines what is excessive?
Punishment of the good for being good: people who did not overextend themselves by buying homes they couldn’t afford and/or didn’t leverage their home’s equity into credit will pay for the sins of those who did.
The best defense is a strong offence (along with denial of responsibility): blame the mess on the 8 years of Bush, on “deregulation,” “greed” without explaining exactly how. Deny the role of your own policies in the fiasco then demand more of the same to “fix” it.
Good intentions (desire to help the people who couldn’t afford homes) absolve you of blame. This includes the management of Fannie Mae who cooked the books to make their business look better than it really was and to maximize their bonuses.
No distinction made between kinds of “greed”: While I dislike how this word is bandied about I’ll use it for the purpose of illustration. As I said above greed is being used as a purposely negative term for self-interest and the desire to improve one’s condition. Having said that there are at least two breeds of greed: (1) the drive to create or produce value (which is what motivates the businesses in the free market), or (2) the greed of obtaining the unearned (Freddie Mac and Fannie Mae senior management plundering tax payers to line their pockets, people buying homes knowing full well they couldn’t make the payments, lawmakers adding pork programs to the bailout bill, and so on.)
Ends justify the means: the “good” intentions of wanting to help people buy homes justify strong arming banks into suspending prudent underwriting standards (e.g., ACORN [to which Obama has ties] fostering activities to intimidate banks, passage and enforcement of the Community Reinvestment Act.)
Ends justifies the means – Part 2: using the bailout plan as an opportunity to shoe horn additional pork into it for unrelated programs and to get the toe in to door for carbon footprint taxes.
Wishes override reality: if banks don’t make loans according to sound underwriting principles let’s encourage them to be more “flexible.” Reality is negotiable!
The role of government is to ensure businesses are serving the community. This is the foundation of arguments for passing the CRA and other laws. However this flies in the face of the greed argument. If businessmen wanted to rape and pillage, I mean maximize profit, you wouldn’t have to force them to loan money. Their profit motive gives them an incentive to “serve” the community. If certain communities aren’t being served that signals the presence of other forces dissuading businessmen from selling their product or service. Implicit in this argument is the belief that customers have a right to demand the services and goods provided by businesses. Of course, this idea underlies arguments for universal health care and whatever other service or good deemed to be too valuable to trust to the market. (Another topic that’s big enough to fill a book.)
1 comment:
Excellent blog. The modern (Western) management concepts of vision, leadership, motivation, excellence in work, achieving goals, giving work meaning, decision making and planning, are all discussed in the Bhagavad-Gita . There is one major difference. While Western management thought too often deals with problems at material, external and peripheral levels, the Bhagavad-Gita tackles the issues from the grass roots level of human thinking. Once the basic thinking of man is improved, it will automatically enhance the quality of his actions and their results.
The management philosophy emanating from the West is based on the lure of materialism and on a perennial thirst for profit, irrespective of the quality of the means adopted to achieve that goal. This phenomenon has its source in the abundant wealth of the West and so 'management by materialism' has caught the fancy of all the countries the world over, India being no exception to this trend. My country, India, has been in the forefront in importing these ideas mainly because of its centuries old indoctrination by colonial rulers, which has inculcated in us a feeling that anything Western is good and anything Indian, is inferior. Gita does not prohibit seeking money, power, comforts, health. It advocates active pursuit of one's goals without getting attached to the process and the results.
The result is that, while huge funds have been invested in building temples of modem management education, no perceptible changes are visible in the improvement of the general quality of life - although the standards of living of a few has gone up. The same old struggles in almost all sectors of the economy, criminalization of institutions, social violence, exploitation and other vices are seen deep in the body politic.
The source of the problem
The reasons for this sorry state of affairs are not far to seek. The Western idea of management centers on making the worker (and the manager) more efficient and more productive. Companies offer workers more to work more, produce more, sell more and to stick to the organization without looking for alternatives. The sole aim of extracting better and more work from the worker is to improve the bottom-line of the enterprise. The worker has become a hirable commodity, which can be used, replaced and discarded at will.
Thus, workers have been reduced to the state of a mercantile product. In such a state, it should come as no surprise to us that workers start using strikes ( gheraos) sit-ins, (dharnas) go-slows, work-to-rule etc. to get maximum benefit for themselves from the organizations. Society-at-large is damaged. Thus we reach a situation in which management and workers become separate and contradictory entities with conflicting interests. There is no common goal or understanding. This, predictably, leads to suspicion, friction, disillusion and mistrust, with managers and workers at cross purposes. The absence of human values and erosion of human touch in the organizational structure has resulted in a crisis of confidence.
Western management philosophy may have created prosperity – for some people some of the time at least - but it has failed in the aim of ensuring betterment of individual life and social welfare. It has remained by and large a soulless edifice and an oasis of plenty for a few in the midst of poor quality of life for many.
Hence, there is an urgent need to re-examine prevailing management disciplines - their objectives, scope and content. Management should be redefined to underline the development of the worker as a person, as a human being, and not as a mere wage-earner. With this changed perspective, management can become an instrument in the process of social, and indeed national, development.
Now let us re-examine some of the modern management concepts in the light of the Bhagavad-Gita which is a primer of management-by-values.
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