Election 2008: The Economy

I'm planning a feature article on economic issues viewed from a Buddhist perspective, but in light of today's front-page stories about failing financial institutions I'm posting a few of my thoughts today.

This is, of course, not an economics blog, and I don't claim to be an economist. That said, my understanding is that today's financial meltdown was caused by the way financial business has been carried out the past several years. These days most big-money financing is done through complex deals arranged by "nondepository" institutions like Lehman Brothers, rather than by old-fashioned banks. Much of what these institutions do is unregulated by government.

From what I have read, so far no one has accused the failing financial institutions of doing anything illegal. However, too many of the executives of these institutions have been making reckless decisions with investors' money. They made bad bets, in other words. Today's financial chaos reveals that recklessness has been the rule rather than the exception.

From a Buddhist perspective -- from any sane perspective, actually -- this is an obvious case of "greed" drowning out "smarts."

For many years in the U.S. it has been fashionable to think everything is better when it's deregulated. Government oversight is "bad" because it wastes taxpayers' money and gets in the way of free enterprise. "Get government off our backs" is a common political rallying cry.

Libertarian economic theory assures us that because it is in a company's self-interest to maintain a good reputation -- that its products are safe, that its books are not cooked -- most executives will make responsible decisions without government oversight.

That sounds dandy, but in the real world, people don't act in their own self-interest. We smoke and eat junk food, for example. We engage in unsafe sex, talk on our cell phones while driving, get drunk at the office Christmas party, become addicted to gambling. The number of human beings on the planet whose every responsible action is in their own self-interest is probably in the dozens. The rest of us are busily self-destructing, one way or another. Likewise, any institution run by human beings can also self-destruct.

There are no end of real-world examples of the terrible consequences of greed on a grand scale. Unregulated and overheated financial speculation was largely responsible for the stock market crash of 1929, for example. Deregulation of the savings and loan industry during the Carter and Reagan administrations allowed S&L managers to take greater risks, leading in turn to the S&L crisis of the 1980s, in which many people lost their life savings and which cost U.S. taxpayers about $125 billion.

One reason the craze for deregulation took hold is that people have the mistaken notion that if one thing is bad, its opposite must be good. Communist economies, which are centrally controlled, have proven to be dysfunctional in the real world. Therefore, the thinking is, we must do just the opposite and get rid of all government regulation. But that extreme causes its own set of problems, as we can see.

Buddhism teaches us to avoid extreme views and find a middle way, and it seems to me that's exactly what needs to be done with the economy. Surely there is an optimum amount of regulation, one that provides enough oversight to ensure financial stability while not so much that free enterprise is entirely choked off.

Buddhism also has a practical view of human nature, which is one of the things I appreciate about it. Even the smartest among us stumbles around in a fog of delusion. We let our greed and other passions jerk us around. This is understood not in a judgmental way, but just in a realistic way. Nobody's perfect, and there's nothing wrong with admitting it.

In the next few days, our candidates for public office will be promising "change" and "reform" as fast as they can move their lips. I advise keeping an open mind and listening carefully to what they say. I also advise that any candidate who thinks we can solve our economic problems with more deregulation and getting government "off our backs" is not one we ought to elect.