Sunday, 28 September 2008

The hustle culture

A veteran economist on finance today:

“The greed-is-good doctrine associated with extreme laissez-faire economics has trashed the need for individuals to worry about integrity. They don’t need to be concerned about their reputations; they just need one deal or one year at the top and they need never work again. The incentive structure has so departed from one of the principal norms of fairness—proportionality between value added and reward—that it has eviscerated trust relationships and integrity.

“Everybody tries to ‘game’ the system on their route to vast personal fortunes—whether short-selling, packaging up dud mortgages as prime mortgages or telling lies about their financial viability—and the result is that the system is getting wise. The best course today in any financial transaction is to presume zero integrity. Credit is drying up and with it the very lifeblood of the economy.”

Thus Larry Elliott in The Guardian. Meanwhile, we read in the NY Times of Friday that Arkady Abramov and Marina Gavrielova bilked $360,000 from our state’s welfare system by claiming she was a destitute single mother and obtaining food stamps, welfare, rent supplements and other benefits over a six-year period. What’s the difference? The similarities are much more obvious: you figure out where the controls are weak and extract wealth at the expense of anyone who actually works for a living or who can’t make it on their own.

The result in both cases is that any attempt by the state to provide a reasonable way of life for the majority or to help the needy is undermined. Just as the breakdown of traditional business fairness and trust lay the groundwork for the extreme fragility of today’s hyper-leveraged market, as Elliott astutely recognizes, the Abramov-Gavrielova scam infuriates the taxpayer, turns everyone into a suspect and weakens the safety net for those truly in need.

Earmarks are another facet of this phenomenon as institutionalized theft debases our legislative branch. The citizenry is justly enraged but misidentifies the culprit. By stacking the deck against any chance of mass social service reform such as national health care, the laissez-faire, pro-business crowd leaves room only for piecemeal, localized programs packaged as payoffs to politico-entrepreneurs, either Bridges to Nowhere or, in the best cases, a few bucks for the senior citizens center—but only if you are in the game and turn a blind eye to the massive looting at the top.

The fact that a huge spending bill laden with Christmas tree ornaments slipped through Congress this weekend just as the Wall Street bailout was being finalized is a sign that business as usual persists despite the crisis atmosphere. The lawmakers are as addicted to the regular injections of illicit cash as are the staggering banks, and the pain is not yet great enough to pave the way for a new modus operandi.

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