We are all aware of the dramatic nosedive of the stock markets, which has eroded trillions of dollars from the value of US and foreign corporations, and is causing economic stress globally. A CNBC TV series suggests that a major cause for this situation, at least in this country, is American Greed. Others blame our government for loosening regulations and ignoring their role of oversight, as CEOs of now bankrupt Wall Street firms walked away with the hundreds of millions of dollars bankrolled by U.S. taxpayers. Listen to this excerpt from my lecture on quality improvement in September 2007 (4:09): Unjust Rewards: Compensation for Failure.
Is greed the only negative core value (of the five: lust, anger, greed, attachment/possessiveness, arrogance) that caused this crisis?
Can you discuss, with examples, how all five negative core values have played a role in creating this crisis?
Proverbs 15:27
A greedy and grasping person destroys community; those who refuse to exploit live and let live.
Roy Ellis has pointed out good points about the U.S postal service. When I look at these examples on this blog makes me wonder that American leaders moral compass stopped working, not in 2008, but way back in 1990s.
Sarbanes-Oxley Act of 2002, the Congress and the president created a law that was revolutionary in the changes it prescribed and the activities it proscribed in our capital markets. It ruled that officers, directors and auditors of publicly traded companies must tale new responsibility for the accuracy of the companies’ financial reports and face stiff penalties for failing to do so.
How could that have happened? I believe it happened because in the course of the 1990s, many American business leaders got confused and their moral compasses stopped working.
It is particularly sad that such confusion took place at a time when U.S. businesses were responding in a brilliant way to a very serious challenge. Globalization of the world economy became much more intense in the 1990s, and American companies lost pricing power. It is easy to see why a manufacturing firm in Chicago cannot increase prices if it has to compete with firms in Mexico, China, India and other countries with dramatically lower labor costs.
All companies that outsourced jobs may not had the good intension. Some did it just to make more money out of greed. Globalization is a good thing, but if the motivation is greed then it will have bad results. The core values are important even you are a company trying to cover up the truth about the values.
http://www.religion-online.org/showarticle.asp?title=3067
Greed is most definitely not the only core negative value that played a role in causing the current economic crisis. In fact, I believe that all of the core negative values played a major role in the current crisis. The root cause of the current crisis is embedded in the state of American credit as it pertains to the housing market. Let me discuss the role each negative core value played in this crisis:
Greed: Our economy is to a large degree built on credit, and this is not necessarily a bad thing when used correctly. Over the last several years it had become easier and cheaper to issue lines of credit and mortgage brokers saw this as an opportunity to become wealthy relatively quickly by issuing risky (ARM) mortgages to new homebuyers and then packaging these mortgages up and selling them as “investments”. Thousands of Americans took out loans that they could not ultimately afford in the hopes that they could refinance later at a lower rate or even flip the house for a profit. The more money these brokers made the more they wanted, and the bad mortgages continued to flow. Greed at work [1].
Lust: The ongoing issuance of bad mortgages exemplifies greed in that the mortgage brokers wanted more and more, but the strategy to to be successful at profiting from these mortgages had to come from somewhere, and this is where lust comes into the picture. Enter Steve Eisman, a Harvard educated lawyer turned equity analyst turned hedge fund manager. Eisman, as well as many other firms and entities on Wall St., had known for some time about the ticking-time-bomb that was the subprime market. Eisman and his company began betting against the subprime bond market, short selling as he knew they would all be worth zero at some point. It was inevitable and he saw this dire situation as a means to fulfill his desire for material gratification [3].
Anger: In the same article referenced above Steve Eisman later finds out that he and his company were being played by the mortgage industry. Eisman was unknowingly providing the necessary backing in the form of interest that was allowing the lenders to create mortgages out of thin air. The article states that upon this revelation by a manager of one of the mortgage lenders Eisman become so enraged and angered that he shorts the guy’s company [3].
Attachment: Not nearly as prevalent in current economic discussions that are permeating media outlets is the role that homebuyers play in contributing to the crisis. There is a widespread attitude of “keeping up with the Jones’” in America today, and this pressure is leading many Americans to live above their means in the pursuit of a certain image [4,5]. Homeownership has been a large part in the traditional “American Dream” and Americans have been more than eager to do whatever it takes to have this dream materialize .
Arrogance: John Scherer, founder of the Scherer Leadership Center, an international consortium of consultants and leadership development specialists, states that “…self-orientation and adrenaline hunger…were the mental engines behind the financial play that is now dragging down economies worldwide”. Scherer goes on to say that, “In this particular context, you have leaders who are driven by the desire to get as much as possible in a shortest time period…This leadership model is very self-centered, self-absorbed; it’s more like: what will help me and the people that I care about?” Scherer argues that in the future companies and their boards of directors will not be willing to engage in activities that pose the risk associated with the current economic crisis. Arrogance among corporations is being watered down, thereby allowing America, in some way, to return to the values it was founded on [6].
[1] http://cashmoneylife.com/2008/09/29/economic-financial-crisis-2008-causes/
[2] http://www.pbs.org/wgbh/pages/frontline/meltdown/themes/
[3] http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom
[4] http://www.businessweek.com/1998/21/b3579105.htm
[5] http://personalmoneystore.com/moneyblog/2008/11/21/stop-keeping-up-with-the-joneses-they%E2%80%99re-broke-and-need-credit-repair/
[6] http://www.cbw.cz/en/%E2%80%98arrogant%E2%80%99-american-leadership-will-be-watered-down-by-the-financial-crisis-/9430.html
Is it Greed or the American Way? Or are they one in the same? Our capitalistic environment drives higher profits to increase the owner value (stock holder). The greed part comes in when the CEO’s manipulate the company in the short term to collect large rewards with no regard for the future of the company or the impact on society as a whole. But is this the reason for the crisis. A very interesting article from DollarsandSense gives the viewpoint that greed is fairly constant on Wall Street. But the “extent of regulation changed”. I tend to agree with this thought.
(http://www.dollarsandsense.org/archives/2008/0908macewan2.html)
The greed part is lost in the risk taking that has been taking place within the deregulated banking market. We are all naïve to think greed doesn’t play a part in this, but we would be even more remiss to think it will go away. It’s kind of like have a Pit bull that’s dangerous and then knowingly let him off his leash. Should we be surprised if someone gets hurt?
As for the other four negative core values (lust, anger, attachment/possessiveness, arrogance), lust runs neck-in-neck with greed; no satisfying the desire. Anger; this is difficult to attribute this to the crisis except that stock holders may be expressing their anger through excessive selling and thus perpetuating the issue. Possessiveness is reflective of greed and lust.
But, I don’t think we can attribute all of this to the top dogs of the companies. We as consuming Americans should take some of the blame. We have become an “I want it now” society racking up bad debt with no foreseeable means to repay the loans. Buying houses and cars we cannot reasonably afford. And we purchase meaningless things. We’ve fed the monster.
I think it’s time for a cleansing.
Chris, I liked, and enjoyed, your comments, PC
You’re right Chris, I too feel strongly about how the culture we’ve bred over the years that points towards materialism and this desire for being successful monetarily, has laid the foundation for the economic climate we are in today. It is sad how we still don’t have our act together in at least being effective and not wasteful in our recovery tactics. This is made obvious with the controversial amounts of bonuses & salaries the executives of top organizations have recieved [ http://blueherald.com/2008/12/greed-the-american-way/ ] As Individuals, all I can say is we need to tighten our belts and ride this storm, while making long-term plans to make sure we don’t shoot ourselves in the foot again by putting too many eggs in the same basket and pushing educational, financial and organizational reforms!
I agree with your comments, Chris. There is plenty of blame to pass around. As much as I want to be sympathetic to the vast number of folks caught up in the mortgage crisis I can’t help but think if some of them had been realistic they wouldn’t be losing their homes. The consumer should never have entertained the idea of taking on a mortgage they couldn’t ultimately afford and the banks should never have presented it in the first place.
The “keeping up with the Jones’” mentality is widespread. I have a friend in Atlanta who has been living above his means for quite some time just to fit in with the rest of the folks in his swanky neighborhood. Now his company is going under and he’s faced with losing his house.
1.Corporate Greed caused the Recession and new Stock Market Crash
The economic collapse was bound to happen as corporate America became more and more greedy. “Greed is good” claimed Gorden Gekko (Michael Douglas) in the 1987 memorable movie Wallstreet. What people failed to realize is that the fantasy of corporate America as portrayed in that movie including the mergers and acquisitions, stock manipulation, and insider trading, has become reality. In greed, corporations developed unstable and opportunistic schemes which – although not illegal, were certainly unethical, illegitimate and perhaps even immoral.This economic meltdown of the 21st century was bound to happen as people became progressively greedy. America suffered through one great depression and now this. Karl Marx was wrong in his views about capitalism, but he was correct when he said, “History repeats itself, first as tragedy, second as farce.”
2.Anger is also responsible for the economic crisis says new director of U.S. national intelligence, Dennis Blair, that the top threat facing the United States was not terrorism or nuclear proliferation, but the global economic downturn, which has led to increasing anger, despair and protest around the world.“Instability can loosen the fragile hold that many developing countries have on law and order, which can spill out in dangerous ways to the international community,”
http://worldfocus.org/blog/2009/02/13/global-economic-crisis-threatens-us-security-interests/4053/
3.Lust: German finance minister Peer Steinbrück has slammed Anglo-American capitalism for endangering global stability in its lust for profit and predicted that the US would now be toppled as the superpower of international finance
.http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3081909/Financial-Crisis-US-will-lose-superpower-status-claims-German-minister.html.
4. There is no single American leader, as anywhere else. we have leaders who are driven by the desire to get as much as possible in a shortest time period in such a way that we still think it has to do with winning—doing it faster and better than the others. This leadership model is very self-centered, self-absorbed; it’s more like: what will help me and the people that we care about? In a strange way most American organizations are led by a different kind of leader. Like in many places of the world, they are led by people who care deeply about the vision and their people and who want to make a contribution to the world. But in a handful of places, all that got lost. Even the word ‘arrogance’ comes from arrogate, which means to harvest more than you sell or take more into yourself than you have the right to take.
Very informative posts, Venkat. PC
Greed is probably the main negative value that is the root cause of our economic situation, but not the only one.
I’ve had it in my head for a long time that the lenders (banks) and the borrowers People) are the the most at fault for our economic crisis. In the context of the negative core values, I would have to say that the borrowers had lust and attachment at their heart when they sought homes, vacations, and other assets that they knew they could not afford. The banks had greed at heart when they loaned too much to those who obviously couldn’t pay it back, just simply competing with the other financial institutions and not worrying about the future of themselves or the borrowers. I would say that arrogance plays a big part in that type of lending too as it is almost like the banks are saying “So what, bail us out”.
I’m having trouble placing Anger as one of the negative core values in the context of our economic situation.
I would also blame the past CEO’s of the car manufacturers for their problems. The past leaders seemed to have laid back, let the unions have their way, and gave no consideration to the future. Now it costs an extra $1500 per car manufactured just to pay past debts so no wonder people struggle paying the higher prices for American cars.
Scott
I like how you identified that it is not only the CEO’s who caused this mess. The unions and others have caused this also
Scott, perhaps the anger element is active on a subconscious level. It may be the case that some of these executives, or whomever else is involved, had some traumatic event occur during their childhood and they carry some kind of resentment or bitterness with them as adults. For example, perhaps someone grew up as the underprivileged but smart outsider who was teased or picked on for not having what the other kids did. If this person carried this resentment into their adult lives, and found success as an adult, they may feel the need to exercise greed and lust as an attempt to express this buried anger.
I do not think banks wanted to lose money on defaulted loans. Banks probably pushed the limits on lending to individuals, however,I think people lusting after things that they did not really need caused most of the individual problems. I think the old saying is “Keeping up with the Jones”, means my neighbor bought a new car, so not be outdone, I will buy a new car, which I really don’t know if I can’t afford.
If the US car manufacturers CEO’s did not worry about their year-end bonuses and dealt with the job of increasing shareholders equity, there companies would be better off. It is surprisingly easy to get a car loan from GM or Ford; they greedy for the money.
Scott, I agree that greed is one of the major negative core values behind where the economy has ended up currently. In addition I definitely believe the unions have taken advantage of their power in the auto industry and other major industries also. Once an organization has opened the door to greed they cannot stop and it seems to become continually worse for that organization and others within the same industry as time progresses.