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?
Everyone has an opinion on what started the economic crisis affecting the US economy, many believe it began in the housing sector. They point their fingers of blame at just about everyone: lenders, bankers and borrowers. Numerous lenders and bankers were very arrogant when using predatory lending practices on some borrowers, committing them to interest only mortgagers knowing once the mortgagers reset they would be beyond the means of the borrowers. Some Lenders, lustful in their ways, often sough after riskier borrowers to ensure higher commission upon sale of the house and loan. Many Borrowers wanting to possess apart of the American dream, although they lack the financial means, committed themselves to a home they could not afford but had to have for an image. But ultimately, greed is culprit for the economic crisis. Many people, lenders, bankers and borrowers, wanted more than their fair share. Their anger and resentment of others material has led to the demise of the US economy.
http://www.cnn.com/2009/US/01/29/economic.crisis.explainer
http://business.timesonline.co.uk/tol/business/industry_sectors/construction_and_property/article1599721.ece
Margaux
Your post is short and too the point. You covered all aspects of why all parties were greedy
I think that all negative core values caused the economic crisis in different levels. But greed and arrogance would definitely be on the top of my list. During my research I have discovered an interesting interview with the U.S.-based executive development trainer John Scherer for the Czech Business Weekly magazine. He says:
”Greed, self-orientation and adrenaline hunger—these were the mental engines behind the financial play that is now dragging down economies worldwide. Leadership was replaced by greed. People who, in a sense, precipitate this situation were being moved by greed in most respects. Many senior executives aren’t motivated by money. It’s not about the money—it’s about winning the game; it’s the adrenaline rush that comes with rolling the dice for a really big score. More entrepreneurial people just like to be No. 1; they like to be better than their colleagues at doing different things. In a way, there was a disconnection between senior leadership of some very significant U.S. organizations and the mission and vision of those organizations.”
An example of arrogance – “Several years ago Walt Disney was creating the Euro-Disney in France. They were just adamant; French people were saying: we’re not going to let our people pay $15 for the entry and then pay inside another $15 for an American hamburger. The Disney people said, ‘Look, we know how to do it, we’ve done it around the world, let’s do it.’ But French banks were about to withhold the loan money unless Disney was willing to listen to the French.”
This crisis fueled the speech of those pointing at a certain arrogance of the U.S. leaders, both political and business leaders.
What is the real model of the American leader?
Scherers says: “There is no single American leader, as anywhere else. You have leaders who are driven by the desire to get as much as possible in a shortest time period in such a way that I 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 I 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. I think that’s what happened here.”
Reference: http://www.cbw.cz/en/%E2%80%98arrogant%E2%80%99-american-leadership-will-be-watered-down-by-the-financial-crisis-/9430.html
The french Walt disney example is very nice Mirek. These people were not allowing to give disney a chance. The link also seems to point at the greed shown by the political leaders in particular. Very justified looking at the current situation.
One example to stress in GREED and it’s results can be told by the recent scam at a company SATYAM COMPUTERS.
The chief of Satyam, Ramalinga Raju, created artificial profits while there was none at all. When the situation where his fraud could become public came, he tried to cover the whole thing by trying hard to acquire deals which could replenish the ‘missing’ money, thereby cleaning up his image. Fate had other plans as this scam was made public before the damage could be repaired and as a consequence the would-be-acquired deals became duds and he failed miserably.The need for more and more money. The ‘fudged’ cash and bank balances could have lasted them 10 months but Ramalinga Raju has already confessed on Wednesday that Rs 5,040 crore out of the Rs 5,361 crore is non-existent.
Because of this, the employees are living with a fear as to whether there will be any pay cuts and layoffs.
Please refer this link. http://timesofindia.indiatimes.com/Business/India_Business/Can_Satyam_pay_salaries_to_staff/articleshow/3954157.cms
Yes Sreesh, this proves that greed knows no regional boundaries and without proper regulations in a free economy such enterprenuers lacking the core values would result in current situations.
Greed is one of the root cause of ecomonic crises.The second cause can be poor handling of finance.Greed is one of the seven dedly sins.One of the major causes of suffering in the world is greed,Desire in itself is not wrongbut when the desire becomes too much,it turns into greed.
Let me quote this example…
“Many have said that the housing crisis has been caused by greed. We know that there were many factors including a directive from the Bush Administration in 2002 to get lower income people into home ownership any way possible. People who could not afford the homes that they wanted were allowed to purchase them anyway with adjustable rate mortgages that ended up increasing to the point that people could not make their payments any longer. Also, with the increase in housing prices, many people borrowed against their increased equity in the form of second mortgages and used that money on consumer spending. When the housing market fell, their homes were not worth what they were and they were left with the debt.”
We can easliy imply that its greed that has caused the ecomonic crises
source http://www.downshoredrift.com/downshoredrift/2008/09/causes-of-the-h.html
Yes Chandrika, poor handling finances is absolutely the cause of the crisis! Let me point out one example that made me sick when I heard about it…Citigroup received $45B in the federal bailout plan and wanted to purchase a new corporate jet for $50M!! Why? Maybe I don’t know the whole story, maybe they really need it (right!), but I just thought this was ridiculous…..I couldn’t believe and understand what could possibly go through their minds….
http://detnews.com/apps/pbcs.dll/article?AID=/20090127/POLITICS/901270358
Mirek
I agree that Citigroups plan to buy a new jet sounds greedy, but you need to know that this jet was probably ordered 2-3 years ago. It takes that long to get a jet.
Also, if no one buys private jets, what happens to the people who work for the jet manufacturers?? 50 million is 0.1 % of 45 Billion
I understand that Roy, however, I just think that if a company receives any kind of financial assistance or help that usually indicates that you are in a desperate need for money in order to survive.
And even thinking about buying a private jet just because they planned it 2-3 years ago is not an adequate “excuse.” To me it’s just a huge slap in the face to all the people that contributed to their help to survive. Surely, they didn’t plan 2-3 years ago to receive $45B in the bailout plan, too. Plans change…that’s life.
Mirek
I understand your point, but after an aircraft is ordered, there are progress payments made prior to taking ownership. If the order is canceled, these payments are forfeited, so payments are lost and there is no aircraft that could be sold.
I see the “corporate jet” issue as one that the media is using to feed a image that corporatiosn are evil
The underwriting standards for lower income and minorities began to loosen as early as the early 1990′s. So the housing crisis began even before the Bush Administration gave the directive in 2002. This directive probably just helped turn things for the worse.
“In an attempt to increase homeownership, particularly by minorities and the less affluent, an attack on underwriting standards was undertaken by virtually every branch of the government since the early 1990s,”
http://www.wnd.com/index.php?fa=PAGE.view&pageId=75717
“I am not a destroyer of companies. I am a liberator of them! The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA. Thank you very much.”
– Gordon Gekko, Wall Street (1987)
Gordon Gekko, played by Michael Douglas in the 1987 film Wall Street, represents the ultimate in corporate greed and the dangers it represents.
The quality improvement link above does not seem to be working. Besides that issue, my comments are listed below.
All of the negative core values have contributed to the current situation in the United States and also around the world. These values may not be in play all at once; however the combination of the core values has led to where we are today.
Arrogance – From all of the negative core values the US government has fallen for arrogance. The government has lacked the oversight and regulations, however the corporate world has. Corporate executives and major organizations have led their employees to believe what they are doing is ethically okay and no negative consequences can occur from these actions. These organizations find ways to falsely represent what they are doing is acceptable in the world market. For example mortgage companies willing allowed their employees to sell risky loans without clearly advising the consumers of what the consequences could be in the future. This is only a small factor for why the markets have been drastically changing over the last few years. The governments must create regulations that do not encourage organizations to leave the country.
Greed –Lust and Greed are the major core values that have contributed to the current economic situation. Organizations, specifically executives within those organizations had focused on pursuing financial gains without concern for their actions. Corporate executives will continue to take within their organizations and eventually there was nothing left to take anymore leaving the economy where it is at today. These executives are only looking out for themselves without concern for others. The increasing impact of globalization within the US economy has also contributed to the current situation. Organizations are moving their operations to other countries with lower pay requirements and relaxed regulations in order to financially succeed. The movement of operations out of the country has created a reduction in the US job force. This is another contributing factor of why the economy is in the situation it is today.
Book Reference on Corporate Greed (moving jobs out of the country)
http://books.google.com/books?id=ESerpQhQ22wC&dq=corporate+greed&printsec=frontcover&source=in&hl=en&ei=WIudSc6CMpW6twfY06XcBA&sa=X&oi=book_result&resnum=15&ct=result#PPA59,M1
(If the above link does not work please let me know)
Lust – As defined lust is the gratification from obtaining anything physical or material. Corporate executives are requesting billions of dollars in tax payer help to assist in bailing their companies out for the carelessness and indulgence they have committed over the last five years. They are only concerned with being financially successful and there has been little attention to the consequences of their actions including corporate takeovers, job losses, and stockholders.
Attachment – The negative core value of attachment is a contributor to the current economic situation but not to the extent of greed. Corporate executives are only looking out for themselves and do not consider the consequences on their actions on other employees, companies, and shareholders. This is evident in the economy today as companies absorb other companies, in the end only looking out for their own needs for financial success.
Anger – There has been probably some anger factored into the current economic situation, but most of this has occurred after the fact of where the problem originated. Retirement funds are drifting away as stocks fluctuate, individuals are losing their jobs, and inflation continues to rise. The pursuit of retiring or purchasing a new home are slowly disappearing.
US News posted an article in October 2008 from information released by the Congressional Budget Office, stating that over two trillion dollars have been lost in retirement savings over the last 15 months.
Reference (Link)
http://www.usnews.com/blogs/planning-to-retire/2008/10/08/retirement-savers-lost-2-trillion-in-the-stock-market.html
All of the negative core values have impacted the economy in some way or another. The combination of these factors has created the path to economic turmoil that we are currently seeing. The economy is only going to break out of this downturn by balancing these negative core values with positive core values.