Does focusing on failures in the "system" undermine... (Part 1 of 2)

Does focusing on failures in the "system" undermine the psychological basis for economic recovery?

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  • Tony Blankley

    “[E]very generation, apparently, is susceptible to the tempting argument that there is such a thing as a free lunch, that the stern ethics, hard work, and self-reliance required of citizens of a free country can be slackened without consequence.”

    Experts across the nation are furiously debating the possible effects of our government’s macroeconomic responses to the current financial contraction. But we should be concerned about, perhaps even more than about those material consequences, the spiritual effects on our national character such massive government intrusions into the marketplace may cause.

    Picking winners and losers, bailing out private companies, rewarding those who were improvident (with the tax revenues of those who acted responsibly) are more than mere acts of unfairness. Over time they may derange the moral calculus that each of us makes every day as we live our lives.

    There is a reason why people who live south of Canada and north of Mexico happen to live in a unique expression of freedom. American freedom didn’t flow merely from the bountiful land or from our Declaration of Independence. It was, and is, the product of the unique American character. What is that character?

    When I considered a title for my latest book, I wanted it to capture the singular nature of our American character. I chose the word grit, thus the title: American Grit. The dictionary definition is “firmness of mind or spirit: unyielding courage in the face of hardship or danger.” A list of synonyms includes: courage, spirit, resolution, determination, nerve, guts, pluck, backbone, fortitude, toughness, tenacity, perseverance, mettle, doggedness, hardihood. Many people when they hear my book title tell me they think of the great John Wayne movie True Grit. So did I before choosing the title.

    But the instinct to maintain those American virtues is undercut by the economic paternalism in which Washington is attempting to shroud the country. As I argue in my book, America has always benefited in a spiritual — as well as material — way from free markets. The material benefits are obvious, but the American work ethic, the willingness to take risks, and the sturdy sense of self-reliance are moral benefits that have shaped our character.

    It is precisely the absence of individual self-reliance amongst our European cousins (in my case, as an immigrant from England many years ago, my literal cousins) that has shaped an excessive dependence on the state, and thus somewhat curtailed individual freedom on the old continent. Unfortunately, from time to time, events offer up a centralizing temptation to the American people. We face such a moment now.

    I came of political age in the early 1960s and was part of the then modern conservative movement of William F. Buckley Jr., Barry Goldwater, Ronald Reagan, and Maggie Thatcher. Having then seen the collapse of the Soviet Union and the discrediting of the socialist experiment, I thought we had ended once and for all the arguments of the statists, redistributors, and collectivists.

    Well, time passes and people forget. So every generation, apparently, is susceptible to the tempting argument that there is such a thing as a free lunch, that the stern ethics, hard work, and self-reliance required of citizens of a free country can be slackened without consequence. Finally, fearful people believe the politicians who tell them they can sell out their economic freedoms and still maintain the individual dignity that they had once been told comes only with being free and independent men and women.

    But just as General Douglas MacArthur once said that in a war between nations “there is no substitute for victory,” so in the struggle to save the soul of the American people there is no substitute for freedom.

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    Washington Times columnist Tony Blankley is an executive vice president with Edelman, a public relations firm in Washington, D.C., and a regular on The McLaughlin Group. His most recent book is American Grit: What It Will Take to Survive and Win in the 21st Century (Regnery).

  • Theodore Dalrymple

    “Too great an emphasis on injustice, therefore, is destructive of grit, even where there is in truth much injustice.”

    Good fortune uncovers our vices, while ill fortune tests our virtues. Anyone, said Mark Tapley in Martin Chuzzlewit, can be cheerful in good circumstances; it is the worst circumstances that reveal the truth of a man’s character, which is why Tapley sought them out.

    There is no doubt that there is a lot of misfortune these days. No one feels secure, not even those who prided themselves on their financial acumen or prudence a short time ago; the bedrocks of the economy are crumbling into dust, unemployment is increasing, and a certain future is a thing of the past. Anxiety is the emotion à la mode.

    Fortitude, the ability to bear misfortune with public equanimity, is not a virtue that has been much in fashion of recent years, having been derided as a form of emotional constipation, but the virtues of this virtue are becoming apparent again. Grit, which is fortitude in its practical aspect, will now be at a premium. To bear discouragement without becoming discouraged and disappointment without becoming disheartened, to renew efforts in the face of failure, has become necessary as it has not been necessary for quite a long time.

    One of the preconditions for the exercise of grit is a belief in the justice of the world’s arrangements, not perfect justice, of course, for such has never existed and never will exist, but sufficient that effort and persistence are rewarded while their opposites are punished.

    Too great an emphasis on injustice, therefore, is destructive of grit, even where there is in truth much injustice. No one can fail to have noticed that many of the pains of the present crisis are not borne by those who are most responsible for having produced it, while those who are most responsible for having produced it appear to have emerged very well out of it, financially if not in general reputation. (My newspaper today tells me that bonuses of $450 million will be paid to executives of AIG, who helped to bring about the largest losses in corporate history.)

    I am no economic egalitarian, but even I feel some tremor of outrage at the spectacle of executives escaping with tens or hundreds of millions of dollars when their personal greed and shortsightedness have ruined the vast institutions they directed, plunging the world to the brink of an economic abyss. Is there no justice in the world?

    Well, actually, there is. To take my own case, which, small as it is, I know better than any other: I have always been rewarded for my efforts, not perhaps as well as I should have liked or felt in my heart of hearts that I deserved, and certainly nowhere near as well as the fallen idols of Wall Street, but more than enough to meet my needs. (Of course, limiting one’s needs is another prophylactic against resentment.) Does it really matter to me, then, if the fallen idols I have referred to do not get what they deserve, or get what they do not deserve? The world has always been sufficiently just to keep me in the business of effort, and I think it will remain so.

    This is not to say that the guilty should get away scot-free, that it matters not if the Madoffs of the world, of whom there seems to have been a surfeit of late, escape all retribution. (Not that such retribution will be sufficient to prevent a financial scandal in forty years’ time, or even less. If history teaches anything, it teaches the recurrence of speculative bubbles, in which the Pied Pipers of painless enrichment and fraud lead the gullible greedy to their destruction in the deep waters of pseudo-investment.)

    To search out those who are to blame for a disaster is always pleasing, indeed one of the most delightful of all pastimes. It is entirely forgivable in those relatively few of us whom the disaster has utterly ruined. If I had lost all in the disaster, no doubt I should be of their number.

    Nevertheless, most of us pretend that we ascribe blame so that we, that is to say humanity, may learn from experience and prevent such disasters in the future. In reality it is the sheer gratification of blaming others that we seek. Without blame, human conversation would be truncated indeed. I think most people understand this instinctively. They will not let the constant emphasis in the press, television, and elsewhere on the shortcomings, follies, and crimes of the fallen idols of Wall Street interfere with their determination to find a way for themselves out of the Slough of Despond, should they land there in the first place.

    More dangerous, perhaps, is the opportunity that the crisis gives to all those political entrepreneurs who promise to lead us from the rocky terrain of danger and risk to the sunny uplands of perfect security, where the economic sun always shines and the temperature is always pleasantly moderate. It goes without saying that we shall arrive at this Shangri-La only if we grant those politicians exceptional powers to reward us according to their conception of our deserts.

    Still, what we need above all is a sense of proportion, one of the most difficult virtues to achieve. Yes, Madoff et al. are terrible men whom the law cannot punish with sufficient severity, bearing in mind the worldwide consequences of what they have done and all the misery they have caused; but still our own individual efforts will be rewarded, and we must not let ourselves become so poisoned by resentment that we lose sight of this fact and, in the words of Hamlet, “lose the name of action.”

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    Theodore Dalrymple is a physician and author whose works include Our Culture, What’s Left of It: The Mandarins and the Masses (Ivan R. Dee). His real name is Anthony Daniels, and he divides his time between England and France.

  • Jeff Faux

    “The current crisis reminds us that the enemy of honest work and fortitude is not government efforts to maintain prosperity, but the casino values fostered by the removal of government regulation over markets and the celebration of individual greed as the highest social value.”

    Does focusing on failures in the “system” weaken the traditional, deeply American virtue of grit? No.

    Getting through hard times may well require extra grit and pluck. But expecting the economy to recover by simply relying on individuals to fend for themselves — with the implicit assumption that market forces alone would regenerate growth — would be reckless folly.

    Today, millions of hardworking, resourceful Americans are unemployed. With more than four job seekers for every available job, all the grit in the world will leave three of them without work. Millions of small businesses are closing; grit alone will not bring in the customers they desperately need. Nor will individual grit unlock an insolvent banking system clogged up with billions of dollars in worthless assets.

    We are facing the “paradox of thrift.” An individual’s sensible and gritty response to a depression is to hunker down, reduce spending, and tighten the belt. But in a market economy, if no one spends, no one works. Today, with consumers and businesses not spending and foreigners not buying our exports, only the federal government can provide the needed stimulus.

    The current crisis reminds us that the enemy of honest work and fortitude is not government efforts to maintain prosperity, but the casino values fostered by the removal of government regulation over markets and the celebration of individual greed as the highest social value.

    Greed, of course, has always been with us, and always will be. Indeed, it is the principal psychological engine of economic growth. But like every engine, it needs to be constrained with brakes, gears, and steering devices. Otherwise, it runs out of control. This was the lesson of the Great Depression and the reason we subsequently established market regulations and social safety nets.

    Over the last several decades, America’s governing class (Democrats as well as Republicans) has systematically removed the needed constraints and protections. We were assured that the market’s rewards for winners’ grit and ruthless punishment of losers’ lack thereof made the system self-regulating. This shift was widely celebrated as a return to the pre–New Deal spirit of entrepreneurship and risk-taking. Market values were extended to virtually every nook and cranny of social life.

    One inevitable result of this “free market fundamentalism” was an upward redistribution of income. But the richest Americans served as role models not for the values of grit and self-discipline but for conspicuous consumption.

    Average real wages (from which most people in America get their income) stagnated. Thus the only way a majority of working Americans could keep up with the constantly rising definitions of the good life was to borrow. In 1980 consumer debt was 70 percent of income; in 2008 it was 140 percent. Contrary to the claims, the economy was not fueled by a burst of entrepreneurship and self-reliance; it was fueled by easy credit in a deregulated financial system transformed into a casino.

    The regulated financial sector primarily provided credit to enterprises that produced goods and services and created jobs over years. With deregulation, its principal function was to provide capital to itself for the production of debt. In 1981 the finance industry’s debt was 22 percent of our GDP. By 2007 it was 122 percent.

    The country’s business culture turned away from values associated with grit — hard work, long-term horizons, integrity of product — toward the values of the speculator: unearned income derived from the fast returns of short-term arbitrage and maximum leverage. The finance and real estate industries became beehives of lies, deceptions, and Ponzi schemes.

    The moral claims for this “free market” also proved fraudulent. The governing class reduced the economic safety net for the average American, citing a “moral hazard.” Yet at the same time it strengthened the safety net for those “too big to fail,” i.e., the rich and well connected. Time and time again, both Republican and Democratic governments bailed out Wall Street: the rescue of the savings and loan industry in the 1980s, the U.S. holders of Mexican bonds in 1995, the speculators who drove the Internet stock market to mindless heights in 2001. Each time the rescue was declared a distasteful necessity, after which these self-styled Masters of the Universe were set loose once again to create another crisis.

    There is no free market solution to the problem we now face. The modern American economy has become too interconnected and complex to allow the unrestrained speculators to create colossal credit bubbles, as well as to let them crash with such massive damage. It is as if a reckless neighbor sets his house on fire by smoking in bed. We can punish him by letting it burn only by also endangering our own house.

    No doubt the average American’s grit was strengthened in the Great Depression. A return to the pages of The Grapes of Wrath reminds us of the fortitude many needed just to survive. But it was not enough. In the end, even Franklin Roosevelt’s New Deal proved too timid. We solved the Depression with the biggest big-government spending program of them all: World War II. The full employment economy that followed released the energies of gritty, plucky Americans to produce the most prosperous, innovative economy the world ever saw.

    Forgetting that bit of history got us into this mess. Ignoring it will not get us out.

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    Jeff Faux founded the Economic Policy Institute in 1986, quickly turning it into one of the nation’s top think tanks on political and economic issues for working Americans. Stepping down as president in 2003, Faux is now a Distinguished Fellow. He has worked as an economist in the Departments of State, Labor, and Commerce; as a manager in the finance industry; as a blueberry farmer; and as a member of a municipal planning board in the state of Maine.

  • William Galston

    “The real danger is…that individuals will blame themselves for circumstances over which they can exercise no control and for which they are in no way responsible, that they will internalize systemic failure as personal failure.”

    Since the founding of the American republic, observers have noted our distinctive political culture: individualistic, skeptical of state power, socially egalitarian but content with equality of opportunity rather than of results in the economic sphere. Americans give more weight to personal responsibility than do the citizens of other advanced democracies. It’s your own fault if you fail, and you should look to yourself rather than others to turn failure into success.

    While this outlook may seem hard-nosed, it is anything but grim, because it is embedded in optimism. Failure is only temporary; progress is ongoing. With but short intervals of doubt, Americans have always been confident that their efforts will be rewarded and that tomorrow will be better than today. This is the cultural vein FDR tapped when he proclaimed that the only thing we have to fear is fear itself, because fear makes us lose faith in the efficacy of our own efforts and fall into passivity. We can only fail, says the typical American, if we stop trying.

    Grit, we may say, is the combination of personal responsibility and optimism, an American stance immortalized in Dorothy Fields’s 1936 lyrics from the Fred Astaire/Ginger Rogers classic Swing Time. Here’s how Ginger bucks up the discouraged Fred, cast against type as a hopelessly clumsy man who can’t get the hang of the simplest dance steps:

     

    Nothing’s impossible I have found,
    For when my chin is on the ground,
    I pick myself up, dust myself off,
    Start all over again.
    Don’t lose your confidence if you slip,
    Be grateful for a pleasant trip,
    And pick yourself up, dust yourself off,
    Start all over again.
    Work like a soul inspired,
    Till the battle of the day is won.
    You may be sick and tired,
    But you’ll be a man, my son.
    Will you remember the famous men
    Who had to fall to rise again?
    So take a deep breath,
    Pick yourself up, dust yourself off,
    Start all over again.

     

    It was this tradition of American grit that the newly inaugurated President Obama invoked when he urged us to “pick ourselves up, dust ourselves off, and begin again the work of remaking America.” Nonetheless, some critics have charged that the president’s expansive vision of activist government will somehow demoralize our citizens — that they will cease to understand themselves as self-reliant individuals and begin thinking of themselves as wards of the state.

    These fears are wildly overblown. Our public culture has survived the ups and downs of the economy, the waxing as well as waning of confidence in government. The real danger is just the reverse: that individuals will blame themselves for circumstances over which they can exercise no control and for which they are in no way responsible, that they will internalize systemic failure as personal failure. In every episode of mass unemployment, the story is the same: Americans line up by the hundreds (and often thousands) whenever they hear about even a handful of jobs opening up. And as their efforts come to naught, week after week, month after month, they blame themselves. What really undermines the psychological basis of recovery is the depression that self-blame so often produces and the passivity that depression so often induces.

    By acting effectively to restore the conditions within which individual effort can succeed, government does not undermine but rather strengthens our tradition of personal responsibility. And by restoring the link between effort and reward, it renews hope. A government that does what is necessary in dire circumstances thus fortifies American grit.

    None of this is to say that we must accept grit on its own moral terms. As alert listeners heard Ginger Rogers croon “you’ll be a man, my son,” they would have recognized the final line of Rudyard Kipling’s If. The virtue Kipling preached was sterner and more stoic than grit: you’ll be a man “if you can meet with triumph and disaster and treat those two imposters just the same.” Americans’ fixation on success — especially, but not entirely, material success — makes us needlessly vulnerable to the vicissitudes of fortune. Perhaps we need to get beyond grit and learn to focus more on the things that the economy cannot take away and that government cannot restore.

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    William Galston holds the Ezra K. Zilkha Chair in Governance Studies at the Brookings Institution and is a former policy advisor to President Clinton and various presidential candidates. He is an expert on domestic policy, political campaigns, and elections. His current research focuses on designing a new social contract and the implications of political polarization.