It Is Honorable for Government to Help People Act More Honorably
The New York <i>Times</i> has an excellent <a href="http://www.nytimes.com/2008/10/09/business/economy/09greenspan.html" target="”_blank”">article</a>
today on Alan Greenspan in relation to the current
financial crisis. It provides food for thought about government regulation at
any level.<br>
<br>
Essentially, Greenspan believes that the cause of the crisis is Wall
Street decisionmakers not acting honorably. However, the decision to
regulate, like the decision to pass ethics codes, is to guide people to
act more honorably and penalize those who do not.<br>
<br>
Greenspan's basic problem is that he ideologically opposes government
intervention that in any way holds back free enterprise. He believes
that the market makes better decisions than governments. He also
prefers individuals over collectives. However, both governments and
markets are collectives and, in both cases, a small number of
individuals can make all the difference. In the case of financial
regulation, he essentially made his policy government's policy by insisting so confidently that he was right.<br>
<br>
In fact, he was wrong. He got the first half of the problem right:
derivatives lessen risk by spreading it. What he got wrong, because of
his misplaced faith in those with the most power in the market, is
ignoring the fact that people who feel safer take greater risks. It
doesn't make them dishonorable, it just makes them human. There is an
easy way to stop this: require more capital to be held to make the
greater risk-taking safer. That's what regulation is for. But you can't
rationally consider this alternative when your ideology makes the
alternative evil.<br>
<br>
Government is not evil, it is the way a community makes its decisions.
It's imperfect, just like every collective and every individual. But it
works reasonably well when its leaders act reasonably, and when people
don't let one man's arrogance blind them to their obligations.<br>
<br>
I don't mean to say that Greenspan is totally responsible, only more
responsible than anyone else. He had lots of help on Wall Street, on
Main Street, in the Clinton and Bush cabinets, and in Congress.<br>
<br>
But local governments need to learn the lesson: there is nothing wrong
with helping people to act more responsibly, to prevent them from harming others or, in the case of ethics, using government for their own benefit. And there is nothing wrong with
government per se. The free market is a fiction, government is not. The
free market takes no responsibility for anything, government has an
obligation to. The free market is like a child, as we can see now, and
government has to clean up the mess. Again and again.<br>
<br>
Rules and regulations are okay, even if opponents, who have something to lose from them or just hate them ideologically, call them socialist or unnecessary. Ethics codes are okay, even if officials insist they're acting totally in the public interest. What is not okay is putting ideology, or self-interest, before one's obligations to the public.<br>
<br>
Robert Wechsler<br>
Director of Research-Retired, City Ethics<br>
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