It is a distinct temptation to concentrate one’s attention, and therefore one’s censure, on the intrigues of Wall Street. And often mere intrigues are what they are. I am have been perusing a handful of books by business and finance journalists, which among other virtues provide the reader with some picture of the human personalities behind the boom and busts of high-finance engineering. For instance, there seems to have been a very clear personal rivalry, an archetypal clash of masculine ambition, concomitant with the rise of the mortgage-backed bond market. The very invention and early development of this new trade in debt securities confected out of hundreds of mortgages, tracked rather neatly for some years, starting in the early 1980s, with the competitive enmity between Laurence Fink and Lewis Ranieri, of First Boston and Salomon Brothers, respectively.
The portrait that emerges from stories like this is that ritual denunciations of “greed” can easily blind us to the deeper motivations of the men who built up the infrastructure of usurious finance. Simple avarice, the desire for material gain or possession, is only one aspect of the libido dominandi.
The acquisitive impulse in man strives for more than possession of wealth. It aims at prestige and honor and status; it desires luxury and decadence; it aims at that respect or fear from one’s rivals which gratifies the innately competitive man; it compasses, also, that pride of the underdog or outsider who conquers the establishment; it embraces indignation at slights or humiliation, and all the welter of grudges and jealousies and strife that follow its the train. Many passions and pressures are wrapped up in it. Men are creatures of complex motives.
Political economy is a subject that can easily take on the dusty aspect of the lifeless academic. The phrase has an aroma like a university library, and a texture like the dry pages of charts in the financial papers. But political economy remains ineradicably a human drama. It is only a dreary and paralyzing delusion to permit the fascination with numbers and equations to drive from view the human beings at back of it all.
Now (to shift my interpretative lens from political economy to political philosophy), when you consider that part of the very project of modern philosophy was to free the libido dominandi, the human acquisitive impulse, from the supposed mummery of the ancients, both Christian and Classical, you can see why in my judgment modern philosophy itself is implicated in the wreck that high finance has made of our political economy. To simplify an extraordinarily complicated story, the ancients, impressed by man’s capacity for folly and evil, dedicated a goodly portion of their efforts to fettering his mind with the accoutrements of discipline and self-denial and uprightness. Reason was the instrument of this discipline; and since the order of the commonwealth could not but reflect the order in the soul, reason in politics consisted to a large degree in the efforts to instill virtue, piety, civic-mindedness — none of which came readily to fallen men.
The modern revolt can thus be seen especially in the attempt to throw off all the accoutrements of ancient reason, especially to the extent that these were instantiated in institutions, and liberate the natural instinct toward possession, toward conquest, toward acquisition, that is in man. From this supposedly native instinct the moderns derived their social contract. Interest, not virtue, would form the ground of politics: man becomes a political creature in a solemn contract, operating in perpetuity, with the artifact known as the State as its guarantor.
The moderns generally parted ways from there. Hobbes said that men assented to the aboriginal social contract out of fear of violent death. Locke added that security of property was important too. Rousseau introduced to spirited streak of radicalism by suggesting that men were tricked into abandoning their aboriginal freedom, or merely robbed of it physically, by the first possessor or owner. From that provocation a thousand socialist schemes were hatched. Adam Smith softened the whole system with a profound subtlety by arguing for a pre-political sociality that could, under the right circumstances, compel sheer interest to the service of order and prosperity.
The question of where the American Framers stood in this great debate across the ages, between ancient and modern, is a truly fascinating one. Nor is the answer, on my reading, nearly so obvious as liberal historians have supposed. My own view is that the conventional narrative, which presents the Framers as basically Lockeans at heart, is mistaken. It overemphasizes the importance of the Declaration of Independence while neglecting the Preamble to the Constitution and above all The Federalist — both of which documents contain distinctly non-modern aspects. But whatever the Framers intended, in practice the acquisitive impulse in Americans has been strong indeed, and has been permitted a wide compass to operate, usually — but not always — within the bounds of law.
Indeed, historically, America has had political economy that included plenty of speculation and shenanigans and outright fraud — from Aaron Burr to the gold rushes, from the speculations surrounding the railroad industry to the speculations in real estate of our day, America has produced some brazen finance adventurers alright.
America has also flourished, of course, because of the extraordinary enterprise of her people. The acquisitive passion need not always issue in rapine. On the contrary, it has been the peculiar greatness of America to demonstrate the magnificent power of the human mind, creative and ambitious, unleashed for its own private endeavors. I reckon it damn-near impossible for a patriotic American to read of, say, the audacity and industry of the early American shipping, which was so often hampered and harried by British monopolies backed by the might of the Royal Navy, and not feel a thrill of pride in his breast. Or consider the greatness of Hamilton’s vision of political economy, which while perhaps be less than satisfactory to today’s free traders, was utterly indispensible to the prosperity of the early Republic. Meanwhile, no traditionalist can possibly gainsay the credentials of John Randolph of Roanoke as a man of the Right, yet some of this great Senate orator’s most devastating polemics were delivered in the defense of free trade. Nor should we (me included) forget that much of modern finance innovation is not, in fact, usurious. Capital lent in the form of debt securities is a legitimate means of funding ventures. Enterprising men must have access to capital (let us also recall that often in America they have been born with none, and yet this proved no barrier to success and great wealth), and that capital is perforce a risked venture. Some speculation will always remain. That cannot be helped. Venture may be defined as this embrace of risk and defiance of convention, in the hope of eventual gain, and sometimes it goes very wrong.
But the American political economy, historically, was also such that the failure of the ventures could be endured and learned from, in the manner of experience being the teacher of man. The acquisitive impulse was free, but the consequences of its excesses be borne by those who lived by it. There would be no rescues. It is only fairly recently that, alongside the preaching of this dream of global capital integration, we have come to this pass where our speculations must be rescued by the state. The New Deal was the first great revolution along these lines, where the American social contract was refashioned to include a strong element of cushion for failure. Less fully understood, perhaps, is the role played by Globalization in extending and amplifying this revolution. This is where we Conservatives need to really work to revise our picture of the world and man’s place in it. The integration of global capital markets has not, as advertized, produced greater stability but rather greater fragility. A town on the edge of the Australian Outback can go bankrupt because of liquidations and margin calls on Wall Street. Icelandic banking woes can drive asset-management funds all over the world into technical default on derivatives contracts. The failure of capital-market integration (which is what Globalization really is) forced the hand of policymakers to effect a shocking series of interventions into the private economies of the world.
In the end political economy is still a thing of human drives, morals, tendencies, habits, superstitions, artifacts, and ingenuity. And as my old friend Chris Floyd puts it, Globalization is a disordered enterprise that amounts to “the delusion that human life can best be sustained at an inhuman scale.” It is high time we reckoned with this.