As I write this, there is panic on Wall Street despite Washington’s $700 billion rescue attempt. The crisis is not contained by U.S. borders, but extends to Europe and Asia. Like many people, I’m incredulous. How could this happen?
Wall Street hired the best and the brightest, paid them handsomely, and gave them unlimited resources and technology. It turns out they were building enormously complicated castles made of sand. A great wave washed them away, astounding all the smart people who devoted their lives to speculation, not production. Their models based on historical data predicted future profits, not collapse. Few people saw this coming until it hit.
“It was the triumph of data over common sense,” said reporter Adam Davidson on the excellent episode of This American Life called “The Giant Pool of Money.” Economist Michael Lehmann in the San Francisco Chronicle called it “the triumph of ideology over common sense.” It’s obvious both common sense and the common man have taken a beating.
It’s hard to stomach that our government must bail out Wall Street. It really means we’ve bet our future on the same people who created the present situation. To paraphrase a joke I’ve heard: It’s like going to a casino in Vegas and rooting for the house. One New York Times reader expressed the frustration that many feel: “Why can’t we take half of the $700 billion and just build something?”
These events shake our belief that free markets work to the benefit of all. The fundamental tenet of capitalism is the “invisible hand”: Adam Smith wrote that “by pursuing his own interest [each person] frequently promotes that of the society.” This year, Nobel Prize-winning economist Joseph Stiglitz said: “In this sense, the fall of Wall Street is for market fundamentalism what the fall of the Berlin Wall was for communism — it tells the world that this way of economic organization turns out not to be sustainable.”
A headline in the Christian Science Monitor says: “With finance crisis, hands-off era over.” Government will need to be more assertive in regulating Wall Street. But I think it goes beyond that. I wonder if we, as individuals, have been living in our own era of hands-off. Have Americans become so disengaged that we’ve become dependent on some invisible force to provide what we need? Have we gotten used to leaving important matters to experts, until they turn out to be wrong?
Isn’t it time for us to become hands-on again?
We, the people, face enormous challenges. Apart from the economic mess, we know fundamental changes are coming because of global warming. Our dependence on fossil fuels is not sustainable. Change is coming, whether we want it or not.
Better we meet the challenges head-on rather than hide. New York Times columnist Thomas Friedman summed it up: “We need to get back to making stuff, based on real engineering not just financial engineering. We need to get back to a world where people are able to realize the American Dream — a house with a yard — because they have built something with their hands, not because they got a ‘liar loan.’ … The American Dream is an aspiration, not an entitlement.”
We have to believe it starts with each of us — not some faceless government or corporate bureaucracy. It’s time for us, individually and working together in business, to reconsider what it means to be productive, not just profitable. It’s time for us to reengage in how our government sets priorities for education, health care, housing, and transportation.
The DIY mindset celebrated in this magazine must again become an essential life skill, rooted once again in necessity and practicality. Our future security lies in knowing what we’re capable of creating, and how we can adapt to change by being resourceful.
A challenge this great can bring out the best in us. We need everyone, because every person has something to contribute. We need a showing of all hands.