A Biblical Approach to the Economic Crisis

NOTE: I found an excellent theological analysis of our current economic mess written by Old Testament scholar, Walter Brueggeman, professor emeritus of Columbia Theological Seminary. I am pasting in the first part of the article below. You can access the entire article HERE.
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So far as I know, the Bible says nothing explicit about subprime loans and the financial implications of such risky economic practice. There is a great deal, nonetheless, that the Bible has to say about such a crisis as we now face. I will comment in turn on a biblical perspective of an analysis of the crisis and a biblical perspective for an alternative economic practice.

While the specifics of the current market collapse are peculiarly modern, biblical perspectives are pertinent because the fundamental issues of economics are constant from ancient to contemporary time, constants such as credit and debt, loans and interest, and the endless tension between haves and have-nots.
We may identify three dimensions of the theological-moral foundations of the current economic crisis:

AUTONOMY. A sense of the isolated, self-sufficient economic individual is deeply rooted in modern rationality and comes to full expression in U.S. “individualism” that resists communitarian connectedness and imagines the individual person to be the primary unit of social reality. Such an individual is completely autonomous, owes no one anything, is accountable to no one, and can rely on no one except himself or herself.

Such a self (perceived almost exclusively as an economic self) is without restraint and is self-authorized to enact Promethean energy to organize life around one’s own needs, issues, and purposes. The autonomous, self-sufficient self takes as the proper venue for life “the market” and understands the market as a place of self-advancement at the expense of all others who are perceived either as rivals and competitors or as usable commodities.

This same autonomy is articulated in the Bible under the rubric of “the fool” who says in his heart, “There is no God” (Psalm 14:1). The capacity to live without the gift or summons of God has immediate practical implications, for autonomy sets the fool over against the neighbor, most especially the poor neighbor. The one who says in Psalm 10:4 “There is no God” is the one who seeks out neighbors for exploitation: “They lurk that they may seize the poor; they seize the poor and drag them off in their net. They stoop, they crouch, and the helpless fall by their might. They think in their heart, ‘God has forgotten, He has hidden his face, he will never see it’” (Psalm 10:9-11).

.... continued at www.wondercafe.ca

Where is George Bailey when you need him?

We celebrate this Christmas in perhaps the worst national (and global) crisis since the oil shortage of the Carter years, and some say we will face the worst economic crisis since 1929 … a sort of “Great Recession.”

This made me think of one of my all-time favorite movies, “It’s a Wonderful Life” with Jimmy Stewart as the civic minded George Bailey and Lionel Barrymore in the role of the evil and greedy capitalist, Henry Potter.

For those of you who have not seen the movie (perish the thought); Mr. Potter is a banker who is attempting to take over Bedford Falls by buying out other businesses. The one business that stands in his way is a small, family owned savings and loan owned by George Bailey’s father. After the father’s death, George Bailey takes over his father’s savings and gives up his dream of a trip to Europe in order to keep the savings and loan afloat during a run on the bank. He ends up staying in Bedford Falls and spending the next 25 years on a small salary, raising his children and helping his neighbors and working friends get sufficient credit to own their own homes. At a critical moment, Mr. Potter steals the money from Baileys bank deposit, on Christmas Eve, just as a bank auditor arrives to look at the savings and loan books. Bailey despairs and considers suicide and expresses the wish that he had never been born. An angel named Clarence is sent to him to show him what life (and Bedford Falls) would have been like if George Bailey had never existed. At the end of the movie, George gets his life back, and all of the friends that he has made through a lifetime of service and friendship show up with contributions to make up the deficit. He is called the wealthiest man in Bedford Falls because of the integrity of his good name and the trust and loyalty of his friends. George Bailey is a good guy. He puts the collective good of his town, his business, his employees and his neighbors ahead of his own self interest.

For the sake of clarity, lets do a quick review of the recent bad news. First, investment giant Bear Stearns went under. There was a bank run in California in July and by Sept. 7, Fannie Mae and Freddy Mac were put on conservatorship to keep them from collapsing. News began to come out about their executives bailing out with golden parachutes consisting of hundreds of millions of dollars in bonuses.

Then Lehman Brothers went out of business on Sept 13 after failing to convince the Federal Reserve to provide assistance. Then, on Sept. 16, AIG successfully demanded a bail-out from the Federal Reserve to the tune of 85 billion. AIG executives promptly yelled "YIPIIIIEEE! went on a lavish company retreat to celebrate and spent God-knows how much money on drinks and massages. Bank of America purchased Merrill Lynch on the cheap. On Sept 17 Bernanke and Paulson convinced President Bush that urgent action was needed to prevent an economic meltdown worse than 1929. Bush went before Congress on Sept. 20th to ask for a 700 billion bail-out package

While unemployment rose to its highest point in over 20 years, the executives whose greed and mismanagement contributed to this mess continued to get million dollar salaries and million dollar bonuses. The ratio of executive pay to the salaries of average employees grew from about 60 to 1 in the 1950s to over 500 to 1. click here (for the rise in salaries of CEOs of Defense contractors since 9/11, click here)The rich have been getting richer and the poor poorer. The middle class who buys all of the damn consumer crap is shrinking.

But wait… it gets better! Shades of Mr. Potter.

Just when we think that maybe the crisis is subsiding, we find out that the big three American automakers in Detroit are running out of money and may go bankrupt. If this happens, hundreds of thousands of jobs will be lost, and multiple business will fail. “We cannot allow this to happen!” say the CEO’s of Ford, GM and Chrysler. So, crusading to save the American way, these courageous capitalists mount up on their private jets and fly to Washington (in three private jets) to the turn of $20,000 round trip EACH, compared to $180 for a seat on a commercial airline. Now, this is just staring to look ridiculous. Ford CEO Mulally’s employment contract was 28 million last year …let me repeat that … 28 MILLION! And they (CEOs AND Congress) are calling for labor to take the hit and reduce their salaries… give me a freakin break….

And if this is not enough … now we have the news about Governor Blagojevich attempting to SELL a U.S. Senate seat to the highest bidder, and another 50 billion investment dollars are lost to a giant ponzi scheme that ran over a 20 year period and was overlooked by federal regulators. Go check out former chairman of the Nasdaq stock exchange, Bernard L. Madoff’s investment web site, it is appropriately in black for mourning. One investor has already committed suicide. And we used to look down our self-righteous anglo noses at Latin America for its corruption? Please.

Are we getting the point yet? It is one thing for Alexis de Tocqueville to talk about “self interest rightly understood” in 1830 when people still had a Judeo-Christian moral foundation … now we are not talking about the invisible hand of the market being self interest, but the cloaked hand of naked greed unchecked by any kind of morality. And while the ship is sinking, Limbaugh and Hanity keep ranting and raving against democrats and liberals and about ‘personal responsibility’(and what about 'social' responsability?) and the land of 'free market' opportunity (that dawg don’t hunt no more), the Republican national committee is already attacking our President-elect even before he is sworn in (click here), and the lunatic left is also attacking our new President for reaching out a conciliatory hand to moderate evangelicals by inviting Rick Warren to offer a prayer at the inaugural. This is ideological mystification of the body politic in the extreme.

And it is not just the banks, automakers, congress, the federal non-regulators and CEO’s that are the problem: WE ARE all the problem. We have all caved into greed, the housing bubble, and rampant credit card debt. We have all sinned and fallen short (Romans 3:23) … trickle-down economics has turned into trickle-down self-indulgent greed … we have become a society of Mr Potters and there are no George Baileys around to rescue us. The U.S. has become Pottersville and the bill has come due. We have turned politics into a uncivil war … the “politics of destruction” that Clinton warned us about. “My friends” (to quote John McCain) we have met the enemy and the enemy is us.

It is time to rethink our paradigm. Are we fed up enough yet? If there are any George Baileys out there, they probably invested with Madoff and are now, on Christmas Eve, standing on the bridge thinking about jumping. Where are the good angels when you need them? Clarence, Monica, or Gabriel, are you out there? Right now would be a really good time for a little help. Merry flippin Christmas everyone ... this year the grinch wins.

Priceless comments from the New York Times blog on the defeat of the financial bailout:

hi ... do you remember my post on Jurgen Habermas a couple of months ago and his view of the inherent instability of the advanced capitalist system? He believes that there are irresolvable tensions and contraditions in global capitalism as it now stands ... I would add that the core operating principle is 'self-interest, properly understood" to quote Alexis de Tocqueville, but that self-interest working properly depends on a civic minded population informed with ethical and biblical values. What happens when CEO's no longer respond to ethical values? Greed, my young friend ... naked, ugly greed. That is why Jurgen Habermas was right ... I applaud the members of the house for having the cojones to stand up to Bush-Paulson-Pelosi and company.

Even average 'joe six-pack' americans can see right through this bullshit. here are two choice comments from the New Yok Times blog ....


community.nytimes.com


#15 29, 2008 7:52 am

This plan is indefensible using reason. That's why all they have resorted to is fear mongering. Disgusting. Shameful. Irresponsible and insulting.

"...this sucker could down!" "Financial Armageddon"

"A once in a century event" "Unthinkable catastrophe" "3-4 million Americans will lose their jobs in the next 6 months" "A meltdown on Wall St. that will IMMEDIATELY cause a meltdown on Main St."

Pelosi's statement was priceless- "All of this was done in a way to insulate Main St. and everyday Americans from the crisis on Wall St."

Insulate? Then why no bankruptcy reform? Why no money for investigators and auditors to provide transparency of the web of toxic practices that got us into this mess? Why no commitment to shut down the CDS casino going forward? What you sold to everyday Americans is the most expensive blanket ever made while neglecting to fix the heat.

The fundamental principle of this bi-partisan plan is a $700 billion dollar tax increase on Joe six-pack and his family to pay the gambling debts of multi-millionaires. That's just a fact. The bogus possibility of taxpayers recouping their losses on those worthless credit derivatives is dependant on the housing bubble re-inflating, which we should all be hoping will not happen! If it does, it will only be brief before it bursts again because bubbles must burst by definition. Inflated price/household income ratios are dangerous. Get it? Talk about voodoo economics. This is the equivalent of bloodletting to treat AIDS.

200 economists wrote to Barney Frank and Co. urging them to wait and study alternatives. He told them to take a hike. The public, screaming in fury at their representatives in polls and thousands upon thousands of phone calls, letters and e-mails were told to take a hike.

Exactly WHY there isn't more time has never, I repeat, NEVER been laid out in unambiguous terms. All we've been fed is a revolting diet of the politics of fear. "You won't be able to get a mortgage! Credit card rates will skyrocket! Businesses will be unable to expand and grow. Unemployment will rise!" They think we're idiots. All these things have temporarily happened before without cries of Armageddon.

Sure, if you got bad credit, you won't get a sub-prime mortgage, which is a really good idea. But mortgages make banks money, they're not going to disappear. Credit card rates going up might cause people to stop living beyond their means, also not a bad idea. Businesses with good products and good models will grow because they are profitable, worthy of investing in. Those with no profits, when you take away the deceptive accounting tricks derivatives facilitate, will fail. And a jobs program would cost a lot less than $700 billion dollars.

The policy makers on both sides of the aisle who accept this deal are lying to us and bowing to fear, subservient to financial industry lobbyists. This bill is a big, fat ugly mistake that must be stopped.
— joe (new york), New York


#18 29, 2008 7:52 am

1. What the U.S. economy needs is a recession. Historically, recession has been the best medicine to cure the excesses of an overheated economy, especially following a bubble. If the weak, the reckless are not weeded out then the next rescue package will be even bigger. A financial package in an effort to stamp out an upcoming depression is fine, even though I don't it will work. But it should not try to smooth over the natural selection process of the capitalist system.

2. Ultimately I don't believe the rescue package will achieve its intended goal. After a short period of false cheer, the reality will sink in -- when the Chinese and Japanese are forced to face the reality that they are holding a few trillion of worthless paper, the dollar, U.S. stock market, and U.S. interest rate will crash in a spectacular fashion as to make Japan's "lost decade" look benign.

3. Hank Paulson should not preside over the implementation of this bailout. He needs to resign after (a) being incorrect in every government intervention so far this year (b) arrogantly demanding monarch-like power in his initial request 2 weeks ago. This is absolutely not acceptable in a democracy (if people still value such quaint concept). (c) His obvious confliect of interest as former CEO of GS must be explored and exposed. Any judge in much more vague connection will have long since recused himself.
— Harry Huang, Philadelphia

Fanny Mae, Freddy Mac and Jürgen Habermas: The crisis of advanced capitalism.

I was on my way to political theory class this morning, to hear the wrap-up of a lecture on German post-marxist political theorist Jürgen Habermas. I flipped on the radio to NPR (National Public Radio) and immediately started to get pissed off.

There was a piece on the current housing market downturn and the possible crisis of Freddie Mac and Fanny Mae, mortgage lending institutions established by congress but publically owned by shareholders. Global markets are plunging based on fears of a financial collapse of these two mammoth institutions in which most of the risk is assumed by taxpayers and all the profit goes to private individuals. There is talk of a congressional bail-out, to protect the markets, but which ultimately would lead to lining the pockets of the executives running these two institutions at the expense of tax-payers and creating a precedent in which they will become reckless with risk since they will have a black check from the U.S. government to bail them out in the future.

In brief, Jürgen Habermas (1929-- ) believes that Marx’s concept of the driving economic base with a resulting but less powerful cultural superstructure is too simplistic for advanced capitalism. Habermas updates and alters Marxist theory by dividing human society into three semi-autonomous but overlapping spheres: the economic subsystem, the political subsystem (where the state is located) and a socio-cultural subsystem which he calls the “lifeworld” which is where people live, think and experience the effects of the other two subsystems.

In Advanced capitalism, similar to industrial capitalism, there is an inherent contradiction which results in periodic boom-bust cycle of system “crises” that can either be described as recession or depression. In Habermas’ theory, it is the job of the political-administrative subsystem to anticipate and “bail-out” these economic crises as they occur. This has meant a great strengthening and centralization of the political subsystem to the expense of the socio-cultural “lifeworld.” This leads inevitably to a “Legitimation crisis” or “rationality” crisis of the political subsystem with the socio-cultural lifeworld.

In others words, when a lot of people lose their jobs, go bankrupt, or lose their house through foreclosure while the government provides a welfare “bail-out” to guarantee the “welfare” of Fanny Mae and Freddy Mac executives and share-holders, the people tend to get pissed and begin to have doubts about the system and to suspect it is rigged against them. Habermas believes that these tensions and crises in the advanced capitalist system will continue until people in the socio-cultural lifeworld come together to find a better way of running the whole system. Remember September 11? What did the government do in response to a security failure of the politico-administrative system? The advice was to “go shopping.” In the words of my esteemed professor, when there is a crisis, the government tells us not to worry, but just go to the “megachurch of your choice and have a Starbucks coffee.” He apologized for being a bit cynical.

I remember a popular Bible teacher that I admired saying in the mid-1980s that “God is a capitalist.” At the time, I was naïve enough to accept his statement at face value (I know, it is embarrassing) My response now? Please, do not pin this on God … he has enough problems!

I have heard several interviews on NPR about building troubles at Freddy Mac and Fanny Mae. One report detailed a large number of executives in both institutions that have been paid salaries in excess of a million dollars and huge bonuses. Today’s interview on NPR details the lobbyist role of both institutions in giving large donations to both the Republican and Democratic parties.

Fanny Mae is a corporation that is supposed to be the mortgage lender of last resort. It is private but was initially funded with public funds. The Federal Reserve has offered Fanny Mae a line of credit. There have been repeated calls for reform of Freddy Mac and Fanny Mae (see this article from 2005).

The logic is, “we have to do this or the crisis will spread.” In other words, the government tells us, “We are going to use your money as a tax-payer, to bail out these people whose job was to evaluate risk and help first-time home buyers, and we are doing it for your good.” What a croc of cow manure! A welfare system for wealthy mortgage bankers!

Yesterday on NPR, Peter Wallison, a former Treasury and White House counsel under Reagon, questioned whether congress controls Freddy Mac and Fanny Mae, or whether they actually control Congress.

According to former Rep. Richard Baker, a Republican from Louisiana and a longtime critic, "I noted that, of the top 20 officials of the company, none made less than $1 million a year," Baker says. "And during the course of a 5-year period, there were bonuses, not salaries ... bonuses paid out of $245 million. This, going to an entity that was supposed to be focused on helping first-time, low-income homebuyers getting access to housing credit."

Here is how Habermas describes the means that the political-administrative system of advanced capitalism uses to resolve these boom-bust cycles:


“In the decades since World War II the most advanced capitalist countries have succeeded in keeping class conflict latent in its decisive areas; in extending the business cycle and transforming the periodic phases of capital devaluation into a permanent inflationary crisis with milder business fluctuations; and in broadly filtering the dysfunctional secondary effects of the averted economic crisis and scattering them over quasi-groups (such as consumers, the sick, the elderly, etc.)”
(Habermas, 1975:39).

Check it out -- Miami-Dade County is in the process of laying off several hundred school teachers, including about 70 school psychologists. Consumers are paying $4.14 per gallon for gas, and cannot afford to live in a house, (or keep the house they already purchased). Don’t even talk to me about the sick and the elderly.

In my short and mostly uncomfortable lifetime, I have seen the anti-war riots of 1968-70, the oil crisis of the late 1970s, the economic downturn of the late 1980s, the dot.com boom and bust of the late 1990s, and now the boom and bust of the housing market. Somehow, through it all, the wealthy get wealthier and the poor get poorer…. The kingdoms of this world are being shaken, including the good ole U.S of A.

Makes me glad that my hope is not in U.S. nationalism, nor in storing up wealth that the thief can steal (mortgage bankers? oil companies?) or the moth corrupt (inflation? Cell phone companies?) but my treasures are in heaven … not a place of fluffy clouds but the dimension where absolute, incorruptible TRUTH reigns along with Divine Love.

-- Jurgen Habermas, Legitimation Crisis (Beacon Press, 1975)