Wealthy Parasites

by digby

Apparently, it never occurred to the great guru that wealthy people would be greedy enough to destroy the system. It didn't show up in his "models."

Greenspan, who called the current financial crisis a "once-in-a-century credit tsunami," said that he remained "in a state of shocked disbelief" that banks and investment firms did not do a better job of analyzing the risks involved with investing in home mortgages extended to less creditworthy borrowers.

Under questioning from Rep. Henry Waxman (D-Calif.), the committee chairman, Greenspan acknowledged that the failure of that expected self-regulation represented "a flaw in the model" he used to analyze economics. "I was going for 40 years or more on the perception that it was working well."

This is the fundamental problem with Randian thinking. They really do believe that capitalism is a moral system in which the people become wealthy because they are morally and intellectually superior to those who don't. Why, it would be wrong for them to not self-regulate and endanger the whole economy, right? It wouldn't make any sense.

Except, well, there's this:

"Let's hope we are all wealthy and retired by the time this house of cards falters," wrote [an analyst] in an email obtained by Waxman's committee.

Being able to pass on all your risk to someone else while personally coming out on top is a pretty glaring and obvious flaw in the system unless you think that wealthy people are too wise and moral to ever do such a thing. The only people who believe that are Randians and Joe the Plumber. Everybody on Wall Street certainly seemed to know the score and acted accordingly.

The moral justification of capitalism does not lie in the altruist claim that it represents the best way to achieve “the common good.” It is true that capitalism does—if that catch-phrase has any meaning—but this is merely a secondary consequence. The moral justification of capitalism lies in the fact that it is the only system consonant with man’s rational nature, that it protects man’s survival qua man, and that its ruling principle is: justice.

—Ayn Rand, “What Is Capitalism?” Capitalism: The Unknown Ideal

Update: like Rand, Greenspan probably operated from the premise that "businessmen" were all moral agents. This is from an essay called An Answer for Businessmen, written by Rand in 1962.

The world crisis of today is a moral crisis—and nothing less than a moral revolution can resolve it: a moral revolution to sanction and complete the political achievement of the American revolution. We must fight for capitalism, not as a practical issue, not as an economic issue, but, with the most righteous pride, as a moral issue. That is what capitalism deserves, and nothing less will save it.

I should like to suggest that you begin by applying to the realm of ideas the same objective, logical, rational criteria of judgment that you apply to the realm of business. You do not judge business issues by emotional standards—do not do it in regard to ideological issues. You do not build factories by the guidance of your feelings—do not let your feelings guide your political convictions.

You do not count on men’s stupidity in business, you do not put out an inferior product “because people are too dumb to appreciate the best” do not do it in political philosophy; do not endorse or propagate ideas which you know to be false, in the hope of appealing to people’s fears, prejudices or ignorance. You do not cheat people in business—do not try to do it in philosophy: the so-called common man is uncommonly perceptive.

See, capitalists are all as honest as the day is long. The only problem with our capitalistic system is that these superior beings are overtaxed and over regulated, and restricted by the parasites from exercising their superiority. They are entirely rational and moral and should be trusted to do the right thing because it is who they are.

Uncle Alan is in his 80s and he's just learned that his heroes aren't what he thought they were after all. No wonder he's in a state of "shocked disbelief." It's a wonder he didn't keel over.