The Repercussions of a National Crisis of Character

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"Character is destiny," remarked the Greek philosopher Heraclitus in the 6th Century B.C. This observation applies as much to nations as it does to individuals. And our current economic woes are, in large part, the repercussions of a national crisis of character. Free markets, in order to function well, depend upon the virtue of their participants. The distrust engendered by vice raises wasteful transaction and monitoring costs to levels that can paralyze the marketplace. Moreover, vice leads to the phenomenon of "putting profits before people." This can be manifested in a variety of ways: by taking imprudent and excessive risks with other people's money; by selling products and services that harm consumers, families, and society; and by engaging in outright fraud. Today, of course, we are suffering from all of the above. Adam Smith, recognized as the grandfather of the modern market economy, understood the link between markets and morality. Contrary to his common portrayal, he did not believe that a successful economy could arise from the raw, unbridled pursuit of self-interest. Himself a moral philosopher, he maintained that self-interest could fuel a successful economy only if it were narrowed by the constraints of traditional morality. Today, we are witnessing what happens when these constraints are relaxed. But we have witnessed this before. Absent from the many comparisons made between our current recession and the Great Depression has been an examination of the moral disintegration that preceded each. The stock market crash of 1929, and the ensuing Depression, was precipitated by the "roaring '20s." That prosperous decade was marked by materialism and licentiousness. It seems as though the moral laxity of the cabaret and the bedroom were not so restricted, but rather extended to a certain moral laxity within the corporation and the boardroom as well. For the investigations that followed the Crash of '29 uncovered rampant corruption among America's boards...
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