When I was in my first year of college, I decided it might be wise to take an economics class. Understanding the operations of markets, supply and demand seemed like useful knowledge to have in an increasingly complex global economy. Besides, all the ‘successful’ types at the college seemed to be economics majors. I enrolled in the class and purchased the textbook. The professor had instructed us to read the first chapter of the textbook as our first assignment. Eager to be a good student, I opened the textbook and read the first sentence of the chapter. My stomach turned. I read it again to make sure that I had understood what I had read. I stared at that sentence for a long time, unable to move on to the next one. It said something like this: “This textbook presumes that the people are self-interested individuals seeking to gain the greatest advantages for themselves.”
I closed the textbook, returned it to the bookstore, and withdrew from the class. I could not go on studying a subject whose premise, in my view, was essentially faulty.
Probably most students were not disturbed by this fundamental premise in economics. But to me, the idea that we were merely ‘self-interested individuals’ stood in direct contradiction to my beliefs about humanity. I was not so naïve to think that people weren’t self-interested; the evidence was all around me. Yet, I wanted to believe that we were capable of something more than that; in fact, that God’s will for us was to surpass our own ‘self-interest’ and private gain so that we might serve others and God.
Much later in graduate school, I did end up studying economics. But instead of approaching the subject from the perspective on an economist—whose job is ultimately to figure out how to gain the largest profit rate for himself, his clients or his corporation—I studied economics in relation to cultural and political systems. I learned that ultimately economic policies are intricately related to people’s socio-political ideologies. And I learned that as ideologies change, so do economic policies.
Today’s economic scares—from rising oil prices and utility costs, to the chaotic stock market, to the recent near-meltdown of the two largest mortgage companies in the United States, Fannie Mae and Freddie Mac—is reminiscent of the United States in the 1920s. As most people know, the 1929 stock market crash led to the 1930s Great Depression. Many factors contributed to the crash, but the principal one was greed. Monopolies that had gained capital and wealth during the 1920s at unprecedented levels hit the ceiling and plummeted. Much like today, the housing market crashed due to people’s inability to pay mortgages. Several shifts in economic policies came about during the Great Depression, the most notable of which was Theodore Roosevelt’s 1932 New Deal.
Most people don’t know that the New Deal was established as a result of an organized movement led by inter-ethnic alliances between immigrants and other working class Americans. Historian George Lipsitz argues that the “culture of unity” that was created in the 1930s challenged the moral authority of dominant groups whose primary interests had been to gain excessive wealth at the expense of the working class majority. Some of the most important economic safety nets came out of the New Deal, among them Social Security, workers’ labor protections and rights, and the National Housing Act that established the Federal Housing Administration (FHA). By federally insuring mortgages and restructuring the federal banking system, the FHA made it possible for working and middle class Americans to become home owners for the first time. These benefits were disproportionately allocated, however, with 98% of FHA loans granted only to white Americans from 1934 to1968. Owning property in America turned out to be the best economic investment a person could make. It has been well documented that home ownership leads to intergenerational wealth accumulation, accounting for the disparities in wealth and education among different groups.
Since America is once again facing a housing market crisis, it is useful to know how we got here. Since the 1970s, economic policies in the US have generally shifted to serve the interests of large corporations, whose ability to move globally posed a number of problems nationally. These economic shifts came about in relation to political ideologies that have come to be known as “neoliberalism.” Essentially, the ideology of neoliberalism argues that serving the needs of most powerful and wealthy by placing fewer restrictions on the movement of capital—“freeing markets”—would produce benefits that would eventually “trickle down” to the less advantaged. An example of this would be to give tax breaks to corporations in exchange for staying in America instead of moving overseas. This was the ideology most ardently defended by Ronald Reagan, who initiated the movement to increasingly cut down federal “safety nets” in the name of reducing “big government spending.” But it was also an ideology followed by Bill Clinton, who initiated policies like NAFTA and the 1996 Welfare Reform Act, and continued the trend of shrinking the social welfare state. (The social welfare state includes insurance programs like Medicare and Social Security, public education, public works projects like the interstate highway system as well as programs for the poor like Food Stamps and Temporary Assistance for Needy Families).
Well, the relationship between corporate exponential profit seeking and a state whose role is theoretically to regulate and redistribute wealth is sort of like that between a child and a parent. The child wants more and more chocolate; the parent warns that eating too much chocolate will make the child sick; the child doesn’t listen and keeps eating more chocolate; finally the child gets sick.
Recently, the federal government had to take a parental role and rescue sickly Freddie Mac and Fannie Mae from going under by lending them $300 billion. The two companies hold or guarantee almost half of the nation’s mortgages, valued at $5 trillion. Corporate greed and the drive of ‘self-interest’ are some of the undisciplined children in this housing market meltdown. Wall Street, investors, companies in charge of regulating and overseeing mortgage loan approvals, and rating agencies all wanted to keep eating the chocolate produced by subprime mortgages and predatory loans (usually called fees). But the federal government hasn’t exactly been a good parent either, since it more often than not failed to enforce fair housing laws and regulations meant to stop unfair and predatory lending practices. The losers in this story are millions of people who have lost or will lose their homes. Particularly vulnerable were those who were working class, since they were the guinea pigs of the first wave of predatory loans.
This is no small matter, since losing home ownership in America is virtually equated with losing opportunities intergenerationally.
Yet, as I mentioned at the beginning, economic policies don’t take place in a vacuum. Since the 1970s, the majority of Americans have participated and conceded to a culture that increasingly values private property over public goods. If one looks at changes in the taxation system, the annually shrinking budgets of public education from K2 to higher education, the falling infrastructure of public projects like bridges and roads, the closure of public parks and libraries, one thing is clear. For the past thirty years, Americans have disinvested from shared goods and have increasingly focused on their own private gain (and perhaps that of their families’). Additionally, a review of welfare policies indicates that any moral duty to help the poor has virtually disappeared. American attitudes toward the poor (the majority of who work full time but still cannot make ends meet) are defined more by contempt than empathy. The role of helping the disadvantaged has been left mostly to religious institutions and private charity organizations. As economic policies have produced an increasing gap between rich and poor, such religious institutions and charities cannot handle the numbers who need assistance.
It seems that the premise stated in my economics textbook—that people are essentially self-interested individuals striving for private gain at the expense of others—is truer today than at other times in American history. It remains to be seen whether this economic crisis, depending on how bad it gets, teaches us the consequences produced by a culture of valuing property over people. In the short term, participating in this culture yields the pleasures of eating chocolate, consumerism, and the status that comes with wealth. But in the long term, it produces consequences that inevitably lead to ethical emptiness. This is because valuing property over people—in its fundamental premise, if you will—requires that we serve ourselves before we serve others. It may even require (and it often does) that we exploit or denigrate someone so that we can serve our interests. Should we find ourselves reveling in the culture of valuing property over people, it may be wise to remember Christ’s warning: “One cannot serve both God and money.”