“Tough on Wall Street” is a career tag line, something used for self-aggrandizement and as a stepping stone to higher positions and more power. In a world where making money is a Bad Thing, being in the finance and securities game attaches a presumption of guilt to you, where you get blamed for everything from melting icecaps to premature balding, and where there are enough vague, conflicting and unjust laws to tar and feather anyone, prosecutors and government investigators have a whole lot to gain and very little to lose in engaging in long-term inquisitions. Former NY Attorney General and Governor of NY (of brief tenure) Eliot Spitzer made his career in exactly such a manner, vilifying individuals and firms on Wall Street in the court of public opinion and forcing most of them to agree to some “settlement” in order to avoid further damage to their reputations.
Recently, when Spitzer was looking to get back into politics, I heard from a couple acquaintances that the people he targeted with his thug tactics “must have done something wrong” for him to target them in the first place, even though he came up with nothing he could use in court. Presumptions of guilt of this sort turn our entire system of constitutional protections and limited government on its head. Why would people presume such? Because the accused were Wall Street big shots? Because they must have done Bad Things to become successful? Because there is a history of malfeasance and bad actors on Wall Street? It’s easy to fall into such a trap, but it’s no different than presuming that all Italians are mobbed up because there has been a history of Italians in organized crime. Sure, people can have opinions outside what a court tells them, but, to quote the speculative fiction author Harlan Ellison:
You are not entitled to your opinion. You are entitled to your informed opinion. No one is entitled to be ignorant.
Yet, presumptions of guilt, born out of ignorance and a predisposition due to a systemic denigration of certain profiles, are rampant in our society. The George Zimmerman-Trayvon Martin case was awash in that, from several different angles. Anyone who makes a lot of money, whether on Wall Street, in the corporate world at large, or even as a self-made businessman, faces this presumption. People who look a certain way, or dress a certain way, or come from certain parts of the country or the world, or who have certain beliefs also get tagged this way. We presume a set of political beliefs and lifestyle choices for the guy with the scraggly beard, ironic hat, weird rings in his earlobes and tattoos up his neck and a different one for the guy with the southern drawl and big beer belly. Which of the two we’d reflexively trust more depends on our own beliefs and lifestyle preferences.
On the flip side, the people who SHOULD face some sort of presumption, some automatic level of distrust, i.e. our politicians, all too often operate under a presumption of beneficence and altruism. Our system of government was born out of distrust and suspicion, and is structured to limit politicians’ power. Yet, people are all too ready to cede ever more power to the politicians, even when they abuse the power they have, even after witnessing the endless parade of miscreants, even though political corruption and abuse of power are standard punch lines of for stand-up comics, and even though politicians who have actually been found guilty of misconduct remain among those to whom this power gets ceded.
Going into politics is extolled as a noble, selfless and sacrificial pursuit and dubbed as “public service.” Yet who actually serves the public more, someone who forces his will and whims upon some for the benefit of others, or someone who offers goods and services that others can freely choose to partake of? Why is it that politicians always seem to end up rich? Why does so much power in society accrue to them? Why do they so often seem to skate away from scandals? Why does corruption and breaking of the public trust so often go unpunished? Why did the Founding Fathers feel it so necessary to create a government that placed strict limits on what politicians are allowed to do?
Those of us who pay attention know that those limits are necessary because, among other reasons, the normal competitive pressures of the free market, pressures that work passively and perpetually to punish those who act against societal desires, aren’t there in politics. The reward and punishment system in politics is nothing like that of the free market. Forced redistribution of wealth and accrual of power are encouraged. Penalties and punishment for corruption, graft, excessive greed and misuse of power are easily dodged. Far too often, the motivation to do good and be responsible is entirely dependent on individual politicians’ internal moral codes. There’s no feedback system apart from elections. Even elections, long held up as the all-encompassing check against bad acts, are so intertwined with forced redistribution of wealth and forcible use of power that, as a correcting force, they’re quite weak. Corrupt politicians get re-elected far more often than not.
In contrast, in a free market, businessmen are subject to passive and powerful correcting forces. Sell an inadequate product, sell a dangerous product, pay the price. Barring rent-seeking and political connections (neither of which is “free market”), there’s nothing to shield the businessman from consequences. What’s more, those consequences don’t require active intervention by some politician or bureaucrat. An inferior product won’t be purchased, a dangerous product will lead to lawsuits, all without you or I demanding it. There is, of course, the reality that Wall Street is very far removed from being a “free market,” but the fault for that lies squarely at the feet of the politicians and the statism-inclined voters who demand regulation and oversight (ineffective and cronyism enabling though it may be, but that’s a different topic).
Who, then, is more deserving of trust? The politician, who has so much motivation and opportunity for misdeeds, or the free-market businessman, who is far more likely to suffer fallout from misdeeds? Why have things gotten so upside-down?
The answer, unfortunately, is that “trust” isn’t the real motivating factor in people’s behaviors regarding politicians and the successful people in the private sector. The dirty truth is that many are driven by self-interest, greed and envy, and in a society where government is as large as it is in ours, those drives and motivations are far more easily fed by going with open hands to politicians than by engaging in the free market. Don’t expect people to admit to this, though, because that would require an admission of base motives. They will tell you that they want politicians to protect them from the ravages of bad actors in the free market, but what they really want is for politicians to bend the world in their favor. Politicians demonstrate that they’re worthy of voters’ “trust” by heaping largesse upon them, either directly or by bending others to their will.
Trusting someone means you are giving some power over you to another person. In trusting someone, you are taking a risk. In simple cases e.g. your morning cup of coffee, you trust the retailer to actually put coffee in your cup, and (possibly) add cream and sugar to your liking. You are also trusting him to sell you a cup of coffee of decent quality, coffee you’ll enjoy. The flip side is that he’s risking your future business and his reputation if he doesn’t live up to your trust. Scale things up, and you get the same sort of dynamic with you and big business, and you and politicians. But, ask yourself who has greater power to do you harm? “Risk,” in a semi-quantitative sense, is the product of probability and consequences. Compare the probability of harm of a free-market business, facing strictly voluntary consumer participation, competitive pressure, and potential consumer backlash for inadequate or malevolent performance to that of a politician who, in most cases, is heavily protected from the consequences of his misdeeds. Compare the levels of consequences, the degrees of harm that these entities are empowered to do to you. Where is the greater risk in trusting? Certainly in the politician.
Be parsimonious in offering your trust to those you don’t know. Be suspicious of those who seek your trust in the name of the public good. Be more suspicious of those who tell you you should put your trust in the government. Trust is a valuable and risky state and action, and the greatest risk comes in emplacing it in those who have the ability to do the most harm.
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