Paolo Freire warns that "`Washing one's hands' of the conflict between the powerful and the powerless means to side with the powerful, not to be neutral."
From Power and Love by Adam Kahane
If you are neutral in situations of injustice, you have chosen the side of the oppressor. If an elephant has its foot on the tail of a mouse and you say that you are neutral, the mouse will not appreciate your neutrality.
Desmond Tutu
The moral component of leadership is the ability to understand and communicate the moral implications of our choices. Choosing policies that bailed out banks but not homeowners is a moral choice. Certainly, if we'd bailed out homeowners rather than banks, the economy would have played out very differently over the last few years. I think it's fair to argue that the financial crisis was a symptom rather than the disease, so in flushing god knows how much money into the financial system we were likely not addressing the underlying problem. In dealing with problems, you want to use your resources effectively - and to put resources where they will do the most good. Bailing out the banksters wasn't an effective use of resources. The financial sector consumed billions without actually helping the economy. In system wide problems, diffused solutions are more effective.
It's like combating infectious diseases. Once an outbreak starts, the options are relatively limited and most of your resources go into treating the ill. By contrast, if innoculations are widespread enough, you prevent most outbreaks, and those that occur are smaller and localized - iow, more easily manageable because you don't have to worry (as much) about them spreading into the general population. Innoculations are cheap. A few years ago, I skipped my flu shot and spent ten days sick as a dog; I spent more on tissues than the cost of the flu shot, not to mention time not at work.
Confronted with an outbreak of an infectious disease, public health officials have two complementary strategies - treat those with the disease while keeping them isolated and identify the source of the outbreak to determine how this person or community slipped through the net and close the hole. In recent years, some parents have become falsely convinced that vaccines cause autism and have refused vaccines; the result has been that some communities have dealt with outbreaks of childhood illnesses we've long thought part of the past - whooping cough for instance has claimed the lives of some American infants in several, fortunately, isolated outbreaks.
Treating outbreaks is extremely costly at the systemic and individual level and failes to prevent future outbreaks. Look at it another way; the simplest way to prevent the spread of HIV is for everyone to practice safe sex - use condoms, get tested regularly. It's extremely diffused lots of people taking relatively small actions on a regular basis. When everyone or most of everyone takes those actions, it doesn't create a crisis point, the system simply shifts. An outbreak of HIV in a community is extremely costly in both lives and dollars - it's not uncommon to hear about HIV spreading suddenly and rapidly in a relatively small population that fails to practice safe sex. The cost of a year's HIV medication ($10,000 to $15,000) is more than most of us will spend on condoms in our lives. Prevention is cost effective at both the individual and societal level.
When a society employs diffused preventive measures, it manages both cost and risk - yes there will always be individuals who fail to practice safe sex or get their kids vaccinated, but once you reach critcial mass, those individuals can cause harm systemwide or society wide harm - they don't turn into modern day Typhoid Mary's. That is not to dismiss their suffering, but rather to point out that we can manage specific risk points easily if we've crafted a widespread web to manage them communally.
At many levels, the real estate bubble and the financial crash reminds me an infectious disease outbreak. At almost any given point in time, some portion of the population is ill and infectious. A flu outbreak, for example, occurs when the portion of population that is ill begins to climb; the system (society) can deal with it up to a point, a sort of incubation period - when it reaches a tipping point, it can overwhelm the system and cause a breakdown. The bubble itself is the incubation period, the crash is what happens once you reach the tipping point. The Influenza Pandemic of 1918 is a good example - up to a point the system coped but when the ill reached a critical mass, they overwhelmed the system and society ground to a near halt in lots of places; the usual ways of coping stopped working and new ways couldn't be developed in the midst of a crisis. The financial crash followed a similar path - there were defaults on mortgages and questions about who owned what mortgages all along, but until those problems reached a critical mass - reached a tipping point - the system dealt with them. At critical mass, the problems that had been there all along overwhelmed the system; there were simply too many problems at once and while no problem was individually beyond solving, collectively they were beyond the system's ability to cope.
There were two issues - first was simply to stabilize the system, second was to prevent future outbreaks. We got the first step albeit less gracefully than we might have hoped. This second step is where we have failed. Despite all the evidence, conservatives continue to assert that Fannie Mae and Freddie Mac were central to the financial meltdown; in fact, the assertion that the GSE's caused the crash are treated as articles of faith on the right despite every major investigation into the crash refuting that assertion (that this has become so accepted on the right seems more an expression of dislike and distrust of the government rather than any actual policy position). This analytical failure has led conservative to offer the wrong solutions (when they've offered any at all). In addition, too many other politicians, despite recognizing the actual causes of the crash, proved either unwilling or unable to respond strongly enough. In the aftermath, we were treated to discussions about "too big to fail" but no action was taken to actually break up the "too big to fail" banks; nor were effective regulatory systems put into place to prevent future meltdowns through finding systemic ways to manage the financial industry's risks. Taking on "too big to fail" institutions is a huge risk - at least it appears so at first. What if you try to rein it in and instead accidentally crash it? Yet, failure to do so is equally risky - it leaves in place the organizations that created the crisis now believing they can make mistakes and be saved from their own bad judgment.
Systemic change requires action at a different level as well - vaccinating people against future bubbles. The housing market grew like it did not because houses were suddenly more valuable in any real way but because underlying economic conditions made previously unpalatable choices appear palatable to lots of consumers; to maintain their lifestyle, many consumers were borrowing against the equity in their homes, other consumers were trying to get in before prices went beyond their ability to afford. Faced with no growth in real earnings and rising prices on almost everything else and unable to put any more family members to work, borrwing against home equity was a reasonable choice. It was the inverse of the paradox of thrift in which we now find ourselves (the paradox of virtual wealth? - people borrowing against apparently yet not very liquid asset to maintain short term lifestyle choices - in fact exhausting long term value of the asset). If it is just a few borrowers, the system works just fine, but as the number of borrowers grew and grew, the system became more vulnerable. Even a relatively mild economic downturn would have turned into a perfect storm - a pandemic outbreak if you will. That's exactly what happened.
That is a long meditation on the nature of systemic problems. It feels as if our "solutions" to the Great Recession has been to focus our attention on discrete points while ignoring the systemic problems, to focus on the big actors when working with the myriad of small actors would be more robust. We need a mass vaccination program - reaching a critical mass of our population with financial education and stability but we're trying to make just the doctors and nurses have received their innoculations. We've focused on the banks and financial institutions because they are such a huge catastrophe that they naturaly draw our attention. What if, instead of bailing out the banks, we'd simply refinanced every single bad home loan? What if we pursued a strategy of raising real incomes? What if we focused on reducing unemployment to 4%? By bailing out the financial sector, we made a moral choice, by failing to "bail out" working Americans by turning them into political pawns, we've made moral choices.
These are economic and policy and moral choices. The Bush administration pushed TARP through Congress on the basis of "OHMYGODTHEWORLDISGOINGTOEND!" And in the fall of 2008, it sure seemed that way some days. The Obama administration has taken the pose of disinterested and detached analysts but has behaved no better. Why?
Well, that brings me back to where I started - if an elephant is standing a mouse's tail, is there such thing as moral neutrality? The banks, financial institutions, mortgage banks and the credit ratings agencies are the elephants. The consumers are the mice. Siding with the institutions - rescuing them while doing precious little to help consumers - has been a major moral failing. It has also shifted our focus from a diffused, system wide solution to a localized outbreak treatment solution. We fixed the localized outbreak by injecting the banks with god knows how much money, while ignoring the unvaccinated populace around the outbreak. We didn't treat the people and we haven't treated the underlying cause.
Steven Johnson's book The Ghost Map is an intriguing study of a major cholera outbreak in London in the mid 19th century. Johnson includes in his book a wide-ranging discussion of the spread of modern plumbing and waste treatment systems as one of the key ingredients in preventing future cholera outbreaks. He talks as well about the adoption of tea as England's national beverage and the way in which hot tea was also a key component of reducing incidents of cholera (boiling the water kills many off bacteria, which makes the tea safer to drink and reduces the spread of disease). These are diffused solutions - every house has hot water, is connected to the sewer system, is not literally sitting atop its own waste. The breeding grounds for cholera are thus vastly reduced as are the means of transmission. In these cases, even limited outbreaks are still a risk, but they don't present a system wide risk.
Now this is all very interesting. But where am I going with it? What's the point?
Damn fine questions.
It goes back to the three key things in Margaret Wheatley's book Leadership and the New Science:
When an organization knows who it is, what its strengths a re and what it is trying to accomplish, it can respond intelligently to changes from its environment . . . The presence of a clear identity makes the organization less vulnerable to its environment; it develops greater freedom to decide how it will respond. (pages 85-86)
Wheatley's thesis in Leadership and the New Science can be summarized as:
Know who you are, stay in touch with who you are, stay in touch with the world around you, be prepared to adapt to it, and never lose sight of your core mission, you will succeed.
We're all enmeshed in systems - staying aware of those systems, staying in touch with them, allows us to respond to them intelligently rather than simply be buffeted by them. Keeping our identity, strengths and goals clearly defined and in our consciousness allows us to react to environmental changes without rigid responses, without walling ourselves off and without knee jerk fear. In addressing public health threats, professionals do their best to accurately assess risk, to identify courses of action and to predict insofar as possible the real world reactions. Overuse of antibiotics, for example, has helped create drug resistants strains of bacteria. So health professionals prescribe antibiotics much less regularly and only as necessary.
In human systems, changes in one area result in changes in another. Too often, it feels as if progressives and Democrats are simply reacting to what's happening. Some of this necessary - the Republicans have lost their collective minds and sense of decency and too often their proposals seem to amount to "Hey it's flu season - infect everybody and let the strong survive, the weakest will either die or get stronger." Rather than an ounce of prevention, they're screaming for a pound of infection. In response that, simply manning the barricades is exhausting. But you have to recognize the Republican strategy for what it is - they're continually creating crises because they have no real policy proposals or solutions and their core values tell them government is always and everywhere the problem.
Progressives are showing some improvement - the People's Budget is a good example of trying to find ways to shift the discussion. Proposing such solutions can work if the people doing the proposing have a plan to shift the discussion. Simply putting out a document isn't enough. Diffused solutions require long term thinking and planning. They require being able to name Wheatley's three things - who are you, what are your strengths and what do you want to accomplish?
Diffused solutions are robust - they survive difficulties better and often introduce new levels of stability. A vaccination program that works in suburban Provo, UT, might not work in urban San Francisco so the tactics can easily be adapted to each locale, but the end result is the same and when that person moves from Provo to San Francisco or vice versa, they don't need some new set of shots. The conservative answer - tax cuts for the "job creators" - is localized, narrow, brittle. A better solution, a national jobs program and infrastructure investment, is diffused, robust. We can build bridges over rivers in Minneapolis, strengthen the levees in New Orleans, earthquake proof public facilities in San Francisco, build sound walls along freeways in Salt Lake; all of them put people to work, strengthen the community, and create the setting in which industry can thrive. It also has the advantage of spreading dollars around to many places where they can be adapted to local needs and conditions. It's vital, powerful and simple.