Greg Smith's GBCW op-ed "Why I Am Leaving Goldman Sachs" has echoed throughout the media (see Matt Taibbi's devastating piece among countless others). Smith exposed Goldman's culture as completely warped, one that prized the company's profit over serving its clients.
But more than that, Smith exposed the fundamental flaw in Republicanism, the thoroughly rotten ideological foundation upon which rests their belief that regulation is almost always bad and an extreme laissez-faire approach to the economy is good.
Smith summarized the behavior of Goldman Sachs employees as follows:
I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.
And here is the problem, folks. Ultimately, it comes down to the reality of human nature. Many people (not all, or even most, but a critical mass nonetheless) will baldly cheat or at least "push the envelope" if they are not given strict rules about what is allowed and then shown that rule-breaking will be punished. The concept "give an inch and they'll take a mile" applies to much of humanity, children and adults. Smith was talking about the corporate culture at Goldman, but his observation applies broadly throughout the economy, and goes beyond what leadership at a given institution can control over the long run.
This reality is why Republicanism's approach to business doesn't work. They think that the market will produce the best results with minimal interference. Wrong. The mortgage crisis, which of course brought our economy to its knees, shows that when there is little to no interference in a sector of the economy, the people willing to cheat the most will make the most money, at least in the short term. Then, the more honest businesses have a choice: either push the envelope as well and cheat in order to compete, or lose market share and eventually disappear.
More after the jump.
Honest businesses need tight regulation to keep their potentially dishonest competitors in line. Of course, the consumer also needs that same regulation in order to be protected from dishonesty. The interests of consumers and, broadly speaking, businesses are actually aligned here, at least if businesses are willing to look beyond the current quarter. Both benefit from smart regulations that are strongly and consistently enforced.
And this is what Joe Biden meant when he spoke in Ohio about the Republican approach to businesses and the economy in general:
"They’re about no rules."
Republicans, even after the financial crash, are still putting forth the illusion that if government would just get out of the way and let businesses and financial services companies "innovate," then things would just work out grand. That's why they (and some less progressive Democrats, to be sure) fought Dodd-Frank tooth and nail and continue to fight all kinds of rules that might help prevent the next crash.
Republicanism's approach to business and regulation is based on a view of human nature that is as flawed as that of Communism. The latter ideology believed that people could be "enlightened" away from their material desires. Republicanism refuses to believe that the human nature Greg Smith saw at Goldman is the natural result of an environment where few rules are imposed. Both ideologies are fundamentally incorrect.
Republicanism's view of human nature is bankrupt. Don't believe me? Imagine a room full of four-year old children with no adult supervision for an entire afternoon. Do you think at least some of the kids would be fighting over the toys? And all it takes is a couple of kids misbehaving to throw the whole class into chaos. Now, imagine instead a classroom with the same children but staffed by competent teachers. Might those kids be likely to be far better behaved? That's human nature. Same goes for adults.
Reality tells us that it only takes a few bad actors to force everyone else into choosing between their morals and survival. Once that happens, it's only a matter of time before the whole thing crashes. Again, remember the mortgage industry and how it brought down our economy.
Republicanism believes that the magic hand of the marketplace will weed out the very, very few bad actors (and of course those called to a career in business are, by definition, more moral in their minds than the rest of us) and unleash the great potential for growth in the economy that will then trickle down, at least to those among the masses who "deserve" it.
Greg Smith and Joe Biden know better. So do we.