In a recent piece in the Atlanta Journal-Constitution, columnist Jay Bookman praised greed the way I am going to praise Jay Bookman.  Mr. Bookman is an artful wordsmith; his prose is always a pleasure to read, marred only by the fact that his ideas are usually rubbish.  I believe that I have complimented Mr. Bookman – ideas, both silly and profound, are abundant while the ability to write with elegance is rare.

Bookman praises greed as the sine qua non of capitalist productivity and wealth-creation.  He correctly points out that, despite its signal virtues, greed must be restrained for the benefit of the common weal lest its unbridled culmination impoverish us all.  Bookman concludes by noting that political power seems to be the only way to keep greed safely yoked to the plow and cautions that balancing greed and power is the most momentous challenge humans face today.

Bravo.

I’d like to expand upon Mr. Bookman’s theme.  Given that I am not subject to the space limitations imposed on him, it is my hope, nevertheless, that what follows will meet with his general approval (but mostly I hope he enjoys my writing).

In the 1987 film Wall Street, director Oliver Stone has Gordon Gekko (Michael Douglas) state that “greed, for lack of a better word, is good”.  Greed is good because it wrings out the inefficiencies in an organization.  Some people may get hurt in the process but the market is a mechanism of efficiency – not sympathy.  In defiance of my enthusiasm for Ayn Rand’s philosophy in my youth, I now believe that government has a valid role in rounding off some of efficiency’s corners and harnessing greed to the betterment of the common folk.

We shamelessly tax producers for the benefit of non-producers and much of that money, no doubt, is directed to the trashier elements.  The system is milked by a variety of scoundrels whose individual take is paltry but, in the aggregate, may be truly astounding.  Contrast these nickels and dimes with Robert Nardelli, former CEO of The Home Depot and current mis-manager of Chrysler, LLC.  At Home Depot, Nardelli was compensated about $240 M per annum for approximately seven years and bailed out with a $210 M platinum parachute.  My calculator has a limited number of zeros, but it tells me that Bob pocketed (before taxes, mind you), 1.89 BILLION SMACKEROOS before vamoosing to Chrysler and leaving his board of directors to explain to outraged stockholders why their shares were diminishing in value.

I don’t mean to single out Nardelli for particular criticism; for all I know he’s a prince and most of that dough went to worthy causes while he and his bride live in squalor.  I just doubt it.  But the government surely got a goodly chunk of that money and used it to assuage the suffering of some folks somewhere for some period of time.  Government power hitched itself (or attached a sucker to) stockholder/management/corporate greed and hopefully helped some people who really needed it.

When greed arrives a la Gordon Gekko, it might be comforting to just assume that the ones being hurt are stupid, greedy, certainly inefficient.  But that is not always the case.  When Enron closed its doors in 2001, no one saw taped footage of executives trading in their Bentleys for Ford Fiestas.  No.  We saw clerks and mid-level executives packing their family photographs and potted African violets into boxes as their universe crumbled.  The problem with greed is that it frequently has an adverse affect on real people with real families, real mortgages and real dreams for their own and their childrens’ future.  Those dreams do not include Alpo for dinner twice a week.

Purely as an aside, I once read that Russian audiences in the glasnost-lubricated Soviet Union cheered Gekko’s speech and generally mixed up the good-guy/bad-guy character orientations.  They thought Bud Foxx (Charlie Sheen) was a putz and Gordon was a hero.  They have now had ample time to recognize the difference between a capitalist and a criminal.  Gordon and Bud were the latter.

One of the tools society uses to blunt the edge of greed is law.  We declare that some greedy activities are illegal – those activities generally considered to harm the innocent or unsuspecting.  Forgery, armed robbery, mugging and burglary are obvious examples.  A few societies have tried to eliminate greed entirely by this method, declaring the practice itself illegal.  They have never prospered.  When you amputate Adam Smith’s invisible hand, it soon becomes clear that it was on the economic tiller at the time, and now the ship is drifting aimlessly.  No one cares about anything – least of all economic efficiency.  In his memoirs, Michael Gorbachev revealed that Soviet productivity was so inefficient that creating a ton of steel required TWICE the industrial inputs (iron, power, labor, etc.) as needed in the United States, while agriculture devoured FOUR TIMES the inputs of seed, fertilizer, harvesters, etc. as the United States for the same bushel of corn.  With no one allowed to greedily sop up the economy’s gravy, no gravy got made.  Say’s Law tells us that production creates demand.  If demand is suppressed, guess what else gets depressed?

If we are not to have the unbridled capitalism of Ayn Rand nor the stifling collectivism of Karl Marx, how do we rationally determine how much law we want to impose on greed to maintain general affluence?  In the Scandinavian countries the answer is “a lot” whereas in the former colony of Hong Kong, the answer was “practically none”.  In all likelihood, neither society would prosper if conditions were reversed because there really is such a thing as “national character”.  It is no easier to imagine a brawling Swedish open-air market than it is to imagine an orderly queue in Kowloon.

If the political remedy for unchecked greed is to be found in the application of laws and regulations, however, it has to be understood that lawmaking and regulating are functions of governments and governments are themselves governed by politics and power.  It is a mistake to assume that the object of greed is always material – frequently, its object is power itself.

I once put forth what I called The Iron Law of Political Suitability:  in order to succeed in politics, LP must exceed HP.  LP is the love of power and HP is the hatred of politicking.  Running for public office is a dreadful business and one can only endure it if his love for political power is greater than his hatred for the process he must endure to secure it.

Harnessing the horse of material greed to haul the wagon of general prosperity is all well and good.  But if the teamster holding the reins is more interested in whipping the horse than in delivering the goods, nothing very good will ever come of it.  Having unburdened myself of what is probably the worst metaphor in written English, allow me to point out that greed for power is no less a threat to the commonwealth than greed for filthy lucre.  I have known dozens of successful politicians during my career and not one of them would have exchanged power for mammon under any circumstances.  Most thought they could achieve both, but none of them would have relinquished their power for any amount of earthly brass.

The exercise of political power to reign-in material greed is an imperfect strategy at best and a path to ruin at worst.  Our current economic woes should reveal to us another emotion besides lust for power or gold – fear.  Greed is a powerful emotional drive but it can’t hold a candle to fear because I may not be able to imagine how much wealth is sufficient for me, but I can easily envision the loss of everything I have.  Dante’s Divine Comedy is a case in point.  Of the three volumes, Dante’s description of the toils of Hell in The Inferno is much more compelling than his sojourn in either Purgatory or Paradise.  Curiously, it is easier to imagine and feel horror than it is to envision bliss, which is why there is no “Bliss” section at Blockbuster Video.

Politicians and others who lust after power realize that fear may render material greed comatose but it is meat and bread for them.  When an entire national – global, rather – economy teeters on the brink of ruin, citizens rightly or wrongly will demand that government (spelled P-O-W-E-R) exercise its god-like influence and restore the situation.  Those who greedily desire power are more than happy to do so.  If the Republicans can be called upon to represent material greed (and why not?), then the Democrats can stand in for power greed and last November we handed control of the country over to that group of politicians who can and will seize that grant of power and exercise it without restraint.  Republicans are required by their creed and convictions to wax warmly on the virtues of the unrestrained market whereas Democrats are under no such compulsion.  They never trusted all those market greed-heads in the first place and it is simplicity itself to cast the market as the villain of the piece.  Bernard Madoff and the vacuum-domed wizards of American International Group are pronounced two peas in the same pod.  The former robbed unwitting investors to the tune of $50B whereas the latter has received government bail-out money equal to the gross domestic product of Chile.

And while we’re on the subject of those with a vacuum between their ears, where were all the regulators and lawmakers while Madoff was stealing and AIG was threatening the financial integrity of the entire planet?  A bowlful of alphabet agencies were, no doubt, chloroformed by eight years of Republican stewardship.  Thus snoring at the switch, they allowed all manner of perfidy to go unnoticed.  There is just enough truth in this characterization to render it credulous to the credulous.  Here is a paradox:  enterprises across the world are closing their doors and hurling their workers into the streets.  Yet, people still desire the products and services these businesses once produced – that has not changed.  People still want to work and provide for their families – that has not changed.  The greedy still want to enrich themselves by producing those goods and services those people still desire – that has not changed.  Only fear has changed.  Fear is just as potent in 2009 as it was in 1933 when FDR identified it as the major problem we faced in the great depression.

In the matrix of greed, power and fear, fear trumps all.  For better or worse we have turned to those who seek power to deliver us from the fear which they recognize as their vital sustenance.  How can it possibly work?  The genesis of our current woes is, by unanimous agreement, the previous profligacy of lending lavished upon the housing market.  Today we are convinced – again by unanimous consensus – that our troubles would recede if only the banks would resume lending.  We need to make up our minds about this.

I have an idea so simple [minded] that it might just work.  To-date we have pumped upwards of a trillion simoleans into the banking, auto and insurance industries in the hope that this extra cushion of cash would overcome lenders’ fears and convince them to extend credit.  It seems that even this gargantuan amount is insufficient to overcome fear.  Lenders are still scared and, from this morning’s headlines (03-06-09) it appears that one of the recipients of this largess, General Motors, may need to take our dough into the bankruptcy courts.

The Federal Funds Rate is that amount of interest that the Federal Reserve Board dictates banks shall pay to each other when they borrow money from one another to cover day-to-day cash shortfalls in their asset accounts.  It is the Fed’s primary tool for encouraging growth and/or taming incipient inflation because most loan interest rates rise or fall with this index, and, with it, the availability of credit is determined.  The Fed tends to move this rate in increments of .25 points and the current rate is .25 points.  The Federal Reserve seems to have smacked into a brick wall because a Fed rate of 0% seems to be ludicrous – and is.

Suppose, however, that the Federal government established a “capital extension” rate of .05 percent.  For every dollar a bank lent out, the Treasury department would stroke a check for a nickel – maybe a dime.  The underlying value of the assets securing the loans would remain unchanged by this device, so lenders would still have to determine that the assets were sufficient for the risk.  Nevertheless, a 5 or 10 percent inducement to release the cash should go a long way toward easing fear, especially since the money would immediately be recorded in the assets column of the lender.  At 5% the taxpayers would cough up $50,000 for every million dollars thus lent out.

My calculator has finally run out of zeros so I’ve reverted to a spreadsheet for what follows. If Washington is willing and (politically) able to borrow a trillion bucks from our progeny’s prosperity to ease the existing crisis, what would that amount of debt purchase for us in immediate lending as an alternative? First of all, the trillion bucks (just for fun, let’s write that out in all it’s zero-laden splendor; $1,000,000,000,000) would remain in our childrens’ future wallets until such time as some bank somewhere actually coughs-up an actual loan and applies for a license to pick the future’s pocket. One of the questions being asked is, “how much is needed?” My plan is self-regulating because the amount needed will automatically equal the amount spent on loans (up to a theoretical trillion) plus 5%. What will the banks do with this charity? Well, they will face a hard choice: if they give their cuckold executives a million bucks in bonuses, their assets account will be reduced by same. If, instead, they loan the money out to promising enterprises who employ real people and produce real products and generate real profits, they will, at the very least, ADD $50,000 to that account. That means the banks get to add an additional 5% “interest” on the loan (provided by your grandchildrens’ college fund). This money would go to keep businesses afloat when they experience cash-flow (as opposed to profitability) problems, which is a vital and historic function of the banking system. And that money remains in our childrens’ future should banks still be reluctant to fork over the dough. If 5% is insufficient, the rate could be raised until whatever magic number is needed.

In any event, it would cost us less and do more good than merely throwing shekels at the American financial system. It would immediately address the overwhelming power of fear and would, as a fortunate byproduct, relieve the government of its ownership interest in failing enterprises. We the people now own a sizable percentage of large banks around the country and, if history is any indicator, we will treat them the same way we oversee public restrooms in national parks. Banks may be worthless at many things, such as monitoring the health of the global economy, but at least they can keep their bathrooms clean.

I’m just an unemployed political consultant / construction manager but if I could come up with this harebrained idea, why couldn’t the GOP’s in Congress do the same? The plan needs a lot of fleshing-out and, as usual, the devil is in the details. When I contrived the Iron Law of Political Suitability I also formulated Rife’s Rule of Rodent Retaliation which states that, while the world will flock to the door of whoever builds a better mousetrap, the mice will similarly flock to the door of whatever rat figures out a way around it. The rats will always be with us, but I have not noticed that the unending presence of burglars has prevented us from crafting suitable laws to inhibit their predations. The key here is the underlying assets – all those enterprises which are now closed but whose products we still all desire, whose jobs we still need and whose profits the greedy still covet. They are still there, awaiting nothing more than a willingness of lenders to smooth out the hills and valleys of cash flow to allow them to continue.

Greed is best tamed and turned into a public asset by LIMITING the degree of interference by power in its activities (instead of eliminating it altogether).  If we must spend our childrens’ inheritance on measures intended to secure the same, we can best achieve that purpose by taming both greed and power equally.  The matrix of greed, power and fear provide us with a wide range of policy choices to bring them back into profitable balance  The first among these is fear.  Eliminate it via the plan I have outlined, and power may just have a chance to put greed back into harness.