CHG Issue #155: Leadership Crisis

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During the Global Financial Crisis (GFC) policymakers and lawmakers faced a choice: they could either 1) save the system by bailing out the morally reprehensible bankers who got us into the situation or 2) let the system clear and rebuild. They chose the only real choice which was to do the unpopular thing instead of doing the unthinkable. Their actions are now widely criticized but that criticism fails to acknowledge the very real and still unknown consequences that would have been realized if we had let the markets clear on their own. What is also not fully understood today is that the choice did not remove the losses that had been incurred, it only transformed them into something that was more palatable for society to handle in the short-term with unknown long-term consequences.

In his book "The Storm Before the Calm", George Friedman writes that the US is in an institutional and socio-economic crisis. He predicted that the institutional crisis would primarily concern the way the federal government functions, but that it would also implicate the way universities function since that is where future technologists, investors, and members of the government establish the foundations of their knowledge. The seeds of this crisis were sown in the policy responses to the GFC. Like early 1990s Japan, the US chose to transform an economic crisis into a social crisis and that social crisis is now rippling through the our institutions. It is unlikely that policymakers and lawmakers consciously made this tradeoff, but this is one of the unintended consequences of their choices. Risk cannot be destroyed, only transformed.

Current events provide ample support for this model. George Friedman covers The Crisis of the University well which leaves us free to explore the unfolding institutional crisis. The institution of the capital markets primarily concerns economic affairs and the federal, state, and local governments, news organizations, and social media make up the modern institution of politics which concerns how power is acquired and exercised in society. Keith Gill, aka Roaring Kitty, is back moving GameStop stock and the broader markets while it's almost a lock that we will have a Biden-Trump showdown again in November only this time Trump is now a convicted felon. These sort of authority figures are emblematic of an institutional crisis.

Instead of crying about the embarrassment and scorn this brings to the US we are going to look in the mirror to understand how we have been complicit in creating the conditions we don't want.

To do so, we have to go back to when the Roman Catholic Church was accepted as the ultimate moral authority in Europe and how that power gradually eroded leaving a power vacuum that was filled by various religious sects, philosophies, and ideologies over time. As there were more choices for determining right from wrong philosophers increasingly questioned the nature of truth and knowledge. As society became more diverse instead of finding unity in that diversity it increasingly accepted plurality without unity. Nietzsche's profound rejection of objectivity in the 19th century shaped what became relativistic thinking in the 20th century. His famous statement that "God is dead" rejected any absolute, objective ground for morals or values derived from a divine source or metaphysical realm.

Freed from the shackles of religious morality society has been able to advance rapidly in the 20th and 21th centuries as scientific and technological advances have replaced the legalistic, moral imperatives of the Church. However, what we are finding today is that these constructs are proving to be just as imperfect as every other system we have come up with to organize society since the dawn of time. This cycle repeats over and over again because without something outside this world to appeal to we are left to argue amongst ourselves. Many of the observations Nietzsche made had some element of truth in them, he just drew different conclusions from those insights. For example, he argued that knowledge and truth claims are inherently perspectival, which is profound, but he concluded that meant there was no higher moral authority instead of concluding that any moral foundation could not come from us and only from a divine source. The problem with his view is that without a moral authority we are left only with our preferences, and nothing to draw meaning or value from; we are debased by our freedom. This is vividly revealed by the playwright Arthur Miller through the character Quentin in After the Fall:

For many years I looked at life like a case at law. It was a series of proofs. When you're young you prove how brave you are, or smart; then, what a good lover; then, a good father; finally, how wise, or powerful or whatever. But underlying it all, I see now, there was a presumption. That one moved...on an upward path toward some elevation, where...God knows what...I would be justified, or even condemned. A verdict anyway. I think now that my disaster really began when I looked up one day...and the bench was empty. No judge in sight. And all that remained was the endless argument with oneself, this pointless litigation of existence before an empty bench...Which, of course, is another way of saying-despair.

The Christian Church was built in the wake of a revolution against the predominant Jewish authorities of the time. The revolution was against the strict religious Law that those religious leaders were in favor of upholding, and it stood for universal love and forgiveness. Fast Forward over 1,500 years later and the Christian Church grew into the same sort of strict institution and there was another revolution, this time a Reformation, against it. The same cycles keep repeating themselves throughout history.

Today, we have moved so far away from strict religious Law that we are adrift in an ocean of relativism and individualism. It is a very confusing but also a very free place to be. It seems like we have tried every option and finding them all wanting, we have rejected any and all objective leadership and put our faith in ourselves. This makes it harder for power to concentrate for any meaningful amount of time but it also allows for the passions of society to felt more viscerally. This is how we got a Biden-Trump showdown and how Roaring Kitty can rise to such fame and power. This is an inherently weak position because we are stronger together; diversity without unity is division, fragmentation, and alienation.

There are no easy answers here and as history unfolds with society vacillating from one extreme to another there are times where we find that perfect balance between a strong moral foundation and personal liberty, but it is fleeting. We are not there today; we are at an extreme. It can easily get more extreme, or it can mean revert once again. The markets are a reflection of society just like you can see the changing attitudes of society in different art forms over time. The headlines are not the story; the fact that the headlines are what is getting the most attention is the real story.

“Liberty is not the power of doing what we like, but the right of being able to do what we ought.” John Emerich Edward Dalberg-Acton

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