America faces a leadership crisis and institutional decay. As manifest in the public backlash against the bailout package, many citizens mistrust our political, economic and cultural elites.
Despite dire warnings - from the president, the treasury secretary, the chairman of the Federal Reserve, leaders of both parties in Congress, Wall Street and the mainstream media - the electorate remains skeptical that a $700 billion infusion is needed to stabilize the nation’s credit markets.
Voters understand that the legislation is a monstrosity. It is the greatest expansion of government in recent history - a form of socialism that will lead to more corruption, sky-rocketing debt and long-term economic debility. The bailout also rewards the reckless behavior of large investment firms, banks and subprime lenders. It signifies the triumph of crony capitalism and bureaucratic corporatism.
This crisis places a spotlight on the failure of government to protect the people. For decades, Congress has been awash with political contributions from government-sponsored lending giants, such as Fannie Mae and Freddie Mac, as well as corporate behemoths like Goldman Sachs, AIG, Bear Stearns and Lehman Brothers (among others). Most members of Congress are beholden to high-powered lobbyists; politicians ensure that their clients’ vested interests are advanced in exchange for campaign cash and perks.
Our politicians are for sale. Therefore, the needs of the wealthy and powerful trump those of the people. America is being transformed from a representative democracy into a corporate plutocracy.
The answer, however, is not social democracy or increased government intervention. Rather, it is to scale back the size of the federal government and devolve power to the states.
Small government is vital to sustaining strong democratic institutions. Big Government is the road to a kleptocracy; greater bureaucracy and red tape inevitably breeds more corruption. If there is less money sloshing around in Washington, there will be less opportunity for the legalized bribery that passes for lobbying today.
The Democrats’ argument that the financial crisis stems from deregulation and the “excesses of capitalism” is false. The crisis is a result of poor oversight and political cronyism. Many on Capitol Hill - including leading Democrats, such as Sen. Christopher Dodd of Connecticut and Rep. Barney Frank of Massachusetts - turned a blind eye to the source of the virus: the shady, irresponsible lending practices of Fannie and Freddie. Their frenzy of bad loans created the housing bubble, which in turn contaminated the financial markets.
Instead of being propped-up, Fannie and Freddie - along with the Wall Street investment firms who peddled bad securities-backed mortgage debt - should be allowed to fail. In the long run, the economy and the country will be better off. Let the marketplace exercise the power of what Joseph Schumpeter called “creative destruction”: the sweeping away of sclerotic, poorly managed corporate entities. The result will be enhanced economic efficiency. Other lending and investment institutions - better, smarter ones - will fill the vacuum. The sky will not fall; there will be no Great Depression.
Ultimately, however, we must address the deeper roots of this financial crisis. There is a moral crisis that infects every aspect of our society. Since the 1960s, American popular culture has waged a relentless war against ethical absolutes and Judeo-Christian morality. This has been replaced with a shallow secular humanism, which champions materialism, consumerism and individual gratification. In short, our culture has done everything to destroy what used to be called “character.” What happened to individual restraint, thrift and personal responsibility? These are the virtues that built the most impressive capitalist economy the world has ever created.
We are now facing more than just a financial mess; almost every other major institution is under threat. The political system is adrift; public schools are failing; the borders are porous; the intelligence agencies are dysfunctional; the inner cities are infested with drugs and gangs; the family is broken; and millions are fleeing their churches.
In most of our institutions there is poor leadership. A survey by Harvard’s Center for Public Leadership revealed 77 percent of Americans believe the country faces a leadership crisis; this is prevalent across 12 different institutions and leadership groupings. In the survey, Congress, the executive branch, the business community and the media ranked in the lower echelons.
Democratic capitalism is based on widespread social trust - especially, trust in leaders. Without this confidence, the whole system threatens to unravel. The solution is not more government regulation; it is moral and spiritual renewal.
Don’t expect to hear any of this from Sen. Barack Obama or Sen. John McCain. They are our leaders, after all.
Jeffrey T. Kuhner is a columnist at The Washington Times.