Friday, January 30, 2009

Faithfulness and America's Economic Collapse

The Five Virtues of Confucius include "faithfulness," according to some translations. When I first read faithfulness in this list, I wondered what the translator meant by "faithfulness." The only occasions I have heard "faithfulness" mentioned was in the context of marital faithfulness, but that is not a topic in the Analects, so what was meant by faithfulness?

When I read Cicero's "On Duties," I saw that Cicero meant "constancy" when he said "faithfulness." Then I ran across this quote from Cicero: "The great foundation of justice is faithfulness, which consists in being constantly firm to your word, and a conscientious performance of all compacts and bargains."

Wow, faithfulness is the foundation of justice!

Is faithfulness of practical import today? Let's consider the story, "A Money-Fund Manager's Fateful Shift" by Steve Stecklow and Diya Gullapalli in the December 8, 2008 Wall Street Journal (front page). This article describes how Bruce R. Bent started the Reserve Fund, a money market fund, with a commitment to avoid "commercial paper," unsecured short-term corporate debt. Bent started the Reserve Fund, the 1st money market fund, in 1970.

Then Bruce Bent broke faith with his guiding principle and bought commercial paper from Lehman Brothers, a lot of it. Then Lehman Brothers went bankrupt, and in 2008 the Reserve Primary Fund "broke the buck:" its share value dropped below one dollar and its investors lost money. The China Investment Corporation, CIC, lost $5.4 Billion in the Reserve Primary Fund. Even today the website for the Reserve Fund advertises, "Security, liquidity, and peace of mind in one account," but how can you trust them when they have been unfaithful to their guiding principles?

America's economy is in trouble today because too many businessmen have not been faithful to what Walter Lippmann called the Old Gospel of Success. Lippmann quotes Benjamin Franklin as an example of the Old Gospel of Success: "prudent management and frugality will increase any fortune to any degree." (Page 167)

Lippmann's book, The Phantom Public, describes from pages 163 to 168 the complexities of modern business. He describes the business world as a complex, interrelated system. It is a "tangle of distant human relations," "invisibly managed markets," a chain stretching beyond the horizon, an "invisible environment," making impotent efforts to succeed by work and thrift.

Lippmann says these complexities lead to a concentration of economic power that needs to be commanded by a single source. He quotes Goethe's Faust: "And then a mighty work completed stands, one mind suffices for a thousand hands."

This line of reasoning explains Lippmann's New Gospel of Success: "for business success a man must project his mind over an invisible environment."

If there is one thing the Postmodernists have gotten right is that it is dangerous to place too much trust on the power of men's reasoning. Relying on calculated self-interest instead of morality as a compass has crashed our economy.

To restore our prosperity we must rediscover the classic virtues that made us a successful society and hold onto them.

Faithfulness is a timeless virtue.

Robert Canright

PS: At the end of Plato's Republic, Socrates says,
"I advise that we hold fast to the heavenly way and always seek justice and goodness..."
"Holding fast" is faithfulness. The "heavenly way" is the Dao of Heaven. There are Confucian ideas in the Western classics.

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