Deutsche Bank Highlights a Society at Risk

Yves here. This article broaches a very large issue, and it pains me to be able to offer only a few additional thoughts.  I don’t think risk aversion is quite the right frame for why destructive conduct has become so pervasive. For instance, as we’ve documented, casual lying is pervasive at CalPERS even though nearly everyone below the CEO is a civil service employee. Generally speaking, that means they are hard to fire. At CalPERS, the motivation seems to be that a lot of people find lying to be much easier than doing things well.

Some of the factors that I believe have contributed to the increase in the propensity to bury problems under rugs, even when everyone can see the rug is lumpy and moving, are:

Diffusion of responsibility. Some of that is not accidental, but you have a great deal of people in corner offices making decisions that they know will hurt people (numerous cases of companies covering up or worse publicly denying health risks of their products, servicers foreclosing on borrowers who could have been saved) and distancing themselves from them because other people are on the front line doing the dirty work.

Increased effectiveness of PR and propaganda. If you can get others to believe it, surely it is real.

Lowering of collective standards from what is proper to what is legal (aka what you can get away with). When I was growing up, it would have been inconceivable for a prominent felon like Mike Milken to rehabilitate himself. I can’t prove it, but I believe one factor in the erosion of norms has been corporate consolidation. In the stone ages of my childhood, there were many more mid-sized companies whose executives were important figures in their communities, often cities in flyover like Dayton, Milwaukee, St. Louis. Being a biggish fish in a small pond meant your personal reputation mattered for more than it seems to now. And those business and community leader therefore felt the need to keep up appearances, which in turn imposed some limits on their conduct.

By Chris Becker. Originally published at MacroBusiness

The HBO series Chernobyl wasn’t about the dangers of nuclear power but rather the ability of societies at large to lie, obfuscate, conceal and pass off individual responsibility to create huge “mistakes”. The collapse of the Soviet Union was due to this cascade of lies, that its economic and social system was literally built on sand and the “meltdown” was just a plain admission by Gorbachev and others that Stalinism and the perversions he created was all a lie.

Luckily, this can’t happen in the West. Can it? We’ve never seen a whole swathe of society lie, defraud, or pass off individual responsibility to create a “big short” have we?

A system that may well be as perverted as communism is the rocky “foundation” of capitalism itself – the financial sector. And the near capitulation of one of its many tentacles this past week, Deutsche Bank, has echoes of Bear Stearns demise twelve years ago.

Robert Gottliebsen has a very good take on DB  here at The Oz:

What happened to Deutsche Bank is yet another example of the inability of large companies and government organisations to admit huge errors.

Despite what is taught at management schools around the world, in most countries, especially outside the US and including Australia, when executives see a disaster that will cost them their job they do not confess. Instead they hold back, often looking for another job.

In the case of Deutsche Bank, concealment virtually destroyed the bank and Germany’s hopes of being a global financial player to rival London and New York.

The culture of concealment starts in middle management but often goes to the top.

Gottliebsen goes on to compare the Japanese banks in the 1990s with our own here recently, namely Commonwealth Bank, but also super manipulator AMP and the deep “denial” culture that permeates our public service.

You can add agencies like the RBA, ATO and ARPA to that culture. And indeed, the Defence Department with its decades long three monkeys problem over procuring equipment for our fighting men and women, let alone the abject disgusting way our veterans are treated by the DVA.

The question is why is the West failing at pointing out these risks? Why are bureaucracies failing at getting this “vital information” out into public where it can be dissected, discussed and solved?

Media is partly to blame, more hellbent on producing reality TV bullshit or covering the latest celebrity or virtue signalling crusade while ignoring systemic issues that only hard core journalism and not sensationalism can uncover. Ironically, its the ABC that leads on that front with successive Four Corners investigations providing the public with access to whistleblowers.

But its not just the media. Its modern corporate and economic culture. Its to be risk averse at every level. To signal to consumers, customers, managers, employers, taxpayers, government and shareholders that you must broadcast all the time a desire to be safe and secure. To not offend. To not make a mistake that would hurt someone’s feelings, to obscure the plain facts behind layers of complexity and doublespeak.

This twisted post-modern desire then leads to cover up and keep disclosure of systemic risk within ranks so that “face” can be saved and jobs and positions can be secured, no matter the cost to society. Perversely, the higher up the responsibility ladder, the less ramifications and the less moral fortitude to actually solve the problem with fidelity. Witness how not a single banker or manager was imprisoned during the GFC. Witness how each of the bankers involved in the latest Royal Commission have not paid a single cent in fines, or any other form of punishment, indeed most got off with golden parachutes.

An erosion of trust in the system is the obvious outcome, with many seeking populist solutions to “drain the swamp” or leave the bureaucrats in Brussels (insert: everywhere) or to turn it all upside down and bring out the socialist revolution.

This modern form of capitalism, this perverted rationalism, where any risks taken by a corporation or public bureaucracy is thus borne by society at large, where individual responsibility is waved away while any rewards are given to the few upends the risk/reward equation that has traditionally led Western society to where it stands today. It is the end game in the neoliberal/economic rationalism trend, where lies are truth and the free market was never free.

Gottliebsen reckons managers need to “Tell the truth and address the problems early.”

It goes beyond teaching managers to tell the truth. The problem lies within how we deal with risk and reward, how we treat our public and private institutions and how individuals should be admired and respected for telling the truth all the time, no matter the cost.

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79 comments

  1. Jim A.

    I agree that corporations and the people running them aren’t risk averse, they’re consequences averse. Just look at the behavior of banks leading up to the RE crash. Lots of risky bonds constructed from risky loans, using dodgy accounting. There was a metric f-ton of risky behavior, but nobody wanted to take any responsibility when the easily predicted crash happened.

    Reply
    1. L

      That is absolutely correct.

      Ultimately the problem comes down to consequences. We have a system where way to succeed is to “externalize” and pass off costs to others. And executives are only punished when someone else catapults to new locales first. While I agree with the note at the top about mid-sized companies I think it comes back to consequences and rewards.

      I would argue that in the older mid-sized company days there was less emphasis on stock and accordingly less emphasis on running companies like a day trader. There was also greater exposure to company losses. If you ran a mid-sized company somewhere how you were viewed by others was something (not that it held the coal companies back from being evil) but the fact that you could not simply take a bonus sell your options and run was more. Now the average tenure of a CEO is less than a decade and many executives are so rewarded in short term options that their cost/benefit horizon is months, not years.

      By the same token deregulation, consolidation, and the gutting of legal constraints has created a literal corporate shield for bad behavior. As the 20 State Attorneys General Settlement(tm) Amply illustrates when actual literal fraud is committed on a mass scale the punishment, if anything, will be leveled not at individuals but the companies that they run or ran. In most cases these companies are punished very little and even if they are, the costs never rise high enough to affect those at the top.

      And the politicians who reward them, the Kamala Harris’s of the world, will go on to be rewarded with smart donations and good identity press on their next election cycle, or safe seats on the corporate boards (Ryan) until they run again.

      Reply
      1. rd

        Other countries are starting to wise up which is why trash is being sent back to Canada and the US from dumping grounds in Asia

        https://www.newsweek.com/plastic-waste-malaysia-minister-yeo-bee-bin-south-east-asia-trash-1436969

        https://www.foxnews.com/world/cargo-ship-philippines-canadian-trash-return

        Our “money is the only value” approach means that we would send out trash to a low-cost place. Now, they are starting to enforce the specifications and rejecting the trash and sending it back. So we will have to deal with it at higher cost which will not make people happy.

        Reply
        1. DHG

          Im not paying another penny for trash service thats a fact. Its quite likely those ships will be sailing forever with the trash on it as they will be denied docking.

          Reply
          1. rd

            Your trash is handled ok going to landfills or incinerators. The problem is the recycling. That gets sent to these other countries for processing and it doesn’t get processed. So many of the feel-good recycling campaigns are really just dumping trash in other countries. We need to figure out how to do that recycling in the country where it is generated. Unfortunately, that would require labor which would create jobs. Our governments have viewed laws mandating job creation to be a bad thing.

            Reply
            1. JC

              The recycling issue requires at least 2 other items: educating the public on the hows and whys of recycling, and paying for recycling.
              It is too easy to externalize costs, that later come back to bite us.

              Reply
    2. larry

      The concept of consequences aversion does not make sense to me. There are always negative and postive consequences attached to any action or decision. Consequences can also be trivial or non-trivial. Your example suggests to me that you are contending that CEOs are averse to non-trivial, negative consequences of their actions/decisions. They certainly try to displace the responsibility elsewhere.

      Reply
  2. XXYY

    The examples cited here (the USSR, US government agencies, and private corporations) where all this bad behavior is happening all have one thing in common: They are totalitarian organizations where power flows from the top. In such settings, safety, advancement, and perhaps even life depend on pleasing the people above you. Furthermore, as the rewards become greater (in larger organizations and as one rises nearer the top), the more the incentives to dissemble, fabricate, and throw others over the side in an attempt to project to one’s bosses a blameless self.

    These settings seem to bring out the worst tendencies in human behavior.

    Reply
    1. animalogic

      Absolutely, XXYY.
      We can argue cause & effect here for ever. The simple fact is we live in a totalitarian world (to a greater or lesser degree). Call it plutocracy, oligarchy or fascism. Simple fact — our elites place the interests of the vast majority in 2nd, 3rd, 4th etc place. They are unresponsive.
      We, the 90 odd % may have to accept some blame here. We have, in numbers, either withdrawn from the hurley burly of day to day politics or jumped on the train for our own bit of gravy.
      There is an answer — unfortunately it’s near impossible, absent some near perfect Black Swan event.
      The answer is democratic socialism. Democratic from the ground up. Socialist because production will be about the provision of real goods & services to ALL. Finance — FIRE — as an essentially parasitic practice should have a very-very limited place.
      And yes, I realise I’m off with the rainbows & unicorns…..

      Reply
  3. Michael Hudson

    I think there was another factor at play at Deutsche Bank: Europe’s obsequiousness to the aristocracy, which always had been corrupt and had a corrupting influence.
    I remember in the early 1960s when DB head Herman Abs (I think) would visit Chase’s head office. I remember him walking by my office wearing his horse riding pants, all very aristocratic.
    To the Europeans, influential Americans and CEOs were the new aristocracy — something like the plebeian oligarchy in Rome.
    A decade ago, German Landesbanks trusted crooked U.S. banks on junk mortgages for much the same idea. You can look at European NATO diplomacy and other diplomacy to find more examples. Deutsche Bank was simply “accommodating power.” Somehow it thought it would benefit, not end up being screwed. It was a mentality

    Reply
    1. Harry

      You make a fine point. There always were some very very haughty folk running DB. Most of them are now in hedge funds but its still home to some rather interesting double and triple-barreled German names.

      Except what happened to “noblesse oblige”? I suspect they dont teach it in business schools.

      Reply
      1. flora

        I think the modern understanding of noblesse oblige came into existence after the French Revolution and the Reign of Terror, which put the fear of god into the English aristocracy who then behaved in a more circumspect way in public. Shorter: noblesse oblige was a form of enlightened self-interest when the larger public had more power to correct excesses, imo.

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        1. Janie

          Noblesse oblige predates the 18th century. “To whom much is given, much will be required.” It fries me when loud self-proclaimed Christians do all they can to destroy the meek, the poor etc., as do the pro-lifers who fight to keep the death penalty.

          Reply
        2. RBHoughton

          We should be returning to the ‘fear of God’ soon but this time amongst the monied class who have never before conceived of a duty of fairness to society. I think its not too late but I doubt they are listening.

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        1. flora

          Gosh, you know, the year 2000 – the 2nd millenium – was supposed to be the start of the end times and the start of a new paradigm according to understood if seldom spoken Christian popular belief systems. (I write this as a Christian, not as a snark. Subrosa belief systems can be used to harm believers, after all.) You mean that idea was misplaced? Maybe the year 2000 wasn’t the end times, but might have seemed so in the the year 1400, for example. You mean the same old predators still exist and still need to be restrained and kept on a short leash?

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          1. anonymous

            Pope John Paul II shared the same Subrosa belief system as Ronald Reagan and Margaret Thatcher. The neo-liberal Trinity. Preferential option for the bond market. TINA and American bullets for 650 million Catholics below Trump’s wall. A pity, Karol Wojtyla could’ve read Michal Kalecki in the original Polish.

            Reply
    2. Susan the other`

      I assumed that when Merkel jetted off to China to sell bunds to bail DB that DB would survive. The German taxpayers were all angry with those”profligate” Greeks – it was all their fault that Germany had higher taxes. But logic said saving DB would take a while, but it would work. And I also thought what a waste it was to suck Greece’s economy dry to keep a certain acceptable balance (?) at the ECB. That was probably fudged the whole time. It would have been better to let Deutche go way back then. It looks like all Germany did was give the rats time to abandon ship and incur the eternal hatred of Greece and their own taxpayers. It emerges through all this fog that if honesty had prevailed things would have been handled much better.

      Reply
      1. Harry

        The French have banks too. If anything, French banks are now bigger, and they were just loaded with Greek risk. Funny thing is that looked at another way, the Greek debts were basically due to their excess military spending. Spending on French and German weapons.

        Reply
        1. RBHoughton

          Yanis Voroufakis at Diem 25 has noted that the wealth of Greek millionaires in Switzerland might have settled the Greek financial problem had anyone sought to seize their money but apparently e don’t like to do that.

          Reply
          1. animalogic

            Didn’t need to seize their millions (as agreeable as that sounds) — just give them the haircut they deserved.

            Reply
  4. freedomny

    “Lowering of collective standards” ….
    I’ve been calling this also the normalization of the abnormal and I see it everywhere, including in my own experiences with family and casual acquaintances.
    To me it started becoming really obvious after 2008 when capitalism was not held accountable at all. This behavioral “business model” has managed to infect all aspects of society/culture.

    Reply
  5. TimH

    I worked for a manager who expected the first words out of the mouth of somebody who screwed up to be “I made a mistake”. Didn’t hear that, the report was going to screw up again.

    Reply
  6. Harry

    Its probably just the observable absence of consequences. Milken is both rich and influential and can make the case that by todays (degenerate) standards he was treated harshly. Social mores can are far more volatile than people believe. The Empress Theodora started life as a sex worker and performer who was reported (by Procopius who clearly cant be fully trusted) to have had a very popular act involving geese, grain, and her naked self.

    Our tolerance for criminal behavior is much greater but it can get worse.

    Can you imagine what the 70s would have made of a President making payments to a porn star.

    This thing hasnt bottomed yet.

    Reply
    1. Louis Fyne

      Or a sitting President getting a ***family-blog*** during office hours from his intern in the Oval Office.

      For family blog’s sake, degeneracy didn’t start with Trump. Just saying that the GOP had a point in 1998.

      Reply
  7. flora

    . I can’t prove it, but I believe one factor in the erosion of norms has been corporate consolidation.

    Monopolies and near-monopolies destroy meaningful business competition leaving them the only game in town; near-monopolites can get away with all kinds of damaging stuff a more robustly competitive business environment would prevent, imo.

    Reply
    1. Bobby Gladd

      See Sperber & Mercier’s Why do humans reason?

      To win the argument, not to get at truth. It has evolutionary “adaptive utility.”

      Trial lawyers know this reflexively.

      Reply
  8. Brendan

    We have created a very efficient and reactive marketing/media/PR/academia/think tank machine that pumps out ideology and spin prodigiously. Their constituency are the corporate managers that demand more pay for themselves and the freedom to do whatever they want. So sure, all of the things we discuss that ail our economy (monopolies, hedge funds/PE) feed into these attitudes, but the bottom line is that they have amassed power and broad-based support and these are people running these businesses who have short-term interests and disdain moral thinking.

    These people have made the decision to chase the money and the career, and in order to do so these otherwise intelligent people have to shut off the parts of their brains that tell them that they shouldn’t be doing bad things. If you get good at lying to others, sooner or later you’ll get good at lying to yourself. These people also accept the framing of their professors and bosses as gospel, because they have good money and good jobs, so why question them?

    Reply
  9. rd

    If all you measure is money and media clicks or ratings, then many other values simply get kicked to the curb.

    The big difference in lower and upper class laws the prosecutors have to work with is “intent”. The police and jury don’t have to show you had “intent” when they arrest and convict you because a bag of drugs is found in your car. Mere possession is sufficient to put you away, even if you didn’t actually know it was there. However, a successful white collar prosecution has to show that the perpetrator of the fraud “had knowledge of” and “intended” to defraud.

    So stupid edicts from executives that led to fake accounts being created means they are home free because they had no knowledge or intent to create fake accounts. They simply set up a system where that was the only possible outcome.

    Unless they were dumb enough to leave an actual paper or electronic trail stating their intentions, it has been virtually impossible to prosecute individuals for the various frauds that have occurred over the past two decades even if the damages were in the billions. The big question I have had for the institutions where their employees have been successfully prosecuted is why was their hiring practice so poor that they would hire people stupid enough to leave the necessary paper trail? We even saw that in the recent Supreme Court decision on the citizenship question where it was clear that the rationale was simply a lie, but documentation of the lie was found in files (or tweeted by the President).

    So we have filled our jails and prisons with poor people who had little impact on society but will now have permanent stains on their records while people who cost us billions of dollars get bonuses instead of jail time.

    I have been pleasantly surprised that there is still enough morality in our society that not everybody has gotten onto the fraud gravy train. A major change that is required is for Congress to reduce the requirement to show intent and knowledge. Ultimately, that is why the certifications in Sarbanes-Oxley are required, so a CFO cannot simply plead ignorance without having done a fair amount of due diligence.

    Reply
  10. Louis Fyne

    Too many causes to name—-and of course there are a lot more factors than below:

    Atomization of society;
    Increased nihilism among the public so long as the “Bread and Circuses” keep flowing (relatively cheap food, fuel and entertainment);
    Consolidation of media/the watchers into corporate oligarchies;
    Less religiosity (not countered with increased secular morality, along the lines of something like Confucianism);
    Tribal/identity politics excusing some serious mistakes (see WJ Clinton in 1999, Hollywood’s hagiography of Roman Polanski, etc);

    Reply
  11. fdr-fan

    No, the focus on personal behavior is a big part of the problem. Leaders who GET THINGS DONE are often messy and immoral on the personal level. Highly moral people are often incapable of making hard decisions. Leaders sometimes have to kill a few in order to save a million, and a conscientious person can’t do that.

    There isn’t a useful correlation either way. We should be ignoring personal stuff and focusing solely on actual results that serve actual people.

    Reply
    1. JBird4049

      We have gone from FDR, JFK, MLK, and LBJ, to Nixon, the Clintons, Bush Jr., Cheney, Obama, Trump, and Epstein; it has gone far beyond some serious moral failings and a few unjustly dead people and, or even an illegal war of the former to the greater personal failings, crimes, multiple illegal wars, and atrocities of the latter.

      American history in business, science, politics, society, religion, even art and music is full of darkness and evil, but also of great light, joy, and goodness; however somewhere in the 70s the former started to occlude the latter evermore greatly to where we have only the dim shadows flickering behind the opaqueness of great, dark, even nihilistic, deeds.

      Reply
      1. whiteylockmandoubled

        JFK? Lol. In just three years, he told massive fibs about Vietnam, Cuba, etc. More importantly, he damn near blew up the world. He avoided doing so by cutting a deal to pull US intermediate range missiles out of Turkey, and by suppressing that fact created arguably the most toxic, destructive lie in US post-WWII history. By pretending there was no deal, he and his cronies built the Kennedy dick-swinging macho myth — the tough guy who faced down the evil commies — which has haunted US politics and especially the Democratic Party ever since.

        And LBJ? I hope that’s meant as a joke.The 1970s did not bring some unexplained wave of corruption to the U.S. It was already there.

        Reply
        1. Yves Smith Post author

          BTW, even getting the US missiles out of Turkey was no concession. I am just about sure they were scheduled to go regardless.

          However, Kennedy did stare down the US military, so not all of the macho story is false. There are detailed accounts based on archival records (one is in Daniel Glover’s book Humanity).

          JFK had ordered a naval blockade. Secretary of State Dean Rusk asked the Chief Admiral what would happen as Khrushchev ‘s ships approached. The Admiral said first they’d make a warning shot. Rusk then asked what would happen if they didn’t change course. The naval officer got angry and started to tell Rusk the Navy has been running blockades since 1812.

          Rusk cut him off and berated him along these lines:

          This is not about your pettifogging Navy traditions. This is a communication between the President and Khrushchev. You will not take a single action unless it has been explicitly authorized by the President. Have I made myself clear?

          Reply
    2. anonymous

      “Highly moral people are often incapable of making hard decisions.”

      What do you base that on?

      Have you ever heard of Dag Hammarskjold, Martin Luther King, Oscar Romero, Deitrich Boenhoffer, Rosa Luxemberg, … I’m so pissed I’m blanking on 5 women’s name that have been murdered in recent years…there s a Russian journalist who was shot in an elevator

      “Leaders sometimes have to kill.”””

      Our best leaders are killed by morons that think like you!

      You must’ve seen that horrible Spielberg movie on Lincoln—-that’s one theater Lincoln would’ve walked out of!

      … . Edward Snowden. . .in your lifetime you will never see a harder, more moral, decision.

      Maybe if leaders forgive student loans and provided Medicare and jobs for All they wouldn’t have to kill.

      Our killer leaders– the ones you seem to admire and learned so much-from — all got draft deferments– tough decision.

      Reply
  12. vlade

    Yves, to your opening point – IMO, the problem there is that the only measure of respectability became one’s balance sheet.

    In the days past, the respectability included honour, knowledge, bravery, patriotism and wha have you – and one could be very well respected w/o being rich (in fact, being obscenel rich and concentrating on nothing but money was seen as a big minus).

    So you could have a reverend or a teacher who were (otherwise) poor as a church mouse, but still very respected in their societies. Most of the rich were going for power, but not necessarily more money – these days, power tends to be “only” a lever towards money TBH.

    Now being poor is close to being evil, and being rich(er) is the goal.

    Reply
    1. Janie

      Agree. Additionally, it’s been pointed out here before that, when the locally owned plant depends on local young people to join its work force, then the plant owners/managers have a vested interest in good schools and local comity.

      The virtues Vlade cites were reinforced by church, fraternal organizations, granges and civic organizations. The men of my father’s generation were Elks, Masons and Rotarians, for example; and their wives supported civic arts association, Scouts, PTA. Almost all gone.

      Reply
      1. Synoia

        Consider the Cardinal Virtues:

        faith, hope, charity, justice, prudence, temperance, and fortitude

        and the Seven deadly sins

        pride, greed, lust, wrath, gluttony, envy, and sloth

        And ask yourself which of these are most evident in our Civilization

        IMHO Pride and Greed lead the pack….

        Reply
          1. Which is worse - bankers or terrorists

            Whenever I fly home to the US, all I see is fat people. Just walking into the short line in passport control is shocking. I’m thinking about going home next month but I’m cringing at the thought. Makes me want to walk into the longer line. They never let me.

            I’m trying to imagine what people are doing while they eat that much.

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            1. harry

              being thin is increasingly unaffordable. Its why thinness is correlated with affluence in the US.

              Healthy food. The ability to exercise. Time to spend on the self. All things poor people don’t have

              Reply
              1. JBird4049

                If you lack money, you have to buy the cheap, because of government supports, that tend to make one fat, but not healthy; the food being subsidized is high in calories, but poor in calories. There are good historical reasons for this.

                Prior to the Second World War, the problem was the high cost of food making it difficult to acquire the calories to be healthy. In many cases to actually stay alive. During the fifties and sixties, the decision was made to make it much harder to be hungry. Hunger, even low grade starvation, previously had been a perennial problem in many parts of the country, such that in the Great Depression there were examples of actual death by starvation especially in cities like New York.

                Fortunately, the problem of starvation deaths only lasted a few years. The various governments started to create soup kitchens and more effort was made to get the food being produced actually into the cities rather than rotting, or even just dumped by farmer. Enough food was almost always being produced, but often the farmers themselves could not get a high enough return keep selling or shipping their food to market. It is like the current housing crisis is a reflection of the earlier food crisis. Housing tended to be affordable whereas food was not. Now it is food that tends to be affordable, but housing is increasingly affordable.

                Yes, famine albeit “mild” has been a thing in America. I think the shame of this prevented much open discussion, but after the war, successful efforts were made to end decades (centuries?) long problem of high food costs with the personal memories of the planners of the Great Depression as an incentive.

                Of course, the quality of American food, much like the quality of the clothes, furniture, housing, and much else has declined and like the cost of housing, the cost of good food has soared. Food manufacturers find it more profitable make high calorie, sugar and fat stuffed, “food” without any of the more expensive nutrient fillers. Profits must be maintained after all.

                There is also the innate pressures by the body to find the necessary nutrients. That is one of the reasons one might get a craving for some specific food item or another. If one is nutrient poor, then the hunger, the urge to eat is ramped up so that the missing items can be filtered out through the increasing mounds of crap being eaten.

                Connect that with the hardwired processes of hoarding calories because it is not disease or violence that has been the most worrisome for humans, but starvation. In many periods and areas there have been little disease and even much peace, but the two, maybe three, great genetic bottlenecks that have been noted in the human genome probably came from mass starvation.

                So, it is still relatively easy for a person to be fed, but it is growing harder for many Americans to be nourished. This is why in the past being fat was a status symbol, but thinness was a marker of being in the lower classes. Just as being tanned instead of pale has become a status marker.

                Reply
        1. David in Santa Cruz

          Pride, Greed, Lust, Wrath, Gluttony, Envy, and Sloth

          What a perfect description of Instagram. Or of my former workplace (a government agency charged with regulating bad behavior). Casual lying, constant deception, and gaslighting of perceived critics or rivals, with a complete absence of personal accountability or consequences.

          I must agree that the new totalitarianism of monopolies and consolidation in both business and government have much to do with the ethical breakdown of contemporary culture.

          I also believe that the “frog-in-a-pot” pressure of population growth (a world population of 2.5B in 1950; 6.2B in 2000; 9.8B in 2050) has created a “Titanic lifeboat” mentality throughout society where scarcity, both real and imagined, is driving an every wo/man for her/himself attitude which has elevated self-interest and dogmatic subjectivism to the level of moral imperative.

          Reply
  13. Democrita

    Also seems worth noting that truth-tellers, whether whistle blowers or journalists, for example, are severely punished. Same in US or UK or … etc

    The malefactors not so much.

    People notice.

    Reply
  14. Andy Raushner

    Eh, your Russian point may not be for the best. Many Russians now believe dismantling the USSR was a mistake, drawn out by stress and costs of policing the empire while others like Gorb wanted more integration with the Little Brothers of Russia. This is what ended it.

    From a economic pov, the USSR pretty much continued Czarist long run growth rates and after the USSR was dismantled, it collapsed into the worst crisis since WWIi. I think the Is dollar imperialism has shown you don’t need a large stick to control the sheep.

    Reply
    1. JBird4049

      Boris Yeltsin’s end run around Mikhail Gorbachev to dismantle the Soviet Union into separate countries did not help. From what I understand, Yeltsin’s actions were more for political gain than for any high minded ideals.

      Reply
  15. Oregoncharles

    I’m going to come down on both sides of “it’s getting worse.” First:

    ” In the stone ages of my childhood, there were many more mid-sized companies whose executives were important figures in their communities, often cities in flyover like Dayton, Milwaukee, St. Louis. Being a biggish fish in a small pond meant your personal reputation mattered for more than it seems to now. ”

    I grew up in a very small pond (30,000 people) with a very big fish, the then owners of Cummins Engine Co. They were for-sure local grandees; their house now belongs to an art museum – probably because they couldn’t sell it. And, full disclosure, my father worked for them directly. And yes, they were very aware of their reputation and went in for a lot of civic activity – they were directly responsible for the quantity of striking architecture in that town. By the time I got to college in the 60’s (my childhood was even more palelithic than Yves’), I thought my father was a bit naive because he’d worked in that sheltered environment. (The family no longer owns Cummins and I have no idea what’s become of them.)

    So I can confirm at least one case of the small-pond effect Yves was talking about. However, I think the change might be simpler than that: concentration of power leads to bad behavior. “Power corrupts…”

    And a counter-example, which I’ve also mentioned before: a book called “Fleecing the Lambs,” about Wall St., by Christopher Elias, published in 1972. I believe that’s before Yves got there. It’s so old it’s a bit hard to find – this is the best I could do: https://www.ebooksdownloads.xyz/search/fleecing-the-lambs. I’m not vouching for that site. Amazon claims not to have it. A big library might be the best bet. Anyway, it makes clear that shenanigans did not start all that recently.

    Reply
    1. rd

      If you just rotate between the Hamptons, Fifth Avenue, Boca Raton, and Palo Alto, then those people you hang out with define your values. Fly-over country people just become consumers and as long as they provide you with revenue, you don’t have to think about them.

      Trump reached out to the ignored people and won. Of course, it was all BS but Bernie Madoff was also successful for a long-time by reaching out to his people with a BS story. People like to think you are paying attention to them.

      Reply
      1. Which is worse - bankers or terrorists

        I used to live in Boca Raton when I was a kid. I can understand how kids growing up there could be suicidal.

        Reply
    2. Lac

      I’m from the same area. My father worked for public utility (now global corp) all execs ate in common cafeteria. If union on strike, dad went in to work. friend’s family worked for Cummins & was located all over. Civic minded down to earth. My cynical self knows it wasn’t all ponies and rainbows (I’ve worked on fraud money laundering) but stuff changed in 70s and 80s when Financialization of everything began

      Reply
    3. mndean

      You can borrow the book Fleecing The Lambs from the Internet Archive if you wish. You get 14 days to read it.

      Reply
  16. marku52

    The problemt sure aint “risk averse behavior”. Much more like “Greed is Good” coupled with “IBGYBG”

    Milton Friedman and the Chicago boys have a lot of the alotted blame for wrecking societal norms and making the money the God of All and the Sacred Market the judgement.

    Reply
    1. Dick Swenson

      I may have missed the fact that no one seems to have referenced a recent article about judges incorrectly sealing the records of settlements. This article referenced the sealing of the records of the suits against the opioid producers thus enabling bad practices to continue.

      It seems difficult to understand why court decisions are “sealed” when they contribute to public harm. And, think about Donald and all his sealed cases. Now we have anyone with money being able to hide behind “sealed” records of wrongdoing.

      Reply
  17. John k

    Lowering standards…
    At one time ceo identified himself as part of a community. Now he’s transient, probably grew up elsewhere, doesn’t see the community as real people, and certainly not part of his class. Only others in the exec suite are or might be in that group.
    Different from ford wanting his workers to be able to buy his cars.

    Reply
  18. notabanktoadie

    A system that may well be as perverted as communism is the rocky “foundation” of capitalism itself – the financial sector. Chris Becker

    Indeed. And please note he said “system.”

    Reply
    1. JBird4049

      Capitalism, communism, feudalism, whateverisms can all be perverted. Just as Stalin and Mao perverted their societies from what had been attempts at communism into totalitarian, dystopian hellscapes, the Chicago Boys and their Fellow Travelers have done the same with free market capitalism and (neo)liberalism. Political and economic systems may be flawed, but never underestimate the ability of humans to always make them so.

      Reply
  19. anonymous

    Don’t know about the EU or UK but in the US the Non Disclosure Agreement is a permission slip and an enforcer for all sorts unethical stuff; it provides cover for these criminal externalities.

    Reply
  20. pretzelattack

    corporations were distrusted from the beginning of the u.s., with good reason. their very existence is predicated on avoiding consequences–limited liability. i was taught this was for the greater good–it was necessary for the capital formation that resulted in a growing economy, but the flip side is that corporate veil protects predators from the financial and legal consequences of their actions.

    Reply
    1. animalogic

      A corporation is an abstract entity given existence by the State & it’s law.
      Corporate person-hood is a legally created fiction. It operates as a “cake & eat it too” mechanism. The CO gets all the benefits of personhood without any of the liabilities.
      The corporate veil is another legally created fiction. (why should managers & shareholders NOT be liable for Co’ losses & crimes? It’s more macroeconomicly efficient? Right…. )
      Nothing about a Co’s existence is natural or inevitable.
      Interesting, the nature of a corporation is so abstract that it can not be classed as an entity towards which one has moral obligations.
      Stealing from a public CO is impossible — in the same way as you can’t
      “steal” FROM a sea shell on the beach. That’s part of the hidden down side of such a “cake & eat it too” entity.

      Reply
      1. Which is worse - bankers or terrorists

        I decided that when I grow up, I want to be a corporation. You get all of the positive aspects of being a human being without any of the negatives.

        Reply
  21. VietnamVet

    Businesses were consolidated into global monopolies or duopolies. “Greed is good” ideology triumphed. Bonuses and increasing stockholder value are all that matters, not safety. Also, democracy was subverted by establishing multinational trading institutions that relegated nation states into a subordinate status. Government is now run by the best politicians elite money can buy. Laws and policies that are best for society and the environment were negated. The United Kingdom is about to jump off the cliff. How this became a possibility explains why all the rest of western society is at risk.

    Reply
  22. Jack Parsons

    I’m finding this in general an interesting problem. I have wondered if economic modeling software can include a factor that models the mutual stickiness of money and the ability to avoid consequences for failure. I suspect that China will suffer greatly for their ambition because the culture condones covering up, and the govt. only prescribes death for high-level failure.

    Reply
  23. dutch

    “When I was growing up, it would have been inconceivable for a prominent felon like Mike Milken to rehabilitate himself.” Yves, I think it was several years before you were born that the prominent NAZI collaborator Prescott Bush, whose bank and its assets were confiscated under the Trading With the Enemy Act, was rehabilitated right into the US Senate. Rich bad guys have always had a way to recover their reputations and influence.

    Reply
  24. JEHR

    Two of my most vivid recent memories are of TV appearances: First, all the CEOs of the tobacco industry blatantly lying about nicotine in cigarettes not being addictive and, second, Lloyd Blankfein and Company lying about not committing fraud through their sub-prime mortgages. The regulators have lost their ability to bring such crooks to justice because they, too, are compromised. Now we have an oligarchy that lies and lies and lies and sometimes we believe them. The world we live in is the one the rich have created for themselves and it is a nasty, brutish and ugly place. I perceive no changes for the better in the near or distant future. Only the planet itself may offer a drastic change to our present situation.

    Reply
    1. DHG

      All of this was foretold millennia in advance as to what would occur in the time of the end. All that is left to happen is for the political to destroy the religious ushering in the Great Tribulation. The current Anglo-American world power is about to fall apart yet the Bible clearly indicates it goes to its everlasting destruction a fully functioning entity. This also means there will be no dictators in the US/UK as that would change the makeup of said world power. I sleep very well knowing these truths none of what I see worries me in the least as it will all end and very very soon now.

      Reply
    2. stan6565

      The regulators have lost their ability to bring such crooks to justice because they, too, are compromised

      The regulators are facilitating the criminality, at all levels, including government. I am involved in construction and town planning; any large scale planning decision I have seen in the last 10 or so years, was based on the government (planning department) allowing and even encouraging (tax breaks), the developers (corporations) to force numerous new “citizens” (where do they all come from, strangely dressed as they are, if we in U.K. have a natural reproduction rate of 1.8 I think), onto the “existing communities” (who have built and paid the roads bridges hospitals schools, which the developers get to avail to for free, and sell on at profit to the “new citizens”).

      The “existing citizens” (read: taxpayers) get shafted in a number of ways. Their living environment gets degraded, including for the public services they fund through their taxes. They get to pay for the fallout of increased pressure on their environment. They get to pay for more people getting onto the dole. They get chastised if they even hint of complaining or describing this environmental Ponzi scheme as unfair on them, original funders. Their quality of life degrades as a result of resulting degradation in law and order.

      Periodically everybody gets fed up and go to vote another lot in. But they get the same bunch of corrupt thieves, only just dressed in new tee shirts. Rinse and repeat.

      I keep thinking that in due course people will start voting for increasingly radical politicians, populist extremist call it what you want, but as it is obvious that the current generation of politics cannot bring about any kind of orderly stop to this abuse, in due course a disorderly method will come about, by default.

      Reply
  25. Another Amateur Economist

    Fortunately, (or unfortunately, depending) reality has a Truth bias. Be prepared for interesting times.

    Reply
  26. Stephen

    Don’t like the current failures and direction that gives us an out of control race to destruction, change the board rules. The psychopathic sociopaths will go away from politics and business back to the endeavors where the consequence of getting caught is removal from society.
    http://www.movetoamend.org

    Reply

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