Culture Trumps Reason: How Wall Street Manipulated the American Dream to Enrich Itself and Why The Victims of the Scam Were Put Out on the Street While the Perpetrators Were Rescued by the Government

Abstract

Purpose – This chapter asks whether the current economic crisis, precipitated by defaults in subprime mortgages, could have been postponed or perhaps even avoided?

Design/methodology/approach – I begin by exploring an aspect of American culture that I call the moral philosophy of “just deserts.” The term “just deserts” is derived from the title of Alperovitz and Daly's (2008) book, Unjust Deserts: How the Rich Are Taking Our Common Inheritance and Why We Should Take It Back. To argue for greater equity in the distribution of wealth, the authors return to the 17th century writings of John Locke who helped establish the rules of property ownership that determine who is entitled to get what in the way of material goods. Locke's writings, infused with Protestant theology, became the basis of Western law and morality. Economic theory, on which the policies that led up to the latest crash and the responses to it, draws heavily on Locke's ideas.

Findings – Holders of subprime mortgages who have lost their homes, according to this thinking that has become intrinsic to our culture, did not deserve to be given mortgages or to obtain homes. Paying these mortgages for them might have postponed or even prevented the crash and the collapse of the financial system. Rational as this seems, it was not even proposed, because it would have given people something they had not earned and hence were not believed to deserve.

Research limitations/implications – The chapter is based on cultural and historical analysis. It cannot be tested empirically since this would require policy makers to change the assumptions on which its economic programs rest.

Practical implications – The practical implications of the chapter are to stimulate examination and discussion of the cultural value of just deserts and the assumptions on which it is based.

Originality/value – The reintroduction of culture and its assumptions into debates over public policy will improve understanding and enable us to avoid repeating social practices that have had negative effects.

Citation

Greenfield, S.M. (2012), "Culture Trumps Reason: How Wall Street Manipulated the American Dream to Enrich Itself and Why The Victims of the Scam Were Put Out on the Street While the Perpetrators Were Rescued by the Government", Matejowsky, T. and Wood, D.C. (Ed.) Political Economy, Neoliberalism, and the Prehistoric Economies of Latin America (Research in Economic Anthropology, Vol. 32), Emerald Group Publishing Limited, Leeds, pp. 161-183. https://doi.org/10.1108/S0190-1281(2012)0000032011