Altruism: The Moral Root of the Financial Crisis

From a state monopoly on money, to state guarantees of bank liabilities, to state sponsorship of mortgages, to state ownership of banks—the progression in the past century has been to move away from free markets toward socialist banking. Why? The fundamental answer is: altruism. The fitful, halting lurches toward ever greater government intervention in American finance follow logically from the altruistic premise that permeates our culture and resounds throughout the halls of power—the premise that being moral consists in self-sacrificially serving those in need. The welfare state and its main financier, the Federal Reserve, are ultimately “justified” on the grounds that the government has a moral duty to provide the needy with goods and services—from education to health insurance to mortgages.

On the premise that a free banking system inadequately served the poor, the Federal Reserve was formed. On the premise that welfare spending is too important to be tied down to an objective system of money, the gold standard was abolished. On the premise that taxpayers have a moral duty to bail out needy banks and careless depositors, the FDIC was established. On the premise that we all have a moral duty to help needy, low-income families “achieve the American dream,” the GSEs were established. On the premise that Americans have a moral duty to preserve America’s financial institutions, Washington is now nationalizing them—ensuring the full politicization of lending, a perpetual flight of private capital, and an endless drain on taxpayers’ wallets.

The fact that each of these interventions has caused (and continues to cause) financial-economic turmoil and wealth destruction is, to those who believe the interventions were moral, simply beside the point. By demanding that one consider the needs of others above all else, altruism morally forbids one to consider the facts of reality that conflict with that mandate. Thus, in the case of a banker who embraces altruism, the fact that a loan applicant is not creditworthy matters not; the fact that default rates are rising matters not; the fact that his bank is nearing insolvency matters not. These are mere economic facts, whereas altruism speaks of moral truth—and in any contest between economics (or common sense) and morality, morality always wins.

Acceptance of altruism leads people to abandon their self-interest, the profit motive, the basic principles of economics, and the basic principle of America: the principle of individual rights. But these values are essential to good living, to wealth creation, to a healthy economy, and to a just society. America’s financial market is suffering not because of greed or freedom, but because of the widespread acceptance of altruism and the consequent government intervention in banking.

The financial crisis is, fundamentally, a moral crisis. The extent to which Americans accept that they have a moral duty to sacrifice for the sake of others is the extent to which they will allow our government to compel us all to do so—by means of further interventions, further subsidies, further controls. To end the crisis, we must acknowledge that government intervention caused it, and we must demand that the government begin removing its coercive hands from the economy. With an eye to the short term, we must demand that it scale back the powers of the GSEs, the Federal Reserve, and the FDIC; and with an eye to the long term, we must demand that the government abolish these agencies entirely and restore a gold standard run by private, currency-issuing banks subject solely to the objective commercial and bankruptcy codes. But in order to advocate these reforms, Americans must reject the moral code that stands in the way. We must reject altruism. We must defend each individual’s right to exist, not as a slave to the needs of others, but for his own sake—bankers included.