A Teacher’s Anger: Markets, Moral Hazards And Schools
Over the last year, as the growing economic crisis took a grim toll among working Americans unable to make mortgage payments on their homes, we witnessed the introduction of a term of art from laissez-faire market economics into our national political conversation. It would be wrong for government to provide assistance to those facing foreclosure and the loss of their homes, we were told again and again, because such aid would create a moral hazard. The dream of working Americans to own their own home has led to financially risky behavior, the logic went, as too many bought homes beyond their means. When an economic downturn makes it impossible for these working homeowners to make ends meet, they have to face the hard consequences of their risky behavior: the loss of their home. Rescue them and others will be encouraged to engage in economically risky behavior. Market discipline must rule, unchallenged, whatever carnage it leaves in its wake.
Yet in recent weeks, as Wall Street’s leading financial institutions came crashing down, one after the other like falling dominoes, one heard no talk of moral hazards. When it comes to finance banks, insurance companies and mortgage providers, a different logic had to apply. If these corporate leviathans are subjected to harsh market discipline, if they are not rescued, we are now told, the American and global economies will collapse, resulting in a massive economic privation. It matters not that in this instance the risky economic behavior was in the service of sheer greed, as those with millions and billions of dollars sought more and more, rather than a modest dream to own your own home. All that is important is that the insolvency of Wall Street’s leading financial institutions would bring economic disaster far beyond their particular bottom lines.
Secretary of Treasury Henry Paulson, who was the CEO of the finance bank Goldman Sachs before he took his current position in the Bush administration, proposed that the rescue of Wall Street involve the unconditional handover of $700 billion. The legislation he brought to Congress gave him the sole authority over the use of this unprecedented amount of money. He and his one-time colleagues on Wall Street fought against provisions which would place limits on the pay of the executives of the rescued corporations, restricting the obscene bonuses and golden parachutes that were symptomatic of the current crisis, on the grounds that this would undermine the incentive of corporate brass to work hard. Incredibly, opposition was also mounted to providing financial aid to homeowners facing foreclosure. It was only Congressional resistance that forced Paulson and the Bush administration even partially off these positions.
Let’s be clear: massive government intervention is clearly necessary if we are to avert a total economic meltdown and the immense harm it would inflict on working people around the globe. But it must not be done on the terms of Wall Street and the Bush administration. Their economic vision treats private profits as sacred, but quickly loses market religion when it comes to socializing corporate losses and having working Americans pick up their bill with our taxes and cuts in our essential public services. Instead, America needs a new New Deal. An effective rescue package will have to address the structural causes of this crisis, restoring the public interest by re-regulating and redirecting an economy where corporate greed has been given free rein. It will need to stimulate economic growth and create new jobs through government spending, provide needed aid to working homeowners, and protect essential public services and the social service safety net. If government is going to save Wall Street from its own folly and avarice with our tax money, the public must have an ownership share in those institutions, and the public must recoup its investment when these corporations turn a profit once again. The government intervention that seems to have had the most positive effect in the current crisis – the purchase of equity shares in the troubled financial institutions – was fashioned by the British Labour government, and the power to implement it in the U.S. was written into law by Congressional Democrats, with the Bush administration unhappily bringing up the rear.
Working Americans have much good reason to be very angry about these developments, and none more so than teachers. For the last decade, Wall Street financiers, hedge fund operators and corporate moguls, together with the market fundamentalists who provide them their ideological support, have been mounting a steady drumbeat of attacks on public schools and on the educators who have dedicated their professional lives to teaching and caring for our children. Our schools are failing and our teachers are incompetent, they repeated again and again in a systematic effort to delegitimize public education, and market based reforms and privatization will make everything right. They know as much about education as Sarah Palin knows about foreign policy: they could see a school from their house. But for them ignorance was bliss: it meant that the laissez-faire market could be the answer to every educational question, without any danger of troubling information on what that actually meant in practice. One might think that the catastrophic failure of the financial markets of Wall Street they had fought to deregulate and remove from public oversight and checks and balances would have led to a little pause and a second thought or two on the wisdom of unfettered, unregulated markets in education. But let’s face it: there is not much capacity for self-reflection in these circles. The work of defending and improving the public schools that are vital to American democracy will rest with those of us who actually work in their classrooms.
Now more than ever, America needs a vibrant and flourishing public square, with public education at its center. The pursuit of greed and excess, the idolatry of unregulated and uncontrolled markets, are no substitute for the pursuit of our common good and the support of our public purpose. We will now pay a heavy price for having forgotten and abandoned this truth of our republic, so as educators, we need to ensure that it is a lesson fully learned.
Leo Casey. NYC. from Edwize