The Rich He Hath Sent Away

There is much to celebrate in the collapse of Lehman Brothers and Merrill Lynch; not the fall of these companies in particular, but what the fall represents. It shows the impossibility of holding onto wealth and power in a free society that is always in flux. And this is as it should be.
I’ll explain why, but first consider an implausible take-off point: the Magnificat, the glorious song of Mary from the Gospel of Luke. We Catholics sing the following: “Dispersit superbos mente cordis sui; deposuit potentes de sede et exaltavit humiles.”
It translates as, “He hath scattered the proud in the conceit of their heart. He hath put down the mighty from their seat, and hath exalted the humble.” Then the finishing touch on these astonishing words: “et divites dimisit inanes.” The rich he hath sent away empty. This is the year that this song has become our living reality.
The deeper question is why this is a celebratory text. Why should toppling big shots be a great thing? Because entrenched establishments almost always lead to corruption and stand against social progress, particularly when those establishments tie together business and government.
Think of the headlines of the last days and how they seem to conform to the text of the Magnificat. Think of Freddie Mac, Fannie Mae, Lehman, Merrill, AIG. Together they controlled trillions. The mighty and the rich should be vulnerable in a perfect world.
This is one message of the Magnificat. It reminds us that life is full of illusions that can be revealed in an instant. We shouldn’t take for granted that the powerful and wealthy will always be so. There are forces operating in the universe that no man can put down.
These words tap into an inchoate sense we all have that establishments sometimes need to be shaken to their core. But how do you reform institutions that are deeply burrowed into the power centers, hooked into the money machine and seemingly untouchable by regular people?
Here we have one of the longest-running critiques of capitalism: its supposed tendency to create monopolistic money centers. But, really, this is based on confusion. The source of monopoly is not capitalism as such but the special privileges given to institutions such as Freddie and Fannie. They were able to offer special terms for borrowers, ones more favorable than other commercial institutions. And their liabilities enjoyed an implicit guarantee that they would be covered by the state should anything go wrong.
Lehman and Merrill were hooked into this mortgage racket, too. They too rode high on a bubble created by loose and subsidized lending. When the market prices for housing took a turn south, these institutions all began to blow apart. It’s not that they didn’t anticipate that the market would turn; everyone knew that this good thing couldn’t last forever. The problem is knowing precisely when that would occur. If you get out too soon, you miss profit opportunities. If you wait too long, you endanger the very life of your institution. Such is the peril of doing business in a bubble.
We visit large cities and see huge skyscrapers, and we tend to think the institutions that inhabit them are invincible and will surely last forever. But this is an illusion. They are no more secure than the hotdog vendor on the street below. Whether the revenue is $100 per day or $10,000,000, both businesses face that great equalizing force in the universe: uncertainty. Neither knows for sure what the next day will bring. No matter what the revenue, what matters most for profitability is the difference between what goes out and what comes in. Profits are made on the difference, which means it is the marginal dollar, not the total dollar amount, that keeps companies growing and prospering.
Market conditions change. A dramatic change can blow away a company with billions in assets in a matter of days. With communication technology moving information at lightning speed every second of every day all over the world, there is nothing anyone can do to stop this from happening. The secretary of the Treasury, the heads of the Fortune 500, and the governors of the Federal Reserve can meet in rooms and hammer out deals all they want. But they are powerless to stop a market that has turned.
Mostly what the powerful attempt to do is provide more of what started this mess to begin with: floods of paper money. What is the effect of that? It can postpone the day of reckoning sometimes. But at what cost? Every dollar that the Federal Reserve prints waters down the value of the existing dollar, which means one thing: inflation. Actually, it means one more thing: distorted market signals.
Even then, the market winds blow ever stronger. The injections of credit in the past didn’t stop the present crisis; it only worsened them by creating the illusion that life could go on as usual.
Think of how marvelous this capacity of the market is to upend the established order of things and set us on a new course. The tendency toward stasis afflicts every society. We have this hope that democracy will somehow rotate elites so that they do not become too powerful and persist in error and corruption. Every candidate runs on a platform of “change,” and we usually always fall for it. But do we get change? Not really. The substructure of the state is a permanent thing. Only appearances and priorities change, not the fundamentals.
The longing for a fresh start is also the basis for why many people support war. Recall the dream of the Iraq war — we were told that it would spark a revolutionary democratic movement that would sweep the Islamic world. People would see that dictators are vulnerable. We’d overthrow the elites, and freedom would be reborn.
But what happened instead? Lots of lives were lost and much property destroyed, and the affected populations became madder than ever before. War as an agent of change has failed.
Revolutions have a similar problem. They sound promising but, typically, evil and ruthless people take charge during revolutions. The French Revolution and the Russian Revolution are cases in point, and even the American Revolution raised the status of military leaders and financiers, who were nobodies before the war and then took charge after it was over — and not all to the good.
Socialism is no solution, despite its appeal since the ancient world. Rather than upending establishments, it creates the worst form of stasis: a totalitarian society in which the state rules and the people become nothing more than cogs in a machine.
Entrenched establishments need to be destabilized sometimes, but not through violence, rebellion, revolution, socialism, or other such means. We need mechanisms that assert truth and reality over lies and illusions, but do it in a way that spares lives and truly reflects the social will.
The free market provides just that mechanism. It has the remarkable way of aggregating billions of tiny decisions all over the world into a single unit called the price, and that price serves as the basis of the calculation of profit and loss, the tools that tell an enterprise if it should keep doing what it is doing or whether it should change. When the price changes, and the accountants deliver the news, all the best-laid plans are in tatters.
It is a beautiful thing to see: The proud are scattered. The mighty are removed from their seats. And the rich are sent away. Is there any other institution that can make this happen, without votes, bombs, meetings, plots, plans, conspiracies, or anything else? The structure of reality itself mandates the shift as a reflection of the will of billions of people involved in the daily process of conforming their economic lives to the living reality around them.
There are economic reasons to celebrate such upheavals. True prosperity is based on wealth and accumulated capital; it is rooted in the savings that come from deferred consumption. The prosperity of the bubble is different; it is based on the illusions that are generated by paper money and false credit signals manufactured by the central bank.
Illusions can’t be the basis of a lasting prosperity. The bust period of the business cycle is a time of truth-telling, a time in which the reality conquers illusion and the system is put back on a solid foundation for the future. A bust that goes to the bottom is a good sign for the future, because it permits bad investments to be washed away and solid investments to return.
I’m not denying that there is pain associated with business failure. It is the form of pain that is summarized in the expression: truth hurts. The great truth we should take away from today’s headlines is that, even under the best conditions, wealth and power in this world is not permanent. The large institutions that are being blown away in the winds of change were built on the sand of paper money. Whatever institutions replace them would do well to build on the rock of savings and well-earned capital.


Jeffrey Tucker is managing editor of Sacred Music and publications editor of the Church Music Association of America. He writes a bi-weekly column on sacred music and liturgy for Crisis Magazine and also runs the Chant Cafe Blog. [email protected]

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