What’s Wrong with Failure?

As angry as many people were about the bailout of Wall Street, something else makes people just about as angry: falling stock prices. It is probably for this reason that Washington decided to take the risk and push one of the more outrageously extravagant spending programs in the history of the world. The benefits of rising stock portfolios are concentrated while the costs of a bailout are diffuse. In the political calculus, then, politicians were betting that they would come out ahead.
What’s really at issue is a deeper problem that is culture-wide: the intolerance toward failure. We can’t face it. It is probably a symptom of the economic boom during which all stocks go up, all bets pay off, all homes rise in value, and everyone is slightly richer today than yesterday and half as rich as tomorrow. You just can’t lose. It was true in Tulipmania, the South Sea Bubble, and it has been true in the United States for some ten years or more.
This is the mentality that spreads throughout a society in which the drug of loose credit — based not on savings but rather the paper products of a printing press — spreads to every sector. Every investor is an amazing stock picker and every home buyer a financial genius. But the illusions don’t stop there. The ethos of genius inflation permeates everyone and everything, so that there emerges a culture-wide resistance to the very notion that someone might not be up to snuff.
For an example, I’m thinking of the usual scene at soccer or baseball practices in the civic leagues. No matter what the kid does, there is always someone around to say, “Good job.” Those two words are said tens of thousands of times during the sports season. Everything is a good job, and there are no bad jobs, no mistakes, and certainly no failures. Improvement is part of the structure of the universe, so of course there is no such thing as failure. If you do and do and do, you can’t but improve.
So it is in economics and business during boom times. Every day is a profitable day. Every stock must go up. Every business is a success. There is no downside risk. All banks pay the big bucks to depositors, and they keep your money safe. The only risk is that by putting your money here rather than there, you are choosing something less profitable over something more profitable.
It’s this way in school where the Lake Wobegone model (“all kids are above average”) is universalized. If a kid makes a failing grade, there must be some explanation that lies outside the volition of the student himself. It is a “failing school,” a bad teacher, or some circumstances in life that mysteriously conspired to prevent the student from achieving the high level of accomplishment that is his birthright.
It’s true in our personal lives, too (an insight I owe to Jorg Guido Hulsmann). The freedom to fail has been replaced by the implacable human right to succeed in all walks of life. The words “mea maxima culpa” are unknown to us, and not only because they have been removed from the liturgy: It is because nothing is ever our fault, much less our most grievous fault.
Everyone else is to blame for any mistakes or conflicts. We are all personally infallible. Maybe you have noticed this. When was the last time you heard anyone say something like: “I was wrong to say X. I’m so sorry.” Not lately? That’s because we are all always right, always winners, always profitable. Anyone who denies the great truth is a lout. Anything that stands in the way must be smashed.
And so it is that masses of people, heavily invested in the stock market, were devastated to see their stocks reduced in a matter of days to a fraction of what they had been. They were aghast, as if some principle of natural law had been violated, and so someone should just wave a magic wand to make the problem go away. The Bush administration was there to wave away the issue with its magic printing press.
But is it really gone? Is there such as thing as markets that are only profitable and never present a downside risk? It’s ridiculous. The whole idea of profit is bound up with the undeniable reality of uncertainty; profits accrue to institutions and individuals that are better able to act in the face of an uncertain future than others. If there were no downside risk to life, there would be no upside, either.
But in inflationary times, we are tempted to believe that we can have all the success we want and none of the failure. So the entire country is filled with people wailing and whining about their devastating stocks losses, pretending as if they had no idea that there might be a downside to keeping (I should say spending) all their savings on stocks or homes.
The stock market collapse has even been likened unto 9-11, as if it were an act violence. The tone of the response has been that bailouts are a simple matter of justice and morality, the same as punishing terrorists. We only need to “get tough” on whatever forces led us to this regrettable situation (which was imposed from the outside).
In fact, falling stocks are an extension of human preferences — real flesh-and-blood choices made in the marketplace in response to the dawning of reality. But tell that to your dinner party guests — you’ll have a roll thrown at your face. An inflationary culture can’t handle the truth. So we will march to the polls soon and vote for whomever tells the most compelling lies. The paper that made the boom has turned the stuff in our brains to papier-mâché.
Don’t throw a roll, but here is the bitter reality: The bust is good. It is needed. It will right our economic structures. It could also help repair the damage that inflationary credit has done to our outlook on life. Maybe in the future, instead of expecting someone to yell “good job” at everything we do, we will learn to see merit to recognizing that we are not so hot at everything in life.

Jeffrey Tucker


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. Jeffrey@chantcafe.com

  • Richard F

    Well said.

    My only nitpick is that you forgot about those among us on fixed incomes, like myself, and whose savings have been destroyed by protracted illness of, say, a spouse – again like me. For such as these bad times become disaster, plain and simple, and inflationary cures don’t help at all. Of course we all deserve it because we are old folks and should have known better than to live so long. No help in sight until the boomers reach the same ages.

  • Jeffrey Tucker

    Inflation is pure robbery, no question. This is why the government should let the recession happen rather than create phony money and attempt to bail out the system. Deflation is far to be preferred in every way, especially for those living on a fixed income. Economic downturns can be terrible times, but the one saving grace is increased purchasing power of money.

  • Michael Petek

    What do you mean ‘inflationary credit’? If by that you mean money lent into existence, created out of nothing by the banks, and lent on interest as the basis for the money supply itself, then I agree with you.

    But if – as I suspect from your credentials – you want the world to go back on the gold standard orsome self-selected commodity money, then it’s not just recession your talking, it’s a return to the stone age.

    The problem with a commodity standard is that it doesn’t allow for adjustment in line with the net value added of an economy.

    There’s no reason at all – and certainly no moral one- for the real economy, and people’s livelihoods in making and selling useful things instead of bits of paper in the banking system’s pyramid selling scam.

  • Kurt Hammond

    Michael Petek,

    Can you clarify your last paragraph:

    “There’s no reason at all – and certainly no moral one- for the real economy, and people’s livelihoods in making and selling useful things instead of bits of paper in the banking system’s pyramid selling scam.”

    What are you saying? There is no reason and certainly no moral one for the real economy? I understand you to mean there is no superiority in creating a useful thing over creating slips of paper which tend to obfuscate the usefulness of the price system.

    Please clarify for the good of any comment readers not versed in economics who may be trying to understand our current situation.

    Thank you,

  • Ann

    Yes, the bust is good. And I say this as someone who just bought a home this year that we will probably never be able to sell again for the amount we bought it for.

    We’re just trying to prolong the inevitable pain with this bailout. Like addicts, just looking for one more fix. And when it doesn’t work? Oh boy.

    If we can hope for a silver lining, one thing I hope for is that no politician ever mentions putting Social Security into the stock market again.

    It’s this way in school where the Lake Wobegone model (“all kids are above average”) is universalized. If a kid makes a failing grade, there must be some explanation that lies outside the volition of the student himself. It is a “failing school,” a bad teacher, or some circumstances in life that mysteriously conspired to prevent the student from achieving the high level of accomplishment that is his birthright.

    I love this quote. This is so true in so much parenting today, and I will admit I am guilty of it at times. It’s never the kid who failed, it’s the teacher, the coach, the principal. To take it further, it’s never ourselves as parents either. It’s also a product of our therapy culture, where all problems stems from cruel society and all things can be solved by psychologists and more money thrown at the problem.

  • Allan

    How exactly does a gold standard not “allow for adjustment in line with the net value added of an economy”? Are you saying the real price of gold can never change; that it is somehow rigid? Justify this assertion. How is the price of anything else can change, but not gold?

  • Rob

    There is quite a difference between accepting the risk inherent in the stock market and the financial system being being drained of value by market manipulators, short sellers spreading false rumors, and banks making extremely risky loans, etc. Yes there was and is a risk to investing, but most investors work under the assumption that the U.S. financial system and the people working in it are relatively honest. It turns out that this assumption may not have been correct. The stock market and the financial system of the U.S. helps gives this country and its people the ability to live a civilized life. It is the engine that generates money that helps pay for roads, schools, hospitals, police, fire, social security, medicaid, food, taxes, etc. A correction might be good, but a financial meltdown is not. The financial meltdown we are experiencing now isn’t about whining kids and doting parents, it is about the survival of our democracy as we have know it for the past 232 years.

  • Why did banks extend risky loans

    Rob, banks extended risky loans because of the loose policies of the Federal Reserve, and also because investors figured (rightly, it turns out) that the institutions trading these rebundled loans were too big to fail. My argument is that such policies have culture-wide effects.

  • Michael Petek

    I’m sorry about that typo. It should have read

    “There’s no reason at all – and certainly no moral one – for the real economy to go into meltdown, taking with it people’s livelihoods in making and selling useful things instead of bits of paper in the banking system’s pyramid selling scam.”

  • Mikael


    Contrary to popular beliefs, USA is not a democracy but a constitutional republic. There is a big difference, but unfortunatley that is forgotten knowledge in Washington just as you seem to have forgotten it.

  • Michael Petek

    In answer to Allan’s question about the gold standard, it isn’t the price of gold that’s the issue, it’s the quantity.

    Under a gold standard the national currency unit has to be backed by, and redeemable against, a legally specified quantity of gold by weight and fineness held in reserve by the national Treasury. The quantity of money in circulation therefore fluctuates according to the official reserves of gold, irrespective of the needs of commerce and industry.

    Activity in the real economy is about creating new value by digging up raw materials, or by growing them, or by transforming them to create new value, or by doing someone else a useful and marketable service.

    The gold standard has no mechanism for creating new money to reflect this new value. And, since it is a device which keeps money artificially scarce it creats a market for money lending on interest.

    When interest is applied to it, debt grows exponentially, according to the laws of mathematics. If Judas Iscariot had invested his thirty pieces of silver at the going interest rate, his successors would today be in possession of a ball of silver the size of the earth.

    But the real economy can’t grow that rapidly, and if it tries to do so in order to raise the means of paying off debt it will eventually collapse. The growth of the real economy is restricted by the laws of physics and by the tolerance limits of the ecology.

  • Kurt Hammond

    Michael P.,

    Thanks for your correction.

  • Michael (not Petek)

    It is not required for the amount of currency to grow in unison with real physical wealth. Money is only a medium of exchange and only need be present in quantities sufficient for buying and selling to occur. Since our current monetary system is debt based, by definition all money is debt and that debt is growing exponentially whether we spend it or hold onto it.

  • Joshua Park

    I thought the article was a good correlation between our American cultural need to never be wrong. I think we’re all guilty of that brand of pride from time-to-time. Thanks, Mr. Tucker.

    As the the comments on the gold standard, Mr. Petek is correct in saying that our currency would need to be defined as a certain weight of gold. (For example: 1 dollar = 1 gold grain.) It seems that his issue is “How would that system allow for increases in productivity?” and even increases in our nation’s net assets. I think the answer, in all honesty, is deflation. Deflation of prices (compared to gold) means an increased purchasing power for the same measure of money.

    Let’s look at productivity and deflation this way: If Ludwig makes 10 of his widgets a day, but Murray has discovered a way to make 100 comparable widgets a day for the same price as good ol’ Ludwig… Murray could sell his widgets for a far lower price and make a good profit from it. Everyone benefits from this “deflation” of the price of widgets because they can now not only buy a widget, but they have left-over money to go buy something else. (Maybe they’d buy whatever Ludwig is selling these days–he’s obviously had to find a different line of work after Murray’s discovery!)

    What we’re concerned with under a commodity standard is not the actual numbers on paper (“I made $50k this year vs. $45k last year,” for example.). We’re concerned with answering “How much can I buy with what I earn?” I’d much rather make the same amount of money yet be able to buy more year-after-year than the current system of losing my savings and my “improved” salary to governmental inflation.

  • Joshua Park

    Sorry, folks. My first paragraph above should have began:

    “I thought the article was a good correlation between our American cultural need to never be wrong and the recent bailouts.”

    The next paragraph, likewise, should have began “As to the comments…”

    So I’m not a great proofreader. “Mea culpa!”

  • Mikael


    You are spot on. For some reason deflation (which is the natural state of an economy with increasing productivity, such as the capitalist economy) has been dubbed a great evil.

    Is it a coincidence that those who benefit the most from inflation (central bankers, politicians, etc) are the fiercest opponents of deflation?

    Deflation can, of course, be bad if it is the creation of an artificial reduction of the money supply just as an artificial increase is bad.

  • Joshua Park

    I wonder, Mikael, what artificial deflation would look like, and how it might be accomplished. Is there a historical precedent for that kind of situation?

    I also wonder what that might do in terms of our gold supply and the value of our dollar as it relates to gold (sorry–I should have just said “the price of gold”. I keep forgetting that we’re not pretending to have dollars worth gold anymore). The only reason I wonder is because gold is trading, what, somewhere around $900? That’s a far cry from the $1 = 1/20 oz. So would this “artificial reduction of the money supply” bring the dollar more in-line with the weight ratio (or “standard”) of 100 years ago?

  • Michael Petek

    Deflation can be as bad as inflation in some ways.

    One of its effects is to increase the real value of prior business debts as the general price level falls cutting corporate revenue.

    If businesses fire their employees or cut their wages to compensate, then personal debts become unserviceable.

    More repossessions and more bad debts. Bigger crisis.

  • Dean

    Rob wrote:
    >Yes there was and is a risk to investing, but most investors
    >work under the assumption that the U.S. financial system and
    >the people working in it are relatively honest. It turns out
    >that this assumption may not have been correct

    That too is a problem that has to do with lack of/refusal to be aware of risk. Assumptions are very dangerous, and any system that over-relies on them is inherently unstable. Say for example the US financial system was “honest” at a certain point in time, if everyone just relies on assumptions there is nothing stopping that from changing.

    It’s funny when they say that the modern financial system is based on “trust and confidence”. “Trust and confidence” in systems one doesn’t understand and people one has never met are at best assumptions, at worst delusions. Real trust and confidence only exists on a human level, when you get to know people over a period of time through regular organic interactions. A system of free market money can use this epistemological fact, a centralised fiat system must suppress it.

  • Michael Petek

    To: Michael (not Petek):

    To an extent you’re correct, as you can expect increased economic activity to be serviced by an increase in the velocity of circulation of money.

    But this can happen only within limits. The important thing is to ensure that there’s enough money circulating in the economy to remove the economic necessity of borrowing on interest.

    A particular disadvantage of the gold standard is that of opportunity cost: gold which is sitting in the Treasury serving as backing for the national currency cannot at the same time be put to use in industrial applications or in making jewellery etc. It also costs real resources to mine and refine.

    Fiat money created by legislation and paid into circulation without debt is vastly cheaper in resources to create, as it’s an artifact of law. And you don’t have to pay bankers fabulous salaries, bonuses and interest to do it for you.

  • Michael C. Hebert

    While I agree with the basic points of this article, I notice in it an underlying assumption that pain is sometimes good. This idea has been echoed in the press lately — in fact, the lead article for the current edition of “Newsweek” says essentially the same thing. That we will emerge from this a better nation.

    I’m not entirely against glass-is-half full arguments, but they bother me a bit because they try to minimize human suffering. “Buck up! It’s all for your own good!” Well, not always. Some people will suffer greatly and irreducibly for this step forward. People who die of untreated health problems, fall into substance addiction because of financial stress, or are victims of criminal activity by financial institutions won’t come out of this better off.

    We have to step back and see pain for what it is. It can be purifying, but the purity it confers may not be of use in this world. God can make it right in the next, but let’s not kid ourselves into thinking in this life that social justice will be done. It may not. All of us are hanging on by a thread; for some of us that thread will snap, and buck up pal language is not appropriate for those people.

  • Adriana

    I would be very happy to accept failure, as long as there was no collateral damage. A rain that falls only on the unjust can be tolerated with equanitmity. To be punished because of someone else’s bad judgment is something else.

    And when that punishment means disaster, then all I can say is that the system stinks.

    Make sure that only the people who deserve it suffer, that you take all kinds of care that innocents do not pay for the guilty and I will go along with your model.

    But I guess it would be too much too ask.