Saturday Rich Yeselson wrote here about the moralistic strain in American politics that leads President Obama to limit proposals to help homeowners with underwater mortgages to those who have proved themselves “responsible” (not that easy to determine, actually, unless you think homebuyers on one side of the housing bubble were inherently more responsible than those on the other).
Housing aside, though, Paul Krugman puts his finger on a similar but broader phenomenon that is common in elite circles in this country: the belief that recessions, and particularly tight money, represent some sort of bracing, morally essential “purging” of evil spirits in the American psyche, reminding the great unwashed that they’d better keep their heads down and not get too irrationally exuberant. This attitude keeps popping up in the pronouncements of inflation fighters, some of them powerful players in our monetary system:
Very early in this slump — basically, as soon as the threat of complete financial collapse began to recede — a significant number of people within the policy community began demanding an early end to efforts to support the economy. Some of their demands focused on the fiscal side, with calls for immediate austerity despite low borrowing costs and high unemployment. But there have also been repeated demands that the Fed and its counterparts abroad tighten money and raise interest rates.
What’s the reasoning behind those demands? Well, it keeps changing. Sometimes it’s about the alleged risk of inflation: every uptick in consumer prices has been met with calls for tighter money now now now. And the inflation hawks at the Fed and elsewhere seem undeterred either by the way the predicted explosion of inflation keeps not happening, or by the disastrous results last April when the European Central Bank actually did raise rates, helping to set off the current European crisis.
But there’s also a sort of freestanding opposition to low interest rates, a sense that there’s something wrong with cheap money and easy credit even in a desperately weak economy. I think of this as the urge to purge, after Andrew Mellon, Herbert Hoover’s Treasury secretary, who urged him to let liquidation run its course, to “purge the rottenness” that he believed afflicted America.
It’s a habit that actually predates Mellon and Hoover, going back at least to the monetary policy batttles of the late nineteenth century, during which farmers starved for credit and suffering from chronically low prices were regularly accused of moral laxity.
The flip side of this syndrome, of course, is the tendency to believe that economic success and the ability to be a creditor instead of a debtor is a sign of strong moral fiber. Today’s conservative lionization of “job creators” is an example; as is the constant baiting of relatively comfortable elderly people to resent younger and poorer people as parasites seeking to rob them of the resources their virtue has earned them.
The vast influence of non-moral factors, from inherited privilege to blind luck, in any one person’s fortunes, particularly during a deep recession, seems lost on those who see some sort of divine hand in a pecking order that favors them. But it’s a powerful inducement to the kind of policies that treat human suffering not only as deserved, but as good for the country.
