Saturday, December 27, 2008

Fraud is an Old Old Story

A few years ago PBS's Masterpiece Theatre gave us Trollope's THE WAY WE LIVE NOW. Most people tuned in for the Victorian costumes and interiors. I remember shaking my head at how modern and up-to-the-minute the story was. A shrewd financier promises astonishing returns on investments and all of prosperous London rushes to give him their money. You know what happens next. It's an old story. Why are we continually surprised?

A French philosopher once wrote "Property is theft." That might be a bit extreme. Closer to the mark is Balzac's famous line "Behind every great fortune is a crime." Actually, the precise quote is "Le secret des grandes fortunes sans cause apparente est un crime oubli , parce qu' il a t proprement fait." ("The secret of a great success for which you are at a loss to account is a crime that has never been found out, because it was properly executed.") We should remember that Washington's Mount Vernon and Jefferson's Monticello were built by slaves on fortunes created by slave labor. Sometimes the great crime isn't theft, but kidnapping and murder. Ordinary fraud seems almost tame.

Every generation produces its naive idealists (let's call them pure free-market economists) who think Capitalism is a religion whose operations are regulated by God. God being the Capitalist himself, who can do no wrong. And every generation relearns the same sorry lesson. The perfect Capitalist we thought was God is often a flim-flam artist.

The trick for the non-economist is being skeptical without growing cynical. But it is hard to be uncynical when the people who run things are such credulous boobs, when the policemen we employ think the crooks will police themselves.

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