Recession rooted in faulty philosophy


“Ideas change the world. The power of a new idea is the engine that transforms the way we live and think.”  -Richard Stengel, Editor, Time Magazine


One of the characteristics of our Western worldview is reductionism, or the belief that a complex system can best be explained by reduction to its fundamental parts. To understand an animal, for example, it can be dissected and its tissues microscopically examined. This is generally seen as the opposite of holism, or the belief that understanding cannot be determined without examining the entire system in which a thing exists. Aristotle famously said, “The whole is different from the sum of its parts.” Aristotle might have pointed out that when you dissect an animal, you have not really understood the animal, but you have killed it.

Unquestioned worldview

Most people assume that their worldview is simply correct, and they seldom question where its component ideas originated. They tend to think that everyone sees the world in the same way. When holistic, eastern, collectivist societies, such as Japan, began to prosper and reductionist, western, individualistic businessmen reached out to collaborate with them, a major gap in worldviews soon became apparent.

Roots of American worldviews

American worldviews come from a blend of worldviews that have gone before. The Greek philosophers influenced the Romans, who added their militaristic and administrative values. When Christianity was declared to be the official religion of the Roman Empire in 313 AD, Christian values entered the mix, and Roman values entered the church. Rome occupied Britain for 367 years (43 AD to 410 AD,) and their ideas about politics, administration, and then religion blended with the ideas of the native Britons.

Enlightenment, Reformation and Revolution

When the Protestant Reformation (16th century) and then the Enlightenment (18th century) inpacted Europe, they did not totally replace the previous worldviews, but were assimilated into them. The Reformation challenged the established Catholic Church and the Enlightenment challenged all churches. Revolutions and Civil Wars eventually resulted in assimilation of Reformation ideas about individual conscience and personal responsibility. Enlightenment ideas of scientific rationalism as the means to find truth and solve problems were also assimilated, but the contest between science and religion as the ultimate source of truth continues to this day. The British colonizers inherited all these influences from their European ancestors. Thus the Founding Fathers were Enlightenment thinkers, and most were Deists, believing in a God who started the world off and then left it in the hands of rational man to run. They also were extremely wary of monarchs and state religions, with the recent bloody European wars over monarchy and religion fresh in their memories.

Free markets and the invisible hand

In the area of economics, Adam Smith (1723–1790) set forth ideas that have become part of the American economic worldview. Smith believed in free markets, a term politician’s use frequently today. Believing that man was both reliably selfish and reliably rational, Smith proposed that consumers would regulate the market by what they bought. Smith said, “By directing that industry in such a manner as its produce may be of greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”

Free markets and deregulation

In the 1980s Ronald Reagan initiated massive deregulation of businesses on the basis of the free market ideal. According to the PBS documentary, “The Warning,” Federal Reserve Chairman (from 1987-2006) Alan Greenspan was not only a true believer in free markets and deregulation, but also a fan of Objectivist philosopher Ayn Rand (1915-1982) Rand was a self-proclaimed atheist, a vehement anti-communist, and she elevated selfishness to a virtue. She said that every man, “is an end in himself, not the means to the ends of others. He must exist for his own sake, neither sacrificing himself to others nor sacrificing others to himself. The pursuit of his own rational self-interest and of his own happiness is the highest moral purpose in his life.”

Who saw the recession coming?

According to The Warning, Brooksley Born (head of a regulatory agency in the 1990s) tried to warn Greenspan that regulation of derivatives was necessary to avoid an economic meltdown. Ms. Bourne was terminated. At a congressional hearing on the meltdown in 2008, former Chairman Greenspan admitted that he had been wrong.

After widespread outcries that greed and lack of regulation of the greedy caused the recession, and even after Greenspan’s admission that he had been wrong, Wall Street continues gambling with very little regulation. Ideas make up our worldview and our worldview motivates our actions. When actions result in catastrophe, it makes sense to re-examine our worldview. While human rationality may sometimes be reliable, it may also be grossly overestimated. While human selfishness may be reliable, it may sometimes need to be restrained.