Bad Apple Economics
Does a bad apple spoil the whole
bunch? Unless the adult influences in my childhood misled me then the answer is
no. Somehow, this came to me as my free-market, anti-regulatory brain tried to
cope with the harsh reality that something has gone terribly wrong with all
that I believed to be true about the stock market. Alan Greenspan may have been
ready to testify before Congress that he was wrong, but I wasn’t quite there
yet. Now that Ben and Henry have entered the building, signing checks until
their pens run dry, you can hear the growling of the government watchdogs at
the door waiting to chase down the supposed perpetrators of our financial
crisis. And me, all I can do is sit and stare at the old black-and-white of
Ludwig von Mises and wonder how I could have been fooled so completely. After
all I have always prided myself on being open minded politically and socially,
but I had never wavered on my faith in free-market capitalism.
Maybe greed is not good as a
certain movie character once told me. Maybe traders, analysts and CEO’s can’t
be trusted to be as ethical and cautious as they are aggressive and creative.
Maybe broad regulatory measures are, in fact, a necessity and a call to Big
Brother is in order. I was wrong! Bring on the dogs and hand over the deeds.
Only the government can save us now! Certainly leaving Wall Street on its own
to make the right choices is like leaving a room full of adolescents alone with
a bag full of candy and a book of matches.
But, then I let out an exasperated
breath and shook my head in disappointment as I bit into my morning apple and suddenly
the child-hood analogy came to me. Bad Apples! What an appropriate term for the
greedy, short-sighted stewards of Wall Street. Bad apples in the bunch, I thought.
Then, of course, my thoughts turned to the rest of the apples. No, the bad ones
do not spoil the bunch! I wouldn’t stop eating apples altogether just because I
bit into a bad one. Neither would I begin a consumer campaign to change the
apple industry, how we grow them, how they are packaged or anything of the
sort. At the most, if I determined that some blame could be assigned to the
market I bought them from, then I may stop doing business there.
Overall, apples are good. Our
economy and the financial markets are essentially good. We have probably
learned things over time that have allowed farmers to grow better apples and
the same could be said in the financial industry. In the light of the current
crisis, some things will need to change, but we must be careful not to go too
far in reaction to our fears.