It is not easy to characterize our times. But there does seem to be a discernable theme that keeps weaving its way through otherwise seemingly unconnected events. History may characterize this era as the Age of Inauthenticity, where very little is what it seems or has claimed to be.
What tipped the balance for me was the charge that no less than Alex Rodriguez, Mr. Clean, had used steroids. Unlike countless other baseball players, a generation so typified by performance enhancing substances that is likely to have an asterisk after each name in the record books, A-Rod at least admitted his wrongdoing when caught. Yet even after doing so, he couldn’t quite get his story straight.
That is small potatoes next to the Pope seeking to rehabilitate Bishop Richard Williamson, who denied the Holocaust happened. (A short train ride to Auschwitz would give him all the evidence he needed.) He claimed he would study the issue and if warranted, alter his views. Yet even after the global outrage led him to apologize for his “intemperate” remarks, it was still not entirely clear whether he changed his views – or just regretted stating them. “He does everything except confront the central issue of this whole crisis,” said Rabbi Marvin Hier, the founder of the Simon Wiesenthal Center in Los Angeles told the N.Y. Times, “Has he changed his mind about the Holocaust, and does he believe that the Holocaust is a historic fact?” How can anyone in their right mind think such things – let alone, someone who claims to represent God?
One could argue that so-called “radical Islam,” nihilists (suicide bombers, even as the Koran forbids suicide) operating in the name of one of the world’s great religions, is a particularly grotesque example of inauthenticity. One watershed event was the 2005 suicide bombing of a hotel in Amman, Jordan that blew up an Islamic wedding. Indeed, we see signs of a backlash in the Islamic world against tactics that have resulted in countless Muslims killed in nihilistic violence carried out in the name of Islam.
Brilliant Meltdown
All these, of course, are a prelude to a hallmark of inauthenticity that has put the entire world economy at risk: our financial meltdown. Those financial wizards, those MIT Phd mathematicians whose financial engineering created arcane new highly leveraged derivatives that either not understood or below the radar screen of regulators, brought in eye-popping annual returns – for a while. Before last September, whatever else many around the world thought of the US, across the board, the US was considered the Mecca of world finance. We knew what we were doing. There was a reason that the dollar remained the world’s sole reserve currency.
There were, of course warning signs pointed by some prominent voices in the world of finance: Warren Buffet, Robert Shiller, a Yale professor and author of Irrational Exuberance, for starters. Yet their alarms went unheeded. Then suddenly the bluest of blue chip firms like Bear Stearns and Lehman brothers goes belly up. Many of its complex derivatives were below their accounting radar. Then there was AIG (now apparently coming back for seconds), now CITIBank is on the ropes. And of course, there is truly spectacular fraud of Bernard Madoff and his $50 billion Ponzi scheme masquerading as financial management. That may even top AIG giving bonuses to their managers even as they come back to Uncle Sam for more taxpayer bailouts. If its current state is AIG’s idea of success to be rewarded, one wonders what one must do at AIG to get fired.
What are we to make of it when even Alan Greenspan, the doyen of free markets, who had argued that such derivatives didn’t require regulation because the institutions buying and selling them were self-regulating, concedes he was wrong. Indeed, Mr.Greenspan suggests nationalizing some banks may now be a necessary remedy.
Whither Trust?
The glue of finance, perhaps even more so than that of our social bonds writ large, is trust. A dollar bill, a company’s share of stock, a bank deposit: these are promises. They are good to the extent you trust their credibility. On a macro-scale, one could say the same thing of our massive financial bail-outs.
The question of trust and credibility is also an essential ingredient in foreign policy. Remember Ronald Reagan’s classic line on negotiating arms control agreements with the Soviet Union: Trust, but Verify. Good advice, especially if you are dealing with countries like North Korea or Iran, whose very credibility as interlocutors often seems dubious. Or for that matter, take the Kyodo climate change accords. What does it mean to have timetables and targets for reducing Greenhouse Gas emissions, fall short of meeting them and then, seek a successor accord that would commit to even deeper reductions, as the Europeans apparently aim to do.
So how do we get back to authenticity? Certainly candidate Obama made it a key part of his election campaign. He essentially argued that Iraq was not a necessary war, that that it diverted U.S.foreign policy from finishing the mission in Afghanistan, the hub of Al-Quida from where their freedom of action facilitated their global terrorism. The failure to find weapons of mass destruction, the central argument for the war, is one well-known case of a lack of authentic rationale.
Similarly, the massive financial bailouts, and on-going discussions about new regulations, standards, and transparency suggests that the flaws that led to our financial meltdown are beginning to be addressed. The new prominence of the G-20 a global forum suggests a recognition that old mechanisms (e.g. the Bretton Woods institutions like the IMF, where Belgium has a similar share of votes to China) need updating to better reflect contemporary economic and political realities.
The President’s refreshing candor, telling us what a deep hole we are in, and that there is no magic bullet to pull us out of it overnight is the sort of humility and realism the times call for. It may be be an important step toward rebuilding the very trust that the economic mess has eroded. But I suspect we will know we are really on the path back to authenticity when a restructured financial industry starts major lending without government help and turning a profit. Unfortunately, it may be the sort of “creative destruction” that economist Joseph Schumpeter wrote of that leads to the sort of transformation of industries now suffering that will signal we have move beyond the age of inauthenticity.
Robert Manning is a Senior Advisor to the Atlantic Council. The views expressed here are solely his own, not those of any U.S. government agency.