I like to return to certain books that gnaw at me. I found great pleasure this week returning to Jane Jacobs’ Systems of Survival – A Dialogue on the Moral Foundations of Commerce and Politics.
I remembered that Jacobs explained so much about the confusing divide in our contemporary dialogue on politics and business, but I didn’t fully trust my memory. Is this book as good and important as I thought it was, 20 years after I first read it?
Answer: Yes it is.
Why are some government actions instinctually abhorrent to me, even though I carry no particular resentment toward governments? Why do we recoil from the actions of certain financiers or large companies? What unwritten moral codes define good and bad behavior, even in seemingly contradictory ways?
Two syndromes, or systems of survival
Jacobs identified two ‘syndromes’ or ‘systems of survival’ of inter-related moral precepts.
The first syndrome corresponds to a “commercial” mindset, which could otherwise be understood as Bourgeois values, or the profit-oriented values of entrepreneurs, traders and salespeople. For-profit businesses embrace the first syndrome, as do, in many respects, scientists.
The Commercial syndrome
These mutually reinforcing precepts are:
Come to voluntary agreements
Collaborate easily with strangers and aliens
Use initiative and enterprise
Be open to inventiveness and novelty
Promote comfort and convenience
Dissent for the sake of the task
Invest for productive purposes
As I reviewed this list, I found myself embracing them as values I grew up with, reinforced every time I read the newspaper (well, in particular, the Wall Street Journal). I’m thoroughly bourgeois and instinctivey profit-oriented. At first glance, I found that the second set of precepts not only contradicted these, but also, sounded less attractive.
The second syndrome corresponds to what Jacobs terms a “guardian” mindset, which overlaps with Aristocratic values, as well as military and government values. Government employees, ranging from police and fire services, to regulators, to judges and courts, to diplomats and elected officials, follow the second set of precepts.
The Guardian syndrome
These mutually reinforcing precepts are:
Be obedient and disciplined
Adhere to tradition
Deceive for the sake of the task
Make rich use of leisure
While I was not raised in a military, aristocratic, or political household, after reading Jacobs’ explanation, I began to see that these precepts are in fact indispensable to the guardian function.
While ‘Be ostentatious’ does not at first sound like a virtue, it explains why our courthouses and statehouses are designed to inspire awe. While my thrifty approach to life clashes with ‘dispense largesse,’ Jacobs points out that much of successful government depends on this function for societal cohesiveness.
As children, we absorb guardian values of loyalty and honor every time we stand in school to pledge allegiance to the flag. Clearly something important and valuable is happening here.
Like everybody who lived through 9-11 in New York City, I found myself weeping in the days following the attacks when police and fire trucks passed through the desolate streets – deeply moved by the combination of NYPD and NYFD virtues such as “adhere to tradition,” “respect hierarchy,” “be loyal,” “take vengeance,” “fortitude,” “fatalism,” and “treasure honor.”
Reinforcing each other
Each syndrome Jacobs argues successfully, reinforces and supports the other. Both are valid and effective systems of survival.
All professional activities can be characterized as belonging to one or another system.
Some of the overly simplistic critiques of contemporary society stem from folks not recognizing the validity, and co-dependency, of the two systems of survival.
Extreme free-marketers on the right wing, for example, in their ‘privatize everything’ fetish, fail to give sufficient weight to the essential role of guardians in enforcing rules and regulations, thereby creating space for private enterprise to thrive.
Extreme pro-government folks on the left wing, for their part, in their plea for government mandates to solve all societal ills, often discount the essential role of trade and free enterprise to encourage innovation and expand production, which raises economic output for everyone.
Even if most contemporary political and economic arguments occur well inside these two extremes, left versus right arguments would benefit from an acknowledgement of the internal validity of these co-dependent syndromes.
Moral monstrosities in the ‘cross over’
What I found most compelling 20 years ago, and again, upon re-reading Jacobs, is the two-system framework for understanding how morality can go horribly wrong.
Jacobs illustrates how individuals and groups operating within one syndrome should not ‘cross over’ to the other syndrome. To cross over creates moral monstrosities that we instinctually recognize as wrong.
Guardians gone Wild
When we hear of ‘guardians’ such as politicians, or judges, or policeman profiting from their position of power, that’s a clear violation of the guardian precept to ‘shun trading.’
Similarly, we impose limits on regulators for example who move from a recent post overseeing markets to one in which they can materially benefit from relationships and knowledge developed on the ‘guardian’ side of the wall.
More subtly, I have a deep mistrust of municipal, state, and national governments that frequently seek to encourage ‘economic development.’ Jacobs’ two-syndrome framework explains why.
Successful and sustainable economic development depends on a commercial mindset, with precepts such as ‘use initiatives and enterprise,’ ‘compete,’ ‘dissent for the sake of the task,’ and ‘be efficient.’
Yet governments – in their guardian function – operate with an opposite, unhelpful set of precepts for the task of economic development. ‘Adhere to tradition,’ ‘respect hierarchy,’ ‘be loyal,’ and ‘dispense largesse,’ to name a few virtues in the guardian sphere, lead to failure and moral hazard in an economic development context.
Whenever I read about my city spending money or offering tax breaks to promote particular companies or industries, or when I read about my state generously dispensing largess in the name of economic development, I get that queasy feeling. I’m sorry to say this, but guardians are just not that good at encouraging commerce, while they are very good at extracting loyalty and taking vengeance.
When I hear about economic development encouraged by governments my first thought is of the opportunity for influence peddling by public officials, and the moral monstrosity of guardians acting outside of their set of moral codes.
For-profit companies that cross over into the guardian sphere similarly create the potential for moral mischief.
The classic profit-oriented mafia group is easily identified as monstrous when they take on guardian-type functions, such as using force, to extract profits
More subtle, however, is the inherent danger of Blackwater-type operations. They operate as private businesses, but engage in protection, enforcement, and military operations, in other words, classic guardian functions. Privatized military operations, of the type encouraged by the Cheney administration in post-2003 invasion Iraq, lead quickly to corruption.
Ugly colonial history is rife with the corruption inherent in for-profit companies which took on government-type functions, such the United Dutch East India Company in Indonesia (1602-1800), the British East India Company (1770 to 1857) in India, and the United Fruit Company in Central America (1900-1960), and we are right to be worried about that mixture of functions.
President Eisenhauer’s parting warning in 1961 about the creeping power of the Military-Industrial Complex describes exactly this distorting mix of the commercial profit-motive with the guardian function.
Jacobs offers an interesting and subtle warning about scientific inquiry funded largely by governments. Scientists, she argues, adhere to the commercial moral code, with its emphasis on competition, dissent, and openness to invention and novelty.
But when a government, with its guardian mind-set, funds most scientific endeavors, the result may be a perversion of the scientific approach. What if scientists come up with ideas threatening to the status quo? If scientists funded by government show insufficient loyalty or respect for hierarchy, will funds be withheld, or will vengeance be enacted?
Too Big To Fail
Finally, why do we recoil so much from the moral failure of the 2008 government bailout of the TBTF banks?
Jacob’s two-part framework helps. Wall Street banks hold a special place in society as exemplars of the commercial system of survival – they are innovative, efficient, competitive, and industrious.
At one point in September 2008, however, their imminent, collective and sudden demise threatened the stability of society – a clear guardian problem.
Instead of sticking with the commercial moral code that the banks and their defenders espouse, suddenly a whole new set of guardian concepts came in to play.
A strict adherence to the commercial code would have allowed for a market solution rather than a political solution. Ruthless and innovative failure, without regard for hierarchy, loyalty, or discipline might have led to a very different outcome, for better or for worse.
Instead, the public was left wondering about the imposition of ill-fitting guardian precepts during that episode, such as the use of ‘deception for the sake of the task,’ ‘exclusivity,’ and ‘largesse,’ for some firms and some corporate leaders, but not others.
Did Hank Paulson – a product of the commercial world but acting in the ultimate guardian function as Treasury Secretary at the time – allow his concepts of loyalty to determine the winners and losers among the Wall Street firms? Did he in fact extract vengeance on Bear Stearns for their disloyalty during the Long Term Capital Crisis of 1998, withholding a bailout through public funds that he offered other firms?
Did loyalty to his long-time deputy John Thain play a role in Paulson pushing Treasury and the Federal Reserve to essentially underwrite Bank of America’s ill-advised purchase of the desperately weak Merrill Lynch in December 2008?
Did loyalty generally, to his Wall Street peers and colleagues, blind him to the clear moral hazard of allowing taxpayer-bailed-out Wall Street firms to pay extraordinary bonuses to employees at the end of 2008?
Most crucially, are the nation’s largest banks, right now, subject to the consequences of a commercial system which rewards investment, thrift, contracts, honesty, competition, and initiative? Or are the largest banks largely protected – by virtue of their systemic importance – by a gross hybrid system that encourages regulatory capture, deception, exclusivity, exerting prowess (power-brokering), loyalty, and tradition?
Even the most pro-Wall Street people know that this gross hybrid – most clearly exemplified by TBTF banks – really sticks in the craw.
I like frameworks
I don’t know all the answers to any of this speculation, but I do know the uncomfortable mixture of commercial and guardian moral codes lies at the root of my obsession with the ongoing TBTF moral catastrophe.
There’s something about a moral framework for understanding our complex world that is catnip for me. Jacobs’ two-part system allows for that complexity. She acknowledges two entirely different but mutually dependent world-views where both can be right, each according to its own moral precepts.
Please also see my review of Jane Jacobs’ classic The Death and Life of Great American Cities.
and please see my review of Jane Jacobs on the importance of cities in economic life: Cities and the Wealth of Nations.
Please also see related post: All Bankers Anonymous Book Reviews in one place!
 Which is why I’ve been pleased so far that Tim Geithner did not immediately join Goldman, upon leaving Treasury, as I had feared.
 When I think about the scariest things about the US in 2013, it‘s my fear that the profitability and commercial power of companies in the extended defense industry will prevent any diminution of our military spending, even if we manage to wind down the Cheney administration’s wars of choice in the Middle East.
 Climate change skeptics believe this is already happening on a grand scale, but we can imagine different times and places where this also applies. Autocratic regimes certainly quash scientific inquiry, and religious authorities in Copernicus’ time did not embrace his innovations – but this happens more subtly than those obvious examples, even now. As the husband of an NIH-funded researcher, I see that governments and their guardian mindset have a heavy-handed influence on what scientists pursue. And not all of that influence is benign, from the standpoint of pure scientific inquiry.
 I haven’t yet reviewed Roger Lowenstein’s excellent When Genius Failed – The Rise and Fall of Long Term Capital about the Long Term Capital Management hedge fund failure that served as a dress-rehearsal for 2008. When the New York Fed successfully invited all the Wall Street firms together in September 1998 to ‘bail-in’ a failing hedge fund and thus save themselves from systemic risk, only Bear Stearns refused to come up with additional capital to fund the private sector solution. For some, this betrayal by Bear Stearns made their demise less than 10 years later coincidental and poetic justice. For others, this betrayal explains Paulson’s treatment of Bear Stearns in March 2008, as Paulson co-headed Goldman Sachs in 1998 and would have naturally reacted to that betrayal with extreme prejudice.
 I don’t even mean to speculate that Paulson made any of these choices in a consciously immoral way. Rather, I think the idea of ‘cognitive capture,’ in which his mindset reflected the mindset of Wall Street, explains most of his actions. The fact that he, by virtue of his guardian position, had to make guardian-type decisions on a failing commercial system led inevitably to horrible “lesser-of-two evils” decisions.
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