The Moral Hazard of Choosing “Not To”
Another bailout of, what is for most people, unfathomable proportions, was announced this weekend. This time it was for Greece, which for the casual observer would seem to have been bailed out several times over by now. All the while, its citizens protest, at times violently, to continue their lives as usual with no sacrifices to alleviate the fiscal troubles in which they find their country.
Meanwhile, in America, people who have the ability to pay their mortgages have openly discussed defaulting on home loans to force banks into renegotiating their loan contracts. In fact, in an alarming trend, people are opting to pay their credit cards over their mortgages—as if their credit card will provide them with shelter from the wind and rain.
The connection between issues such as the bailout of Greece and mortgages and credit cards in The United States may seem tenuous, but they are less so than they may first appear. The first increases the likelihood of the second. This is one example of the “moral hazards” we face today. There are, obviously, more direct connections to be made within this country, too.
Although moral hazards take many forms, one of the biggest on view today is simply choosing to not live up to an obligation despite the ability to satisfy that obligation. Indeed, for many, necessity has little to do with choice. It is a matter of getting not what one deserves, but getting the same benefits as others who are viewed as no more deserving.
This is also part of the same anger that has been stirred by Goldman Sachs (GS). That company has been made to personify the “rich fat cats” that take advantage of everyone and anyone for the sake of profits, and, of course, large Wall Street bonuses.
And herein lies the double-edged sword. There is no denying that, when viewed from a higher vantage point, The United States needed a “bailout” and the same holds true for Greece. Indeed, financial problems at the former spread into a worldwide recession. The latter could cause the eurozone to stumble back into a recession. But the average person in this country, and abroad, sees these events in a more pedestrian way.
Indeed, for many, the is, “Why am I still doing the right thing when so many others are benefiting from having done the wrong thing?” It takes a great amount of personal integrity and fortitude to make the hard decisions that lead to financial stability in life. These include, but are not limited to, such things as spending less than one earns, living in a home that is within one’s means, having several months worth of income in savings for a “rainy day” and investing any money beyond that in a prudent manner, creating a will, and having life insurance to help provide for any dependants one might have.
These are not easy things to do, but they are the right things to do. Part and parcel of this is living up to obligations that have been made. For example, the need for life insurance is about fulfilling the obligations to one’s family should you die unexpectedly. Saving for a rainy day is born of a similar obligation, but, particularly in today’s society of more frequent job changes, more is likely to be needed. To not see and address these potential problems is a moral failure, and one that is made easier by the repeated “saving” hand that has reached out to people and countries around the world.
And this is the moral quandary that is most problematic today. That people who “can” are increasing choosing “not to”.