Mandeville, LA – [Editor’s note: This is an excerpt from Patrick Deneen’s Why Liberalism Failed, the Mike Church Show’s featured book this month.-MC, Ed.] “The economic catastrophe and near collapse of the world economy in 2008 was, above all, the result of the elimination of a culture that existed to regulate and govern the granting and procuring of mortgages.
The destruction of culture thus achieves not liberation but bondage.
This activity was historically understood to be consummately local in its essence, requiring relationships that developed over time. Laws grounded in long-standing customs once existed to shore up a local mortgage culture, forbidding banks from opening branches in communities outside the ones where they were based—a practice premised on the belief that the granting and accepting of debt rested upon trust and local knowledge. These laws, and the culture they supported, were based on the idea that “the bankers’ interests and the interests of the larger community are one and the same.” The mortgage market was thus understood to be not a naked arena of anonymous and abstract relations but a commercial activity grounded in relationships formed over time and in particular places in which trust, reputation, memory, and obligation were requirements for the operation of a specific market. As Thomas Lamont, a partner at J.P. Morgan, stated in 1928, “The community as a whole demands of the banker that he shall be an honest observer of conditions about him, that he shall make constant and careful study of those conditions, financial, economic, social, and political, and that he shall have a wide vision over them all.”
By 2008 the financial industry, much like contemporary college campuses, had been divested of its long-standing culture rooted in nature, time, and place. Indeed, training in the dorm parties and fraternities of one’s college appears to have been the perfect preparation for a career in the mortgage bond market. The mortgage industry rested upon the financial equivalent of “hookups,” random encounters of strangers in which appetites (for outsized debt or interest) were sated without any care for the consequences for the wider community. Apparently, responsibility- and cost-free loans were mutually satisfactory and wholly liberated from the constraints of an older financial order. However, in another reflection of the state of affairs on college campuses, these arrangements led to gross irresponsibility and abuse, damaging entire communities and demolishing lives. The response has been the same—calls for greater government regulation and oversight of the consequences of untrammeled appetite, including threat of penalization (rarely enforced) and requiring massive expansion of an administrative state to oversee a most basic human interaction: the securing of shelter. Liberated from the confinements and limitations of local market cultures, the result is not perfect liberty but the expansion of Leviathan. The destruction of culture thus achieves not liberation but bondage. – Patrick J Deneen, Why Liberalism Failed