It’s A Crisis of Faith Not A Crisis of Stocks
Posted In: Economics, History, Middle East, Religion
From my hotel balcony here in West Jerusalem, I can see the walls of the Old City, and behind them the steeples and minarets of this city that haunts the imagination of the world. The religions of Jerusalem have been around a long time, and in their separate ways the faiths and the religious establishments of the Jewish, Christian and Islamic worlds today face a variety of challenges.
But with the world’s financial markets gyrating wildly and the threat of a true depression looming over the still fragile economic recovery, the faith today that seems under the heaviest assault is more modern: the faith that natural and social science would lead humanity to an era of progress, security and peace. The religion of Enlightenment, born in Europe and North America in the 18th century, swept through the world faster than any of the faiths of the old prophets. Barely two hundred years after its birth the faith in progressive modernity had conquered the world.
Like the other religions, the Enlightenment faith comes in several flavors. Its two main denominations were Marxist and Liberal. By 1960 about one third of the world’s people lived under governments who claimed to believe that Marxist social science and modern technology would usher in a golden age of global peace and abundance. Most of the rest of the world lived under one or another form of Liberalism, believing that free markets plus liberal political institutions and modern technology would bring in the golden age.
The religion of the Enlightenment spread so far and so fast because it worked. That is, modern science and technology really did heal the sick, feed the hungry, and bring light and life to the poor. More and more people reached unprecedented levels of personal affluence, even as lifespans grew longer and medical progress made life less unpredictable and tragic as fewer women died in childbirth and fewer children died before growing up.
Over time, Liberalism beat Marxism as the failures of Marxism became blindingly evident. By 1990 the Soviet Union was crumbling and it appeared that the ideas of the liberal enlightenment had all the answers humanity needs.
That faith is now facing a set of challenges that are far starker and more difficult to overcome than those facing the traditional religions.
Most urgently, there is the question of the economy. No group of intellectuals in the last twenty years was more dogmatic, more smug, more confident that they had the answers than the world’s professionally trained economists. Yet the twenty years since the fall of the Soviet Union have seen a series of escalating economic crises that has culminated in the present three years of upheaval and turmoil. The IMF, the World Bank, the central banks of the leading economies, have never been so well staffed with so many well trained economists. The Federal Reserve and its peers have never had so much information, so much autonomy, and such powerful tools of analysis.
The economics departments of the world’s leading universities have never searched so hard for the best talent and given that talent so many opportunities and facilities for study as now. Economic theory has never been as highly developed, the peer-review process never been so vigorous or so well supported, the rewards of success in the field have never been so great.
And yet, still, somehow, the global economy seems not to be working particularly well; more than that, the world’s economists don’t seem particularly good at either predicting economic behavior or preventing disasters.
I don’t mean this as a Luddite screed against knowledge and science. Not only the economists, but their colleagues across the fields of learning and knowledge, have hugely expanded the possibilities of human life and helped us organize ourselves in ways that are far more productive and effective than anything our ancestors knew. And I don’t think that the way out of our present difficulties involves burning the books, forgetting what we know, and going back to some primitive or fundamentalist view of the world.
But I think it points to an important truth, one that somehow seems especially clear here in Jerusalem: while liberal modernity has succeeded as a way of organizing human society for greater productivity and power, it has failed as a religion. The rational, liberal enlightenment has helped us master the forces of nature (though events like the oil spill in the Gulf remind us that we still have much to learn in this respect), but it has not done much to help us master ourselves or to shape our destiny.
We do not fear natural disasters quite as much as we used to, but we are, if anything, more exposed to social and historical disaster than ever before. The crops don’t fail as frequently as they used to, leaving us exposed to famine and starvation. But stock markets and national economies burn out and threaten us with social consequences that can be even more devastating.
For the last generation, we have been acting on the assumption that the great problems have been solved, the great questions answered, and that all that remains is the application of our correct general principles to particular cases. In other words, we have assumed that we are living in an Age of Technique.
I think that is wrong. I think even the experts don’t have the solutions to many of our problems. The twenty-first century is a time of uncertainty, risk, revolution and explosion and unfortunately we are heading into it with some assumptions that look less and less likely.
There is for example the assumption that social science can yield reliable techniques for political action. Economics is far and away the best developed and most intellectually rigorous of the social sciences, and it is clearly a useful discipline that generates valuable insights. Yet it seems less and less likely that we will ever have the kind of economics of which we all dream: a set of ideas and formulae that when followed yield automatic and growing prosperity. Human beings are too cranky and too unpredictable; our social interactions are too complex and shift too quickly; culture, history and institutions are too deeply embedded in our lives to eradicate for our behavior to be pinned down by equations and computer regressions like butterflies in a display case.
It’s clear for one thing that our economists and central bankers, sage and wise though they are, don’t know how to steer national and regional economies through the kinds of challenges we face. Looking at Europe, it’s clear that political elites can’t bridge the cultural divides between Greece and Germany. Given that, it is next to impossible to imagine how they will create a framework of global governance that suits Saudi Arabia, India, China, Russia, the United States and Brazil anytime soon.
Economic policy and more generally governance and social policy are going to remain arts and not sciences. Politics is going to be a matter of inspired (and frequently uninspired) guesswork. Things will sometimes go massively wrong. It’s not just that Wall Street computer glitches at critical moments will cause the stock market to dive; much larger historical events depend on unknown, unknowable risks. Nobody knows what China should do to avoid social and economic explosions as its massive transformation continues; at some point the Chinese are almost certain to get it disastrously wrong. There is no surefire strategy in peace that can prevent war; there is no surefire strategy in war that can lead to a guaranteed victory; there is no surefire strategy to make money in stocks.
This doesn’t just mean that world stock markets are going to stay as risky as they were when Mark Twain wrote Pudd’nhead Wilson’s calendar:
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February.
It also means that another one of our operating assumptions is wrong. We like to assume that history is getting calmer, more settled, safer and more predictable. It ain’t. history is going to remain radically risky, radically unknowable, and scarier than anything Stephen King ever wrote.
Liberal democratic capitalism is not a strategy for making God unnecessary by creating a stable and predictable world. Liberal democratic capitalism is a revolutionary force that brings us face to face with the haunting uncertainties and big questions that since the dawn of time have driven people to God in search of answers.
Jerusalem is a good city in which to contemplate the crisis of humanity’s faith that enlightened reason can solve our problems and make us safe. The constant efforts to find a way for Jerusalem’s religious and tribal groups to divide the city and reach some kind of peaceful solution have frustrated the efforts of some of the world’s greatest statesmen and leaders.
Sometimes as I watch diplomats toil to bring peace to Jerusalem, and European elites struggle to build a new kind of political architecture to give Europe a better future, or watch economists everywhere trying to develop the policy and regulatory frameworks that can give us the kind of steady growth we all yearn for, I feel as if I’m watching Sisyphus struggling to push his rock up the slope — or watching the ancient Middle Easterners try to build a tower in Babel that would reach up to the sky.
The Tower of Babel fell; the global system fell in 1914 and then crashed repeatedly through the twentieth century. Worst case, something like that could be looming just ahead.
If it is, we will need Jerusalem more than ever. This city points to the fragility and failure of human striving; but it also points to an enduring hope. The domes, steeples and minarets of Jerusalem point to our undiminished capacity to recover, to rebuild, to rediscover faith in the ruins of broken dreams. The Middle East is littered with the ruins of fallen towers, but people keep building.
There is still a better than even chance that the world economy will recover its footing, and that the Greek mess is a stumble rather than a fall. But sooner or later the unthinkable will happen, the bottom really will fall out of things, and we will all be left groping for some way to understand what is happening around us.
When that day comes, it will be to Jerusalem that most of us turn; the gods of Brussels are letting us down.
