February 6, 2012
Ask Fr.Spitzer
Are Bailouts Ethical?
Q: A lot of the public anger over the massive federal bailouts comes down to ethics. Companies and industries that behaved badly are getting rewarded. How does an expert in ethics like Fr. Spitzer view the whole matter? Are people right to be angry?
A: (from Fr. Robert Spitzer) From an ethical perspective, the problem here is a conflict between two principles: the principle of the common good and the principle of justice. People often speak of these principles together – “justice and the common good” – but at times they can be directly opposed to each other. That’s because the common good is directed toward what benefits the whole, while justice is oriented toward equity and fairness between parties.
In this particular case, the principle of the common good dictates that you really do need to bail out these financial institutions. In fact, it’s an obligation, because if these institutions go under water, the entire economy will go down with them. These companies don’t merely hold huge assets, they hold together the whole financial system, which establishes the marketplace we use day to day for every transaction that occurs. Because of that, there is no way, according to the principle of the common good, that Bernanke or any other leader can escape this obligation. They have to make sure these companies don’t go under. So that’s one side of the equation.
"You can’t blame people for being upset because there’s a lot of culpability and greed at the root of the problem." |
On the other side, there’s the principle of justice. You want equity and fairness for all parties concerned, which means giving praise and rewards to those who benefit society, as well as blame and penalties to those who cause problems. But in this particular case, justice is not being served. Companies and leaders who caused the problem are getting bailed out or, believe it or not, rewarded! When people see this, they’re outraged. Their sense of justice is violated, and they say, “Why in the world would you bail out or reward someone who has culpably caused problems?” You can’t blame people for being upset because there’s a lot of culpability and greed at the root of the problem.
But the real question is, when the principles of fairness and the common good are in direct opposition, which one should win out? My own thought, in this case, is that the common good is like macroeconomics and justice is like microeconomics. And generally, when there’s a conflict, the macro principle wins over the micro principle because the macro is providing the conditions necessary for the micro to exist. We have an extremely complex and technical economy, which has garnered huge efficiencies because of its complexity and technical superiorities. And for this reason, there’s no question in my mind that the macroeconomic principle of the common good has to win out over the microeconomic principle of justice.
You might say, “Can’t you have both?” The answer, in this case, is no. There are times when you have conflicts in principle. There are times when you can’t have both. The lesser of two evils has been with us since time immemorial. So as much as we hate to subordinate one principle to another, I think Bernanke and company have done the right thing.
The devil is in the details of course, and how you construct and implement the bailouts. The key question becomes, “Which 'hows' or groupings of hows are being selected?” We need to select hows that not only benefit the common good but ones that undermine the principle of justice as little as possible.
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Last changed: Jun 03 2009 at 12:55 PM