October 20, 2009
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This essay is excerpted from the most recent version of the HCM Market Letter. To subscribe directly to this publication, please go here.
“The premier demand upon all education is that Auschwitz not happen again. Its priority before any other requirement is such that I believe I need not and should not justify it. I cannot understand why it has been given so little concern until now. To justify it would be monstrous in the face of the monstrosity that took place. Yet the fact that one is so barely conscious of this demand and the questions that it raises shows that the monstrosity has not penetrated people’s minds deeply, itself a symptom of the continuing potential for its recurrence as far as peoples’ conscious and unconscious is concerned. Every debate about the ideals of education is trivial and inconsequential compared to this single ideal: never again Auschwitz. It was the barbarism all education strives against.”
Theodor Adorno, Education After Auschwitz (1969)
It may seem alarmist to some readers to compare the obligation to prevent genocide from reoccurring to the obligation to maintain stable and moral financial markets. In fact, other than being belated, the connection is absolutely necessary. The stakes today are that high. The conditions that gave rise to the type of barbarism that led to genocide in Germany 70 years ago are no less present in our world today. As Adorno writes, “[a]mong the insights of Freud that truly extend even into culture and sociology, one of the most profound seems to be that civilization itself produces anti-civilization and increasingly enforces it.” Thirty years after Adorno’s admonition, insufficient attention is being paid to the fact that without functioning financial markets that are capable of raising capital for productive uses and creating opportunity for the disenfranchised, the world is far more likely to spin into anarchy. The grievances that led to Germany’s vicious rise to power in the 1930s are echoed in similar inequalities around the world today. Having exported economic disaster to all corners of the world, the dominant Western economic powers need to reorder their priorities as they heal their economies in order to create a more equitable and stable global order.
As the tools of finance become more sophisticated, the obligation to regulate them wisely increases exponentially. In Modernity and the Holocaust (1991), the sociologist Zygmunt Bauman argued that two of modernity’s signal achievements made the holocaust possible - technology and bureaucracy. In fact, he argues, the genocide of the Jews (and murder of millions of others) was carried out in a manner that was completely consistent with the norms of how business was conducted at the time. In other words, Auschwitz was an example of modernity cannibalizing itself. Why can’t the same be said about modern finance and the succession of increasingly destabilizing financial crises that have consumed the financial markets over the past two decades? Beginning with portfolio insurance, which contributed to the stock market crash of 1987, and continuing through credit default swaps, which swept away some of the world’s largest financial institutions in 2008, financial technology became the tool that almost destroyed the very system it was designed to protect from risk. What could be a better example of Adorno’s “civilization creating anti-civilization”? And if it is indeed the case that our best tools are also the ones that are most capable of destroying us, mustn’t we educate ourselves to prevent that from happening? As the perpetrators of the crisis try to sneak away from the scenes of their crimes unseen, it is incumbent upon the rest of us to insure that the intellectual and moral lapses that caused so much damage are exposed for what they are. Only after this flawed thinking is exposed can be disposed of.
The Iranian threat
It is no accident that the most imminent danger now comes not from the least advanced but from the most modern society in the Middle East, Iran. Iran’s attempt to gain nuclear weapons capabilities should not surprise anybody who is a student of ancient or modern history. Iran has a highly Westernized populace governed by a retrograde group of clerics and a Holocaust-denying President whose legitimacy is open to question. Mr. Ahmadinejad’s hatred was on full display last week at the United Nations, where for some reason he was again allowed to speak as though his country should be numbered among the community of nations when it refused to conform to the laws that guide those nations. Moreover, Mr. Ahmadinejad’s support within his own country comes primarily from the Revolutionary Guards, a particularly unsavory group whose economic and political power continues to grow at the expense of the rest of the polity. In its latest coup – this time, fortunately, non-violent - the Revolutionary Guards were able to purchase just over 50 percent of Iran’s Telecommunications Company in a $7.8 billion deal (we can only guess where they obtained the money). Tyrants are particularly eager to control the communications systems of their countries, and it was hardly an accident that text messaging was cut off on election day in Iran and the cell phone network was disconnected during the unrest that followed Ahmadinejad’s phony victory. The Revolutionary Guards’ shopping spree will undoubtedly continue with the purchase of more key strategic assets.
The events unfolding inside Iran are a recipe for instability both inside that country and in the surrounding Middle East. Western leaders are faced with a host of bad choices, but none of those choices includes inaction. Iran, which is Persian in origin but Arab in political alignment, is thumbing its nose at the West, and part of its goal is to provoke a reaction that will further divide the Arab world from the Western powers. Saddam Hussein thumbed his nose at the West but was not building weapons of mass destruction; some of us believe the Bush Administration did the right thing in not leaving things to chance and HCM for one shed no tears when he met the gibbet. Iran is a far more complex challenge, but anything that allows Iran to build a nuclear capability will turn out to be a profound mistake for all of mankind. Iran professes that it needs nuclear energy, but only a fool would buy that argument - the country is sitting on enough oil to last it for eternity. There is only one reason for it to build a nuclear capability, and just in case the world isn’t paying attention, its President has made no secret of what he plans to do with it: destroy Israel. Acting sooner rather than later is the only choice that makes sense, beginning with strict economic sanctions if meaningful inspections of the sites in question are not permitted immediately. The only way to prevent another Auschwitz is to take the difficult steps now. It will only become tougher later.
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