Collective Forgetfulness

We learn nothing because we remember nothing. – Gore Vidal, 1925-2012

That men do not learn very much from the lessons of history is the most important of all the lessons that history has to teach. – Aldous Huxley

If you found this while looking for a blog about nursing homes full of Alzheimer’s patients you may be disappointed:-) But please read on.

We have all heard, especially when it comes to politics, that we have short memories. This explanation is used to justify in some way why we find ourselves repeating mistakes of the past. For some reason it is always the mistakes that we repeat or at least it is the mistakes that get the attention rather than the successes. And we are all familiar with the truth of the aphorism “those who forget the past are bound to repeat it.” It is curious that we all remember the aphorism but forget the specific issues that we are bound to repeat.

Generally, most of histories disastrous mistakes are caused by people of influence who should have known better but were caught up in a misguided ideology, driven by an unrestrained ego, influenced by selfish interests, and surrounded by people who for the sake of their own careers failed to offer an informed dissenting opinion and let’s not forget the quest for power and ignorance in high places.

Let’s use the current economic crisis as an example to briefly illustrate some of the factors that might result in a collective forgetfulness.

Alan Greenspan, as we have discovered, is enamored of  Ayn Rand’s economic fiction. It was this fiction which in part informed Greenspan’s belief in an unregulated free market and that the market was self-regulating. We now know that by his own admission in congressional testimony that he was wrong.

In 1999, former Senator Phil Gramm was successful in repealing the 1933 Glass-Steagall Act. This act was put in place after the stock market crash to separate commercial banks that focus on consumers from investment banks, which deal with speculative trading and mergers in the hope that regulating banks will help prevent market instability, particularly amongst Wall Street banks.

So where was Ben Bernake, that scholar of the Great Depression, when this went down?

Roger Lowenstein’s book “When Genius Failed: The Rise and Fall of Long-Term Capital Management” provided great insight into the 1998 failure of LTCM associated with excessive financial leveraging, derivatives and biased computer modeling used to drive unfettered gambling in the market.

Brooksley Born who was head of the Commodity Futures Trade Commission issued a warning in 1998 to then Federal Reserve chairman Alan Greenspan on the dangers of derivatives and swaps. She was strenuously opposed by both Greenspan and Treasury Secretaries Robert Rubin and Larry Summers in what had to be an act of hubris.

To add insult to injury Senetor Gramm, ignoring the Born warning and the failure of LTCM, early in the Bush 43 administration, clandestinely slipped an amendment into the omnibus appropriations bill titled: Commodity Futures Modernization Act,  that few senators, if any, read. The essence of the act was the deregulation of derivatives.

“Madoff Securities is the world’s largest Ponzi Scheme,” wrote Harry Markopolos,  in a 1999 letter to the U.S. Securities and Exchange Commission. For nine years Mr. Markopolos pursued his accusations with the SEC and was ignored. Why? Was the SEC simply not paying attention, were they just incompetent or did they think that they knew better?

As we are fond of saying these days, did anyone connect the dots?

The answer as pointed out by the examples above is yes. The problems were that leadership was not paying attention, had another agenda, or was in denial that in these advanced times history could not possibly be repeated.

All this does not let “We the people” off the hook. We are told that we will continue to experience events like market bubbles and other seemingly cyclical man-made disasters. But this situation is unacceptable and for the most part avoidable.

Let’s now turn to some of the excuses and then end with some possible solutions.

Excuses are many:

  • We are too busy with daily life.
  • We fail to take the time to work through the details of an issue. Yes, the details are tedious but are key to understanding.
  • We are not interested in the past or in history.
  • We are too focused on the narrow interests of our careers and/or frivolous diversions.
  • We abdicate too much to so-called leaders and authority figures.
  • We fail to engage in issues of the day and take responsibility as citizens, in fact most citizens do not even exercise their right to vote.

So what can we do to improve our collective memories and use them to eliminate or at least minimize the impact of future disasters simply because we forgot:

  • We must be well read on both the issues of the day and how similar issues played out in the past.
  • We must be willing to play out  numerous “what if” scenarios until we fully understand the risks of some undertaking no matter how long it takes.If analysis results in paralysis then perhaps the undertaking in question is indeed too risky.
  • We must change the culture to welcome different informed view points.
  • We all must actively engage in a process of life long learning.
  • We must jettison the idea that the boss is always right and have the necessary checks and balances in place to remove him/her and be willing to use them.
  • For politicians and people who are already in positions of influence: Please do your own work! What better way to become familiar with the issues and their relationship with the past. Executive summaries and staff prepared talking points just don’t cut it.

Fortunately we have noted and reputable authors, journalists, historians and academics who do the hard work of research to provide us with materials that educate and inform. We ignore them at own peril.

Culturally, we must not forge ahead, blindly or otherwise, into the future at the expense of past. The past, (history, if you will), IS relevant and if forgotten WILL inform the future whether we like it or not.

Perhaps we need to invent some periodic cultural event like a memorial day to commemorate and remember market and political disasters.

That’s my view, what’s yours?


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