Size Matters

I’ve been thinking about this interesting essay which relates today’s economic turmoil to the principles established by the Founding Fathers. A quote:

I suspect that the cause of today’s financial crisis can also be attributed to man’s passion for power, fame and wealth. Man still carries inherited traits that were required for survival thousands of years ago. Stone-age tribes consisted of strong and vicious leaders and docile followers.

Among today’s numerous followers are many strong leaders who indulged in today’s credit crisis. Man’s lust for power led to a monopoly of power in the Roman Empire with dictatorships and ultimate collapse. Likewise man’s lust for power in America today created a governmental monopoly of America’s credit market. Government’s meddling in sub-prime mortgages without adequate controls to provide more affordable housing played a leading role in causing the credit crisis. This snowballed into an estimated and monstrous 70 trillion dollar international credit avalanche. It is far beyond the capability of even the powerful U.S. or any other single nation alone to stop.

I have two additional thoughts:

  1. The problems caused by “man’s passion for power, fame and wealth” are not limited to government. We may need big corporations to accomplish big tasks, but all large powerful institutions provide opportunities for abuse of power.
  2. Even if we could somehow control “man’s passion for power, fame and wealth”, the sheer complexity of large systems means that errors will occur. With greater centralized power, the negative impacts of the errors become greater as well.

The virtues of smaller institutions are many, yet we need big institutions to accomplish big tasks. This poses a quandry.


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