The Ponzi scheme of Bernard Madoff bilked investors out of $50 billion. Many of his victims thought so highly of his investment skills they pulled rank to become his clients. The man with the magic portfolio model reported 10-12 percent annual returns on capital invested through the highs and lows of Wall Street. The naive believed Madoff had a wealth-producing Ouija board; the street-smart suspected insider information. In the end, all lost their money whether earmarked for retirement or life’s comforts.
I suspect most people invested with Madoff for security or happiness. Preoccupation with our economic lives in terms of finances and possessions causes us to salivate at sky-high returns while hungering for basement-low prices. The system makes us economic actors seeking more for less and haggling for the best deal from the marketplace.
Yet, with all our fixation on wealth-status and acquisitions, few of us ask about the morality of the marketplace. How do our economic investments affect society and ultimately our own personal spirituality?
Economist Bob Goudzwaard in Sojourners (June 2009) discusses investments in writing about “A Paper God.” His point: Global investors have enormously increased the amount of money invested in the highly speculative markets in the financial economy rather than in the “real” economy.
Investing in the real economy promotes making, selling and buying goods and services, like shoes, groceries, storm windows and doctors’ visits. Conversely, the financial sector, i.e. the world of liquid assets, deals with the buying and selling of money-products in their own right, like trading in bonds and loans, or buying and selling foreign currencies or shares of stock. While a strong financial sector occupies an essential place in a healthy economy, over the past decade the volume of paper exchanged for paper has increased four times faster than the amount of paper exchanged for real commodities. This speculative bubble feeds on itself, pushing the expectations for returns higher and higher.
Two clear consequences affecting people flow from speculators’ quest for maximum short-term financial gains. Developing countries — so dependent on loans and investments from abroad — lower taxes on capital to attract and keep capital, and then cut spending on social programs like health care and education to meet their debt obligations. The world’s poorest go without, while investors amass fortunes.
Second, financial behemoths such as hedge funds frequently using borrowed money gain control of companies in the real economy, then merge, sell out, split and restructure to increase short-term profits. Here workers lose jobs, while investors grow rich.
For the global common good Goudzwaard counsels: “The growth in the financial economy must serve the growth of the real economy, not the other way around, and heavy restrictions must be placed on speculation.”
On a personal level, people of faith recognize the seduction of wealth: “For the love of money is the root of all evils, and some people in their desire for it have strayed from the faith and have pierced themselves with many pains” (1 Tim 6:10). Yet, each hour of each working day the news summary reports the Dow Jones Average, subliminally reminding listeners to think about their economic status — i.e. be preoccupied with money and wealth.
People of faith know money is a servant, not a master. Spiritual growth depends on an attitude shift from simply pursuing the greatest rate of return to considering the social context of the investment. We don’t need Bernard Madoff’s wealth-producing Ouiji Board. We need our wealth to build our security while working in the service of others.