Great Depression Survivors, Scholars, and Theologians Share Valuable Lessons for A New Crisis

October 13, 2008 at 2:53 am Leave a comment

Louise Radez remembers the Great Depression. She remembers the hunger
all around her. And she remembers that her father’s success in
repairing shoes was due largely to most folks in Indianapolis being too
poor to buy new ones.


But the lessons she learned from that era — that you live within your
means, you pay in cash or you do without — seem like lost wisdom from
an ancient culture in today’s America.

As we seem headed once more toward economic peril, theologians and
business scholars, preachers and Depression survivors such as Radez,
86, say America’s brewing fiscal collapse has a common cause: a
bankruptcy of values when it comes to money.

At the most practical level, we have stopped saving and grown too dependent on credit. But keen observers say the problems go deeper.

They
say homes are seen not so much as places where families live, but as
commodities to be flipped for a profit in three years’ time. Seeking
wealth, people pour money into investments they don’t understand.

Some
believe corporations that once recognized responsibility to their
communities and their employees now sacrifice both at the altar of
cutting labor costs and placating shareholders focused solely on the
next quarterly earnings report.

“The unlimited desire for wealth
was always considered a vice,” said D. Stephen Long, a Wabash native
and professor of systematic theology at Marquette University who has
written about ethics and the economy. “I think we have forgotten that.”

The current financial bind has gripped society from top to bottom.

Millions
of families and individuals bought houses they couldn’t afford with
easy credit. The bad loans were bundled and sold to hungry investors
who looked past the risks in search of easy money.

Government
contributed to the fall by repealing pieces of Depression-era
legislation meant to put brakes on a market that had proven it could
fail.

“Thirty years ago, we began to forget that men are by
nature greedy, that speculations are bubbles that burst, that stock
market operators are not in it for the great good of the people, that
they are in it for themselves,” said Lewis Lapham, founder and editor
of Lapham’s Quarterly, a New York-based journal that measures the news
of the day against the lessons of the past.

The calamity that
followed the 1929 stock market crash has grown dusty in the collective
American memory, and the idea has sprouted in recent years that
“everything can go nowhere but up,” Lapham said.

The illusion, he
said, was that Wall Street had solved the puzzle of market downturns.
Former Federal Reserve Chairman Alan Greenspan was deemed a wizard, and
billionaire financiers began to grace the covers of popular magazines.
Lapham calls it a modern-day “adoration of the magi.”

“It is the
idea that greed is good, to be admired — the worship of mammon,”
Lapham said. “There’s been no counterargument really in the last 30
years.”

Like all bubbles, one built on inflated housing values had to burst. Lapham thinks we could be headed for another depression.

“Certainly a deep recession,” he said.

The
federal government already has taken some steps to boost financial
markets. But Lapham said something more is required: Individuals must
repent of their free-spending ways.

“The question,” he said, “is whether we will get a new sensibility.”

Radez,
a lifelong resident of Indianapolis, is among the few who didn’t lose
the sensibilities forged by the Depression. She remembers the hunger
she saw then: people living on coffee and mush, three families living
under a single roof, supported by one income.

Credit wasn’t so
easy to come by back then. Radez and her husband spent their first four
years of marriage renting a room from an older couple in Haughville, on
the city’s Westside.

“I was very happy,” she said.

Today, people are different.

“They want everything,” she said. “And that is the only way you can have everything, to go into debt.”

That is certainly something Laurie Jones sees.

As director of education at Momentive Consumer Credit Counseling Service, Jones sees people come in with mounds of credit card debt, homes in foreclosure and payday loans with interest rates of 450 percent.

“My
honest feeling is that we have just totally gotten out of control,” she
said. “Credit has just gone crazy these days. People are getting mixed
up in things out of desperation and finding themselves caught up in a
web, and it is very hard for them to get out.”

The essential problem, she said, is that so few people know the financial basics. So, they learn the hard way.

Radez
saw what debt eventually did to her father. Despite his business
success, he died with a list of unpaid creditors. She cleaned up after
him and resolved not to get in such a bind. She has lived the rest of
her life on a cash-payment basis.

“I just thought you weren’t supposed to buy things unless you could pay for them,” Radez said, “and I’ve always been like that.”

That
is the philosophy being taught in a growing number of churches. In a
society that glorifies excess, they preach the lost gospel of restraint
through programs with names such as Financial Peace and Crown Financial
Ministries.

Don Vandoski, who teaches Financial Peace at Mount
Pleasant Christian Church in Greenwood, says their underlying principle
is Proverbs 22:7: “The rich rules over the poor, and the borrower is
the servant to the lender.”

Vandoski, 53, managed to pay off his debts — credit cards,
home mortgage and all — in three years through the program’s guidance,
a mixture of frugality, focused debt reduction and the use of cash
instead of plastic.

“When you have cold, hard cash and it’s in
your pocket, and you have to get it out and see that leaving your hand,
it hurts,” Vandoski said. “Just whipping out a credit card — it
doesn’t register the same.”

Such personal financial philosophy
seems quaint in today’s culture. Many would consider it impractical,
even weird. But then, the United States is a country where individual
savings has declined to less than 1 percent annually.

“Virtually
zero,” is how Bruce Jaffee, a professor of business economics at
Indiana University’s Kelley School of Business, describes it.

For
a while, when home values were high, that was no problem, Jaffee said.
Americans could get cash through their home equity to feed their
spending habits, and that kept the economy buzzing. But when the real
estate market tanked, the cash cow died.

Jaffee said Americans
need to forsake their exaggerated spending and investment habits and
“move back to basic, solid priorities.” The same is true, he said, for
lending institutions. He said free market capitalism isn’t dead, but it
needs new constraints.

“People and businesses have got to recognize that times are different,” Jaffee said.

As the ash heap of America’s financial portfolio grows higher, some worry that we may be past the point of a bailout.

“As
a father, I kind of grieve,” said Vandoski, who teaches the Financial
Peace classes. “We are borrowing our way out of prosperity, I believe.
We are just transferring that pain to our kids.”

But the Rev. Damon Roach thinks all is not lost.

Yes,
he is angry that the political solution to the current financial crisis
was a bailout for Wall Street rather than for people losing their
homes. But he thinks America will pull itself out of the pit.

“God
is not going to allow America to fail,” said Roach, pastor at First
Christian Missionary Baptist Church on the Eastside. “America has been
too good and spread too much love and finance around the world for God
to let America fail.”

If things keep going as they are, that faith could be put to the test.

Source: Indianapolis Star

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