This week’s Washington Letter takes a look at some of the parallels between earlier economic depressions and today’s financial upheaval.
One often cited concern that led us into this mess is the drive to produce ever increasing income which leads to higher profits, at least on paper. Fueled by a booming housing market and relaxed regulations governing many types of financial activity, incomes grew meteorically.
The quest for more revenue became almost addictive in the era of growing real estate values, which those in the industry said would continue upward for years to come. Although different industries were involved, it’s a similar story that existed prior to the nation’s two most serious economic crises: the panic of 1873 and the Great Depression.
One key factor in the economic decline has been the increased concentration of wealth where the top 1 percent of the U.S. population garnered higher shares of the country’s wealth. It’s what Douglas Astolfi, professor history at St. Leo University, calls “incredible greed.”
But another expert contacted by Catholic News Service suggests one additional segment of American society contributed to our current economic woes: us.
Joan Junkus, associate professor of finance at DePaul University, said the consuming habits of just about everyone helped build debt that many could not afford to pay back. With more defaulting on debt payments, banks and financial institutions got sick.
Junkus encouraged Americans to step back and look at their lifestyle and ask why they desire to consume more and more.
“I think the conversation for everyone should be more of ‘did we go too far being greedy?’ Ourselves included. In an election year, people want to point the finger at someone. People have a huge amount of (financial) leverage in their own lives that we used to not have.
“Credit cards and home equity loans are part of this. You have this problem where people are leveraging themselves. And why? They’re not doing it to start a business or invest. They’re trying to support a lifestyle.
“(Our debt accumulation) is not so my children have a better life. It’s ‘I really deserve it.’ I think we have to talk about other things in life than consuming.”