Monday, October 20, 2008

When We Fail to Manage Risk

Last Thursday I went to Huntsman Hall to see a talk by U.S. Department of Homeland Security Secretary Michael Chertoff, titled “When We Fail to Manage Risk.” The Dow had fallen 700 points the previous day. The housing bubble and the credit crunch and the subprime meltdown and the extra digit on the Times Square deficit billboard were all over the news. I was curious to gauge the mood of the business community so I went to the talk in order to eavesdrop on the audience. For the presentation itself, I had low expectations. A few weeks prior, the Department of Homeland Security had run a campus recruiting event – the word on the street was, they needed statisticians and analysts to deal with all that surveillance data they’d been gathering. So I thought this talk would be part of a recruitment drive for talented students whose private sector prospects had plunged with the markets.

The eavesdropping was dull, since most people were engaged with their phones and laptops. But the talk was more interesting than I’d expected. Chertoff drew on natural disaster scenarios to illustrate his points, but the economy was the obvious subtext. He started out by solemnly informing us that the core responsibility for risk management lies with the private sector. After all, he said, the right to balance risk and reward – to take chances and reap the consequences - is “the definition of freedom.” After the shout-out to the free-market folks, Chertoff spent the rest of his talk explaining why the market can’t do it alone. In his words, “we have difficulties because of the way we are wired.” Because humans are bad at “estimating time-horizons,” we choose immediate gratification over long-term safety. Because we are harbor a blindness to “collateral and cascading external costs,” we set up conditions whereby our actions come back to haunt us. Because we “resist transparency,” and hate to explain ourselves, we foster faithlessness. Unchecked, markets (us, only bigger) are impulsive, selfish, and secretive. That’s why we need the Department of Homeland Security to protect us from ourselves. Apparently, strong yet realistic regulation can check dangerous human tendencies without smothering human initiative. In his diagnosis of our current financial problems, Chertoff neatly de-politicized greed by framing it as a hard-wired flaw that could be diagnosed and compensated for through sound managerial techniques. From a Foucauldian perspective, the talk practically analyzed itself.

From a Hornerian perspective, I thought the talk was a little perverse. To illustrate why people should be required to build elevated houses on flood plains, Chertoff described touring a neighborhood after a bad hurricane. Whole rows of houses were “crushed, as if a giant had stepped on them,” but occasionally he’d see a house that was practically untouched, because it had been built on stilts. In Chertoff’s words, these homeowners could move back into their intact houses “like it never happened.” OK, yes, that’s an overstatement -- if your neighborhood is a pile of rubble, even if you still have a house your situation is not good. My point is not that Chertoff is being disingenuous, but rather, that his focus on individual risks and benefits constrained his ability to promote his larger cause. The anecdote exemplified a problem for public discourse in general: when we talk about public responsibility for the public good, we are rhetorically hamstrung by the neoliberal frame. A focus on individual outcomes impoverishes our ability to conceive of the common good on its own terms, without the baggage of zero-sum ideology (i.e., one guy wins and one guy loses) which (IMO) is the constant subtext of the individualist frame. Chertoff made this point: if the builder and the buyer accept the costs of elevating a house, then the owner will survive a hurricane. But there’s a false equivalence afoot. I admit, I’m a knee-jerk communitarian, so people who take sides in the eternal struggle between big bad gummint and the feisty lone individual may not agree with me, but maybe in order to really conceive of the community protecting the community, we need to talk about it and think about it through a different frame.

I read The Grapes of Wrath last August on vacation with my family (I got teased for picking such a gloomy beach read.) It’s a remarkable book, and now that everyone’s talking about the Great Depression I think of it often. Anyone interested in sustainable agriculture will find it eerily relevant. Steinbeck has a lot to say about community and the common good. Since the economic slide appears to be snowballing, I’ve found myself pondering how things will go –will we start using powdered dry milk and Tang again? Will multigenerational households become typical? Will we go all survivalist and suspicious and start hunkering down with our guns and canned goods? On the latter point, I found this very cogent argument against the impulse to hoard and defend. To survive a financial/social/ecological catastrophe, Charles Hugh Smith wrote,

…the best protection isn't owning 30 guns; it's having 30 people who care about
you. Since those 30 have other people who care about them, you actually have 300
people who are looking out for each other, including you. The second best
protection isn't a big stash of stuff others want to steal; it's sharing what
you have and owning little of value. That's being flexible, and common, the very
opposite of creating a big fat highly visible, high-value target and trying to
defend it yourself in a remote setting.

Read the whole essay: Smith is not a pie-in-the-sky hippie dreamer. In his view, people are sinful, some more than others, and bad things happen when we fail to manage risk. However, he and Chertoff have very different ideas about how to survive a catastrophe. In Smith’s pragmatic view of risk management, he invokes a moral economy / gift economy fueled by voluntary relationships, not a market economy running on profit and loss. Sure, there’s a false equivalence here too: Smith describes a smallish community on the edge of a wilderness, and Chertoff is working on a national scale. Still, Smith makes me feel a lot more capable and optimistic about surviving the years ahead. I’m “on the job market” – I sent out a bunch of job applications, and today I got an email notice that one job search has been suspended because of “the current economic crisis affecting American higher education (and beyond).” I hope this does not signal the start of a trend, but if it does, I’ll work on my home-brewing skills and follow Smith’s advice on risk management.

Note: After posting this I read a Chris Hedges essay on TruthDig that quoted Canadian philosopher John Ralston Saul on elites' obliviousness to a concept of the commons. He puts it nicely:

“Their inability to see the human as anything more than interest driven made it
impossible for them to imagine an actively organized pool of disinterest called
the public good."

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