In the Vice-Presidential debate last night, Sarah Palin railed against "corruption on Wall Street."  She referred to this notion at least five times, by my count.  But the more I think about it, the less it makes sense (which is true for most of what Palin has to say).

    First of all, what is the underlying issue in the current financial crisis?  It is very common to hear politicians from both parties complain about "greed" on Wall Street.  And that makes some sense, in a very general sort of way.  Yes, people have been greedy in pursuing ever higher profits.  Of course, there is a counterargument, most pointedly captured in the 1980s movie "Wall Street," that capitalism is based upon selfish, greedy motives.  If you like capitalism, you should accept, perhaps even champion, greed.  As the character Gordon Gekko famously intones: "Greed, for lack of a better word, is good."

    But corruption is something different than greed.   It presumes an existing standard or norm or law or regulatory framework against which some deviant behavior is judged.  In the current crisis, it is precisely the lack of clearly defined rules that has allowed for the explosion of ever-more leverage and ever-more abstruse derivatives that have magnified the underlying mortgage weaknesses.  To my mind, the mortgage problems are only one layer of the trouble.  Perhaps the greater difficulty stems from excessive leveraging of those underlying mortgage-backed securities (and as a colleague of mine reminds me, it's not just mortgages; other sorts of credit – car loans, student loans, etc. – have also been leveraged, derivitized (is there such a word?) and traded).  The scale of the problem is thus made much, much worse, presenting us with the overwhelming mess of curbing the "destructive power of deleveraging."  

    Since there was no regulatory framework, or even a normative consensus (beyond the mildest expectations of prudence), to constrain the explosion of leveraging, how can we call it "corrupt"?  It has not been understood as "corrupt" for the past twenty years or so.  Only now, when we face this extraordinary collapse, is excessive derivative leveraging suddenly referred to, by Republican deregulation ideologues, as "corruption."

    Indeed, by invoking the notion of "corruption" Palin and company are suggesting that there ought to have been a much stricter regulatory regime.   Do they really mean that?  Of course not, because such a belief run directly counter to the old Reganite "magic of the marketplace" dogma. 

     An alternative view, which would embrace a broader understanding of corruption, would be fundamentally skeptical of markets.  Such is the case for Mencius.  A modern Mencian would look upon the current crisis as a reflection of a deep and disfiguring corruption of humanity by the profit motive.  When we let profit determine our actions, when we provide such rich rewards for narrow, selfish, profit-seeking behavior, we lose something of our Humanity.  Here's an excerpt from Mencius, chapter 12.4:

If you talk to these emperors about profit, and in their love of profit they stop their armies – their armies will rejoice in peace and delight in profit.  Soon ministers will embrace profit in serving their sovereign, sons will embrace profit in serving their fathers, younger brothers will embrace profit in serving their elder brothers – and all of them will have abandoned Humanity and Duty.  When these relationships become a matter of profit, the nation is doomed to ruin.

   Now, that's what I call corruption!  But it is not, of course, what Palin means.  She means only to find an immediate political advantage, even if it runs against her and her party's underlying ideology and intentions.  For her "corruption" is just another political tactic, easily discarded when conditions suffice.  For Mencius, it is the inevitable outcome of the profit motive.

    If Gordon Gekko had been a Mencian, he might have said: "profit, for want of a better word, is corrupt."