Moral Hazard Paves the Way for Social Collapse

The more the government institutionalizes moral hazard by passing laws that tempt people to act in ways that harm society, the faster society will decline. [U.S. Collapse: Part. II.]

National collapse may conjure up images of barbarians at the gate, but a more realistic image of a U.S. collapse would entail less immediate destruction and more degradation of lifestyle, as the elites carefully hold together the population they are manipulating. Indeed, a power-hungry member of the ruling elite might well argue that no collapse was even happening: “You still have food on the table, don’t you?” Well, yeah, except for the 10 million now permanently unemployed and until the now 40 million on food stamps get kicked off.

That a state entity entitling itself the “U.S.A.” will still exist is of absolutely no consolation if the social content has changed to the point that the “American Dream” has been transformed into the “American Nightmare.” Asking if the U.S. might collapse is thus not necessarily or even primarily a question about the strength of foreign enemies and, indeed, in the current era, the question has almost nothing to do with foreign enemies—all of which are relatively weak, except to the degree that U.S. politicians exploit the existence of anti-American feeling as an excuse for implementing the very policies that are promoting corruption while undermining the health of the U.S. economy and the civil liberties central to the American way of life.

Official refusal to hold rich bankers responsible for their actions, police mistreatment of protests by democracy activists, and politician bias in favor of austerity for the poor combined with free passes for the rich are all examples of core patterns of bipartisan American governance in the 21st century that are undermining the legal, economic, and even military (e.g., by degrading educational standards) security of American society. Moral hazard has been raised to the level of a core guiding principal of financial behavior by the post-2007 practice of bailing out “too big to fail” corporations while simultaneously refusing to hold the corporate leaders responsible for the policies that caused their companies to need corporate welfare in the first place. If the victims of muggings are punished and the muggers allowed to go free, then all citizens will face the temptation to become muggers—this hazard will threaten their morality. Similarly, if capital gains are taxed at half the rate of income earned from work (the current situation under Obama) or one third the rate (the situation under Bush), people will be tempted to give up working: it is hard enough to hold an honest job in the first place without having the government punish you for it! The more moral hazards the system places in the path of citizens, the more likely will be a general moral collapse.

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