Money, sex and power: a lesson from Mr. Strauss-Kahn

Quote
“The consequences arising from the continual accumulation of public debts in other countries ought to admonish us to be careful to prevent their growth in our own.”  John Adams, second US President, 1797.

News

A week ago, Dominique Strauss-Kahn (DSK) was the charismatic head of the IMF, taking a leading role in solving the Eurozone crisis and setting his sights on winning France’s Presidential election in 2012.  Today he is without a job, on bail for $1 million, and facing grave charges of sexual assault.  Yet according to the Financial Times, the alleged incident with a hotel chambermaid may not be DSK’s greatest error of judgment – instead it is his handling of the Eurozone debt crisis. 

As head of the IMF, he chose to treat the financial woes of Greece, Ireland and Portugal as problems of liquidity, not of solvency, bailing them out with huge loans on condition of draconian measures to reduce government borrowing.  He eschewed the options of debt restructuring or possible withdrawal from the euro, which would allow these countries to devalue their currency and increase exports, to offset weaker domestic demand resulting from spending cuts. As it is, the current measures are pushing Greece further into recession, tax revenues are falling and borrowing requirements remain stubbornly high.

What do these two decisions associated with Dominique Strauss-Kahn have in common?  Both are relationship problems, both illustrate how something valuable can turn into something destructive when removed from its relational boundaries.  Sex is good but only in the safe limits of a consensual, committed, socially-sanctioned relationship (which once was called marriage).  When a person’s appetite for sex is stronger than the commitment to express it within these limits, it can wreak havoc.

Similarly with debt.  While the ideal is to avoid debt, it can be useful if kept within secure boundaries governing the relationship between borrower and lender, summed up as follows.  The person who makes the loan should share the risk involved in its recovery; the lender should only burden the borrower with an amount that can be reasonably repaid; the borrower must view the loan as a binding commitment to repay the lender; and finally, the lender must be prepared to cancel debt should the borrower become genuinely unable to repay.  The problem is that financial institutions have moved away from lending within relational boundaries, and treat debt more like a commodity; this is a major root of the financial crisis.

Power can deceive people into thinking that the normal rules of relationship (usually enshrined in law) somehow don’t apply to them.  DSK’s alleged incident with the chambermaid may well have cost him his career and reputation, even before his trial.  It remains to be seen what price will finally have to be paid (and by whom) for the way in which banks and global financial institutions have torn up the relational rule book regarding debt.

Read on...

The economist Paul Mills has written about the current financial crisis from the perspective of the relational principles on debt found in the Bible.  You can read his Cambridge Paper here.

Walk the talk

How seriously do we consider the impact of debt on relationships?  Would it be helpful to review your own lending or borrowing in the light of the relational principles above?

The last word
From the Bible, Psalm 37, verse 21: “The wicked borrow and do not repay, but the righteous give generously;” and Proverbs 22, verse 7: “The rich rule over the poor and the borrower is slave to the lender.”