Editorial – You, Me, and AIG

Moral outrage is spewing across America like some kind of pecuniary Vesuvius. In the face of foreclosures, job losses, and a desperately unstable economy, everyone from plumbers to the president is calling for heads to roll at A.I.G.

Not just the heads of those who pleaded for a government bailout and then handed $165 million in bonuses to executives; executives ?in the very unit of A.I.G. that arguably turned a stable, prosperous insurance company into a dice-rolling financial firm in search of quick profits.?

No, the outrage is also aimed directly at the 463 execs who took that bonus money.

The question (and rightfully so) is this: How dare they take a reward without earning it first?

?Have the recipients of these cheques no shame at all?? demanded Representative Earl Pomeroy, Democrat of North Dakota, on the House floor.

Which makes me wonder?beneath all that righteous indignation, does anyone else get the incredible irony of it all? The realization that, except for the difference in scale, the behaviour of those A.I.G. executives is fundamentally the same as millions of average consumers who gambled with debt and are losing it all?

Because That’s exactly what most consumer credit is: taking a reward (big-screen TVs, vacations, clothes, electronic toys) before we’ve earned it.

It’s one thing to be strained by credit for something essential (say, medication you couldn’t otherwise afford), but there’s no arguing that an attitude of entitlement drives our consumer culture. We want it, we want it now, and there’s no reason we shouldn’t have it.

The stories are all over the news?millions of people are drowning in debt from high-interest credit cards and subprime mortgages.

In one case, a woman was losing her house because of staggering credit card debt. When the camera was done panning the half-empty home and her tearful face, there was a mumbled explanation of how maybe, after all, she didn’t need those hundreds of shoes and purses she’d bought on credit. She looked at the piles of merchandise with longing; it was going to be so very, very hard to give it all up on eBay.

In another example, a couple took out a subprime mortgage on their home to pay for vacations and a new kitchen. When their revolving interest rate went up, they could no longer pay their mortgage. With puzzled expressions, they wondered if maybe they should have saved up for their expensive holiday instead.

Yes, there are those who have fallen on hard times because of medical expenses or other emergencies, but a common theme in far too many articles is that people have knowingly made bad financial choices because they felt entitled to the ?bonus? of buying things before they had earned them.

And besides, comes the plaintive cry, it was there. How could we say no when they were offering it to us?

Essentially, It’s the same argument used to justify accepting those hefty bonuses: it was in the contract. Under mounting pressure several A.I.G. executives have agreed to hand the money back, but that doesn’t justify having accepted it in the first place.

But what of the social cost, you may ask? After all, the A.I.G. bonuses are only possible because of taxpayer money. It isn’t fair that ordinary people should have to pay for the excesses of others, especially others who already have so much.

The same thing can be said of the ?bonus? of easy credit. Our landfills are overflowing with the stuff that It’s so effortless to buy and discard. In developing countries, our cast-off cell phones and laptops form mountains of toxic waste. Besides the chemicals that leach into and poison drinking water, thousands of workers are exposed to hazards like toxic fumes and acid spillage as they labour to salvage the parts for pitiful pay.

It may not be in our backyard, but ordinary people are paying every day for the excesses we enjoy thanks to the unearned ?bonus? of easy credit. Imagine how much lower the social cost would be if we only took what we had earned.

Should executives in bailed-out companies be rewarded with bonuses? Absolutely not. But oh, how the wails of moral indignation ring strangely hollow.