February 23, 2010 by Templeton Editor
In the last few months, we have posted excerpts from Sir John Templeton’s speech, “The Religious Foundation of Liberty and Enterprise,” which he delivered to Buena Vista College in 1993. This speech outlined five economic vices (envy, greed, pride, intolerance, moral relativism) and five economic virtues (cooperation, creativity, charity, adaptability, and integrity).
To continue our conversation on these economic virtues and vices, we are sponsoring a blog contest challenging those who maintain personal or professional blogs to answer the following question for a chance to win $500:
Taking this lecture into account, which vice, as described by Templeton, is most responsible for the recent economic downturn? Which of his five virtues is the most important to the economy’s rebound?
Contest entries must be submitted to this site by April 15, 2010. Click here to read more about the contest guidelines.
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March 11, 2010 by Templeton Editor
It’s been a while since we cruised around the blogosphere to see what people were saying about Sir John Templeton, so we’re due for another link roundup.
- “The Future of the U.S. Dollar” from Global Crisis News
- “Sir John Templeton Predicted Financial Chaos for Many Years” from Trump the Recession
- “Templeton Predicted ‘Financial Chaos’ Will Last Many Years” from Moneynews (of the two similarly named articles, this one probably offers a more thorough analysis)
- “The Best Investment In Uncertain Times” from Rational Spirit
- “Interview With James Montier – The Little Book of Behavioral Investing – How Not To Be Your Own Worst Enemy” (Part 2) from GuruFocus (has a good tidbit on Sir John’s take on self-control)
- “Tuesday March 8, 2010 Update” from Daily Market Update
- “Five Step Formula For Financial Success” from Ezine Articles
- “Famous Quotes in Stock Market” from Bell the Bull
- “A Short Investment Journey” from Retirement Investment (an interesting extended metaphor)
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March 9, 2010 by Templeton Editor
Lauren Templeton and Scott Phillips, coauthors of Investing the Templeton Way, will provide their analysis on John Templeton’s Buena Vista speech on the economic vices and virtues in upcoming posts. Please consider entering our contest on this topic for a chance to win $500.
Finally, the U.S. economy also ranks high on Sir John’s virtue of integrity. During the past twelve months the U.S. population has demonstrated, through many public acts and even elections, that it does not desire the government’s strategy of adding more public debt to the current balances. This can be easily viewed in a number of grass-roots political movements including the Tea Party, as well as the election of Massachusetts Senator Scott Brown. Given that the fundamental drivers supporting this political activism have been a rebuttal of increased government spending and national debt (that represents irresponsibility), we can see that the virtue of financial integrity is alive and well among the citizens of the U.S. This virtue can also clearly be seen in the sharp rise in the personal savings rate among Americans during the past twelve months.
As we can see, while the U.S. economy has demonstrated periods of economic vice, it appears that it is underpinned by strong virtue and has been for some time.
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March 4, 2010 by Templeton Editor
Lauren Templeton and Scott Phillips, coauthors of Investing the Templeton Way, will provide their analysis on John Templeton’s Buena Vista speech on the economic vices and virtues in upcoming posts. Please consider entering our contest on this topic for a chance to win $500.
Despite these clear examples of economic vices, and the demonstrable role that U.S. government institutions play in their enactment, the bedrock of the U.S. economy remains virtuous. For this, we should be thankful. One of the most important driving forces behind the U.S. economy and its persistent success over the past one hundred years has been its creativity, which is the second economic virtue that Sir John lists in his speech. The U.S. economy is often associated with large firms with strong branding such as Wal-Mart, GE, McDonald’s, Coca-Cola and so on, but the reality is that small businesses, comprised of entrepreneurs, represent 99.7 percent of the nation’s employers, 50 percent of GDP, 97 percent of exporters, and on average are launched at an annual clip of 500,000 per year. The propensity for Americans to envision a better way of doing things, and then accepting the risk of the unknown (and hence possible failure and personal loss) remains one of their most important strengths. In this sense, as long as the U.S. government does not impede the ability of these individuals to act creatively, take risk, and start new businesses, the U.S. economy has been and should remain wealthy in this virtue.
Likewise, the U.S. economy ranks high in Sir John’s third economic virtue: charity. The U.S. has been and remains one of the most charitable societies ever known to humankind, as it has always expressed generosity to those in need. The simple truth is that the U.S. gives away approximately $300 billion per year in charitable donations, and as long as Americans can continue to pursue their dreams and build wealth, we should expect this behavior to continue. Most recently, this behavior can be clearly seen in the unmatched response by Americans to the recent earthquake devastation in Haiti.
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March 2, 2010 by Templeton Editor
Lauren Templeton and Scott Phillips, coauthors of Investing the Templeton Way, will provide their analysis on John Templeton’s Buena Vista speech on the economic vices and virtues in upcoming posts. Please consider entering our contest on this topic for a chance to win $500.
As we know, this behavior of utilizing debt to live beyond one’s means strained the balance sheets of the households and the financial intermediaries that facilitated the behavior to the point of nearly toppling the financial system itself. In the wake of investment bank failures such as Lehman Brothers, and the de facto failures of the remaining investment banks such as Merrill Lynch, the U.S. government implemented a form of wealth redistribution by infusing public taxpayer money into these firm’s balance sheets to ensure their survival (TARP). In doing so, the government transferred liabilities from these indebted firms to the U.S. taxpayer. When the government ostensibly rewarded these firms for their risk taking by allowing them to survive, they committed a highly visible act of envy by forcibly reallocating resources that the firms dearly sought, but had no right to obtain.
Many pundits correctly warned of an ensuing “moral hazard” that would develop, where irresponsible firms may come to believe that their behavior is acceptable since the government will ensure their survival. This is one good example of what Sir John referred to in his discussion of the evils of envy since “envy can blur the boundaries of private property . . . when the boundaries of private property are gone, so too go many of the moral rules of society . . . the social conscience is affected, and vice becomes more generally practiced.” We must acknowledge that the redistribution of taxpayer money to irresponsible firms set a precedent for this economic vice to become more generally practiced.
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February 25, 2010 by Templeton Editor
Lauren Templeton and Scott Phillips, coauthors of Investing the Templeton Way, will provide their analysis on John Templeton’s Buena Vista speech on the economic vices and virtues in upcoming posts. Please consider entering our contest on this topic for a chance to win $500.
One of the most interesting exercises we undertook after reviewing Sir John’s 1993 speech on economic vice and virtue was to take the ideals he described in his discussion and look for evidence of them in the recent past and present.
With that in mind, the U.S. economy provides a dynamic panorama where careful observers can view many of the economic vices and virtues that Sir John described in his 1993 speech.
Within the simple time span of the past twenty years, we have witnessed the economic vice of greed, and its component of covetousness as it was manifested through the steady leveraging of both personal and financial sector balance sheets over the course of the 1990s and first decade of the 2000s. The accumulation of debt in an attempt to obtain the image, but not reality, of prosperity continued unabated until the behavior imploded from its own over-indulgences. This phenomenon was aptly illustrated by a household debt to GDP ratio that ascended from 66 percent in 1998 to approximately 100 percent by 2007.
Interestingly, but far from lost on many onlookers, this consumer behavior needed outside assistance in order to come to fruition. In that role, institutional forces including the Federal Reserve incentivized spending over saving for years on end by providing remarkably low interest rates during the early-to-mid 2000s. Low rates provided the bedrock to support acts of greed and covetousness as consumers responded to this economic incentive through accelerated dissaving, conspicuous consumption, and speculation on real estate assets through borrowed money. Through the market mechanism of rising house prices, those who borrowed against these rising values could obtain larger stocks of material goods including cars, furniture, electronics and other luxury items. These lifestyles became a manifestation of greed and covetousness as they would have been unobtainable if they were predicated on personal levels of income.
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February 18, 2010 by Templeton Editor
John Templeton’s fifth economic virtue is integrity. He outlined this and the other economic virtues and vices in his speech to Buena Vista College, “The Religious Foundation of Liberty and Enterprise.”
The final economic virtue is the most important: it is integrity. In the Old Testament, we find many references to the uses of property. Most deal with the ethics of its use. And the rules all come down to personal integrity. Pay your debts. Don’t cheat your neighbor. Don’t use false weights and measures. Keep your financial commitments.
…
Not paying one’s debts is a form of stealing. The creditor who extends a service is making a contract. Not paying that creditor on the agreed terms is a violation of contract. It takes another’s property without rightly restoring it in the agreed upon time.
Similarly, laborers should practice diligence in their work habits. Goofing off, too, is a form of theft, just as hard work is the practice of exercising integrity.
An individual who makes too many promises, and cannot keep them all, is not acting with integrity. But a person who keeps commitments, and deals honestly with others, is practicing this fifth economic virtue of integrity.
The market economy depends for its survival on the personal integrity of those acting within it. People who don’t act with integrity are also punished by the mechanism of the market. Credit will not be extended, for example.
Governments, too, can practice the virtue of integrity. We have gotten used to governments that run high deficits. Every day we hear about politicians that do not tell the truth about the state of the nation’s finances. Inflating the currency away through unsound political practices is a form of changing weights and measures.
An economically virtuous government will not do these things. Instead, it will insist on practicing the kind of integrity that religious faith expects from individuals.
Nothing can kill economic liberty like a widespread lack of personal integrity. Over time, people stop trusting others. When you cannot trust your neighbor, you cannot trade with him. Enterprise comes to a halt.
But when people do what they say they will do, and deal honestly, then you have a moral foundation for economic growth. The society can then flourish economically and morally.
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February 16, 2010 by Templeton Editor
John Templeton’s fourth economic virtue is adaptability. He outlined this and the other economic virtues and vices in his speech to Buena Vista College, “The Religious Foundation of Liberty and Enterprise.”
Just as there are many ways to be charitable, there are many ways people can contribute to society. That is why we need to be able to understand the fast pace at which society changes, to roll with the punches, be willing to change, and why we need to understand the fourth economic virtue: the virtue of adaptability.
The state of the world is never static and never homogeneous. Every day is unique and requires a unique response from all of us. The entrepreneur responds to this uniqueness by always evaluating his investments and current concerns. He is ready and eager to meet changing circumstances.
The consumer too must be eager and adjust to modern realities. Laborers need to understand that they can not always get the kind of salaries they want or the particular job they want.
Most of us at some point in our lives will suffer disappointments, get fired from a job, have our wages cut, or be asked to make undesirable career moves. We may be called to change our occupations or undergo some kind of retraining. We must learn to adapt. New challenges help us to grow. Continue Reading »
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February 12, 2010 by Templeton Editor
Today we continue to explore what John Templeton listed as the five economic virtues by looking at his thoughts on charity. Again this is from his thought to Buena Vista College entitled “The Religious Foundation of Liberty and Enterprise.”
The third economic virtue is charity. Profit and exchange alone are not enough to sustain the good in society. We need to care for those in society who cannot care for themselves. At a minimum, that means giving attention to children and the aged who cannot care for themselves. God has obligated us to be charitable first to them.
[...]
We cannot help but be encouraged by the extraordinary generosity that leads American people to contribute $120 billion to charitable cause every year.
The most generous societies that have ever existed are also the freest. Why? A free economy fosters the wealth and the sense of responsibility that leads to charity. The Bible says, “Give and it shall be given unto you.”
[...]
The virtue of charity recognized that none of us are the ultimate owners of private property, for God is the ultimate owner and master of all our resources. We are merely stewards of it. It is by being obedient stewards that we can best practice the economic virtue of charity.
Posted in Philanthropy, Philosophy, Quotes | Tagged charity, economic virtue, John Templeton, stewardship | Leave a Comment »
February 9, 2010 by Templeton Editor
In the last few months, we have shared what John Templeton thought were five economic vices: envy, greed, pride, intolerance, and moral relativism, as cited in his speech to Buena Vista College entitled “The Religious Foundation of Liberty and Enterprise.” Now we are exploring what he listed as the five economic virtues.
The second economic virtue is that of creativity. This is another word for entrepreneurship. It is the ability to imagine possibilities that have yet to come in to existence.
From the economic point of view, the virtue of creativity is the most important cause of wealth in society. It introduces new goods and services. It helps us to use our resources more effectively. It creates jobs and raises our living standards. It is the key to bringing the world from poverty to prosperity.
Of course, creativity demands the freedom to act. Wherever people are left free to exercise their creative capacities, the wealth of society will grow.
Millions of new businesses appear every year. But where enterprise is hindered, both prosperity and human liberty suffer. The society will stagnate. People will not be able to fulfill the highest potential.
Economic progress is in part driven by both the virtue of creativity and the related virtue of emulation. Success in a market economy comes from improving the degree of efficiency in the way goods, services, and labor are used. And others’ success at this can induce us toward right ambition. It leads us to seek entrepreneurial gain and to fmd better ways of doing things, making us better and more productive members of society.
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