The problems of the financial crisis stem from deep set beliefs. Try looking at money through a Buddhist lens …

When Lehman Brothers Bank collapsed in October 2008, threatening to take the rest of the banking sector with it, Alan Greenspan, former Chairman of the US Federal Reserve, declared that he was “in a state of shock and disbelief”. The Congressional Oversight and Reform Committee investigating the crisis asked him what he meant. He replied:

An ideology … is a conceptual framework with the way people deal with reality. Everyone has one. You have to – to exist. The question is whether it is accurate or not. And I am saying to you, yes, I found a flaw. I don’t know how significant or permanent it is, but I’ve been very distressed by that fact. [The] flaw in the model that I perceived is the critical functioning structure that defines how the world works.

Greenspan explained that he had always believed that “free, competitive markets are by far the unrivaled way to organize economies” and that banks would manage their risk rationally because that was in their best interests. The system would regulate itself.

Economists and financiers are usually too focused on markets, wealth and trade to discuss philosophy. But as the economic tide has withdrawn, leaving bad debts and dodgy investment schemes, it has also exposed the questionable assumptions on which the system has rested. There’s no reason to imagine that Buddhists would have insights into fiscal policy or economic cycles, but “views”, their nature, origins and effects, have been the tradition’s abiding concern.

The free market ideology having failed, those in power turned to pragmatic solutions: “There are no atheists in foxholes and there are no ideologues in a crisis,” said Ben Bernanke, Greenspan’s successor. Conservative governments part-nationalised banks and breached borrowing limits; monetarism was out and Keynes was back; and bankers are received the opprobrium heaped on trade unions in the 1980s.

But there is more to this continuing  financial crisis than the failure of certain ideas about the market. The feelings prompted by the crash of 2008 recalled vertiginous disorientation that followed the collapse of the Soviet Union. The normative picture of the world, which had viewed it through the prism of a bipolar conflict, no longer prevailed and a gap opened in which new ideas could take hold. 2008/9 is such a time. Old certainties are dissolving and the world is realising that what had been “reality” was in fact a perception: a human construct, not a fact. It’s not just that we don’t know whether the recession will turn out to be a brief interlude or the start of a rolling crisis. We glimpse, if only for an instant, the contingent, intangible basis of the system itself.

When the Buddha left home on a quest for the truth he joined the sramana movement of religious wanderers and found himself in a whirlpool of “speculative views”. His culture was haunted by fear of death, which was profoundly threatening whether it meant obliteration or rebirth. The sramanas sought the true Self, or atman, because that alone would survive death, and their philosophies obsessively circled the nature of identity. One of the Buddha’s greatest contributions was the realisation the sramanas’ ideas about identity were based on emotional needs, especially the need to avoid uncomfortable truths. In mistaking their rationalisations for reality, he said, people wove a net and became entangled.

Perhaps money is the modern atman – the key way our culture structures reality. Lehman Brothers was worth $15bn at the start of the week and nothing at the end. Shares in the Canadian communications company Nortel were worth $250bn at their height and $150m when it filed for bankruptcy. The value of banks themselves is bound up with the worth of the debt they hold, which no one can calculate. Where has the money gone? The only possible answer is that it was never “really” there in the first place. Banks can lend much more than the value of their deposits, and in the recent boom secondary markets priced the debts they were owed at many times the value of the entire world economy. Demand for them dictated the price, not intrinsic worth.

The very notion of financial value is a human creation. Money lets you buy real things from real people, but people decide the price. As James Buchan wrote in The New Statesman, “The world is held together only by instances of agreement between two or more people.” The willingness of the one party to sell and the other to buy depends, partly, on a “speculation” about future values. This should hardly need stating, but habit and greed obscure the insubstantiality of the process and we all get caught in the illusion. The climbing value of our houses makes us feel better; our status is bound up with our wealth; when people pay us well we feel “valued”; and our emotional security is interwoven with our financial security. Karl Marx long ago showed how money “abstracts” the relationship between buyers and sellers or employers and employees by connecting it to a larger system of relationships. Buchan quotes Hegel’s description of the mechanism through which we come to believe in the truth of the abstraction: “Through repetition, that which at the beginning appeared as merely accidental or possible, is confirmed as a reality.”

Amid such perplexity, we need an alternative “Buddhist economics” less than we need guidance in breaching the thickly formed texture of what we think is reality. There is no better advice than the Buddha’s words to the Kalamas, in their own philosophical perplexity:

Do not go upon what has been acquired by repeated hearing; nor upon tradition; nor upon rumour; nor upon what is in a scripture; nor upon surmise; nor upon an axiom; nor upon specious reasoning; nor upon a bias towards a notion that has been pondered over; nor upon another’s seeming ability; nor upon the consideration, “The monk is our teacher.”

He suggested they consider what their own experience and that of people they thought wise told them conduced to human flourishing. This is good counsel amid the euphoria of a boom or the dejection of a bust; it also cautions us against the persuasive claims of ideologies be they capitalist, social democrat or, indeed, Marxist. It is probably even good advice for making sound investment decisions.

The continuing economic crisis should sober us up. The world has become more dangerous and unstable, and Buddhists aren’t immune. If you think interconnectedness brings the reassuring assurance that we are not alone, then consider that it also means our jobs, food and environment bind us to the global web economy and we will suffer with it. Tens of millions will lose their jobs in the first truly global recession, and we cannot predict what tensions and conflicts will stir as people sense that their chance to join the culture of abundance is slipping away. But a crisis, as President Obama likes to say, is also an opportunity because it opens people to change. The glimpse it has afforded of the system’s insubstantiality is an opening for new ways of envisaging the world and its economic relations. If this crisis doesn’t make us rethink our views, nothing will. As Marx and Engels wrote in The Communist Manifesto:

All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses, his real conditions of life, and his relations with his kind.

This article was first published in 2009 for the UK Network of Engaged Buddhists. I’ve edited it a little here.