By refusing to consider the consequences of their actions, those who created the financial crisis exemplify the banality of evil, writes Shoshana Zuboff.

    The financiers at AIG were awarded millions in bonuses because their contracts were based on the transactions they completed, not the consequences of those transactions. A 32-year-old mortgage broker told me: "I figured my job was to get the transaction done ... Whatever came after the transaction - that was on him, not me." A long list of business executives have reaped sumptuous rewards even though they fractured the world's economy, destroyed trillions of dollars in value, and disfigured millions of lives.

    Most experts now blame a lack of regulation and oversight for this madness. Or they point to misguided incentive programs associated with the push for shareholder value that tied executive rewards to a firm's share price. These factors are surely important, but they ignore the terrifying human breakdown at the heart of this crisis.

    Each day's economic news leaves me haunted by Hannah Arendt's ruminations on Nazi war criminal Adolf Eichmann as she reported on his trial in Jerusalem for The New Yorker 45 years ago. Arendt pondered "the strange interdependence of thoughtlessness and evil" and sought to capture it with her famous formulation "the banality of evil." Arendt found Eichmann neither "perverted nor sadistic," but "terribly and terrifyingly normal."

    Remoteness from Reality

    He was a new type of criminal, a participant in "administrative massacre" who committed his crimes "under circumstances that make it well-nigh impossible for him to know or to feel that he is doing wrong." Eichmann had no motives other than what Arendt described as "an extraordinary diligence in looking out for his personal advancement…he never realized what he was doing.That such remoteness from reality and such thoughtlessness can wreak more havoc than all the evil instincts taken together," she concluded, "…was, in fact, the lesson one could learn in Jerusalem."

    The economic crisis is not the Holocaust but, I would argue, it derives from a business model that routinely produced a similar kind of remoteness and thoughtlessness, compounded by a widespread abrogation of individual moral judgment. As we learn more about the behavior within our financial institutions, we see that just about everyone accepted a reckless system that rewards transactions but rejects responsibility for the consequences of those transactions. Bankers, brokers, and financial specialists were all willing participants in a self-centered business model that celebrates what's good for organization insiders while dehumanizing and distancing everyone else - the outsiders.

    This institutionalized narcissism and contempt for the "other" found its ultimate expression in the subprime mortgage industry, and the investment business derived from those mortgages. In far too many cases, the obvious risks to borrowers and investors were simply regarded as externalities for which no one would be held accountable. If there was a family forced to relinquish its home or a retiree exposed to unfathomable risks in her pension, these human beings had not been imagined. Their suffering was invisible to those on the inside: it was so remote that for all practical purposes it did not exist.

    No Feelings of Empathy

    As in war, that emotional distance made it easier to operate in one's own narrow interests, without the usual feelings of empathy that alert us to the pain of others and define us as human. The narcissistic business model provided the modern day "circumstances" that enabled individuals to ignore the poisonous consequences of their choices. This paved the way for a full-scale administrative economic massacre.

    Despite Arendt's deep understanding of the Nazi system to which Eichmann conformed, she insisted that the central moral issue - not only of the trial but of all time - came down to the nature and function of individual human judgment. "What we have demanded in these trials, where the defendants had committed 'legal' crimes, is that human beings be capable of telling right from wrong even when all they have to guide them is their own judgment, which, moreover, happens to be completely at odds with what they must regard as the unanimous opinion of all those around them."

    Eichmann's trial sent a message to the world that individuals must be held accountable for their judgment, even when they have "thoughtlessly" conformed to toxic institutional circumstances. This message is not restricted to the unspeakable horrors of mass murder. It is relevant to the relationship between individual judgment and institutional processes in any situation. It's a message that says: you can't just blame the system for the bad things you've done. Yet to the world's dismay, thousands of men and women entrusted with our economic well being systematically failed to meet this minimum standard of civilized behavior. They did not capably discern right and wrong. They either did not judge, or they did not act on their judgment. This failure defines the raw heart of the public's outrage at each fresh disclosure of outlandish bonuses. It is less a thirst for revenge than it is a rebellion against this banal evil.

    The public's indignation reflects a sense of morality that points deeper and truer than the laws devised to protect self serving business practices. The call now is to take back our community, to return to a place where people are capable of telling right from wrong because they recognize themselves in one another. The public demands - no, commands - that our leaders reassert their capacity, their duty, to judge what is right, even if that means standing up to lawsuits and angry bankers.

    Vacuum of Moral Leadership

    Edward Liddy, the Paulson-appointed chairman of AIG, initially recommended that the bonuses given to its employees go forward, though he found it "distasteful and difficult." Mr. Liddy missed what could have been the shining moment of his career by failing to insist from the start on what he thought to be right, despite "the unanimous opinion of all those around him." Neither Mr. Liddy nor anyone in the Obama Administration has demonstrated that kind of moral leadership, as they now scramble to respond to the public's demand that AIG employees return their bonuses.

    By now the existential security of millions of people has been threatened or destroyed. No one is safe from the waves of value destruction set into motion by the banal evil of this self-centered business model and the unquestioning participants who failed to assert their own moral judgment. The urgent lesson for capitalism's heirs redounds through every headline: There is no "other"; there is only us. The damage that was supposed to be "theirs" is now shared misery on a global scale.

    Since the days of Eichmann in Jerusalem, our understanding of human rights has evolved to include economic, social, and cultural rights. The Universal Declaration of Human Rights adopted by the U.N. includes "the promotion of social progress and better standards of life in larger freedom." The U.N. Commission on Human Rights has called the business community to account, stating that "transnational corporations and other business enterprises, as organs of society, are also responsible for promoting and securing the human rights set forth in the Universal Declaration of Human Rights."

    The economic crisis has demonstrated that the banality of evil concealed within a widely accepted business model can put the entire world and its peoples at risk. Shouldn't those businesses be held accountable to agreed international standards of rights, obligations, and conduct? Shouldn't the individuals whose actions unleashed such devastating consequences be held accountable to these moral standards?

    I believe the answer is yes. That in the crisis of 2009 the mounting evidence of fraud, conflicts of interest, indifference to suffering, repudiation of responsibility, and systemic absence of individual moral judgment produced an administrative economic massacre of such proportion that it constitutes an economic crime against humanity.

    Shoshana Zuboff is the author of The Support Economy: Why Corporations Are Failing Individuals and the Next Episode of Capitalism. She was the Charles Edward Wilson Professor of Business Administration at Harvard Business School.