There is a simple truism in life: If you keep doing what you are doing, you are going to keep getting what you are getting. Or, in biblical terminology: If you sow the wind, be prepared to reap the whirlwind.

Cause and effect: You don’t work, you don’t eat—you don’t eat, you go hungry. The principle is very simple and straightforward, right? Not so, it would seem—at least not for mixed-up Anglo-Saxon society today. Instead, we reward the incompetent, and bail out the greedy.

Consider the current administration’s economic stimulus plan.

A plan needed, we are told, because our economy is a mess, and falling consumer spending is threatening to drag the economy into recession. The solution: Run up the national debt another $168 billion and hand it out to people and businesses for the explicit purpose of encouraging them to spend more money.

It is not hard to see the problem with this solution.

The reason the economy is in trouble in the first place is because consumers have already been spending way too much money, and not saving enough—you can’t go on living beyond your means indefinitely. Government handouts may temporarily stimulate the economy, but encouraging people to spend more money will only promote more deficit spending, create more debt, and make matters worse over the long term.

And what is the government going to do once the $600-per-person handout is spent and the economy needs another stimulus? Print up another round of $600 and hand that out so more people who are living beyond their means can keep on spending themselves into a hole? Where does it end?

Instead, the politicians in Washington could lead by example by getting control over their own over-expenditures—not endangering the nation’s finances just to encourage more reckless spending.

Wall Street too is following the bad example set by politicians in Washington.

Currently, many of America’s biggest and most prestigious financial institutions are mired in a banking crisis of possibly bankrupting proportions.

Look at the damage: America’s largest brokerage house, Merrill Lynch, has reported its biggestloss in its 93-year history, and more write-offs are probably still to come. Citigroup, formerly America’s largest bank, reported the biggestloss in its 196-year history. Investment bank Morgan Stanley recorded its first-ever third-quarter losses in its 72-year history. Bear Stearns also recently experienced its first quarterly loss in its 84-year history. All told, losses originating in the subprime mortgage crisis total $124 billion. Yet, with some astute analysts predicting losses of at least $400 billion before all is said and done, the question is, who is still trying to hide the $276 billion in losses unaccounted for?

Considering the massive and largely unprecedented losses, you might be forgiven for thinking that heads would be rolling. After all, that is what capitalism is supposed to be about—being rewarded according to your works. One might presume the words “don’t let the door hit you on the way out” would be ringing in inept ceo’s ears.

But not in America. We reward corporate failures, even failures that lose tens of billions and cost thousands of jobs.

The departures of Merril Lynch ceo Stan O’Neal and Citigroup ceo Charles Prince, for example, were surprisingly pleasant—in the sense that they took home compensation in the hundreds of millions for being let go.

When O’Neal was asked to leave, Merrill Lynch board members made sure to carefully point out that the $160 million O’Neal got to take with him wasn’t a severance package, but just what the firm was contractually obligated to pay him. Sounds good but for the following fact, as noted by TheStreet.com’s James Cramer (emphasis mine):

[I]f you lose $8 billion, you can be fired for cause and be denied the contracted pay package. If $8 billion in losses isn’t cause, what is? But it seems that no company will fire a ceo and then say “sue us for the rest of your salary,” no matter how deserving the firing might be, and this was the most compelling case for a firing that I’ve ever come across that didn’t involve outright embezzlement.

Citigroup was even more gracious with ex-ceo Charles Prince, even though the losses under his regime could wind up exceeding O’Neal’s by billions. The Citi board conveniently allowed him to resign the day before the board of directors was to meet to decide his fate.

Isn’t that nice? No one even had to be fired, and Prince took with him a $40 million going-away present. Meanwhile, Citigroup is firing 20,000 employees to pay for the mess that Prince resided over.

Morgan Stanley’s ceo, John Mack, didn’t even get asked to leave, despite his multi-billion-dollar losses and the fact that he helped wipe out eight years’ worth of shareholder equity and forced the company to get a loan from the government of China. He will keep his $40 million annual salary, along with the more than $100 million in shares he was paid for his disastrous service.

And no doubt it won’t be long before some of these failed ceos are back at the helms of other multi-billion-dollar companies.

But rewarding bad ceo behavior is just the tip of the iceberg. The whole financial system is plagued.

While the big banks are rewarding failed ceos, and politicians are giving voters free money to spend, the Federal Reserve Bank is busily slashing interest rates (to the tune of the biggest monthly cuts in 25 years) and creating all kinds of extra money to prop up ailing banks. The federal government is helping too, allowing government-sponsored housing authorities to buy ever-greater numbers of devaluing mortgage investments from the troubled banks—shifting the risk onto the taxpayers.

Does anyone stop to consider that by bailing out the banks every time they get in trouble, future risk-taking is only encouraged? Cause of banking crisis: greed and speculation. Normal consequence: bankruptcy. By removing the consequence, it just legitimizes the bad behavior. More crises will be on the way.

If rewarding bad behavior were just limited to economics, maybe society would muddle on. But unfortunately, it is endemic in just about every aspect of our society. Even in international relations, politicians have no problem rewarding wrong behavior of other nations, as long as they win votes back home, or score political points.

The simple point is, rewarding wrong behavior only guarantees more wrong behavior—whether it is in politics, finance, or life in general. It might seem a no-brainer example of cause and effect, but it is a lesson that society is not learning.

To learn how you can avoid the illusory success of this greed-based society, and instead find true success—not just financially, but in life—read The Seven Laws of Success.