Economic Venting

Seeing President Bush the other day acknowledge we are in economic turmoil, but that we shouldn’t worry because the government’s here to help, and that they’re dilligently working on it, is a bad sign.  It looks like this morning will see another great and terrible solution.

Market problems (a direct consequence of various government economic interventions) are bad enough.  But getting the government even more involved is even worse.  Bad problems become worse.  A moderate recovery time becomes a slow recovery time.  Or a problem gets pushed to the backburner, for someone else to worry about (like the national debt, say).

American hubris is near an all-time high: after all the government-induced market turmoil over the decades since serious government intervention started (like the Federal Reserve or the New Deal, for instance) we still think we can control market forces and subdue economic crises by getting together, having a meeting, making a policy, printing some money, and giving some speeches.  The Soviets tried this approach for decades and it was quite disastrous.  Socialism (admittedly closer to our current situation than Soviet Communism) has crippled Europe’s economic health.  Central economic planning is really what’s going on, and it is disturbing for me to see both parties sickeningly and quickly cooperate to “fix” a problem by making it worse.

The biggest problem is that the arrogant, high-and-mighty Washington elitists have made no concerted effort to understand the problem.  They assume their charts and graphs and equations (or their subjective, highly biased interpretation of them) are correct, with no attempt to truly investigate not only the fundamentals of their economic models, but also the effect of prior government economic interventions.  The assumption is made that they understand the problem and know how to fix it, when in reality, neither is the case.

Some of the biggest government economic interventions led up to (i.e. the Federal Reserve) and prolonged significantly (i.e. the New Deal, Hoover Dam, etc.) what we call The Great Depression.  Another set of grandiose economic interventions (i.e. LBJ’s war on poverty) led up to the stagflation problems in the 1970s: prices go up (inflation) but economic growth is stagnant.  Stagflation conditions certainly are plausible over the next few years.

The worst consequence of this biggest problem is that individual liberty has shrunk.  We move closer to a totalitarian state, where the government takes nearly everything from us (like the opportunity to sell stocks, or an increasing set of long-term financial obligations, or our money via inflation) to care of everything for us (listen to Nancy Pelosi, for instance, talk of government “insulating Main St.” from the effects of this economic crisis).

I do not believe that many in Washington are complicit in the disaster: most are economically ignorant, unaware of the ineptitude of and destruction associated with government economic intervention.  But this is no excuse.  It is our responsibility to be educated, to be aware, and to understand the principles (i.e. freedom, individual responsibility, private property rights, etc.) that America was founded on, and that we have largely ignored in the last hundred years or so in favor of a new set of values that hold economic intervention in the highest esteem.

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3 Comments

Filed under Austrian Economics, fiscal policy, Libertarian, politics, role of government

3 responses to “Economic Venting

  1. socialist brother-in-law

    Hey, I’m glad you noticed that the Republicans are now acting like socialists. I was wondering when you’d post about it. Unfortunately, their idea of socialism is socialism for the rich: bailing out the people who already—by any reasonable measure—have plenty, and letting everyone else pick up the tab.

    As a liberal, I have lots of problems with the government bail-out of these big companies, but I see the problem stemming from “conservative” ideas in the first place. In 2004, the SEC decided to relax some regulations, allowing five companies to expand their debt/capital ratios. How did that work out? Three of those five companies have basically fallen apart this year (one bailed out by the government, one allowed to go out of business this week, and one bought for a fraction of its previous value by another bank that will probably be in trouble itself after a while).

    John McCain likes to point out some of the same problems I do: corporate greed, insufficient oversight, etc. But, while he hasn’t been very specific, it looks like his solutions are 1) huge tax breaks to the people and companies who caused the mess, 2) more bail outs as necessary for other companies that made similar poor choices, and 3) a “commission” to get back to us later about what might have gone wrong.

    I’m not convinced a Democratic government would get it 100% right, either, but at least I don’t think it would be quite as much wrong.

  2. plato04

    Agreed that John McCain, like the GOP, talks out of both sides of his mouth. His logic is inconsistent and his arguments make no sense. It’s very difficult to figure out what he’d do in any given scenario. At least the Democrats have some sort of principle they strive to adhere to (i.e. wealth redistribution).

    I think the same neoconservative influences that transformed W. from a “humble foreign policy” to a hyperinterventionist foreign policy are afoot tutoring Sarah Palin. She’ll tow the non-sequitor that is the GOP party-line.

    I think American government alliances with big business go at least as far back as Hamiltonian central banking notions, and include such 19th century ideas as land grants for railroad manufacturers, subsidizing the rich and wealthy. And then we wonder why only a few companies were using the railroads?

    I may not call it socialism: it’s more an unholy alliance between government and big business. It’s closer to a form of fascism or corporatism. But I empathize with many in the left that recognize this. And I certainly don’t find it any more tolerable than socialism. I may actually prefer socialism than these unholy alliances which have created monstrous American businesses. Socialism is at least more sincere, up-front, and, in its own way, transparent than this detestable form of corporatism.

    I see the SEC “de-regulation” differently than you. While a mainstream conservative would call this “de-regulation,” I see it as government mismanagement. It’s another evidence that the government does a poor job of regulating. This is another testament of government ineptitude when it comes to central government planning.

    Instead, let the market regulate itself. Why is the government the best determiner of the optimum debt-to-capital ratio? Why is the government qualified to set economic regulations at all? Is it constitutionally authorized to do so? What are the negative consequences from government regulation? These are the type of questions that I think people should think about and talk about, instead of swallowing whole the idea that government regulation is obviously good without critical analysis of this assumption and its effect on individual liberty.

    And these are the type of questions, of course, that keep me far out of the mainstream.

    One of my hopes is that as a result of my admittedly vain babblings, individuals start asking the same sorts of questions about government, liberty, and freedom. This could be considered the entire purpose of the blog.

  3. plato04

    Most importantly, Socialist Brother-in-Law, (your importance has mandated the use of capital letters) thanks for chiming in. Your thoughts are always welcome.

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