The Good News

Believe it or not, there is good news in this economic mess.

One piece of good news is that individuals of all stripes are skeptical of this government solution: they may begin to question the wisdom of government economic intervention.  This response can take many flavors, like questioning whether we can afford all of this, for instance.

With all the focus on our domestic mess, there’s a reduced risk of getting involved in foreign military adventures.  Few people really think this is a good time to attack Iran, say.  So this is positive.  Avoiding war and violent conflict is positive.

One of the biggest pieces of good news is the strength of the market.  In this case, I mean the market as in individuals acting and transacting freely.  In times of incredible stress and strain (like now) when forces (like the federal government) continually oppose individuals acting freely, the market still delivers: cars, groceries, toys, clothing, etc.  Supplies may fluctuate, but as long as prices have some flexibility, then many wrinkles get naturally smoothed out.  I have yet to see a grocery store with empty shelves.  It’s relatively rare to even see an item out of stock nowadays, barring a very unusual sale. 

This is remarkable considering what little variety (and quantities) used to be in general stores, for instance, or what little variety American pioneers had in their civilization, or what absolute poverty (when compared to today’s relative wealth) mankind has lived in when compared to the prior and current centuries.  The differences are remarkable.

Seeing the market under stress and still providing goods and services (I can still get a car wash, for instance, or cheap medication, or frozen vegetables, or a new car, or a showerhead, or thousands of other things) is a testament to its strength and durability, despite efforts which effectively disrupt economic activity.

Perhaps this is a crude metaphor, but I can’t help thinking of that scene in Spiderman 2, when the train is racing away to the edge of the track, increasingly accelerating.  It seems hopeless.  All are doomed.  Spiderman tries a couple of things that fail pathetically.  And then he finds something that works.  He holds on for dear life, and the viewer is amazed at Spiderman’s strength and durability to withstand the crisis and save the train.

The market, similarly, performs very well under very stressful and tense situations, if given freedom to do so.  Seeing it not catastrophically crumble and buckle and fail is to me some sort of miracle.  I pray it will not crumble and buckle and fail until the appointed time, and I think we have (at least) several decades left before things start looking really really ugly.

May we be prepared when that day arrives!

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11 Comments

Filed under Austrian Economics, Libertarian, Personal, politics, role of government

11 responses to “The Good News

  1. If you laissez-faire apologists are lucky, maybe you can bring about another Great Depression. Which, if you think about it, would really be just about the last thing you’d want to have happen, since it would most likely mean an even greater increase in the size and scope of government in the long term. And, if the last half century has taught us anything, it’s that it is hard to make the government small after it has gotten big.

    Hence, perhaps one should vote for Obama, as he likely will, à la Clinton, finesse the size of the government to respond to our economic woes – which I think are more serious than you admit – making government bigger in some areas, and smaller in others, thereby preventing a total collapse, which would result in either authoritarian rule or anarchy, neither of which appeals to me.

  2. plato04

    I’m sorry to read of your mistaken faith in central economic planning. I cannot understand how you, along with millions of others, assume that laissez-faire economic policies led to the Great Depression, when in reality, laissez-faire economic policies of the 19th Century lead to panics, yes, but few of any length or depth or breadth comparable (say, within an order of magnitude) to the Great Depression, which marked a huge uptick in government economic intervention.

    It started, of course, with the Federal Reserve in 1913, the U.S. sanctioned bank, which financed America’s Johnny-come-lately entry into WWI. Then there was the inflationary, artificially-low-interest-rate buildup (let me emphasize this was the doing of the government-sacntioned Federal Reserve) of the 1920’s, followed by the inevitable collapse of unsustainable investment.

    Instead of a rapid recovery (like the panics of the 19th Century), further government involvement, like the Hoover Dam and later the New Deal, greatly stagnated economic growth, reallocating capital where it was least efficient and least effective at combating the economic conditions.

    FDR confiscating Americans’ gold in 1933 was only one step that prolonged the unnecessarily long agony. It’s a classic example of the government misallocating resources (and in an anti-liberty fashion).

    Whenever we think that some government entity is better able to control market systems than individuals acting freely (the real definition of the market), we are digging our own grave.

    In summary, with government interventions (like a government-sanctioned central bank), corrections will be necessary. But they need not be years long if the government gets out of the way and lets the market correct itself. This is one of the greatest lessons of thousands of years of economic history. One of the great economic tragedies is that as time goes along, the less we seem to understand about how economies work.

  3. The causes of the Great Depression were manifold and messy. But what’s clear is this: the idea that the free market is self-correcting is just as much a historical fallacy as the idea that central economic planning is the way to go. Both extremes are bad. The answer is balance. That’s all I was trying to say.

    I’m an intellectual not an ideologue. I have no faith in central economic planning. But neither do I have any faith in a completely unfettered free market. I’m far too cynical, I suppose. I believe that people are, at base, ruled by things like greed. Unfortunately, history seems to confirm my suspicions.

    Though I really do wish transportation in America, especially air travel, would be freed from many of the shackles of regulation. I’ve love it if foreign airlines could compete for business in the U.S. Traveling by airplane in the U.S. is a nightmare. Traveling by airplane on some airlines in Europe and Asia, by contrast, is a joy.

    Still, I gotta say, I like the interstate highway system, brought to you by – who else? – the U.S. Government. I also really like libraries. So it’s a mixed bag.

  4. socialist brother-in-law

    Plato04 wrote: “Instead of a rapid recovery … further government involvement … greatly stagnated economic growth, reallocating capital where it was least efficient and least effective at combating the economic conditions.”

    If that is your concern, I really hope you’ve contacted your Senators and Congressperson this morning about the current administration’s plan to authorize $700 billion in transfers to the very people and organizations who made very poor decisions in the last decade, with no strings attached. That seems like the most inefficient allocation of capital I can think of.

  5. plato04

    Matt,

    Thanks again for chiming in.

    Interesting thoughts on air travel.

    Pity you’re not an ideologue. I admit I do not really understand how one can talk and understand and believe in ideas and not be some sort of ideologue.

    Maybe I misunderstand what an “ideologue” is (highly likely, I suppose).

    I am once again mystified by the call for “balance.” Isn’t that what we’ve been trying to do for the last 100 years or so? I mourn socialistic influences, but there are admittedly market forces afoot, and still a core belief in a market system operated by private, rather than public, property rights. Isn’t what we have today some extremely complex intermingling of government and private forces/interests/individuals/agencies/monies?

    Isn’t it a balance?

    Again, how can we say that’s worked well or is ideal when it’s led us to and through the Great Depression, Stagflation of the 1970s, and now this mess?

    The Highway system is, as I’m sure you know, actually a bit of a mess from a liberal’s standpoint: it is of course very expensive and has subsidized urban sprawl, not to mention air pollution. On a side note, it has put passenger trains nearly out-of-business (or at least required vast subsidies to keep passenger trains going). It’s funny how 21st-Century liberals and I agree on many of the same problems, but not on the solutions. I find it interesting that Nazi Germany inspired one of our biggest mid 20th-Century public works’ projects, and such was implemented by a general.

    I imagine you would share those concerns, but like many, feel the benefits of a subsidized highway system outweight the costs.

    There are certainly problems with a free market. But in a free market, those problems are not being subsidized against one’s will. It’s a different story in our society.

    I never understood how greed, supposedly one of the great societal ills (I rank it behind murder, theft, and adultery, personally), is apparently not present in government-run institutions, and is an anamoly reserved for the “free market.” Funny that. Perhaps you disagree with my sentiment. Or perhaps I mischaracterize many in the mainstream blaming this mess on some amorphous, unquantifiable trait called “greed.”

  6. plato04

    To Socialist-Brother-in-Law:

    I agree 110%. This bill is one of the greatest examples of public misallocation (and fiscal irresponsibility under an already irresponsible Republican President) I can recall, to say nothing of the ethics associated with this piece of legislation.

  7. Two points:

    [1] Not to get all starry-eyed or anything, but on the idea of “balance,” see Morris Berman’s discussion of José María Arizmendi in The Twilight of American Culture. Here’s the relevant bit, with the particularly relevant portions in bold:

    Arizmendi was a journalist during the Spanish Civil War, and when the latter was over, he returned to his studies. His goal was to try to the needs of community with individual property rights; to find a middle path, in other words, between capitalism and socialism. In 1941 he was assigned to the Basque parish of Mondragón, and in 1956, after years of teaching, preaching, and private study, he started a factory with five other men in the village. It was called Ulgor, and it manufactured paraffin heaters and cookers. Eventually, this led to the foundation of a savings bank, all worker-owned, and having a salary differential, top to bottom, of 3:1. By 1987, there were more than one hundred cooperatives, twenty thousand workers, and a salaray differential of 6:1, quite remarkable in a world of corporations with differentials of 400:1 or more. The co-ops follow a principle of verticality when it comes to expertise, but a horizontal political structure of one person, one vote. Despite a strike that occureed in 1974, the Mondragón experiment has been very successful. In 1986, when unemployment in the Basque region exceeded 25 percent, the Mondragón co-ops added five hundred new jobs.” (144-145)

    Berman adds a little later, “Planeloads of American sociologists arrived, trying to distill the ‘formula’ of Mondragón (they failed)….”

    To answer your question, I don’t think we really have balance today, or perhaps I should say I don’t think we have the right kind of balance. I think the government should be involved in some things (I’m in favor of socialized medicine, for instance) and should stay out of others (for one thing, I’m against capital gains taxes).

    [2] How the U.S. government works is to some degree determined by us. (Theoretically, at least.) We shape how the government works. We vote. We petition our representatives. We investigate our government. We fight to change it. We work in it, both for and against it. Moreover, if you really don’t like it, you can leave the country, or maybe move to a compound in Idaho. The point is, government is far more participatory and voluntary than you suggest. It’s not necessarily just something that’s imposed on you. When it is, that’s bad. Almost everyone agrees on this point.

    A truly free market, by contrast, is by definition outside of any one person’s influence or control. Yes, in some senses it’s more voluntary — e.g., you vote with your pocketbook, etc. Though it may not be forced down your throat Soviet style, if a free market constitutes the environment in which we live – if it’s the water we all swim in, so to speak – that strikes me as equally bleak because then one really has very little agency. This amounts to default totalitarianism.

    The question is: Would you rather be ruled by corporations or by the government? Government strikes me as the lesser of two evils here mainly because corporations are based on the profit motive and not the welfare of the people, though I’d rather be ruled by neither.

  8. plato04

    Matt,

    Thanks for your thoughts. Interesting ideas about Arizmendi.

    Regarding a voluntarily communal lifestyle, I really have no qualms. If individuals choose to donate their material goods, or money, or property, or voluntarily choose to relinquish private property rights and not own anything individually, but instead, collectively, then that’s their right.

    The true free market is this: individuals acting freely. If they choose to live in a commune, so be it. Many in my own religious tradition, for instance, lived communally in different settlements, like the Utah settlements in the middle and late 19th Century. They largely participated in these societies voluntarily. That’s the key.

    I agree with you that government is largely a participatory organ, and that we can control things to some extent. But it seems to me that so many people accept statism as the status quo and gladly relinquish individual responsibility without considering what they are relinquishing. I’d much rather have people understand not only the moral and ethical considerations of a huge nation-state (i.e. with respect to taxation), but the economic consequences as well.

    To me, the true free market (which we of course do not have today; America is more of a corporatist state where government and overregulated big business are uncomfortably cozy) is the natural extension of how people organize themselves as individuals and families, based on the principle of private property rights. People naturally economize their resources and exchange with each other to the good of both. Unlike most in the mainstream (left and right), I don’t see capitalism and private property rights as exploitative. I don’t see it as a zero-sum game, where there is a winner and a loser, one who benefits and one who gets “ripped off.”

    If there is someone who gets “ripped off,” there are market solutions which are more efficient and humane than the monopolistic state variety. Solutions like insurance, private certifications, and recommendations, for instance.

    A mostly laissez-faire society could still have a court system where individuals can arbitrate instances where a contract was breached, or where someone was “ripped off.”

    Any truly free exchange is really a benefit to both parties. Otherwise, why would they exchange?

    There are times, however, in an overly-regulated market, for instance, where choices are limited and constrained, but even then, we still choose whom to patronize and what to purchase. Even then, the exchange is largely voluntary, though choices are constrained by external (non-market) forces.

    I don’t see the moral issue with a system based on mutual exchange. I do see a moral issue with a system based on compulsory taxation and regulation. The fact that such a system is pervasive all throughout the world does not make it justified, in my eyes.

  9. socialist brother-in-law

    When you talk about “solutions like insurance, private certifications, and recommendations” do you have insurance companies like AIG or maybe credit rating agencies like S&P and Moody’s in mind? When the free-market solution isn’t a solution, what do you propose next? More of the same?

  10. plato04

    One problem with this type of analysis is that as I have said before, our current system is not a free market. It is some sort of corporatist state. As a result, we get over-regulated, heavy-lobbying, poorly-performing, and occasionally-subsidized mega-companies like AIG, Lehman Brothers, Goldman Sachs, etc. Most people consider these part of the “free market,” but that is a myth.

    Remove government involvement in these firms and government restrictions on starting new businesses and immediately, entrepreneurs have a market for insurance that is cheaper, more responsive to the needs of the insured (or uninsured), more effective, etc., and can compete with the big boys.

    It is therefore difficult to pin these type of problems on the “free market.” We can say that the market would create incentives which would automatically (or voluntarily) reduce these problems significantly.

    The broader problem of economic cycles are a result of artificially low interest rates. Again, it’s a question of government economic management: the government-sanctioned (but unaccountable) Federal Reserve system sets artificially low interest rates, which account for the booms and busts. Let the market set the rate, and the situation evens itself out remarkably well. Ironically, the instability comes from government involvement, not the market itself.

    I’m not saying that non-government entities are necessarily good, just, wise, kind, honest, etc. They may, in fact, be the opposite. But intense market competition creates a huge incentive to be all of those. When we use Washington to regulate the market, or get government otherwise involved, the competition decreases, and thus the competitive advantage from the consumer’s side is decreased. In other words, a true consumer advocate would push for much less government involvement, not more of the monopolistic variety that is literally destructive (like the FDA (http://en.wikipedia.org/wiki/Criticism_of_the_Food_and_Drug_Administration), for instance).

    Again, the problem is the intermingling. I point out the problems with economic darkness (state control), but any shade of gray (like our corporatism) may manifest some variant of that problem.

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