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Monday, September 22, 2008

Brook: The Resurgence of Big Government

I couldn't agree more with Yaron Brook's recent journal article The Resurgence of Big Government recently published in The Objective Standard.

Let me add, that the most important aspect of this latest fiasco is the attribution of its fundamental causes. The economics underlying this so-called crisis have been understood for at least 200 years - since the time of David Hume and Adam Smith. I have outlined the causes in detail in previous posts. This is not an economics problem. It is a moral and philosophical one. As Brook states:
These [various government interventions] are the real causes of the housing and financial crisis. But this fact, open to anyone who makes the effort to see, goes unnoticed because commentators, politicians, and policy makers know the popularly accepted “cause” in advance: the “greed” of banks, mortgage brokers, lenders, and borrowers—the “greed” that produced “market excesses.” The solution? Rein in the selfishness of these market participants with new government interventions and more government regulators. Thus the very cause of the housing mess—government interference in the market—is adopted as the solution, and the government’s power to dictate our economic decisions grows and grows.

This was the historical pattern of the 20th century. In every major economic crisis, the evidence implicating government interventions went unnoticed, and blame was laid instead at the feet of the market.

Everywhere, I read so-called experts laying the blame for this crisis on lack of regulation, free markets, greed, speculation, etc. The most important action we can take now is to expose the true culprit: government intervention in the economy based upon the heinous theory that sacrifice is the "good."

The root cause and ostensible justification for government intervention in the form of regulation and redistribution of wealth is the ethics of altruism. We are told that it is for the poor and helpless that we must enact welfare schemes and be our "brothers' keeper"- it is for the downtrodden third world that we must pour taxpayer money into foreign aid- it is for the "common good" that the government must fund science research, the arts, consumer protection, environmental laws, bail out investment bankers, etc. And when politicians do not want to raise the taxes necessary to pay for this largesse, they must borrow money. And, in order to not have to pay high interest rates they set up the absurdly evil "Federal Reserve" system and grant it the power to literally create money out of thin air with predictable long run consequences: the debasement of the currency, rising commodity prices, and a boom-bust business cycle as the pyramid scheme periodically crumbles. Meanwhile, pressure groups and lobbyists line the politicians pockets to secure their piece of the infinite government budget and to harness the coercive power of the state for their own benefit. However, instead of just opposing statism, we must stand for something positive. Quoting Brook:

It is true that capitalism unleashes selfishness. But Americans must learn what this actually means: Capitalism unleashes the thinkers and creators of the world. By protecting the individual’s right to life, liberty, property, and the pursuit of happiness, capitalism leaves each individual free to use his mind and produce goods. When you consider some of the giants of American industry—from John D. Rockefeller to JP Morgan to Henry Ford to Sam Walton to Bill Gates—two things stand out: the ideas these men originated and the novel products and business innovations they created. These men created products and services that improved our lives by orders of magnitude—and they were able to originate and produce such goods only to the extent that the government left them alone. Americans must come to realize that our quality of life stands in direct proportion to the freedom of industrialists and businessmen to act selfishly—and that the only way to defend such freedom is to recognize and uphold the morality of self-interest.

Americans must come to realize that we have nothing to fear from businessmen acting selfishly. On the contrary, we can only gain from their rational, productive efforts. We can learn from their example and profit from the opportunity to trade with them. Our unprecedented prosperity and standard of living exist not despite but because of these men. To shackle and tether such individuals with government regulations and interventions—to treat them as potential or actual Al Capones—is both unjust and self-destructive. Where would we be without our cars, medications, and computers?

Liars and cheats and crooks exist in every era and every culture, but under capitalism their opportunities diminish and their “lifestyles” become more difficult. Because capitalism entails a wall of separation between economy and state, their path to power is cut off. In a capitalist society, no businessmen or lobbyists would be skulking around Washington in search of favorable government interventions—whether subsidies for themselves or shackles for their competitors—because the government could not intervene in economic affairs. No politicians would be promising a new prescription drug benefit to be paid for by soaking the rich or by treating the middle class as beasts of burden, because the government would be constitutionally prohibited from “managing” the economy. Fewer business scandals on the order of WorldCom or Enron would arise, because unscrupulous businessmen would not stand a chance competing against fully free businessmen with long-range vision and integrity, men such as JP Morgan and Sam Walton (not to mention that in a capitalist system, actual crooks would be jailed).

Americans must come to understand that appeals to the “common good” and the “public interest” are not moral claims but licenses to evil. Because the American public is just a number of separate individuals, whenever some group trumpets action in the name of the “public interest”—say, a new prescription drug benefit or Social Security scheme—it is declaring that the wishes of some individuals trump the rights and interests of other individuals. But everyone has a moral right to pursue his own happiness, free from coercive interference by others. If it is to have a legitimate meaning, the “public interest” can mean only this: The rights of each and every individual are equally protected by the government.

If Americans want to turn permanently toward a genuinely free market—and thus toward peak prosperity—they will have to reconsider their moral convictions. They will have to discover a new morality, one based on the requirements of human life and backed by detailed arguments and demonstrable facts. This is what Ayn Rand offers in her body of writings. She is the only champion of capitalism who would and could defend capitalism on moral grounds, as indicated by the radical titles of her books Capitalism: The Unknown Ideal and The Virtue of Selfishness. Those who want to fight the trend toward statism—those who want to effect a real and lasting turn toward capitalism—would do well to study her thought.

To paraphrase Ayn Rand, what America needs now is not to return to capitalism but to discover it.


Anonymous said...

many argue that the American government has spent more money on 'socialism for the wealthy' than entitlements for the poor- I wish I could sell worthless goods (bad mortgages, etc.) knowing that the American taxpayer will bail me out. It is important to point out that the function of government should not be to redistribute wealth, but you seem to focus on non-businessmen at the expense of where a huge portion of redistribution is actually directed. Also keep in mind that JP Morgan and other successful bankers played a large role in the creation of the Federal Reserve Act... the real monster in our arbitrary monetary system. Businessmen are not always 'forced' to protect themselves from government force. At times, they are leaders in its expansion. The forces that contribute to the expansion of government power are varied and diverse.

Anonymous said...

excellent points. With corporate subsidies, farm subsidies, etc., we haven't had a free market in nearly a century.