And Rightly So

February 17, 2009

So we find ourselves in the worst financial crisis since the Great Depression. At least, that's what our politicians are telling us. Likely it's a self-fulfilling prophecy. If we're not in quite that much financial trouble yet, we're bound to be soon, once those same politicians have rolled up their sleeves and done their best to fix everything by engaging in the worst case of "bold, persistent experimentation" since the New Deal.

How did we get into this mess? Almost everyone points to the collapse of the housing market. But why did it collapse? Not, as Thomas Woods makes clear in Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse, because of the greed of unregulated businessmen. As I've mentioned before, there's nothing unusual about greedy businessmen. They're a permanent feature of the landscape. Adam Smith, more a fan of capitalism than of capitalists, observes -- engaging in a bit of hyperbole -- that men in any trade can hardly meet even socially without starting some plot to defraud the public. The honest, successful American businessman whom we can all respect and admire is not a given.

Because what's also quite usual (nearly universal, in fact, in world history) is that government interference makes it hard for honest businessmen to succeed. Kings give monopolies to their favorites. Legislators reward bribes. Revolutionaries nationalize industry. Fascist thugs make deals with corrupt corporations to profit at the expense of the citizen. But this sort of thing -- government interference in the economy for politicians' convenience and to the benefit of the greedy, the lazy, and the corrupt -- ought to be unusual in a free market economy. What makes a free economy work is the level playing field represented by such concepts as "the free market," "private property," "a sound currency," and "the rule of law, not of men."

Starting in the Renaissance, European civilization, and particularly the Anglosphere, achieved extraordinary prosperity as government respected property rights, upheld the rule of law, and generally got out of the way of ordinary people’s thrift and industry. We should all pray that we're not living at the end of this unexampled prosperity.

Because when the government starts to pick favorites - - when, for example, Democratic legislators pressure lenders to create irresponsible mortgage instruments to reward minority voting blocks, or when Republican-appointed Fed chiefs inflate the currency to keep the booms going and cheer up Wall Street, then we're headed out of the historical anomaly we've been blessed to live in. Tom Woods has the facts and the analysis you need if you want to understand where our economy's going: not a good place, I fear.