Obamas Dubious Purchase of the Free Market

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When people respond to the claim that Obama is not friendly to “business” they normally start with something like… ‘How can you say that? He (Obama) bailed out the banks, the auto makers and the insurance companies!’  If you claim he is anti-small business, they will point to one of the dozens of tax credits he has given to small businesses. When you say his health-care “reform” is socialist, they will respond (correctly) that he has not socialized it at all – but has given the insurance companies millions of new customers. These answers miss the point, but that is because the question has not been posed correctly.

There are really two kinds of “capitalism.”  One of these is a laissez-faire capitalism, and one is “crony capitalism.” As well, one of these leads to prosperity and plenty – the other to misery and woe.  One to freedom… one to serfdom.  Our country has been drifting further and further toward crony capitalism for the last 100+ years, Obama has just been initializing the final steps.

Lets start with laissez-faire – From answers.com:
Policy dictating a minimum of governmental interference in the economic affairs of individuals and society. It was promoted by the physiocrats and strongly supported by Adam Smith and John Stuart Mill. Widely accepted in the 19th century, laissez-faire assumed that the individual who pursues his own desires contributes most successfully to society as a whole. The function of the state is to maintain order and avoid interfering with individual initiative.

This system of economics is what I am referring to as the “free market”  This system was the driving force behind America’s surge from a small collection of colonies at the beginning of the 19th century, to the economic powerhouse of the world at the beginning of the 20th.  This system fulfills Jefferson’s edict:

“A wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement.”

This system is also the only system where property rights are truly respected, thus the only one where liberty can abound. Just a short aside on that last point, if I only live a certain number of days, and those days belong to me, then I give some of my days in exchange for property (so that I may sustain my life), then taking that property is almost as if taking my life (or those days that I spent to acquire that property).  It is therefore logical that any taxation above the level needed to fund basic services to keep local order and to prevent lawlessness- is tantamount to “partial murder.”  A government so limited as to allow a truly free economy allows maximum freedom to its citizens and fosters such pride and appreciation, that the citizens would voluntarily be a part of an all-citizens militia (as existed at the founding), relieving the necessity of a standing army. (Which by the way, was not intended by the founders; and was one of the contentions of the anti-federalists that was explained away by the two-year renewal of the military, raising authority of congress).

The other system of  “free market” economics is ‘crony capitalism,’ which is increasingly practiced by the US, (especially including and since Hoover).  In a crony capitalism system from answers.com:
“A description of capitalist society as being based on the close relationships between businessmen and the state. Instead of success being determined by a free market and the rule of law, the success of a business is dependent on the favoritism that is shown to it by the ruling government in the form of tax breaks, government grants and other incentives.”

The problem with calling this capitalism is that it more resembles fascism.  IE., in fascism, (when you separate it from historical examples like Germany), what you have is a very cozy relationship between government and big business- where the government grants monopolies to many large corporations or organizes them into “syndicates,” which operate with no competition.  With “crony capitalism,” government grants tax breaks, subsidies and monopoly privileges to favored companies and eliminates the competition incentive.  Let me give an example; After the Government sued the large tobacco companies, they (the government) received a big check- along with promises for even more checks in the years to come.  Counter-intuitively this was a big win for the tobacco manufacturers, as they were just organized into a syndicate.  No further competition could ever arise, simply due to the large fees associated with running a cigarette company. 

While RJR, Phillip Morris and the like could easily afford to pay the fees associated with producing cigarettes- no manufacturers who were not established could.  What this means is that these companies have essentially a license to print money. And they never have to innovate or adjust pricing levels (except as the Government dictates).  For this industry- it causes a stop to advancement, but for the individual firms that get the special privileges- it is a welcomed gift and has almost the same numbing affect that welfare has on someone who already has a low self-esteem. Bailouts have the same sort of affect;  Small firms have no chance of a bailout. If you make too many mistakes in your pay-level to your employees- you go out of business. Alas, a large bank makes monumental mistakes- and they are granted special privileges.  All they have to do is submit to the Government control of their paychecks.  You notice we no longer call it ‘tax cuts.’ (Government taking less)?  This is because in this type of economic system we cannot allow words that imply people having ownership over their money (thus implying that the Government does not own it).  They are now ‘tax credits.’ (The Government giving you something).

The Government has nothing to start with that it didn’t take from someone else.  When they take from you to fund “solar initiatives,” that money is taken from someone who would have used it for something else.  That means that the other ‘thing’ will now have less funding.  What I am saying is this:  Stimulating the economy by government spending is tantamount to cutting off your own fingers to eat because you are starving.  You may be temporarily fed, but your body cannot be fed this way on any kind of permanent basis, and worse still- you have permanently lost an assumingly productive digit(s).

So what would have happened to the economy if the Government had done nothing?  I have heard this specious argument so many times I am sick just to write it.  If we had done nothing, the healthy pieces of the businesses that went out of business would have been bought by good businesses, the companies who took on too much risk would have went out of business, the renters who had waited because housing was in a bubble would have had a chance to get a house at a price that is affordable, the businessmen who where so bad at prognosticating business conditions would no longer be entrusted to run businesses.  And we would already be well on our way out of the recession (which, granted, would have been significantly worse for the 6 or 7 months of the beginning of 2009).

In his/their zeal to “save the banks” Obama/Bush took large stakes in many sectors of the economy.  From banking to insurance, auto manufacturing to finance, etc.,  large companies in these industries owe their livelihood to the administration, and thus are willing participants in whatever scheme the Government may want to impose on the rest of the country.  Health-care was not so much socialized (this requires government ownership) it was nationalized (government does not own these companies, but rather runs them through a puppet corporation with multiple mandates ensuring that they will behave just as the Government would if they were the owners).  They fund companies who do things they like (“green energy”) and deny funding to companies who do as they do not like (oil drillers, arms manufacturers, etc).  Governments grant special governmental favors to some such as granting peoples property to corporations to use as their parking lots, and the like.  While this system may allow private property, it is not consistent with liberty, and is the equivalent of allowing freedom as long as you choose to do what we want.  It also denies a number of important components of capitalism, such as equal opportunity, and unquestioned property rights  and is rife with moral hazards.

The other aspect of this system is that there is an underlying expectation of government assistance in any failure.  If a bank fails the government will ride to the rescue, this not only encourages risk within the bank, it discourages bank customers from checking the banks stability prior to depositing, denying the best protection from bank failure (depositor due diligence).  we also artificially control the lending rate, this denies the free market signals of the available capital in the economy, causing projects to start when they should not, and guaranteeing “bubbles/busts” eternally.  It gives government an imaginary free method with which to make ridiculous promises to the population that cannot be kept.  These are the aspects which make this system undesirable, but forgetting these, the most important aspect which can be stated is that this system is inconsistent with liberty, Liberty is an end in and of itself, and even if it was said that our society would never advance in a system consistent with liberty, such a system would be the only moral one.

So we must ask the question, will we follow H.L. Menckins words:
“I believe that liberty is the only genuinely valuable thing that men have invented, at least in the field of government, in a thousand years. I believe that it is better to be free than to be not free, even when the former is dangerous and the latter safe. I believe that the finest qualities of man can flourish only in free air — that progress made under the shadow of the policeman’s club is false progress, and of no permanent value. I believe that any man who takes the liberty of another into his keeping is bound to become a tyrant, and that any man who yields up his liberty, in however slight the measure, is bound to become a slave.”

….or will we follow Adolf Hitler:
“It is thus necessary that the individual should finally come to realize that his own ego is of no importance in comparison with the existence of the nation, that the position of the individual is conditioned solely by the interests of the nation as a whole.”
The choice is ours to make.  Of course you know where I stand, how about you?

In Liberty,
Tim Reeves
Tim Reeves is the State Chapter Coordinator for the Oregon Tenth Amendment Center.

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