Statism And Its Inevitable Consequences

If there is to be any progress in civilization’s development toward peace, liberty, and prosperity for all, people will need to get some very simple causal relations down at some point. Just as an obese person has to stop overconsuming sugar before he can even remotely think of getting ripped, individuals in society will need to stop gobbling down that high caloried, multi layer, ultra fattening fudge cake of statism, before they can even think for a second that they are in a position to come up with solutions to the challenges of society.

If you allow one or more people to initiate violence or threat thereof to obtain other people’s property, you create a powerful and privileged class of exploiters and with that, on the other side of the coin, an under privileged class of exploited. Noticeable income inequalities will emerge as a result. This is as sure as night follows day and doesn’t take more than a moment’s thought to grasp.

To imagine that putting some words onto pieces of paper and marking check-boxes in polling booths will ever check the power of those exploiters in any sustainable fashion is deplorably naive.

To act surprised and get upset when the richest and most corrupt people within society, by means of lobbyism and funding, flock toward and join that group of exploiters, is downright funny to watch.

I don’t speak from a high pulpit, for I used to think the same way. And I laugh at myself for it. The whole point of philosophy is to stay open to better theories to replace inaccurate ones!

It is in that light that I have to view statements from articles like these about income inequality (I do want to point out that not all these were written by one author, but it’s rather a compilation of different comments from different people):

A key lesson to take from all of this is that simply railing against income inequality doesn’t get us very far. We have to find a way to prevent or limit major banks from repeatedly going short on volatility at social expense. No one has figured out how to do that yet.

Actually, people have figured it out. It’s to not allow a gang of people to order other people around, take their property, and throw them in cells if they don’t oblige. You prevent people from grabbing for extorted money by not allowing for any extortion in the first place. Like I said, if we can’t get that down, there’s no need to think any further.

Why is it so difficult? Well, regulation may not be up to job of restraining rich financiers. Libertarians may argue that if banks are allowed to fail then the cycle will be broken. But, Mr Cowen says, this is a difficult solution to adopt in practice, not least because rampant bank failures will cause substantial pain among taxpayers at large.

Actually … all that libertarians like myself are saying is this: Don’t allow people to initiate violence against others. Don’t shoot or lock up peaceful individuals. Be mature adults! There is nothing magical, arcane, or difficult behind this.

If the voluntary actions of individuals, as flawed as they may be at times, are not interfered with by the initiation of violence via compulsory action (the precise opposite of voluntary choice), there will be no large scale business cycle in the first place, there will be no wide spread booms and busts and thus the problem of such large scale bank failures would not occur in the first place, nor would the alleged “pain amongst taxpayers at large”.

Progressives laudably seek to oppose injustice by deploying government power as a countervailing force against the imagined oppressive and exploitative tendencies of market institutions. Yet it seems that time and again market institutions find ways to use the government’s regulatory and insurer-of-last-resort functions as countervailing forces against their competitors and, in the end, against the very public these functions were meant to protect.

Bingo! So the conclusion that this fella would have to come to at some juncture in his life, if he is honest with himself, is that aggression should be universally proscribed, right?

Both Mr Cowen and Mr W are saying that Wall Street’s great wealth flows from the government, and in particular from the one-sided bets it hands out in order to protect the country against various ills, namely, economic depression. Both men also seem to wish, as a solution, for a sadly unobtainable libertarian world in which markets handle their own business.

This kind of stuff is simply amazing. The belief on some abstract level that markets can’t handle their own business is so widespread that it’s very difficult for people to see through this fog of blatant nonsense and bigotry. This guy for example, simply assumes this position, without even thinking about providing any evidence. So please, oh economics dude, give me some convincing examples of how markets or industries that were completely unbridled, or at least minimally interfered with by government intervention haven’t been able handle their own business.

On the other hand, it would be quite fascinating if you could do us the courtesy of showing us how all those industries and businesses with heavy government involvement, subsidies, rules, laws, decrees, and bailouts have been able to handle their own business, absent of excessive monopoly profits, corruption, and lobbyism, you know, like, say, banks, auto companies, Big Oil, insurance companies, pharmaceuticals, defense contractors, and the like.

Oh that “sadly unobtainable libertarian world” … :)

In this telling, it isn’t the power of Washington that’s the problem (even a much weaker federal government would have had the wherewithal to bail out the big banks). Rather, it’s the power of Wall Street. And the solution to the problem might well be a highly progressive system of financial regulation and taxation. Certainly this is the argument made by prominent writers like Paul Krugman. And they can point to the period from the end of the Second World War to the early 1980s, during which government was big, inequality was low, and crises were rare, as evidence for their ideas.

OK, let me just gently list some facts (annoying, I know): Actually, after WW2, the scope of the intrusion of the government in the market was cut by 62% (!!), inequality began rising immediately after the Great Society programs started getting rolled out, and in this small 30 year period we had the collapse of an entire monetary system (Bretton Woods), an oil crisis, a catastrophic, unnecessary, and bankrupting war in Vietnam with over 5 million (!!) Asians murdered, and a Savings and Loan crisis. But all those trifles taken aside, I guess everything was just fine from the 50s through the 80s, now wasn’t it?

But even then, let’s say everything I’m saying above is invalid. (Which I think I can with some credibility and evidence say that it’s not, at least not all of it.) But anyway, let’s make it as easy as possible on this guy. So you are going to tell me that the alleged and questionable evidence of a small 30 year window in one country trumps the evidence of 5,000 years of recorded history of civilizations around the globe??

Come on guys, seriously, don’t be silly now! :)

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