Craig Green's blog discusses history, philosophy and economics from a free market perspective. See Craig's bio, premises, archives and links in the right column. From 2011, April's "Unchain the Builders" series begins with "Unchain The Builders 1," each linked to the other articles. March's "Subordinate Acts" is Craig's article on the U.S. Constitution. Also see March's LIFEPOWER articles from the 1990's. Anyone can comment without subscription, but leave email if you want to keep abreast.
Thursday, January 3, 2013
HOW TO COOK A GOLDEN GOOSE
By James Craig Green
Suppose you had a
goose that laid golden eggs. The last thing you would do is cook it for dinner.
But, apparently this is not obvious to people who don't understand they wouldn't then get any more golden eggs. Simple…or so I thought.
Over the last decade and a half, U.S. Presidents Bush and Obama clearly
proved that knowledge of economics is not a requirement to hold the most powerful
political office on the planet. Faithfully repeating the mistakes of their
predecessors a lifetime ago (Republican Hoover and Democrat Roosevelt), neither
Bush nor Obama seemed to understand how increasing government spending and control has always
made the economy worse, not better. Sure, it helps some with well-publicized
giveaways, but always hurts the economy by trading freedom and incentivized production
Just like the 1930's, both "fearless leaders"
encouraged Congress to go along with their grandiose plans of bailouts, make-work
jobs, tariffs and increased regulations, promising endless prosperity without effort or accountability. Just like the 1930's, the dangerous narcotic
of government spending mesmerized Americans anticipating short-term benefits
into thinking what was good for them was good for America. Just like the 1930's, manipulating the
money supply, increasing public debt and increased government spending produced the
illusion of "solving" a financial crisis. Just like the 1930's, the
goose that lays golden eggs (business) was cooked for dinner, as markets were
blamed for the whole affair by politicians and media pundits. Government - as
apparent "hero" to punish evil, greedy business exploiters - is, once
again being used to blame the victims instead of the true aggressors
(governments). This is the nature of the government beast...
So, if business is based on voluntary transactions, with
both sides consenting before spending their own money (WIN-WIN), how does this compare to
government, with almost every dollar forced by threat of jail (WIN-LOSE)? Just about everything is upside down and opposite, for one simple
reason – Government eats, breaths and lives aggressive - not defensive - FORCE. This is the destroyer of production,
wealth and the division of labor that so clearly distinguishes business from
government. Government is funded by fraud (political spin), extortion (legal
threats of jail) and theft by printing money, increasing public debt and raising
taxes on its citizens under penalty of law - and jail. The welfare state is a giant
fraud - hurting most of those it claims to help, by making today easier, at the expense of an oppressive, hopeless future.
Today, we are barraged with stories of the terrible abuses
of "Laissez Faire Capitalism" and the dangers of "not enough
regulation" in the financial industry. People who have lost their homes to
"unscrupulous mortgage lenders" shed Crocodile tears on camera to
reinforce the conventional "wisdom" that markets are to blame for all
this mess. This is reinforced by the worst financial collapse since the Great
Depression of the 1930's – something most of us did not live through and still don't
understand. Since the government did not plan this catastrophe, it is
"reasoned," it must be the inherent evils of greed and unrestrained
market capitalism that have created the whole mess. This makes great theater on the
political stage, but makes no economic sense, just like cooking our golden egg-laying
"Laissez Faire" (hands off) Capitalism hasn't
existed in America for more than a Century. It has been replaced by Crony Capitalism, which I will discuss further below. In 1890, the hysterical,
politically astute but economically ignorant progressive movement got
the idea to punish the "monopoly" that Standard Oil had on the
production of petroleum products. This led to antitrust legislation, and it has
been "Katy bar the door" on government interventions in the economy
ever since. It was ironic, and painfully predictable, that Standard Oil had
already lost a huge portion of its dominance due to market competition before
the legislation was actually implemented. Thus, the "goose-cookers"
who think they can run a complex, diverse economy better than the people who
produce and exchange wealth for a living began a long, tortuous road of destructive,
anti-competitive policies. It is no accident that most, if not all, of these
policies were undertaken in the name of "stimulating competition" or
"regulating monopolies." It never dawned on any of them that the best
regulation for market-based monopolies is the LACK of government intervention -
subsidy - which usually has the opposite effect of that stated as its intent. It didn't dawn on them they were sacrificing small quasi-monopolies, to the largest, most damaging, most bureaucratic and wasteful monopoly of all (government).
From the antitrust legislation in the late 1800's, to the
creation of the Federal Reserve and income tax in 1913, to World War I, to the
1929 stock market crash, to the Great Depression, to World War II, right up
until today, the economy has seen one massive government intervention after
another. People who blame markets, or greedy capitalists for these events promote
ever more power for government, to constrain this "evil" growth of
avarice by the private sector.
Government spending in the United States (as a percentage of
Gross Domestic Product, or GDP), has grown from 9 percent in 1913, to about 45
percent today. Not only did this direct diversion of productive resources from
private to public interests grow exponentially over an entire human lifetime,
but new laws promoted by every special interest in the book restricted the
freedom of private producers and service providers in each and every one of
these years.Of course, during WWI,
government spending peaked at about 23 percent, and in WWII, almost50 percent, before returning to lower levels
after these wars. However, each government intervention in the economy led to more and greater interventions after these events than before.
It is no accident, nor the fault of markets, that today's
public debt exceeds 16 TRILLION DOLLARS, in addition to somewhere between 50
DOLLARS of unfunded liabilities. The lower number was provided by David
Walker, former Comptroller General of the U.S., and the higher number was
provided by the CATO Institute. American
government is worse than bankrupt, which has NOTHING to do with
Laissez Faire Capitalism or too-little regulation as frequently claimed by the
major media, unions and false crony capitalists pretending to be free marketeers.
So, you ask, what could have caused this calamity, if not
the greed and abuses of private business?
INDIVIDUAL VS. COLLECTIVE
Markets create real wealth by producing goods and services
for which their customers are willing to pay. Not only is this production
encouraged by millions of voluntary transactions each day, mistakes in
assessing the market's demand are most often quickly admitted and corrected, because not
to do so results in financial loss to those making the mistakes. This selfish
profit incentive and aversion to loss which drives markets comes from the
nature of productive people, which is to maximize their gains and minimize losses. By rewarding
production with profit and punishing losses, markets bring out the best in
people, both as buyers and sellers. Although prosecution of crimes such as theft, fraud and extortion are supposed to be applied evenly across the board, some criminals are more equal than others, as George Orwell said in his all-too-real Animal Farm. In short, when these crimes are committed by bureaucrats, politicians and their protected operatives, they not considered crimes at all.
Today, millions of people demand something for nothing,
which government is always glad to provide, like manna from heaven. Government
advocates mistakenly think you should provide them with everything they want,
without providing value-for-value, which can only be provided through the
marketplace. They have bought into the greatest – and most destructive – myth
of all time: that markets fail, and only government can correct market
mistakes. If ever there was a reversal of logic, fairness and responsibility, this is it.
From the antitrust legislation of the 1890's to the creation
of the Federal Reserve in 1913, two world wars, Hoover's
and Roosevelt's Great Depression, Johnson's
Great Society andNixon's unconstitutional
elimination of the gold standard in 1971, American government has grown exponentially
in size and influence. The last two presidents, George W. Bush and Barack Obama,
have increased the size and power of government more than any presidents since Hoover
and Roosevelt in the 1930's. Instead of helping America, this has burdened it
with unprecedented public debt, annual Federal deficits exceeding ONE TRILLION
dollars per year, and little hope of a soft landing for the vast majority of
Americans. As always, the welfare/warfare state benefits the rich at the
expense of the poor, despite decades of government programs pretending
otherwise. If you want the see the future of America, walk through the downtown
streets of Detroit or the poorer sections of Washington D.C. today. Washington, DC, by the way, receives the most money from the federal government, compared to the least contribution from taxes in the fifty states. In other words, the nation's capital is the biggest welfare queen in America.
Along the way, the federal government has grown by any measure you
care to make. In percent of Gross Domestic Product (GDP), U.S. government
spending grew from about three percent in the late 1800's, peaking in WWI to
23% and 48% during WWII. Now, for the first time since WW II, it once again
approaches 50% of GDP. All government spending is a NET LOSS, not a gain, to
the economy. This is why it should be limited to the narrow list of duties outlined in Article 1, Section 8 of the Constitution and others specifically mentioned. Including it in GDP as a benefit, instead of a loss, is one of the
three most dangerous and destructive frauds of the last
century (the other two were the creation of the Federal Reserve - a PRIVATE
banking monopoly - and the Income Tax in 1913, previously ruled by the Supreme
Court TWICE as unconstitutional).
America is in decline because of government, not in spite