Thursday, January 3, 2013


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 for sloth and dependency.

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 goose.

"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 - or 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, almost 50 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 and 120 TRILLION 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?


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 and Nixon'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 of it.

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