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Correcting Bad Economics

I was recently added to a political discussion group and while the topics covered are interesting, the premise of the group is faulty and based on some skewed version of history and economic theory. In this article, we will pull apart the mission statement and note the major inaccuracies, since they are prevalent in many other debates.

“In the aftermath of a global recession, as we have seen a massive failure of deregulated subprime-mortgage securities poison the global economy, we seem to be stuck with the same old economic debates.”

This opening sentence shows us where the author is coming from; He is essentially under the belief that deregulation is what caused the mortgage meltdown. Such is not the case, and anyone that makes the argument that the US has been deregulated in any substantial way has not been paying attention. As I pointed out in an earlier article,  the amount of regulations has gone up for 16 out of the last 30 years with the only significant (and sustained) drop happening during Reagan.

The main cause for the subprime-mortgage “poison” was the government instituting regulations. While the beginnings of the problem can be traced to the 1940’s, it wasn’t until the 1977 Community Reinvestment Act, a vague and crudely-worded piece of legislation, that the issue snowballed. Essentially, banks were forced to lend to people that couldn’t pay the loans back (in the interest of “fairness”). The loans were, naturally, high-risk, so the banks bundled them up into a “security” and sold them to other institutions. Those companies realized it as a bad deal and sold them to other institutions, and so on until the last company holding the bag got shafted. This never would have happened without government intervention in the marketplace. (I am aware of counter arguments made by somewhat reputable sources regarding the 1977 CRA, specifically that a problem caused by such an old law is a “silly’ notion. I contend that those authors lack the ability to see a causal relationship to actions and seek to gloss over the evidence in order to fit their ideological viewpoint).

As for “same old economic debates,” these debates have been happening since the dawn of civilization. Some believe that humans are fit to make their own economic decisions, while others seem to believe we need a government to make those decisions for us. It is an argument pitting liberty against government control. With the historical record clearly showing the greatest leaps in humankind having happened in direct proportion to the amount of economic and political freedom citizens possess, you’d think this debate would have been over centuries ago.

“The U.S. has never been purely socialist, not purely capitalist, except in the era of the banker and industrial robber barons of the late 1800’s.”

This is a cop-out, and is historically accurate to the point that the late 1800’s did see a rise in economic freedom, but it began to unravel with the McKinley administration (who enjoyed Republican control of Congress) and ended with Teddy Roosevelt and his “trust-busting” policies.

The use of the term “robber barons” is enlightening. While the term is applicable in the train industry, where railroad executives worked with the government to pass legislation (which is not capitalism), it is not applicable when applied to the likes of John Rockefeller and Standard Oil, the usual scapegoat who was able to grab a huge market share by eliminating waste and inefficiency in the fuel refining process, which allowed him to sell his fuel cheaper (which was better for consumers) and reap huge profits (which was better for him and his workers).

Yes, there were a lot of swindlers, but all of these regulations only hurt the honest businessman. It’s like the gun arguments involving gun-free zones; a criminal intent on murdering people is not going to stop because a certain area is “gun-free.” They have already made the decision to commit murder. A regulation banning his weapon of choice from a certain area is not going to stop him. In fact, the evidence points that it only encourages them.

“We have people advocating the same old trickle down deregulatory approach which has greatly helped the top 1%.”

Here, we see the beginnings of the class warfare argument, which is a stance rooted in envy, greed, and seeks to influence the worst parts of human nature. Steve Jobs is in the top 1%, so the argument goes that he should have to pay more in taxes and be regulated more. The flip side to the argument that the class-warfare warriors never seem to understand is how much more productive individuals and society as a whole is by the fact that Steve Jobs exists and is allowed to make his products. He and his team work hard and provide superior products to people who want them, and he should be allowed to keep the money he earns selling those products. Any so-called societal obligation has already been paid in full by the very nature that he made people more productive and grew the economic pie, of which everyone at all levels is able to enjoy.

“As for liberals or left-wing people like myself, I advocate government programs for the poor and disenfranchised as I know full well the ills of bureaucracy, inefficiency, waste, fraud, etc of our government.”

This is the revealing statement, where the author lets his views be known. The problem is that it contradicts itself. How can one advocate for government programs while simultaneously acknowledging the problems associated with them?

The fact of the matter is that those very government programs the author, and those associated with his belief structure, do not work for the simple fact that politicians and bureaucrats make decisions based on a political return, not an economic return. They have no fiscal discipline, and are not subject to the rules of the marketplace, so their job security is based on whether or not they can hand out more goodies and not on job performance. Never mind that those goodies are laced with poison and paid for on the backs of others.

Never in the history of mankind has centralized planning or class-warfare worked. Besides the faulty economic basis for such theories, i.e. class-warfare was only valid when the rich were the ones writing the laws and jailing the people who did not pay up, it ended when capitalism (meritocracy and free markets) came into effect.

“We cannot return to full-fledged Keynesianism and wax nostalgic over a past far better than the present, but we need to examine what clearly works well under the rubric of “social democracies” whose middle and poor classes benefit and progress from governments’ support of education, green technology, and universal health care. We have to consider the government’s role in providing the jobs and sustainable economies of the future as contrasted from the current oligopoly of fossil fuel companies, drug companies, big banks, the media conglomerates, all these being functional fascisms dictating the world economy.”

Again, with the class-warfare argument. He seeks to segregate people into groups and wants to equalize outcomes, which is impossible. The best that we can do, the path that we are morally obligated to seek, is one that frees people to go as high as they want while placing no burdens on their fellow man. The notion of all men being created equal escapes those like the author, who sees people as incompetent and in need of a benevolent force to take care of them.

Before the “common era,” that benevolent force was sold to mankind as a god-in-the-flesh whose divine power was mandated by heaven. His argument is little different and constitutes a societal regression, which is ironic since the people who use those arguments consider themselves “progressive.”

The latter part of that quote is important. The only role government has in a free society in providing sustainable economies is twofold, and is centered around the notion of keeping us free. The first is to protect us from force, which takes form in the defense of our borders (outside threats) and the defense of our selves and property (home-grown threats) with military and law enforcement. Secondly, the government should provide a court system so, in the case someone brings undue force against his neighbor, he can take them to court and have the matter judged by an independent arbiter.

The purpose of government is not to jump into the economy and start picking favorites, controlling people, and passing arbitrary regulations that make everyday living even harder. Such policies, which the author advocates, creates the very “functional fascism” he is railing against.

“The market for regular citizens cannot possible be free with the concentrations of power into ever fewer hands.”

Yet he would put control of that market in the hands of regulatory agencies controlled by 535 members of Congress, a president, and 15 cabinet members? One cannot make the argument that such a plan gives us more power when you consider that Congress is only at a 6% approval, hasn’t passed 20% in recent memory, and yet they still get reelected time and time again.

“Getting power back to the people cannot happen under the persistent stagnation of stereotyped economic polemics.”

Polemics (attacks) on leftist economic policies are warranted because those policies have never worked in the history of mankind despite 10,000 years of experimentation with centralized control. Whether you call the fascist, socialist, socialist-light, communist, tribalist, progressive, or liberal, they all fail horribly and only after sucking away the talent and motivation of a people. Such policies need to be attacked, discredited, and buried because real people’s lives are at stake.

What he said is true regarding polemics against capitalism. Capitalism is incredibly misunderstood even though it is essentially the easiest to understand: You are free to make your own economic decisions. It is because of this misunderstanding that I added the first picture in this article.

“We need to find common ground, try to understand the merits of theories we are predisposed to oppose before we can shift the paradigm. Shifting the paradigm is necessary to move forward and extricate ourselves from the transnational corporate tyranny impeding personal freedom and potential for growth.”

The “transnational corporate tyranny” is a straw man argument, though any sort of tyranny caused by corporations could not exist were it not for the regulations and amount of government control he advocates. No company can force you to buy a product, only government. No company can form a cartel without the assistance of government (i.e. the railroad industry in the 1800’s). In a free market, absent of the massive amount of regulations in place today, such companies cannot exist because a dozen competitors would rise up to take their market share.

In this argument between freedom and control, there can be no middle ground. You cannot say you are for freedom while advocating a new set of Jim Crow laws that put people into various groups and treat them differently under the law. 80% of millionaires in this country are self-made, first-generation, and they get that way through dedication, frugality, and hard work. They produce products people are willing to buy, and do so by hiring people willing to do the work. Enacting laws that essentially steal their money to fund corrupt programs does more harm to society than anything else. Such is the folly of “liberals and left-wing people.”

(Crossposted at Federalism Online)

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  1. htedr says:

    I got like halfway through this before realizing you may have once taken an introductory economics class and stopped there, if even getting that far… there simply isn’t a space in economics for this drivel , pure laissez faire economies (gov’t exists to protect private property, individual liberty) don’t exist, and it’s agreed that if they did they would be a nightmare. if you think otherwise you need to actually read Adam Smith, or for a quick crash course just skip forward to Pigou.

    • Ryan Craig says:

      You complain that the points I made are “drivel,” yet you claimed to have stopped reading half-way through and the only thing you could come up with is a comment that was full rhetoric, had no counterpoints other than a vague note about your belief regarding laisseiz-faire, and was followed by a reading list.

      In order to have a proper debate about something, you need to first read someone’s entire stance, react to what they wrote as opposed to what you believe they might stand for, and follow up with some actual counterpoints. Otherwise you’re just wasting time.

  2. doctorhugo says:

    Ryan, if I read you right and you blame ALL government regulations as bad I must disagree, just as I believe that genuine antitrust laws serve a public purpose. In your topic post here you appear to not want to assign blame where it duly belongs. With the corrupted politicians who make bad regulatory law replete with pre-ordained legal loopholes. A sleight-of-hand exercise concocted to fool the generally disinterested public and to serve their corruptors in the corporate and banking world. Need I offer up more than Tommie-boy Dodd and his criminal associate Ms. Barnice Frankly.

    You see I believe that the ideal is politicians feet held to the fire of acting WITHIN THE PUBLIC TRUST. Unfortunately we continue to elect the shady characters who act AGAINST the public trust. They make regulatory law NOT IN THE PUBLIC INTEREST, BUT…for political objectives NOT for TRUE regulation of corporate behavior against the public interest. One must always use the standard of We the People. By that I mean that policy must go to and law must be made in the best interest of the public as a majority.

    It’s a sad, but true observation that an ignorant and distracted citizenry gets the government it supports and deserves. And now that malasie of indifference has us teetering on the edge of the abyss. In short, we have met the enemy and he is us.

    • Ryan Craig says:

      @doctorhugo: Not all government regulation is that bad, but the majority of it is unneeded, wasteful and increases costs for everybody.

      Antitrust laws should not exist in a capitalist economy because they are unwarranted and unfair. You end up with a bunch of people who can’t hack it lobbying the government to stop the people with the good business model. Rockefeller is a prime example. His main focus was getting rid of inefficiency, which he did, and he was punished for it by people running around screaming “fairness.”

      In a free market, there are always competitors that rise up. We can even move that particular debate up to today, where I am using Mozilla Firefox to reply to you instead of Internet Explorer, even though Microsoft bundles IE into every computer that uses their operating system.

      You highlighted one of the grandest absurdities of the entire political class-warfare game when you talked about the sleight-of-hand. Instead of getting people motivated to make more of their lives, politicians pander to the least common denominator and get people to support them because they will tax those evil rich people…but in the end they create these regulatory loopholes because even they (usually) realize that the survival of the economy rests on those evil rich guys creating jobs.

      The blame belongs with the underlying philosophies between the left and the right, which was what I sought to point out here using an example that just happened to walk across my computer screen. My initial reaction was a short-hand version of what I wrote in the initial paragraph and the author called me on it, so I obliged.

      • doctorhugo says:

        We generally agree save for your position on anti-trust laws. I stand by my comments defining what a corporation is. Having said that, capitalism does not equate to unrestricted control of a specific market. When you advocate for that you advocate against freedom, because the very situation you champion will ultimately take away your freedom of choice. When a market is cornered and controlled exclusively by one company all of us loose and COMPETITION is eliminated and no longer do we have a freemarket system, which I remind you thrives on one thing. Ingenuity and creativity that competition is essential in breeding AND that advances our society as a world leader. It’s what made us the greatest example of successful capitalism in the world.

        • Ryan Craig says:

          What was your definition of a corporation? Actually, hold off on that. I wrote a huge piece on “Corporate Personhood” over at my other site. I’ll crosspost it in here in the morning and we can have at it.

  3. WillofLa says:

    I’m done.

    • doctorhugo says:

      Congratulations. You have a habit Will of espousing opinion without validating it though. You called Teddy Roosevelt a “Socialist” and I fear it is, because you’ve ingested Glenn Beck opinion raw without putting it on the spit and slowly turning it for careful and studious examination. You have not shown one instance that justifies branding him as a “Socialist” and so I wonder if you really comprehend what a socialist is by definition. Can you show me where Teddy Roosevelt ever stood up and advocated for vesting the ownership and control of the means of production, commerce, finance and property in the community as a whole by sharing? Of course not and neither can Glenn Beck.

      On the other hand I can show you a myriad of comments indicating a contrarian opinion. In his speech delivered in the hot Kansas summer of 1910 he concluded with these comments. READ CLOSELY PLEASE:
      “[No matter how honest and decent we are in our private lives, if we do not have the right kind of law and the right kind of administration of the law, we cannot go forward as a nation. That is imperative; but it must be an addition to, and not a substitution for, the qualities that make us good citizens. In the last analysis, the most important elements in any man's career must be the sum of those qualities which, in the aggregate, we speak
      of as character. If he has not got it, then no law that the wit of man can devise, no administration of the law by the boldest and strongest executive, will avail to help him. We must have the right kind of character -- character that makes a man, first of all, a good man in the home, a good father, a good husband -- that makes a man a good neighbor. You must have that, and, then, in addition, you must have the kind of law and the kind of administration of the law which will give to those qualities in the private citizen the best possible chance for development. The prime problem of our nation is to get the right type of good citizenship, and, to get it, we must have progress, and our public men must be genuinely progressive.]“(1)

      If you understand his meaning, his “progressive” reference relates to government policy that is progressive TO THE END THAT opportunity empowers man and that man himself is the master of his fate. That’s what he meant to key on with this comment “…you must have the kind of law and the kind of administration of the law which will give to those qualities in the private citizen the best possible chance for development.”. Empower the man of good character to PROGRESS to become a more complete and better, productive citizen, NOT a parasite upon government. He believed that the corporations and banks left unchecked would directly prevent that by their greed abuses as they have no morality or conscience and only genuflect at The Altar of The Bottom LIne to the detriment of hard working Americans. He was right as corporations are mere legal entities established to 1) assign legal liability and 2) collect tax revenue. You have but to look at today and how, using lobbyists and other minions that do their bidding, they corrupt the peoples’ representatives in government.
      The Community Reinvestment Act and Fannie/Freddie abuse and stimulus 1and 2 come to mind right away. Present day Wall Street history shows that much financial distress could have been prevented if REAL GOVERNMENT CONTROLS existed and were enforced to control big banks, hedge fund managers and derivative speculators. He believed in blending the Hamiltonian and Jeffersonian views so that a national government only had power delegated it to manage those base essentials to guarantee that which is stated in the Preamble to our Constitution and NO MORE.

      Teddy’s idea about being progressive has NOTHING in common with the progressive liberal agenda. In matter of fact they are antithetic in conception.

      Beck and others who navigate history with blinkers on and make great assumptions are wrong.

      (1) “The New Nationalism” speech – Theodore Roosevelt>Osawatomie, KS in August 1910 available text;
      http://teachingamericanhistory.org/library/index.asp?document=501

  4. WillofLa says:

    I’m saying that this article points out the fact that Socialist President Teddy Roosevelt wasn’t a man from India or an American Indian or a Black or a Mexican. He was a White man, and all the following Presidents after him were all White. Some were okay, and some were bad, but they were all White men. Most all the representatives in both Houses were White men. It wasn’t until late in the last century were there other races, women who were more previlant in our government, and now we have in this century a Black President. So what? I’m merely quoating history as it is, not how other people wish it had been. It wasn’t that way, it was the way it was and Whites have run this country since it’s inseption, but we did it with a fully benevolent heart for ALL of Ameria’s citizens. We tried to make things fair for everyone. I can’t honestly say that it would have gone that way as well as it did if some other race had been in power. Alright, nowwww! I’m not saying that only Whites could make things right. I am merely looking at history, and historic evidence of who, what, when, and where, and sometimes why, Okay? But it’s true. And even with a Marxist, you won’t find a whole lot of Blacks or American Indians who are Marxist with the history that they do who took over our government. As a matter of fact it was White liberals who have done all this to US ALL! Think about that! See? The attacks that we can make are still going to be towards White people of a certain political persuasion. It’s White liberals who are the biggest racists in our government, who took control over the Blacks and enslaved them by telling them that the government would take care of them and it was White liberals who created the largest number of criminals, drug addicts, illegal prostitution, illegitamate births, and horrible poverty in the history of this nation. And at the same time it is White liberals who care the least of a people that they created with Welfare and Food Stamps, and other handouts. Until Blacks started waking up did they leave the Democrat Party and went to work and began to build their own wealth that they found out that it was White conservatives who had been telling them the truth for decades about being enslaved by liberal Democrats. Now, they have joined the conservative movement with us, White conservative Christian’s who are committed to trying to get rid of liberals in control of our govenment. The Blacks, and all others as well as Whites can come together on issues we agree on in a conservative manner can be a powerful force against liberalism and the cult of Marxist and this President who cannot see the real America through the blindness of his hatred. Not the color of his skin.

  5. WillofLa says:

    Yeah, yeah, I know, it will take ALL American’s to solve these problems. And I’m saying that in order to keep those of you who take the time to read my posts, and are thinking in other areas than what I’m pointing out here. I am fully aware that it will take more that just White people to save the country. I am fully aware that it is the responsibility of all races of American citizens to come together and throw out these liberals and restore the nation. Yes, that is right. But you miss my point I’m trying to make here. And that is everytime you listen to TV news how many times do you hear how, and the leftist news casters never come right out and say the word, but you know who they are talking about, that the oppressed need to be freed by Obama because the oppressors care to much about the color of the President to think straight. Okay? You know damn well that it’s White people they are talking about. And why? Because it is White conservative Christian’s that liberals accused from the beginning who were more about skin color and race than any other race was the reason why liberals said they needed to be allowed to make all these changes to the country. Okay? Don’t attack me on a single issue because I’m fully aware of all the other people in America who love this country as much as me, and my race. Okay?

  6. WillofLa says:

    My question is, what generation is going to achieve this knowledge of what the Constitution guarantees, and what being a real American is supposed to look like? Who will it be, us? We’re doing, and I don’t want to say we’re doing “everything” we can do to save the country because we’re not united enough to accomplish that before we die. Unless there is some kind of awakening, there are just to many White people who are liberals and like all the changes Socialists/Marxists have made to this country. I hear them everyday call into the radio programs I listen to. I know they are out there by the millions. And I know what you’re thinking, “Why did he say White people who are liberals?”, and “What does he think that only White people can save the country?” And my answer to that is yes, White people are the only people who can save this nation and the reason why is because we’re the people that liberals came after to destroy and suppress back in the 60’s when all this Socialism began to do real damage to our country.

    Liberals didn’t come after Black Christian’s when they attacked America’s moral stand on sex, the family, our education system that only taught about mostly White leaders who made the country great, liberals didn’t come after Oriental people because of their nonviolent beliefs and their committment to order and tranquility, liberals didn’t come after American Indians or Mexican citizens because of the numbers of constitutional members of both Houses who refused to submit to Socialist social and domestic spending programs. No, liberals went after White conservative Christian people because of how we were perceived to control the CULTURE! And it was our culture that liberals said was repressive of Blacks, Indians, Mexican’s, and anyone who was different from White people. It was White people who were embarrassed in public for being “racists” and “bigots”. You can’t call Blacks or American Indians racists or bigots, at least not to any extent as who is always associated with being racists, i.e. the KKK, okay? It is not any other race of people who the liberals attacked when the “Freedom Riders” came down South to “free the po’ Black man” from his White suppressors!! The picture of the White plantation owner bull whipping his Black slaves was the picture liberals presented to the American people. It was White big business owners who are being attacked right now, you know the people who buy all those corporate jets? Who do you imagine it is who is buying all those corporate jets when you think about it? Do you imagine a Hindu man who is a American citizen when Obama and the liberals rail against the “rich”?

    No, it’s White people who are going to be the ones who can save this country. And the reason why is it’s because we outnumber most all other races of American’s. That is for right now. We’re being caught up with real fast by illegal Mexican’s and Muslims who are seriously outpacing White reproduction. Soon we will not be the previlent race in America and at that time it’s whoever holds the numbers will be who controls the CULTURE. Very rapidly illegal Mexican’s are changing the culture of large parts of the Southwest. And Muslim’s are rapidly out reproducing White people in the North and Northeast.

    I’m not saying at all that America needs to be mostly White in order to remain America. I am not saying that at all, and I’m sure liberals who are reading this are thinking, ” He’s just worried his race might become a minority, and that’s exactly what needs to happen. It’s White people who’ve caused all these problems in the world anyway.” Yeah, well that’s your stupid opinion. It’s to bad you can’ t understand that it’s because of liberals who think that way is because they choose White conservative Christian’s that stopped us from feeling like we had anything to protect and preserve. Liberals embarrassed Whites so badly by calling us “racists” when 99% of us were not, and “bigots” when 98% of us were not that it made it easy to take the government from us, turn the culture into something immoral, and to easily deconstruct our government from a mostly Constitutional form of governance into a qusa-fascist police state with a overbearing Socialist/Marxist regulatory government.

    So think about history when you are thinking about who and what is going to have to happen when you think about how all this trouble is going to be resolved.

  7. WillofLa says:

    Mr. Craig’s point is well put. He inserted the statements of liberalism and then went on and disproved it’s failings. It’s a crying shame that more representatives cannot relate the conservative ideals in the article to their constiuents. Obviously liberal Socialist Marxist Democrats are not going to do that, and neither are leftist Republican’s. But what’s worse is a populance that is so ignorant of what rights they are entitled by God, that government is supposed to protect under the Constitution. People under the age of 50-55 don’t have any idea how this nation used to be free to create what businesses they wanted with little government regulation. I do. I’m 62 and went to school and grew up in the 50’s and 60’s when some of the most inventions known to man were created. I’ve seen this nation taken over by the leftist Marxist and Socialists and watched them damage this nation beyond belief. I see who it is that needs to go, and I mean they need to be arrested and put in prison for the rest of their lives for what they’ve done. But, like I was saying anyone younger than 50, like someone in their 40’s or worse their 30’s has no idea that the government is not supposed to run everything. They actually think it is, and when they see Joy Bayhar blabbering her big mouth about the evils of conservatives want to destroy the country and government needs to shut them up, these young people actually think she’s telling the truth because they’ve never heard otherwise, or worse never knew a time in this country otherwise. In short, they are ignorant of what being an America is supposed to be…..free, not under government control.

    If there is anything that needs to be done is not so much to elect conservatives to help offset the liberals in the government, but rather to inform and educate the public of what being an American is supposed to be. Then they would be able to see these leftists as the real threat and not conservative constitutionalists who want to repair America and make again the greatest nation on Earth. Maybe then we would see the importance of closing our border to Mexico, we would see why we need to restrict Muslim people coming into our nation because of their dangerous beliefs about our way of life not agreeing with their religious beliefs and we need to die because of it, and American’s would see that education and good non union jobs(because those provide the most freedom of movement and creative applications), and becoming the exceptional people we were destined to become who are able to fully resist Socialist lies and Marxist deception.