I must have missed the part where capitalism allows the government to create money out of thin air:
Saying that the recession continues to deepen, the U.S. Federal Reserve announced Wednesday that it would pump an extra $1 trillion into the economy by buying mortgage-backed securities and long-term Treasury issues.
It's hard to avoid snark and sarcasm when one realizes the utter ridiculousness of what is going on. I wonder what it's like to be the son or daughter of a Federal Reserve chairman. "Eat your breakfast, Jimmy. When you grow up you too can debase the currency and bring further ruin to the global economy." The lessons which will be repeated pounded into my poor reader's heads--if only to give a brief respite to the pounding within my own--are: that this system is not capitalistic; and that the inmates who run the asylum haven't the foggiest idea of what they are doing, and so have no possibility for success. Enjoy the ride.
On a related note, there has been a bit of a hullabaloo over the AIG bailout. It seems that a number of employees were planning on using the money for bonuses. The populace is enraged, and thus the Democrats, who continue to lead by following, are up in arms:
Talking tougher by the hour, livid Democrats confronted beleaguered insurance giant AIG with an ultimatum Tuesday: Give back $165 million in post-bailout bonuses or watch Congress tax it away with emergency legislation. Republicans declared the Democrats were hardly blameless, accusing them of standing by while the bonus deal was cemented and suggesting that Treasury Secretary Timothy Geithner could and should have done more.
In an age of agitated action, it is asking too much to expect our representatives to actually read the bills which rob the people of their hard-earned money to give to whomever Congress feels has more need of it. If AIG is behaving immorally, they are at least legally in the right. There is a lesson here about the importance of sober reflection before action. It's almost like that time the Congress rushed through the PATRIOT Act, and then lamely asserted that they didn't realize what the bill would be used to do.
On the one hand, it's absurd that money is being taken from the people to give to those who have proven to be abject failures. Bonuses are the sorts of things you get when you make money, not when malfeasance or incompetence causes the government to give you money to stay solvent. But if the righteous indignation remains directed at the employees of AIG, ultimately, it misses its mark. As Rich Lowry writes in his column: "The bonuses AIG wants to pay its employees are a pittance compared with the $170 billion it has received in government bailouts, a trifling .097 percent."
I'd like to see the population insist on the bailout money being returned from every single recipient, bonus or no bonus. Such a blatant redistribution of wealth is pure thievary, made worse by the fact that it won't prove beneficial to anyone but the recipients themselves. If there's a sanguine note on which to end this sorry episode, it's that the cowardly democrats are sufficiently scared of a popular revolt placing the republicans back in power that they might just act. Left for an exercise for the reader is the appropriate response to a system which places faith in the people's propensity to cajole their represntatives into doing right.
Wednesday, March 18, 2009
Wednesday, March 11, 2009
The expiration of the evangelicals
At the peak of the Bush presidency--the country behind him after 9/11, the war with Iraq not yet begun--and perhaps even before that, a number of observers noted that the evangelical bloc which gave him the White House was now a force to be reckoned with. Then, as per usual with the fare that populates the current affairs section of any bookstore, everyone extrapolated the present trend into the future. Theocracy--whatever that is--was here to stay.
But prophecy is a difficult art. Once believed to be invincible, the evangelicals were unable to swing the election in favor of McCain. Cue the same predictions from the opposite side of the political aisle. The "permanent republican majorities" of yesteryear are today's GOP, doomed to wander for an eternity in the political wilderness. No trend is so permanent that it cannot be bucked eventually.
While power is bound to vacillate between the two parties in our rotten system, the people upon whom they depend for support will change. For the culture, which forms the people, is always changing. The role played by evangelicals, like any other, will vary; and not for the better according to Michael Spencer:
We are on the verge – within 10 years – of a major collapse of evangelical Christianity. This breakdown will follow the deterioration of the mainline Protestant world and it will fundamentally alter the religious and cultural environment in the West.
More prophecy it seems. But because he attempts to back it up, we ought to hear him out. His second point especially merits consideration:
We Evangelicals have failed to pass on to our young people an orthodox form of faith that can take root and survive the secular onslaught. Ironically, the billions of dollars we've spent on youth ministers, Christian music, publishing, and media has produced a culture of young Christians who know next to nothing about their own faith except how they feel about it. Our young people have deep beliefs about the culture war, but do not know why they should obey scripture, the essentials of theology, or the experience of spiritual discipline and community. Coming generations of Christians are going to be monumentally ignorant and unprepared for culture-wide pressures.
Spencer is very perceptive here. Although I was raised Catholic, I was also exposed to a good deal of evangelical culture, not directly since my family didn't know many evangelicals, but through the "music, publishing and media". Much of said is morally good, or at least mildly edifying, but a lot of it is disturbingly lowbrow. And a dreadful percentage of it was derivative, without necessity. Was the world really improved by Bibleopoly?
As an aside, the tendency to copy the culture with which we were supposed to be at war sent mixed messages. If Christian products are only clones of their secular counterparts, then young people will confuse a belated sense of hipness for religious principles. There's also the sheer bizarreness of trying to market Christianity; the gimmicks only make this weirder.
For all of the faults of evangelicals, I don't wish to insist that Catholics have this all figured out. For one, Catholics in America tend to be at least partially Protestantized. My family didn't have Bibleopoly, but we had Bible Baseball. On the other hand, Catholicism's basis in tradition means that ties to the past haven't been severed. Not many people seek out the heady spiritual and intellectual material which strengthens the soul and the mind to contest with powers and principalities. But I would argue that the material is more readily accessible to the Catholic. If you read the Catechism, you'll see the Summa cited. If you decide to pick up the Summa, you'll come across references to almost every significant thinker who lived before Thomas. Where would an evangelical begin his search with similar results?
In making an appeal to the past, I'm not insisting that everyone study the Church Fathers, or that without an intimate knowledge of Augustine's thought, you'll never become a saint. On the contrary, a great many holy men and women have had very little book learning, and Dante filled his inferno with bishops who at least knew their way around a church library. Nor is it true that good books could not be written today which might prove as beneficial as the great works of the past.
Instead, I merely note that a philosophy must have a solid foundation. Aside from the religious equivalent of current affairs book, an evangelical is armed only with his Bible and, if he is fortunate, with C.S. Lewis. Certainly this isn't a bad place to start, but one shouldn't confuse humble beginnings with a complete set of tools for life's journey. The Bible should be read and re-read throughout one's life, and although I am fond of Lewis--especially The Abolition of Man--there is too much good thought out there to confine oneself to one thinker. And yes, this even applies to my Chesterton.
My only hesitation in agreeing fully with Spencer is that monumental ignorance isn't confined to a subset of religious individuals. It's ubiquitous. I'd never profess optimism for a culture mired in hedonism and recklessly unaware of its own past, but neither would I discount a return to religion. An irreligious age will bear no resemblance to the promised land of secular utopias. This way have been mildly convincing when postulated by the philosophes of the Enlightenment, but it can hold little sway for mankind after the gulags and gas chambers of the twentieth century.
Man must return to God or perish. But what if those who speak in His name can't even convince their own?
But prophecy is a difficult art. Once believed to be invincible, the evangelicals were unable to swing the election in favor of McCain. Cue the same predictions from the opposite side of the political aisle. The "permanent republican majorities" of yesteryear are today's GOP, doomed to wander for an eternity in the political wilderness. No trend is so permanent that it cannot be bucked eventually.
While power is bound to vacillate between the two parties in our rotten system, the people upon whom they depend for support will change. For the culture, which forms the people, is always changing. The role played by evangelicals, like any other, will vary; and not for the better according to Michael Spencer:
We are on the verge – within 10 years – of a major collapse of evangelical Christianity. This breakdown will follow the deterioration of the mainline Protestant world and it will fundamentally alter the religious and cultural environment in the West.
More prophecy it seems. But because he attempts to back it up, we ought to hear him out. His second point especially merits consideration:
We Evangelicals have failed to pass on to our young people an orthodox form of faith that can take root and survive the secular onslaught. Ironically, the billions of dollars we've spent on youth ministers, Christian music, publishing, and media has produced a culture of young Christians who know next to nothing about their own faith except how they feel about it. Our young people have deep beliefs about the culture war, but do not know why they should obey scripture, the essentials of theology, or the experience of spiritual discipline and community. Coming generations of Christians are going to be monumentally ignorant and unprepared for culture-wide pressures.
Spencer is very perceptive here. Although I was raised Catholic, I was also exposed to a good deal of evangelical culture, not directly since my family didn't know many evangelicals, but through the "music, publishing and media". Much of said is morally good, or at least mildly edifying, but a lot of it is disturbingly lowbrow. And a dreadful percentage of it was derivative, without necessity. Was the world really improved by Bibleopoly?
As an aside, the tendency to copy the culture with which we were supposed to be at war sent mixed messages. If Christian products are only clones of their secular counterparts, then young people will confuse a belated sense of hipness for religious principles. There's also the sheer bizarreness of trying to market Christianity; the gimmicks only make this weirder.
For all of the faults of evangelicals, I don't wish to insist that Catholics have this all figured out. For one, Catholics in America tend to be at least partially Protestantized. My family didn't have Bibleopoly, but we had Bible Baseball. On the other hand, Catholicism's basis in tradition means that ties to the past haven't been severed. Not many people seek out the heady spiritual and intellectual material which strengthens the soul and the mind to contest with powers and principalities. But I would argue that the material is more readily accessible to the Catholic. If you read the Catechism, you'll see the Summa cited. If you decide to pick up the Summa, you'll come across references to almost every significant thinker who lived before Thomas. Where would an evangelical begin his search with similar results?
In making an appeal to the past, I'm not insisting that everyone study the Church Fathers, or that without an intimate knowledge of Augustine's thought, you'll never become a saint. On the contrary, a great many holy men and women have had very little book learning, and Dante filled his inferno with bishops who at least knew their way around a church library. Nor is it true that good books could not be written today which might prove as beneficial as the great works of the past.
Instead, I merely note that a philosophy must have a solid foundation. Aside from the religious equivalent of current affairs book, an evangelical is armed only with his Bible and, if he is fortunate, with C.S. Lewis. Certainly this isn't a bad place to start, but one shouldn't confuse humble beginnings with a complete set of tools for life's journey. The Bible should be read and re-read throughout one's life, and although I am fond of Lewis--especially The Abolition of Man--there is too much good thought out there to confine oneself to one thinker. And yes, this even applies to my Chesterton.
My only hesitation in agreeing fully with Spencer is that monumental ignorance isn't confined to a subset of religious individuals. It's ubiquitous. I'd never profess optimism for a culture mired in hedonism and recklessly unaware of its own past, but neither would I discount a return to religion. An irreligious age will bear no resemblance to the promised land of secular utopias. This way have been mildly convincing when postulated by the philosophes of the Enlightenment, but it can hold little sway for mankind after the gulags and gas chambers of the twentieth century.
Man must return to God or perish. But what if those who speak in His name can't even convince their own?
Sunday, March 08, 2009
Thomas and Rothbard on property rights
The great Murray Rothbard succinctly captures the thought which undergirds libertarian philosophy in an essay titled War, Peace and the State:
The fundamental axiom of libertarian theory is that no one may threaten or commit violence ("aggress") against another man's person or property. Violence may be employed only against the man who commits such violence; that is, only defensively against the aggressive violence of another. In short, no violence may be employed against a non-aggressor. Here is the fundamental rule from which can be deduced the entire corpus of libertarian theory.
This statement may seem surprising. After all, there is a tendency to see libertarians as a purer—if more hopeless—strain of conservatives. This is a misconception. Conservatives supported the Iraq War, something no sensible libertarian could ever do.
This fundamental antipathy toward aggression can be hard to square with what is known of libertarian thought. Many of us would probably be receptive to a system in which “no violence may be employed against a non-aggressor”; but it is also apparent that the number or us who would readily embrace the libertarian vision is minuscule. There seems to be a disconnect with the principles upon which libertarians say they build their philosophy and the philosophy itself. In short, we need to make apparent the connection between the usual behavior of libertarians, that of denouncing the State, with Rothbard's fundamental axiom:
It is time now to bring the State into our discussion. The State is a group of people who have managed to acquire a virtual monopoly of the use of violence throughout a given territorial area. In particular, it has acquired a monopoly of aggressive violence, for States generally recognize the right of individuals to use violence (though not against States, of course) in self-defense. The State then uses this monopoly to wield power over the inhabitants of the area and to enjoy the material fruits of that power. The State, then, is the only organization in society that regularly and openly obtains its monetary revenues by the use of aggressive violence; all other individuals and organizations (except if delegated that right by the State) can obtain wealth only by peaceful production and by voluntary exchange of their respective products. This use of violence to obtain its revenue (called "taxation") is the keystone of State power.
If we see that taxation requires the use of violence—or, more accurately, the threat of violence—and if we are opposed to violence except against aggressors, it becomes impossible to accept the existence of a large State. This is another example of the chasm between conservatives, who wish only to ameliorate some of the excesses of the State, with libertarians, who wish to come as near as possible with its abolishment.
As an aside, I am not familiar enough with Rothbard's works to know whether he finds the existence of the State itself to be an affront to liberty, or whether, like Robert Nozick for example, he would find a minimal state to be acceptable. I myself find Nozick's case to be convincing, and can think of no reason why Rothbard wouldn't come to a similar conclusion.
Setting this point aside, I do have one issue with which I find myself in disagreement with Rothbard, and for which I turn to St. Thomas Aquinas to better explain myself. As both Rothbard and Thomas recognize, the right to life should be absolute: anyone who aggresses against another's person is in the wrong, and the non-aggressor has every right to defend himself. Rothbard has already made his case; let us hear Thomas answer: Whether it is lawful to kill a man in self-defense?
Therefore this act, since one's intention is to save one's own life, is not unlawful, seeing that it is natural to everything to keep itself in "being," as far as possible. And yet, though proceeding from a good intention, an act may be rendered unlawful, if it be out of proportion to the end.
So far so good. But what of violations of property rights? Something in us recoils when we place the same commitment to reinforcing property rights as we do to those of life itself. We readily empathize with a man who accidentally kills a man in self-defense of his own life, but would find it harder to understand if the man had been killed over a watch. Part of this, perhaps, is the “proportion to the end” of which Thomas speaks. Might there be another reason?
First, we need to see what Thomas believes about property in general. He asks: Whether it is lawful for a man to possess a thing as his own?
Two things are competent to man in respect of exterior things. One is the power to procure and dispense them, and in this regard it is lawful for man to possess property. Moreover this is necessary to human life for three reasons. First because every man is more careful to procure what is for himself alone than that which is common to many or to all: since each one would shirk the labor and leave to another that which concerns the community, as happens where there is a great number of servants. Secondly, because human affairs are conducted in more orderly fashion if each man is charged with taking care of some particular thing himself, whereas there would be confusion if everyone had to look after any one thing indeterminately. Thirdly, because a more peaceful state is ensured to man if each one is contented with his own. Hence it is to be observed that quarrels arise more frequently where there is no division of the things possessed.
A couple of things are of interest here. First, the objections are largely pragmatic. This fits well with Thomas's philosophy of Natural Law. Man, being of a certain nature, behaves a certain way; any system which ignores this will be wholly impractical since it is at odds with the nature of human beings. We see here, in the 13th Century, some very common sense objections to the socialism that would arise in various heretical sects throughout the Middle Ages, and would later be revived in the teachings of Karl Marx, before being passed onto the revolutionaries of the twentieth century to sow destruction throughout the world.
Back to Rothbard. He writes:
It is wrong and criminal to violate the property or person of another, even if one is a Robin Hood, or starving, or is doing it to save one's relatives, or is defending oneself against a third man's attack. We may understand and sympathize with the motives in many of these cases and extreme situations. We may later mitigate the guilt if the criminal comes to trial for punishment, but we cannot evade the judgment that this aggression is still a criminal act, and one which the victim has every right to repel, by violence if necessary.
While he is certainly to be applauded for his clarity, I cannot confess that he is correct. If a starving man were to enter a person's house to procure bread for himself so that he didn't die, we would be hard-pressed to defend the person who expelled the aggressor. But I would also, it must be admitted, find it difficult to accept a situation in which anyone is allowed to any property whatsoever if they have a great enough need for that object. I am reminded of Chesterton's quip in The Man Who Was Thursday: "Thieves respect property. They merely wish the property to become their property that they may more perfectly respect it." If we are not to draw the line where Rothbard does, surely we ought to draw it somewhere. Fortunately, Thomas has already answered our question: Whether it is lawful to steal through stress of need?
In cases of need all things are common property, so that there would seem to be no sin in taking another's property, for need has made it common.
It should be pointed out, that while Thomas answers the question, he still leaves a good deal unsaid. The concept of need is, to put it bluntly, ambiguous—if not for Thomas, certainly for one used to a slew of modern amenities without which we find life to be difficult, but which can by no means be called necessary since man lived for so long without them. Clearly food is a need while cellular phones are not. But this leaves a good deal unsettled.
This essay had already run on for too long, so I will merely suggest two areas for future discussion. First, any attempt to enlarge the acceptable sphere of state action must do so on grounds of meeting an essential need. To take but one possible example, it could be argued that taking from the rich and giving to the hungry is within the rights of the State because the latter have need of food. To pose an objection, any money taken from taxpayers to enrich State employees cannot do more than meet the bare minimum of needs, for anything more is clearly theft. Even if we interpret need in the largest sense possible, all sorts of actions fall well outside acceptable bounds, and require a vigorous defense on their behalf before we should accept them as legitimate.
Second, any attempt to reconcile libertarianism with Catholicism, as it is one of my aims to do, must determine when it is acceptable to violate property rights. Suggesting that property rights are absolute does not strike me as compatible with Catholic teaching. However, since non-aggression is a principle in full accord with Catholicism, I remain optimistic that much common ground remains.
The fundamental axiom of libertarian theory is that no one may threaten or commit violence ("aggress") against another man's person or property. Violence may be employed only against the man who commits such violence; that is, only defensively against the aggressive violence of another. In short, no violence may be employed against a non-aggressor. Here is the fundamental rule from which can be deduced the entire corpus of libertarian theory.
This statement may seem surprising. After all, there is a tendency to see libertarians as a purer—if more hopeless—strain of conservatives. This is a misconception. Conservatives supported the Iraq War, something no sensible libertarian could ever do.
This fundamental antipathy toward aggression can be hard to square with what is known of libertarian thought. Many of us would probably be receptive to a system in which “no violence may be employed against a non-aggressor”; but it is also apparent that the number or us who would readily embrace the libertarian vision is minuscule. There seems to be a disconnect with the principles upon which libertarians say they build their philosophy and the philosophy itself. In short, we need to make apparent the connection between the usual behavior of libertarians, that of denouncing the State, with Rothbard's fundamental axiom:
It is time now to bring the State into our discussion. The State is a group of people who have managed to acquire a virtual monopoly of the use of violence throughout a given territorial area. In particular, it has acquired a monopoly of aggressive violence, for States generally recognize the right of individuals to use violence (though not against States, of course) in self-defense. The State then uses this monopoly to wield power over the inhabitants of the area and to enjoy the material fruits of that power. The State, then, is the only organization in society that regularly and openly obtains its monetary revenues by the use of aggressive violence; all other individuals and organizations (except if delegated that right by the State) can obtain wealth only by peaceful production and by voluntary exchange of their respective products. This use of violence to obtain its revenue (called "taxation") is the keystone of State power.
If we see that taxation requires the use of violence—or, more accurately, the threat of violence—and if we are opposed to violence except against aggressors, it becomes impossible to accept the existence of a large State. This is another example of the chasm between conservatives, who wish only to ameliorate some of the excesses of the State, with libertarians, who wish to come as near as possible with its abolishment.
As an aside, I am not familiar enough with Rothbard's works to know whether he finds the existence of the State itself to be an affront to liberty, or whether, like Robert Nozick for example, he would find a minimal state to be acceptable. I myself find Nozick's case to be convincing, and can think of no reason why Rothbard wouldn't come to a similar conclusion.
Setting this point aside, I do have one issue with which I find myself in disagreement with Rothbard, and for which I turn to St. Thomas Aquinas to better explain myself. As both Rothbard and Thomas recognize, the right to life should be absolute: anyone who aggresses against another's person is in the wrong, and the non-aggressor has every right to defend himself. Rothbard has already made his case; let us hear Thomas answer: Whether it is lawful to kill a man in self-defense?
Therefore this act, since one's intention is to save one's own life, is not unlawful, seeing that it is natural to everything to keep itself in "being," as far as possible. And yet, though proceeding from a good intention, an act may be rendered unlawful, if it be out of proportion to the end.
So far so good. But what of violations of property rights? Something in us recoils when we place the same commitment to reinforcing property rights as we do to those of life itself. We readily empathize with a man who accidentally kills a man in self-defense of his own life, but would find it harder to understand if the man had been killed over a watch. Part of this, perhaps, is the “proportion to the end” of which Thomas speaks. Might there be another reason?
First, we need to see what Thomas believes about property in general. He asks: Whether it is lawful for a man to possess a thing as his own?
Two things are competent to man in respect of exterior things. One is the power to procure and dispense them, and in this regard it is lawful for man to possess property. Moreover this is necessary to human life for three reasons. First because every man is more careful to procure what is for himself alone than that which is common to many or to all: since each one would shirk the labor and leave to another that which concerns the community, as happens where there is a great number of servants. Secondly, because human affairs are conducted in more orderly fashion if each man is charged with taking care of some particular thing himself, whereas there would be confusion if everyone had to look after any one thing indeterminately. Thirdly, because a more peaceful state is ensured to man if each one is contented with his own. Hence it is to be observed that quarrels arise more frequently where there is no division of the things possessed.
A couple of things are of interest here. First, the objections are largely pragmatic. This fits well with Thomas's philosophy of Natural Law. Man, being of a certain nature, behaves a certain way; any system which ignores this will be wholly impractical since it is at odds with the nature of human beings. We see here, in the 13th Century, some very common sense objections to the socialism that would arise in various heretical sects throughout the Middle Ages, and would later be revived in the teachings of Karl Marx, before being passed onto the revolutionaries of the twentieth century to sow destruction throughout the world.
Back to Rothbard. He writes:
It is wrong and criminal to violate the property or person of another, even if one is a Robin Hood, or starving, or is doing it to save one's relatives, or is defending oneself against a third man's attack. We may understand and sympathize with the motives in many of these cases and extreme situations. We may later mitigate the guilt if the criminal comes to trial for punishment, but we cannot evade the judgment that this aggression is still a criminal act, and one which the victim has every right to repel, by violence if necessary.
While he is certainly to be applauded for his clarity, I cannot confess that he is correct. If a starving man were to enter a person's house to procure bread for himself so that he didn't die, we would be hard-pressed to defend the person who expelled the aggressor. But I would also, it must be admitted, find it difficult to accept a situation in which anyone is allowed to any property whatsoever if they have a great enough need for that object. I am reminded of Chesterton's quip in The Man Who Was Thursday: "Thieves respect property. They merely wish the property to become their property that they may more perfectly respect it." If we are not to draw the line where Rothbard does, surely we ought to draw it somewhere. Fortunately, Thomas has already answered our question: Whether it is lawful to steal through stress of need?
In cases of need all things are common property, so that there would seem to be no sin in taking another's property, for need has made it common.
It should be pointed out, that while Thomas answers the question, he still leaves a good deal unsaid. The concept of need is, to put it bluntly, ambiguous—if not for Thomas, certainly for one used to a slew of modern amenities without which we find life to be difficult, but which can by no means be called necessary since man lived for so long without them. Clearly food is a need while cellular phones are not. But this leaves a good deal unsettled.
This essay had already run on for too long, so I will merely suggest two areas for future discussion. First, any attempt to enlarge the acceptable sphere of state action must do so on grounds of meeting an essential need. To take but one possible example, it could be argued that taking from the rich and giving to the hungry is within the rights of the State because the latter have need of food. To pose an objection, any money taken from taxpayers to enrich State employees cannot do more than meet the bare minimum of needs, for anything more is clearly theft. Even if we interpret need in the largest sense possible, all sorts of actions fall well outside acceptable bounds, and require a vigorous defense on their behalf before we should accept them as legitimate.
Second, any attempt to reconcile libertarianism with Catholicism, as it is one of my aims to do, must determine when it is acceptable to violate property rights. Suggesting that property rights are absolute does not strike me as compatible with Catholic teaching. However, since non-aggression is a principle in full accord with Catholicism, I remain optimistic that much common ground remains.
Thursday, March 05, 2009
A return to economic sanity
During his State of the Union speech, President Obama, whose budget roughly doubles the percentage of government spending with respect to GDP, insisted that his reasons for the lavish spending increases were pragmatic and not ideological: “I called for action because the failure to do so would have cost more jobs and caused more hardships.” Attempts to justify such profligacy invariably depend on a narrative that suggests that capitalism is inherently unstable. Unless the system is somehow buttressed by government action, its greedy paroxysms will cause it to collapse. It is implicitly assumes that we do in fact possess a system of laissez-faire capitalism. But as is so often the case, the narrative is ultimately at odds with the facts.
In Meltdown, Thomas Woods attempts first, to point out the absurdities of blaming capitalism for the economic crisis, given the immense dissimilarities between the present system and a truly free market. Second, he puts the blame squarely where it belongs: at the feet of the central bankers of the Federal Reserve. Especially considering how quickly the book was written, Woods succeeds admirably. Despite being a short book, Meltdown makes a thorough case against government intervention in the economy, and more than vindicates capitalism for the latest economic crisis.
As Woods reasonably points out, “We cannot expect the situation to improve until we understand how we got there.” This may seem too obvious to deserve mentioning, but most economists have no idea what causes a recession. Paul Krugman, neo-Keynesian and columnist for the New York Times, lamely asserted on C-SPAN that “bubbles happen”. One wonders if he also posits incredulity about the reasons for a recovery.
Although an alarming number of economists share Krugman's ignorance, the small but growing Austrian school of economics, of which Woods is a member, professes to know why the crisis occurred, as well as the way out. Woods spends an entire chapter explaining the business cycle theory, which accounts for the boom and bust cycle of the economy. Although businesses fail all the time, a recession occurs when a whole sector of the economy is revealed to have made bad investments. By artificially lowering the interest rate and injecting money into the economy, the Federal Reserve deceives businesses into thinking that it will be profitable to make long-term investments—something which would never happen to all businesses at one time if the interest rate was allowed to float freely. Sooner or later, the malinvestment becomes apparent to all. To take a present example, the scores of McMansions which were foolishly built on credit are without buyers: all of the capital and labor spent in the building process has been badly allocated. The economy will only recover as production becomes reallocated to sectors of the economy in which demand actually exists. And, since the easy credit policy of the Federal Reserve was the cause of the bubble, attempting to inflate oneself out of a crisis will only serve to encourage malinvestment and postpone the recovery.
This is precisely what happened during the Great Depression. Rather than letting capitalism correct itself, as it did admirably during the depression of 1920-1921, Hoover put into action a drastic program of economic intervention—which FDR then continued. The argument that the Great Depression was somehow too big for the market to solve holds no water as “Conditions were worse [by the middle of 1920] than they would be in 1930, after the first year of the Great Depression.” Throughout the book, Woods presents evidence that government repeatedly prevents economic recovery.
Another valuable chapter focuses on the issue of money, which is crucial if we are to understand the economic crisis. The health of an economy cannot be improved by injecting more money into the economy; for money is only a means to an end. The real ends are the goods and for which we hope to exchange for the money we earn by producing goods which are in turn used by others. The productive powers of an economy are of far more importance than the number of paper or electronic dollars in circulation, and no attempt to increase the latter will improve the economy unless production also increases.
Meltdown concludes with a logical and well-articulated political program. It's completely impractical, of course, but it will become less so as the arguments the book presents take hold in a culture which must sooner or later realize that sound money and economic freedom have more to offer than the perpetual inflation and turmoil provided by central planners.
In Meltdown, Thomas Woods attempts first, to point out the absurdities of blaming capitalism for the economic crisis, given the immense dissimilarities between the present system and a truly free market. Second, he puts the blame squarely where it belongs: at the feet of the central bankers of the Federal Reserve. Especially considering how quickly the book was written, Woods succeeds admirably. Despite being a short book, Meltdown makes a thorough case against government intervention in the economy, and more than vindicates capitalism for the latest economic crisis.
As Woods reasonably points out, “We cannot expect the situation to improve until we understand how we got there.” This may seem too obvious to deserve mentioning, but most economists have no idea what causes a recession. Paul Krugman, neo-Keynesian and columnist for the New York Times, lamely asserted on C-SPAN that “bubbles happen”. One wonders if he also posits incredulity about the reasons for a recovery.
Although an alarming number of economists share Krugman's ignorance, the small but growing Austrian school of economics, of which Woods is a member, professes to know why the crisis occurred, as well as the way out. Woods spends an entire chapter explaining the business cycle theory, which accounts for the boom and bust cycle of the economy. Although businesses fail all the time, a recession occurs when a whole sector of the economy is revealed to have made bad investments. By artificially lowering the interest rate and injecting money into the economy, the Federal Reserve deceives businesses into thinking that it will be profitable to make long-term investments—something which would never happen to all businesses at one time if the interest rate was allowed to float freely. Sooner or later, the malinvestment becomes apparent to all. To take a present example, the scores of McMansions which were foolishly built on credit are without buyers: all of the capital and labor spent in the building process has been badly allocated. The economy will only recover as production becomes reallocated to sectors of the economy in which demand actually exists. And, since the easy credit policy of the Federal Reserve was the cause of the bubble, attempting to inflate oneself out of a crisis will only serve to encourage malinvestment and postpone the recovery.
This is precisely what happened during the Great Depression. Rather than letting capitalism correct itself, as it did admirably during the depression of 1920-1921, Hoover put into action a drastic program of economic intervention—which FDR then continued. The argument that the Great Depression was somehow too big for the market to solve holds no water as “Conditions were worse [by the middle of 1920] than they would be in 1930, after the first year of the Great Depression.” Throughout the book, Woods presents evidence that government repeatedly prevents economic recovery.
Another valuable chapter focuses on the issue of money, which is crucial if we are to understand the economic crisis. The health of an economy cannot be improved by injecting more money into the economy; for money is only a means to an end. The real ends are the goods and for which we hope to exchange for the money we earn by producing goods which are in turn used by others. The productive powers of an economy are of far more importance than the number of paper or electronic dollars in circulation, and no attempt to increase the latter will improve the economy unless production also increases.
Meltdown concludes with a logical and well-articulated political program. It's completely impractical, of course, but it will become less so as the arguments the book presents take hold in a culture which must sooner or later realize that sound money and economic freedom have more to offer than the perpetual inflation and turmoil provided by central planners.
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