A crisis is a terrible thing to waste: so say politicians who over the past decade have used every actual or imagined one to justify more government control over the economy.
First they created Sarbanes-Oxley. Passed under the Republicans, and justified by a few high profile frauds [1], this law presumes all publicly traded businesses as guilty until proven innocent. Public companies are now forced to divert untold billions from productive efforts to plead their own innocence to various political appointees.
Then it was Bush’s bailouts. Using the Lehman bankruptcy as cover, Republicans and Democrats alike advocated a carte blanche rescue of other financial institutions — but were initially stymied by massive public outcry. Unfortunately, when the stock market dropped almost 9% after the bill initially failed, people accepted it as “proof” that the law was necessary, because — though we might not like bailouts in theory — the government had to respond to the emergency. (Curiously, when the market fell another 38% after the bill passed, nobody saw fit to repeal the bailouts or the mentality behind them.)
Obama carried the logic further during his automaker bailouts, when he used the impending bankruptcies to unlawfully give unionized workers millions of dollars rightfully owed to investors.
Next came Obama’ $787 billion stimulus package. Under guise of a vague economic crisis, the nation indentured its children to fund all sorts of government boondoggles, from Cash for Clunkers to green subsidies for soon-to-be bankrupt firms to spending $7 million per home to provide broadband internet access.
Having had no (positive) effects, the stimulus was then repeated in kind by Bernanke’s trillion-dollar QE1 and QE2.
In every case, when advocates were asked to justify these programs, the response was: “Given the crisis, it’s incumbent that the government do something.”
The actual result of these and countless other government interventions in the economy has been to weaken the real driver of economic growth: creative individuals left free to operate in the private sector.
Consider just some of the impacts: Sarbanes-Oxley treated executives of public companies as latent criminals. Not only did this destroy the morale of the business community, it also steered firms away from America’s public markets. When companies can’t readily access the capital required to grow, investors, consumers, and job-seekers all suffer.
Bailouts embedded a “too big to fail” mentality which increased systemic risk. They also unjustly punished the foresightful individuals and institutions that would have profited absent government intervention. (Those who refrained from entering an over-heated housing market still haven’t been rewarded for their acumen, while deadbeat lenders and homebuyers are being subsidized to keep home prices from falling.) The lesson? Prudence and forecasting don’t pay; it’s much better to plunge in recklessly and then have the government redistribute other people’s wealth to save you.
Similarly, Obama’s disregard for the law taught everyone to be wary of investing unless they happened to have the president or his cronies in their pocket. (A lesson emphasized by Obamacare and its notorious waivers.)
The nonstop spending, whether labeled “stimulus” or “quantitative easing” (a.k.a. inflation), has pushed the nation’s liabilities to unimagined levels and created an overarching long-term uncertainty. In the process, Obama has destroyed the country’s once pristine credit rating, spooked private investors and businessmen, drawn rebukes from foreign investors, and driven consumer confidence to 30-year lows.
The sum of all these interventionist policies has been to inculcate an atmosphere of fear, withdrawal, and uncertainty among private businessmen. No one wants to expand or hire new employees, given that they have no idea what Washington will do next. Hence the latest crisis that politicians now supposedly have to solve: chronically high unemployment.
For decades, the principle underlying our economic policies has been: in any crisis or quasi-crisis, let the government spend a little more of our money, control a few more of our choices, further regulate our businesses, and then all will be right with the world. This is unadulterated socialist theory, in which government intervention is a panacea for every ill.
Yet ever since the writings of Mises, Hayek, and Rand, we’ve known the nature and outcome of such intervention, economically, politically, and morally. Seventy more years of its practice, both here and abroad, has only served to confirm and reinforce that knowledge.
So rather than continuing a pattern by which every increase in power and every instance of intervention precipitates more calamities, why not break the cycle?
Let’s no longer accept the politicians’ claim: “We can’t just sit here, we have to do something.” (Where “doing” always means increasing the scope and size of government.) Instead, let’s do the opposite. Let’s restore liberty in general and in principle. In times of crisis, rather than imposing emergency controls we should enact emergency freedoms.
Given the past century of interventionist policies, we’re admittedly short of examples in implementing such freedoms — but that shouldn’t stop us. For even if we don’t know the exact form that government deregulation, repeals, or rollbacks should take in any given sector, we know their ultimate outcome (think West Germany vs. East Germany, or South Korea vs. North Korea). And while the transitions necessary to achieve long-term prosperity may cause short-term discomfort, we can use the lessons learned from each experience to make further transitions easier.
If we’re to finally solve — not exacerbate — our economic problems, we must replace our interventionist theories and mindset with pro-liberty principles and policies. We’ll know we’ve succeeded when our immediate reaction to any economic crisis is: “Time for emergency freedom!”
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[1] The frauds were properly prosecuted under pre-existing statutes, which were more than sufficient for the task.
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