A source of tremendous frustration amid the financial carnage has been watching the mainstream media exemplified by Jacob Weisberg – author of The Libertarians’ Lament in The Big Idea section of the October 27, 2008 issue of Newsweek magazine – accuse libertarians of failing to understand the financial crisis resulted from too little government intervention not too much.
Weisberg either knows little if anything about Austrian economic theory or is a naked statist or fails to realize the American economy operates on the British economic philosophy of mercantilism, which for Weisberg’s sake I will explain.
From the 16th to the 18th centuries, mercantilism led to some of the first instances of significant government intervention and control over the economy, and it was during this period that much of the modern capitalist system was established. The system encouraged many wars and European imperialism. The founding fathers understood mercantilism’s dangers, failings, and shortcomings and strove to establish a true free market in the United States, free of government intervention. The nation enjoyed such a true free market for most of its history until the early 20th century when mercantilism reared its ugly head disguised in part by the establishment of the Federal Reserve in 1913.
The latest financial crisis illustrates the failure of mercantilism not the free market which is self-regulating but Weisberg either knowingly fails to point out the distinction or is ignorant of the distinction.
He openly mocks the arguments put forth by many libertarians that government intervention in the marketplace is dangerous.
From The Libertarians’ Lament Weisberg writes, “One line of argument casts as villain the Community Reinvestment Act, which prevents banks from ‘redlining’ minority neighborhoods as not creditworthy. Another theory blames Fannie Mae and Freddie Mac for subsidizing and securitizing mortgages with an implicit government guarantee. An alternate thesis is that past bailouts encouraged investors to behave recklessly in anticipation of a taxpayer rescue.” Weisberg continues “But libertarian apologists fall wildly short of providing any convincing explanation for what went wrong.”
Let’s examine what went wrong with Weisberg’s analysis or lack thereof.
First, the above actions all helped cause the current financial crisis. These are not “theories,” they are truths. One would hope a “journalist” and I use that term lightly would understand the difference between theories and truth.
Second, there are no “libertarian apologists.” Libertarians understand government intervention and our mercantile economy are fully to blame for the current financial crisis.
Third, the “explanation” of what went wrong was just summarized above but apparently Weisberg does not believe it or does not want to believe it.
Here’s one of the most unpardonable sins of the entire article. Weisberg writes, “We have narrowly avoided a global depression and are mercifully pointed toward merely the worst recession in a long while. This is thanks to an economic meltdown made possible by libertarian ideas.”
The economic meltdown was made possible by endless government intervention, fractional reserve banking, fiat money, government control of money and monetary policy, and our modern day mercantile economy.
Weisberg continues his uninformed indictment of what he calls libertarian economic philosophy, which he fails to realize is really mercantilism not a true free market economy supported by libertarians.
“Any competent forensic work has to put the libertarian theory of self-regulating financial markets at the scene of the crime, ” Weisberg states with a presumably straight face.
Uh, earth to Jacob, any competent journalist has to put government intervention and the mercantile economic system still alive and not-so-well in modern American at the scene of the crime!
Weisberg like so many liberal statist apologists whole-heartedly believes markets filled with traders, business people, entrepreneurs, brokers, and others in the private arena are evil and must be regulated by government.
The only lack of regulation that exists today is a lack of regulation on government itself. Government will never restrain itself. Leviathan’s only goal is to expand its power, influence, and profit through force, taxation, and war.
Weisberg even fails to correctly explain the economic philosophies, private and public, of Alan Greenspan, Phil Gramm, and Christopher Cox.
The writer claims “these men took the hands-off positions they did because of their political philosophy, which holds that markets are always right and governments always wrong to interfere.”
Weisberg could not be more wrong. These men did not take a hands-off philosophy. In fact they are the ultimate meddlers in the free market!
Greenspan inflated the money supply in an orgy of government intervention while simultaneously driving interest rates below what the free market had determined were prudent and sustainable. Gramm, the former chairman of the Senate Banking Committee make sure government worked closely with special interests to keep the whole scam going, while Christopher Cox, chairman of the SEC, made himself busy by meddling in other aspects of the market.
Weisberg quotes George Soros who called the market’s right to buy and sell “market fundamentalism.” Congrats to Soros on grasping the true nature of capitalism built upon private property and the right to buy and sell in voluntary transactions. Weisberg uses the quote to indict what he thinks is a true free market but in reality is a mercantile economy.
Here’s another sin committed by Weisberg, his explanation of libertarianism. He writes, “The best thing you can say about libertarians is that, because their views derive from abstract theory, they tend to be principled and rigorous in their logic. Those outside the government at places like the CATO Institute and Reason magazine are just as consistent in their opposition to government bailouts as to the kind of regulation that might have prevented on from being necessary. Let failed banks fail is the purist line. This approach would deliver a wonderful lesson in personal responsibility, creating thousands of new jobs in the soup kitchen and food pantry industry.”
Wrong, wrong, and more wrong!
Libertarian political philosophy does not derive from abstract theory. It derives from common sense about private property rights, sound banking, sound money, and no government intervention.
Then Weisberg continues his wrong-headed “analysis” and “explanation” of libertarianism. “The worst thing you can say about libertarians is that they are intellectually immature, frozen in the worldview many of them absorbed from Ayn Rand. Like other ideologues, libertarians react to the world by failing to confirm to their model by asking where the world went wrong. Their heroic view of capitalism makes it difficult for them to accept that markets can be irrational, misunderstand risk, and misallocate resources or that financial systems without vigorous government oversight constitute a recipe for disaster. They are bankrupt, and this time, there will be no bail out.”
Weisberg has absolutely no idea what libertarianism is or he willingly misrepresents it.
Libertarians, despite Weisberg’s assertion, are intellectually mature espousing a worldview based on liberty, private property, and true free markets. The mainstream media exemplified by Weisberg has cornered the market on intellectual immaturity with their failure to understand Austrian economics and to accurately describe and explain libertarian political philosophy.
Weisberg gets half of the argument correct, markets can be irrational, misunderstand risk, and misallocate resources but ONLY when they are encouraged, prompted, prodded, and forced by government decree, government programs, and government force.
The mainstream media is intellectually, morally, and ethically bankrupt and Weisberg’s entire “argument” is filled with lies, misunderstandings, fabrications, twists, turns, ignorance, and arrogance.
Weisberg should issue an apology for misstating, misunderstanding, and mischaracterizing the causes of the financial crisis, libertarian political philosophy, and economic theory.
The only lament libertarians have is that far too many of the mainstream media, political establishment, and everyday Americans have no clue about libertarians, Austrian economic theory, or the principles of liberty.
And that has to change in order for the country to return to its roots of true free markets, Constitutionally-protected civil liberties, peace, and prosperity.