Who is John Galt?
Two questions continually echo in my brain as I listen to the mainstream media "news" with growing disbelief to the slow motion train wreck overtaking the American economy.
First, why is it that no one is speaking of the causes of the crisis? The cause is the same here as it was in the Great Depression. Easy credit policies, favored by the state, in that case meddled with the credit supply through the newly formed Federal Reserve Board, and in this case meddled with the housing credit supply through Freddie and Fanny, complex federal insurance schemes meant to underwrite, and therefore encourage, malinvestment. During the Great Depression the malinvestment was in stocks; here, in mortgages.
To add insult to injury, there was also peculation from political leaders, who looted the banking system for campaign funds, or just for funds. The very people who caused this problem — it is one hundred per cent pure quill nothing but state intervention in the free market that caused it — are the ones now vowing to fix it. And to fix it how? By massive state intervention.
To add evil to insult, the voices in the mainstream media – degraded to a mere propaganda organ from what was once a high estate of truth-seeking journalism – are calling for punishment and retribution for the wrongdoing — wait for it!— against Wall Street and from the state! As if, having been poisoned by a witch, and treated by a doctor, we then ask, if our health fails, to have the witch punish the doctor! Such reversals of justice, logic, and cause and effect are awe-striking, if not positively diabolical, in their insolence. One almost admires the sheer chutzpah.
Ludwig von Mises over half a century ago proved, beyond a shadow of doubt, that a little intervention in one sector of the economy creates an incentive for a lot of intervention in ever larger sections of the economy; and the government must forswear either the goals it has set as policy or the means selected to pursue them to resist, if ever, that incentive, and suffer the humiliation and financial loss of reversing long-standing policy. (A nice summary of his argument can be read here: http://mises.org/midroad.asp. A complete study of the underlying logic and epistemology can be read here: http://mises.org/resources/3250 )
As you can imagine, such complete reverses of ideology are rare. It is the road to serfdom. No serious student of economics would debate the issue, any more than a serious scientist would debate the theory of phlogiston.
The moneyed powers against whom G.K. Chesterton is so fond launching his Jeremiads, to the degree that they are not simply imaginary figments of that imaginative writer, are not the Ayn Randian self-made men we have here in America, honest businessmen. The moneyed powers are Big Government types, the heads of banking committees, the presidents of Fannie Mae, the chairmen of the Federal Reserve Board: people who transfer wealth, not the men who make wealth. In short, they are the Dems.
Those who see this debacle as an indictment of Capitalism are the same ignoramuses who saw the Great Depression as the indictment of Capitalism, and the death of the West. The socialists held an angry Jubilee and danced in the streets, never realizing that the unenlightened, if not downright evil, policies of Keynes and the clumsy non-policies of FDR would aggravate, extend and expand the Depression to make it a decade-long nightmare rather than a short and painful market adjustment. Perhaps in those days, an willing dupe of Soviet propaganda might have the excuse that he trusted Stalin, and therefore concluded that a command-and-control economy was more prosperous than a free market. These days, no one, no one at all, has that excuse.
Yet nonetheless, even to this day, some intelligent people repeat, without deep thought, the old myth that the Second World War somehow cured or pulled us out of the Depression: as if the shocking national debt war expenses incurred, the death of countless young men, and the destruction of countless dollars of equipment, the suspension of international trade, and putting the economy on a war time rationing and quota system could somehow produce wealth. If destruction caused wealth, why not simply bomb your own factories, rather than waiting for the Blitz? Bastiat demonstrated, with the precision of a geometer, the folly of such attempts over a century ago. This is not news. It is Victorian Era knowledge. As if no one had yet admitted the conclusions of Maxwell’s Four Laws. Against such widespread ignorance, the gods themselves contend in vain.
Second, where is the outrage? We are sleepwalking into socializing our housing and banking markets. Have we learned nothing from the failed policies, the poverty, the lunatic politics of postwar Western Europe and (more importantly) of Eastern Europe?
As best I can tell from casual conversations with friends in person, and with strangers and acquaintances on the Internet, the answer is a resounding NO. Not one person in ten knows the basics that could be gleaned from an ECON 101 textbook. They do not know where money comes from, nor what it represents. They do not know what sets the height of interest rates. They think there is such a thing as a free lunch.
But there ain’t no such thing as a free lunch. The bill always comes due.
What ought a sound and honest country should do in a crisis like this? Determine the causes of the problem and remove the cause. The cause is state intervention in the credit cycle. To remove it, place the credit rate and money supply outside of the range of the state, for the same reason, and in the same way, the press and the church are outside the range of the state: because history proves the state both incompetent and unwilling to govern these areas justly and disinterestedly. Abolish Freddie and Fanny; abolish the Federal Reserve Board; return to the gold standard; remove government incentives for unwise bank loans; let banks that unwisely lend go bankrupt. If you want, at the same time, to goose the economy, then let us by all means the abolish all capital gains tax, and abolish estate taxes, abolish the income tax. Don’t you think those steps would restore some investor confidence?
Sadly, one cannot run a free market republic in a land where the citizens are ignorant of the basic scientific laws governing the market relations. If most voters follow any Rumpelstiltskin or Paracelcus who says they can make gold from straw or lead, the voter’s theory of how the economy works will lead them to sabotage the economy, thinking they are doing good, as if someone ignorant of the germ theory of disease insisted on being bleed with filthy leaches in order to balance his humors. If the theory of humors is wrong, the acts based on those theories will be unproductive or even counterproductive of the ends sought.
About John C Wright
John C. Wright is a practicing philosopher, a retired attorney, newspaperman, and newspaper editor, and a published author of science fiction. Once a Houyhnhnm, he was expelled from the august ranks of purely rational beings when he fell in love; but retains an honorary title.
