Quick-Fix Quacks

Ilana Mercer, October 3, 2008

Misallocation of capital is inevitable in socialized systems. This immutable economic truth is anathema to America’s incontinent legislators, president-in-waiting, and their  crooked cognoscenti.

By “misallocation of capital” I mean the following:

In a free market, the institute of private property ensures that we have prices. Prices are like a compass: pegged to supply and demand they ensure the correct allocation of resources. Conversely, in socialized systems there are no prices because there is no private property. Absent such knowledge, misuse, misallocation and mismanagement of capital are inevitable.

You can take THAT to the bank.

The subprime mortgage cesspool is the latest acquisition in the government’s growing disinvestment portfolio.

If you’re working from the right set of first principles, you’ll understand that the State should not have an investment portfolio.

When one works from solid first principles, predicting what will happen upon their violation is easy. What isn’t easy is arriving at the correct principles in the first place.

Holding immutably true, principled positions is both politically unpopular and intellectually unintuitive to the mindless multitudes.

But not for one very clever economist—Bob Higgs—who, like another very clever statesman—Ron Paul—predicted the mortgage miasma into which the country has slid.

In “Ticking Time Bomb Explodes, Public Is Shocked,” Higgs explains how the violation of eternal truths has precipitated “the biggest government bailout/takeover in U.S. history,” likened by Higgs to “the collapse of the USSR’s centrally planned [unworkable] economy”:

“[T]he American people have little interest in liberty. Instead, they want the impossible: home ownership for those who cannot afford homes, credit for those who are not creditworthy, old-age pensions for those who have not saved, health care for those who make no attempt to keep themselves healthy, and college educations for those who lack the wit to finish high school. Moreover, they want it now, and they want somebody else to pay for it. … “

For its predictive value, the piece deserves to be excerpted extensively:

“In the future, we will see a similar breakdown of the U.S. government’s Social Security system, with its ill-fated pension system and its even more inauspicious Medicare system of financing health care for the elderly. These government schemes are fighting a losing battle against demographic realities, the laws of economics, and the rules of arithmetic. The question is not whether they will fail, but when—and then how the government that can no longer sustain them in their previous Ponzi-scheme form will alter them to salvage what little can be salvaged with minimal damage to the government itself. …”

“Each of these time bombs has at least one element in common: it promises current benefits, often seemingly without cost; but if it must acknowledge a substantial cost, it places that burden somewhere in the distant future, where it will be borne by somebody else. From the standpoint of society in general, every such scheme is a species of eating the seed corn. It satisfies the public’s appetite to consume something for nothing right now, with no thought for the morrow. It represents the height of irresponsibility by permitting people to live higher today than they can truly afford, financing this profligacy by borrowing recklessly and by taxing politically weak and ill-organized people in order to shower benefits on politically strong and well-organized special interests. …”

“… All competent economists understand these things. Ludwig von Mises explained as early as 1920 why a centrally planned economy could not work as a rational system of allocating resources. The reasons why Social Security, especially its Medicare component, and many other such government programs contain the seeds of their own destruction have been explained time and again.”

Are the politicians who construct these structures really such idiots that they cannot understand the logic of what they are doing? Not at all. But they are not striving to create economically viable institutions that serve the general public interest; they are feathering their own electoral nests in the only way they can in the context of our political institutions.” [My emphasis]

Where this column disagrees with Dr. Higgs is in his upbeat assessment of the collective intelligence of the governing quick-fix quacks.

Understandably, men and women with astringent minds find it hard to comprehend how systemic—and crushing—is the stupidity among corporate, political and academic elites. But they had better believe it. This is the age of the idiot. Bailout Boys Hussein and McCain are asses with ears; every bit as bad as they seem. Psychologizing about—or rationalizing—their motives only gives these intellectual tabula rasa more credit than they deserve.

ON THE TOPIC OF CREDIT: TV talker Glenn Beck deserves quite a bit. Beck is the only media mouth who gets that solvency is a virtue; bankruptcy a vice. He gets, to quote Higgs, that “members of the public are dense … greedy, impatient, and immoral, because the present benefits they hope to gain via politics, however unsustainable in the long run, come entirely at the expense of the taxpayers from whom the government extorts its revenues.”

Glenn is the only pundit in the peanut gallery on whose show you’re likely to hear sentences and sentiments such as, “Where is that in the Constitution?”

One question: Why does this sensitive a scrupulous soul—whose instincts are generally good—invite snake-oil merchants like Stephen Moore of the Wall Street Journal to obfuscate about the bailout (while making the obligatory noises about the merits of the free market he flouts).

Moore’s last book is titled “Bullish on Bush: How the Ownership Society Is Making America Richer.” If that’s not an indictment, nothing is. “Bush’s bailout society” is an instantiation of the principles upon which “Bush’s ownership society” was founded: credit for those who are not creditworthy.

So is America ever going to fire its failed philosopher kings when they fail to predict anything?

And is America ever going to understand that nothing can grow in the shadow of a State that has squandered trillions and makes up for it by printing more?

 ©2008 By Ilana Mercer
  October 3

CATEGORIES: Business, Economy, Federal Reserve Bank, Inflation, Politics & Policy

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