Wednesday, September 17, 2008

The Economy and Its Malcontents

"Malcontent: a person who is discontented, as toward authority."

I don't know enough about economics to tell you in detail why bad things are clustering just now or to make specific recommendations to combat them. But I do know more than Harry Reid, the current Senate Majority leader. That's not a boast (and it's a pretty low bar, anyway). Harry himself says so:
Senate Majority Leader Harry Reid, asked today what new regulatory actions Congress can take, said, bluntly, "No one knows what to do. We are in new territory here. This is a different game. We're not here playing soccer, basketball or football, this is a new game and we're going to have to figure out how to do it."
Well, he may not know what to do, but its not true that no one does. Hundreds of economists from Adam Smith to Thomas Sowell have pointed out the obvious for generations. Beneath all the complex talk of derivatives, leverage, and the like they all say pretty much the same thing: Politicians, get out of the way. Let the market deal with it.

Sound advice.

The opposite is taking place right now, among both Presidential candidates, many otherwise knowledgeable economists, and most journalists of the major news outlets.

According to McCain,
Under my reforms, the American people will be protected by comprehensive regulations that will apply the rules and enforce them to the full.”
Yet it was "the rules," specifically the rules that established Fannie Mae (and, later, Freddie Mac) as quasi-private businesses (backed by implicit government guarantees), that led to the current problem in the first place.

Fortunately, there is at least one politician — will wonders never cease — who understands this.
Sen. Jim DeMint, R-SC, an avowed free marketer, said the problems go back to the creation of public-private hybrids like Fannie Mae and Freddie Mac. He said the market is not under-regulated, but over-regulated.

"Many of the problems we're having today, particularly the problems with AIG, the failures on Wall Street, the mortgage industry, actually go back not to greed in the private market but political greed," Demint said.
I don't expect him to be heeded until the day a majority of the American people say they have had enough. Oh, they complain alright. But few are insisting that we reduce the power of the politicians to do harm by making it illegal for them to interfere in the financial markets, and the economy in general.

That will not happen until the general populace are helped to see what used to be common knowledge: that the government should be limited to the protection of property rights and providing protection from fraud.

What we need are more malcontents.

1 comment:

VH said...

Wall Street is already making changes to the way it was doing business; this is happening right before our eyes yet no one mentions it. Reid is the perfect example of a hack politician that knows absolutely nothing about economics but will end up supporting some sort of massive legislation in the name of "doing something."