Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.
While the term "robber baron" has never been applicable to Capitalism, the rest of the quote makes a very useful point. And, today, there are no busier busybodies than the Progressives, who believe that a capitalist system is necessarily composed of nothing but robber barons and their victims. On that basis they assert that governments must lean hard on the predators, to curtail their predation.
That's one answer to a question they spend a good deal of time not answering: by what right? By what right do you propose interfering in voluntary trade? By what right does even a Democratically elected representative insert himself in the middle of a transaction in which no one's rights are violated?
Thus, we have Jacob Weisberg, chairman and editor-in-chief of the Slate Group, declaiming libertarianism1, as if he understood what the word meant. He starts his Slate article:
A source of mild entertainment amid the financial carnage has been watching libertarians scurrying to explain how the global financial crisis is the result of too much government intervention rather than too little.As Progressives like Weisberg rarely do, he gives no argument nor cites any facts in order to validate his position. He merely offers mockery. For example, he goes on to say:
But to summarize, the libertarian apologetics fall wildly short of providing any convincing explanation for what went wrong. The argument as a whole is reminiscent of wearying dorm-room debates that took place circa 1989 about whether the fall of the Soviet bloc demonstrated the failure of communism.He says nothing about why referencing the CRA, Fannie/Freddie actions, etc. isn't relevant to explaining the financial crisis. He never offers an alternative explanation. In short, he merely asserts. As evidence, I offer:
Like all true ideologues, they find a way to interpret mounting evidence of error as proof that they were right all along.He never says what is that mounting evidence allegedly proving the error of libertarianism. I.e. he never explains how a system of free markets leads to system-wide financial failures. That isn't surprising, since he can't because it doesn't.
He offers no hint, as Progressives in general don't, of acknowledging the existence and actions of the Federal Reserve (a government institution, I note, that wouldn't exist in a 'libertarian' free market society) and how its manipulation of interest rates and the money supply over several years might have played a role.
He shows no inkling of knowing how ACORN and others, wielding the CRA as a stick (given them by President Clinton, a government official, I note) might have caused lenders to ease traditional lending rules.
Nor, does he provide any evidence of awareness of how Fannie Mae (a Government Sponsored Enterprise) was run by a series of executives with Progressive views, each of whom explicitly worked to massively increase loans for low and moderate income borrowers, who are generally greater risks. Weisberg doesn't talk about how those borrowers' loans were securitized in ever-increasing numbers in the 1990s through today in a bond market brimming with government controls.
I suspect he doesn't know.
He goes on to complain:
To which the rest of us can only respond, Haven't you people done enough harm already? We have narrowly avoided a global depression and are mercifully pointed toward merely the worst recession in a long while. This is thanks to a global economic meltdown made possible by libertarian ideas.George Reisman does a very thorough job of addressing his question in The Myth that Laissez Faire Is Responsible for Our Present Crisis
Instead of arguing the case further, I want to take Weisberg at his word for a moment. Suppose that it were true, contrary to overwhelming evidence, that 'libertarianism' did lead to the financial crisis. Would it follow that abandoning free markets (if they existed), curtailing individual rights to voluntary trade (if they weren't curbed already), and all the other aspects of freedom Progressives abhor be the rightful course to follow?
In other words, I want to ask Weisberg: by what right? By what right do you ask government to interfere in the actions of free men, even when those actions lead to economic harm? The answer is: there is no such right. Not, that is, if it's true that men have a right to voluntary exchange at all.
Suppose, for example, that Warren Buffett buys stock on behalf of Berkshire Hathaway in General Re, an insurance company that insures other insurance companies. (In fact, BH did that in 1998 and now owns it outright.) Now suppose that General Re suffers a severe financial setback (as it did after 9/11). BH stockholders are going to lose money as a result, almost certainly a lot of money.
The fact of General Re/BH's woes will get reported in the financial press. Since Buffett is a well-known public figure, that news will quickly spread to the general media. Others will get nervous. Suppose they sell their shares in other insurance companies for less than they bought them, trying to limit their losses. The contagion spreads.
Now tons of people are losing money right and left. There's a general loss of confidence in insurance companies and the whole industry sees a severe contraction. People get laid off, lots of people who had nothing to say about how Buffett invested or managed General Re. (Ignore, for the purpose of this argument, that for every seller of shares there has to be a buyer, otherwise there's no sale.)
At any point in this scenario is there any proper point for the government to step in and start bailing out insurance companies, second guessing the decisions of market participants, or restricting their actions? Provided no force or fraud is involved, I claim the answer is a big, fat NO.
True, many innocent people will suffer economic harm. (In practice, it will be limited provided the government follows a 'hands off policy' — as I'll explain in detail in an upcoming post showing how Paulson's actions are actually making our current situation worse. But let's suppose the problem expands to huge proportions.) None of them had any control over how Buffett invested, how his managers measured or controlled risk, or how stock market participants chose to trade. They suffered through no fault of their own.
Still, no one has an inherent right to a particular job, a particular income level, or a particular degree of risk. Such a right, if it existed, would imply a corresponding obligation on the part of those who provide jobs, decide salaries, and judge risk. To implement those rights, the latter would require omniscience, the second is (in the end) determined by the supply of and demand for labor, and the first is purely a matter of individual choice on the part of the managers.
So, if those who hire and fire have the right to run their own lives (and by extension, the businesses they've been authorized to run) as they see fit, there can't be any right to dictate how they do so. That Progressives feel an overwhelming urge (whether healthy or neurotic, I leave aside here) to help those helpless victims of Buffett's mistakes changes nothing. Their feelings don't create rights.
The only relevant right that does exist is the right to voluntary trade in a market as free as possible of force and fraud. That right is a corollary of the rights to life, liberty, and the pursuit of happiness. The pursuit. Not a guarantee of the results.
The economic consequences may be a small dip in the stock price. Or, they might entail the elimination of an entire sector of economic activity. (Let's fantasize grotesquely that no company is any longer willing to offer insurance at all.) The degree of severity of the economic downturn — which certainly will cause suffering to people through no fault of their own — does not magically create new rights.
But the concept "rights," as understood in classical liberal thought, takes on a wholly different meaning in the mushy minds of Progressives. To such men, there is a right to a job, economic security, and a particular degree of risk.
Well, the first proper response to that claim is: Oh, yeah? Prove it. That, they will never do. If they're like Weisberg, they will never even try.
1Note: I'm not a fan of the word "libertarianism," since it's vague, encompasses too much, and is actually otiose. There's nothing wrong with the phrase "classical liberalism" and it's about the same number of syllables. It also actually has a fairly clear meaning. That said, libertarianism generally means, today, "a doctrine favoring free markets, advocating individual rights and limited government." So, I use it here.