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Everything You Need to Know About Statism


As someone who teaches people about economics on a daily (or nightly) basis, I’m always on the lookout for a good object lesson, especially one that demonstrates a fundamental difference of principal between the “collectivist” and the “Free Market” outlook. And it would certainly be hard to pass up on the (Frank-Dodd) “Financial Reform” bill, sponsored by two of the most corrupt people in congress, as just such a lesson.

So, let’s start with the fundamental distinction: Socialists believe that capitalism is subject to corruption. Free marketers believe that people are subject to corruption. The underlying belief behind the agenda of the Obama Democrats and their predecessors throughout history is that there are two different kinds of human beings. There are corruptible manipulators like you and me trying to claw our way ahead in the free market. Then there are the select, who eschew all that personal gain and go into government service. They care only for the common good and their lack of ambition is made up for by an extra dose of wisdom which allows them to know exactly when and how to manipulate the economy for the greatest good!

Of course, no one on the left will acknowledge this belief in quite those terms. It’s just the inescapable foundation of their policies. Capitalism (a system designed around humans as we are–as opposed to the way someone thinks we ought to be) has a built-in mechanism for ensuring that the best possible decisions get made: We all make decisions with our own money. And while we may at times delegate those decisions, they are still ours to take back if we don’t like the result. No one has ever come up with a better method to avoid corruption. The odds are that a Senator who has been forced to retire because of taking sweetheart mortgage deals, and a Congressman who denied for years that there was any problem with Fannie Mae granting mortgages to people manifestly incapable of paying them back, are not likely to have come up with a better one either.

The statists simply want decisions taken away from private actors and turned over to government bureaucrats. But if I’m right, they’re no more honest or clairvoyant than the rest of us. But they are playing with other people’s money and are thus free to make (or rather force) bad decisions with impunity.

So, after destroying the one actual safeguard (the assignment of risk and benefit to the decision maker) the statists must then create a reserve to bailout the victims of their bad decisions. This will be funded, of course, from taxes on those who made wise decisions. It’s a recipe to ensure ever more bad decisions from which the government employees will retire on government pensions unaffected by their negligence but, perhaps, supplemented by the bribes they will attract due to their power to make or break businesses.

On second thought, I hope the socialists are right! Because if the 10 members of the “Financial Stability Oversight Council” turn out to be lazy, capricious, self serving and acquisitive (just like the rest of us) we’re going to turn into a third world country where “pay to play” becomes the rule in business just as it now is in Washington.

Loren Spivack (The Free Market Warrior) blogs at and offers free seminars in “Economic Literacy” all over the country.

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