Don’t Just Do Something, Sit There!
One of my favorite bloggers, economist Russ Roberts of Cafe Hayek, has offered a commentary on National Public Radio on the damage Treasury Secretary Henry Paulson is doing to our economy by his frenetic attempts to help it. Roberts’ commentary is linked from a post of his at http://cafehayek.typepad.com/hayek/2008/11/paulsons-failur.html and the transcript is well worth reading in its entirety.
My take: what is happening in the economic sphere right now gets to the heart of the case for anarchism. It isn’t that a free society will solve every problem: it is that the use of aggression is so consistently harmful. As I’ve suggested in other posts, it is government intervention that created the current crisis, not a free market, but even if you believed the latter, consider the chaos that is resulting from government attempts to address it. The bailout threatens massive interventions of an uncertain nature. Bear Stearns is bailed out. Lehman Brothers is allowed to die. AIG Insurance is bailed out. Fannie Mae and Freddie Mac are bailed out. Maybe they’ll be killed, maybe not. A massive bailout program is proposed for $700 billion, then it fails, then it is passed by making it worse (adding $150 billion of pork), and now the targets of the money keep changing, with lobbyists lining up and Paulson changing his mind constantly about what should be bought with his gigantic credit line drawn on the taxpayers. And the auto companies are lined up for money. And on and on.
Businesses and individuals are so uncertain that they are afraid to act and then have the rules of the game changed. One of the reasons the Great Depression went on and on and on in the United States was that Hoover and then FDR kept coming up with gigantic programs and plans, and what is called “regime uncertainty” caused a paralysis of businesses waiting for a stable regulatory environment before making long-term commitments.
One argument used by Hoover and FDR then and by Bush and Obama now is that the government cannot just sit there doing nothing, even if it isn’t clear what should be done. The government is like the doctors of old who had no idea why someone was ill, so they applied leeches and drained blood every day, making the patient worse and often killing them when their illness was otherwise non-fatal.
I can’t prove that the healing powers of the market will resolve the economic crisis, but neither can anyone prove that taking gigantic sums of money away from some people and handing it to others will do so. So, as long as we aren’t sure:
STOP ALREADY WITH THE LEECHES!!!