And Rightly So

April 13, 2009

For a book about history, you can hardly get more topical these days than Robert Murphy's The Politically Incorrect Guide to the Depression and the New Deal, can you? Though, come to think of it, President Obama’s channeling more than just one Democratic President who failed in a spectacular way.

His Carteresque foreign policy may be even more dangerous than his FDR-style hubris about the economy. As Thomas Sowell pointed out before the election, we could afford Jimmy Carter's mistakes in the seventies only because Iran didn't have nuclear weapons. Appeasing the Islamic Republic now is even more horrifyingly clueless than it was then. And it's equally immoral. Does President Obama know about the Iranians imprisoned and tortured for opposition to their totalitarian government, or for converting to Christianity? Does he care? Perhaps not any more than his Secretary of State cares about the mistreatment of dissidents and religious minorities (and simply pregnant women who don't want to abort their children) in China; one of Hillary Clinton's first official acts was to reassure the Chinese dictators that the U.S. isn't going to let human rights interfere with the vital business of Chinese-American cooperation on the economy and global warming. Remember what a breath of fresh air Ronald Reagan's strength and responsibility on human rights were? Where Carter had actually made things (e.g., Iran) much worse by agonizing and dithering, Reagan actually got persecuted individuals -- and eventually whole persecuted peoples--free from tyranny. Well, that was a long time ago now.

But getting back to the economy, we have the spectacle of our new President using the power of his office to feed populist rage at the bonuses paid to employees of the bailed-out AIG insurance giant. No doubt the financial whizzes in New York have been living disgustingly high on the hog. Defenders of the bonuses sound awfully unconvincing, arguing that the whiz kids' unique talents are worth so many multiples of what the average American worker makes, and that the bailout-rescue-stimulus to the U.S. economy will trip and fall on its face without their expert guidance. But the real problem isn't that a few Ivy League grads have managed to get their hands on an obscene amount of money. Probably some of them could command those same sums in a truly free market, in which case, more power to them.

The problem is that we've talked ourselves into believing that the economy can and should be managed by the superior expertise of anyone -- Wall Street whiz kids, outraged Presidents, grandstanding Congressmen, inscrutable Fed chiefs. Of course the American people shouldn't be taxed to pay million-dollar bonuses to high-flying bankers and insurance executives. But, much more, we should never have signed them up to work for the U.S. government in the first place, by buying up 80% of their bankrupt company.

The parallels with the Great Depression are astonishing. The market crash in 1929, Murphy shows, came when the bubble blown up with easy money supplied by the (then newly created) Fed went bust. And then, as now, the government couldn't let business failure -- an inevitable condition of a truly free market, real private property, and responsibility and liberty for citizens -- take its natural course. First Hoover and then FDR (only more so) thought they could engineer, manage, and experiment their way out of the bad times. Instead, they managed to make the depression great, extending it for nearly a decade. And, this is the real kicker, introducing a new level of demagoguery and corruption into American politics, as the Constitution and the rule of law were compromised.

The reward for respecting private property and holding citizens responsible is that when we mind our own gardens, then in the nature of things we reap our own rewards, good or bad. We share with our neighbor out of charity, but we don't demand his property (and he can't demand ours) if we don't do as well as he does. The sad truth about socialism, planning, central management -- whatever you want to call the very mixed ex-capitalism we're moving toward now -- is that the rewards are divvied up according to who has the most power, so we're at each others' throats.