23 September 2008

This is not a pipe.

I always knew Ron Paul was a crackpot, the sort of guy who dreams of those utopian days of free-market capitalism that haven't existed since...well, since ever, but especially since we decided that sweatshops and child labor and completely expendable workers' lives were no longer in fashion, but he confirmed it with a commentary on cnn.com. According to Paul, our current fiscal crisis is a problem of too much government regulation as opposed to too little, basically proving that he's been out to lunch for much of the last thirty years.

Paul is correct in arguing that the proposed Paulson bailout rewards idiotic behavior, but his opposition to it stems from entirely incorrect assumptions that the so-called free market isn't free enough. Here's a little sampling of Representative Paul's theory:
The solution to the problem is to end government meddling in the market. Government intervention leads to distortions in the market, and government reacts to each distortion by enacting new laws and regulations, which create their own distortions, and so on ad infinitum.
It is time this process is put to an end. But the government cannot just sit back idly and let the bust occur.
It must actively roll back stifling laws and regulations that allowed the boom to form in the first place.
The government must divorce itself of the albatross of Fannie and Freddie, balance and drastically decrease the size of the federal budget, and reduce onerous regulations on banks and credit unions that lead to structural rigidity in the financial sector.
Until the big-government apologists realize the error of their ways, and until vocal
free-market advocates act in a manner which buttresses their rhetoric, I am afraid we are headed for a rough ride.

Umm, it was the lack of "stifling laws and regulations" that allowed the false boom to form, not the presence of them. Throughout the 1980's and 1990's, the government removed many of the regulations that prevented financial institutions from overextending themselves and exposing themselves to massive speculative debt. "Vocal free-market advocates" have had their way ever since Reagan rode into town, and the chickens are coming home to roost. These "distortions" in the market that Paul tries to lay at the feet of government were created and sustained through the prevalent free market practice of speculation; a quick primer on the history of capitalist economics could show you that the cycle of boom and bust -- a cycle not absent but decidedly much more extreme during the heady days of unregulated markets -- has been leveled and controlled through regulation.

Over in the corner, Ron Paul's been watching the deregulation gang kicking the supports out and as the roof collapses he's shouting that the few remaining beams are the cause of the collapse.

No comments: