When a Government Loses Its Principles

In the last few months I have been doing some thinking about what kind of economic and political system we are living under. On paper we are still a market-driven democracy, but in light of recent market and political events it is starting to look more and more questionable.

For example, what kind of economic system would continue to bail out companies that lose billions of dollars each quarter? I can certainly tell you it's not capitalism, which in its purest state is a form of economic Darwinism (only profitable companies survive). Are we becoming more socialist or communist even? Certainly we are not communist, since none of the failing industries have been nationalized. And as far as I understand it, socialism's aim is to provide a safety net for citizens, not for corporations. So what are we left with? We are left with a government without principles or a basic philosophy, a government that arbitrarily decides what companies it wants to save with taxpayer dollars i.e. AIG and Citigroup (C), and what companies get the axe, i.e. Lehman Brothers. And while on the subject of taxpayer dollars, let us acknowledge that the ability of the government to bail out these failing institutions translates into billions of extra hours ordinary Americans must work to pay their taxes.

If the handouts to the financial institutions weren't bad enough, U.S House Speaker Nancy Pelosi now tells us "bankruptcy for automakers is not an option?" Why? Why is bankruptcy not an option for automakers but it is for millions of Americans who can't even pay their medical bills? Why should we help companies who are less efficient than their competitors and at the same time end up make inferior products? Should the government have bailed out typewriter manufacturers at the beginning of the PC revolution?

The scariest part for me about the government's handling of this crisis is the almost total lack of new ideas. There is no one to stand up and say "I am mad as hell and I am not going to take this any more." And when someone like Ron Paul does voice a fresh opinion, they are treated as a sideshow and are labeled too extreme and therefore are not taken seriously. With no principled vision and most importantly no macroeconomic game plan, the government will continue plowing money into companies that it already has so much invested in that now they really can't fail. And while the market will eventually recover, I am not so certain about the trillion plus dollars the government has so frivolously allocated.

Comments

[sheople:]

Amen. The feds/treasury has bankrupted this nation. Of course the citizens have ignored the sound advice of Ron Paul, too.

2008 Dec 03 03:01 PM

[tradeorfade:]

"And while the market will eventually recover..." Go tell that to the Japanese buddy. Besides that very assumptive line, I totally agree.

2008 Dec 03 08:34 PM

[carey_jim:]

A hundred years ago there was no income tax in America and almost all government revenue came from tariffs on imports.

The Supreme Court ruled that unions and the minimum wage were unconstitutional.

The work week was ten hours a day, six days a week. Child labor was common and laws against it almost non-existent.

There were no pensions and men worked until they couldn't work anymore. Less than 15% of women worked outside the home.

There was virtually no regulation of corporations and big corporations used every means possible to strangle smaller businesses. Social Darwinism was the rule and the government did virtually nothing to regulate this process of forming what were called "trusts" (monopolies.)

Upton Sinclaiir and Ida Turnbull wrote books which described this process in detail and helped create a strong socialist party in the early part of the twentieth century but socialism was crushed with the help of the army and other government institutions.

The Federal Reserve did not exist.

America was on the gold standard which meant that the money supply was tied to the amount of gold circulating in the world. During the last twenty years of the 19th century this caused mild deflation because there were no new gold fields and so the money supply could not expand. When gold was discovered in South Africa, Alaska and other places in the last years of the 19th century the money supply suddenly increased which caused inflation for about ten years into the start of the 20th century.

In the panic of 1907 the stock market lost 30% of its value in two weeks which began the process of very mild reform but which ended with the jailing of Eugene Debs, the leader of the socialist party, who obtained almost 6% of the vote for the president during the 1912 election. (He got 3% of the presidential vote in 1920 even though he ran while he was in prison.)

After the American "victory" in World War I, reforms took a back seat to the economy of the Roaring Twenties whose excesses precipitated the Great Depression.

This is a partial history, up to the 1930s, of the development of the American oligopoly economy of today where approximately 1/2 of 1% of the population controls about 40% of the wealth in America and the "bottom" 80% controls less than 10% of the wealth.

By no stretch of the imagination can you describe America as a socialist government today, or if it is, it is the most ineffective socialist government in history. (1/2 of 1% of the American population own 40% of the wealth and 80% own less than 10% of the wealth?)

2008 Dec 04 11:54 AM

[perceptions...:]

Now there is an oxomoron, if ever I heard one -

Government Principles

2008 Dec 04 09:21 PM