Tuesday, April 22, 2008

Government is the problem

It's difficult to identify major problems that exist in our country that weren't caused by the government. Resentment in the Middle East is mostly due to U.S. interventionism. The U.S. imposed the Shah on the Iranian people, and he killed many. The U.S. imposed Saddam on the Iraqi people. The U.S. encouraged Saddam to do battle with Iran, and supplied him with weapons. Even chemical weapons, which he used on Iranian civilians. Likewise the U.S. provided weapons to Iran as well to fight against Saddam. The U.S. used the money from the sale of weapons to Iran to fund the Contras, who were busy attacking Nicaragua. Likewise, elsewhere in Latin America U.S. interventionism is largely to blame for resentment there. In Panama the U.S. imposed another CIA operative, Noriega, on the Panamanians. When the U.S. decided Noriega was a problem he was ousted violently, and many civilians in Panama were slaughtered.

The same thing is true with regards to the economic crisis that currently exists. Is capitalism the problem? Do we need more government intervention? In fact what we need is the very opposite, as Ron Paul explains well here. Notice how Ron Paul, speaking in 2002 long before the housing bubble had really burst, explains why a housing bubble is to be expected. The central planners that manipulate the value of money create the mal-investment that leads to the irrational financial decisions that are made. If the market were permitted to function without government regulation, then the true value of money is reflected in the price. When the central planners set the price, the market information is lost, and people make wrong, uninformed decisions.

It is the government involvement that caused the problem in the first place. But what politicians will do is use the current crisis to pile on more regulations that will lead to even greater problems. As Paul writes: "The only decision now before the central planners in Washington is whose special interests will continue to benefit from the coming pretense at reform."

If we don't get government out of the way things could get very bad in the U.S. Unfortunately neither the Democrats nor the Republicans are willing to fix the problem. I'm concerned that this is all going to end at some point in the near future. And it will end badly. Unless people wake up and we get the government out of the way.


Anonymous said...

Much as I like Ron Paul (at least cmpared to most republican politicians) he is manifestly wrong in this case.

He complains about the current system but totally fails to see that although it is not his beloved free market, it is very much the product of capitalism. Free markets, left unregulated and unmonitored do not stay free. consilidation, monopoly and protectionism are the inevitable result of free markets. Look at microsoft. Do you believe, that free of government regulation they would be more inclined to allow competitors to flourish or do you believe they would flex their considerable might to destroy any and all opposition to maintain their position as market leader?

The huge bubbles and busts that you see are also the result of capitalism at work. With quick and vats profits to be had, even though the long term might be risky, a company cannot afford to not take risks. If they don't then they are outperformed by their competitors. Their share price drops, they go under or get bought out. To maintain parity with their rivals they MUST make the same foolish risks as their rivals to get the short term pay off. the stockmarket doesn't look a few years down the line, it looks a few weeks down the line. Companies cannot afford to fall behind.

Fraud and quasi-legal or flat out illegal acts are also the result of an unregulated market. If a company can make huge profits by lying in the short term, their success draws investors who will often inject enough cash to make the lie reality. The cases we know so well such as Enron are the cases where the lie was too big to be made right with investment, or where individuals chose to cheat their company for individual profit at the expense of the shareholders.

Look at it this way. Who provides the best service when it comes to utilities, big companies or small companies. Usually a small local company can outperform a large national company. Why? because they do not have the same level of competition as the larger companies, they don't have the same level of need to bow to shareholder desires on the short term that lead to overseas outsourcing, or cutting or customer service departments.

Efficiency and profit margins are everything to large companies, customer service comes way down the list.

Now with government i agree with your post wholeheartedly, the US government (and my nation, the UK) are too much involved in what is rightfully other nations business. This is ultimately working against us and certainly against the best interests of those countries. But again, much of this is driven by unrestrained corporate greed. Our whole middle eastern problem comes down to oil, the lifeblood of our economy. And yet if you look at how much money the US has wasted, just on Iraq, you could have solved the oil issue for your own nation, and in doing so, created a world leader in oil less technology that would provide excellent export potential.

If the US is ever to provide the equality and care to its own citizens and the rest of the world it needs to heavily regulate the market, especially the larger corporations. Nationalised health care, free education and plentiful investment in modern technology combined with a casting off of the military industrial complex and their insanely expensive wars would fix most of America's great issues. And the terribly thing is that America has the cash and the technical base for this, but it is being wasted, most obviously in Iraq, but also via lost corporate taxes, bloated defence budgets and gross inefficiency.

Anonymous said...

By the way, love the blog.

Jon said...

Hey Anon. Glad you like the blog.

First of all I agree that a free market can't allow monopoly, so some government regulation is necessary. I also agree that government is needed to prevent fraud and enforce contracts. This is the standard liberterian position, and Paul agrees.

But let's talk about Microsoft. What happened was Bill Gates did not have active lobbying operations pumping money into the pockets of politicians. His theory was that since he's just interested in making software what is the need? Well, he's figured it out now and now he does have active lobbyist operations giving these guys their money. This could make him more effective at running a monopoly than he was before as his friends in Washington look the other way. This is the problem with bringing government into the picture. The goals may be noble, but in practice the regulations are really nothing more than favors for priveledged people.

Of course bubbles can occur as a result of free market forces. But whereas the market ultimately punishes those that have made the poor decisions, when government causes the bubbles the perpetrators aren't affected. Why is oil so expensive? Partly because the government monopoly that runs our currency has inflated it to where investors are afraid of what might happen with the currency so they hedge with commodities. This is another bubble caused by the government.

If I take a risk and invest in a tech company and it fails, I suffer. But that's fair. My risk, my reward or loss it it doesn't work out. Government creates bubbles that harm other people not involved in the decisions.

Sure, oil companies want profits, and we are in the Middle East for them. But this is absolutely not about a free market. This is about corporations and government completely wedded together, like a fascist system. The oil companies are simply using the government to impose their will on unwilling people in the Middle East. This is the opposite of a free market in action. In a free market oil companies bid to earn contracts for oil in the Middle East. Iran is free to accept or reject any offer, and they probably accept the highest bidder. Big government is about overthrowing elected leaders in Iran and dictating to them what the oil contracts with be with corporations. Don't assume that just because you're looking at a big corporation you're looking at the free market in action. The problem is big government, not free markets.

Since government breaks everything it touches I absolutely do not want government health care. Actually, what exists in America tody is a huge government system which is so bad it is absurd. Government regulation is what causes the 10% annual increases in the cost, whereas unregulated medical operations, such as eye surgeries and plastic surgeries, stay pretty flat and actually get more advanced and better at the same time.

You probably have a better system in the UK than we do, and yes yours is government provided. But don't assume that what you are seeing across the ocean here in the states is in fact a free market system. It is not. If you are interested in seeing what a real free market system would look like, watch John Stossel's 20/20 special on health care on youtube.