StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Assisted Free Enterprise

17 Nov 2008
Posted by Stan Collender

One of the more bizarre experiences I've had over the past few months is having members of the financial services community say to me that they were voting against Obama because he would bring Socialism to America.  This was after they had bitterly complained about the federal government not rescuing Bear Sterns and the $700 billion bailout for their industry had been approved.  They were adamant that Socialism didn't/would never/should not exist in the U.S.

George Will in yesterday's Washington Post eloquently explains what I tried to say to these folks: the pure free enterprise economy the financial community insists we have in the United States, with their approval hasn't really existed for quite some time.  

At least since the Great Depression (and probably since the earliest days of the Republic), free enterprise and free markets have existed in the United States only when times have been good and markets have been rising.  Falling prices, failing businesses, declining markets, and job losses have all been reasons for publicly supported massive government intervention in the economy that has led to some type of redistribution.

The redistribution hasn't just been demanded from lower-income, left wing participants in the economy.  In fact, from farm owners to Wall Street moguls to corporate titans, this has been expected, required, demanded even from the most fiscally conservative and wealthy.  That's why there are agricultural price supports, bailouts, the Federal Reserve, and tax breaks for certain corporate and individual activities along with Medicare and Medicaid.

This is not a rant; although I disagree with some of these forms of government support the point is to recognize that it exists rather than condemn it to hell.  

But, as Will points out, because using the S word is inflammatory, it's probably time to come up with a new phrase -- like "assisted free enterprise" -- that describes the U.S. economy without being provocative.

 

Abetting moral hazard

"... it's probably time to come up with a new phrase -- like 'assisted free enterprise' -- that describes the U.S. economy without being provocative."

Yes, because as Orwell wrote in Politics and the English Language, renaming something in order to make it more palatable is a good idea, and takes care of the root problem:

"The inflated style itself is a kind of euphemism. A mass of Latin words falls upon the facts like soft snow, blurring the outline and covering up all the details. The great enemy of clear language is insincerity. When there is a gap between one's real and one's declared aims, one turns as it were instinctively to long words and exhausted idioms, like a cuttlefish spurting out ink. In our age there is no such thing as 'keeping out of politics.' All issues are political issues, and politics itself is a mass of lies, evasions, folly, hatred, and schizophrenia. When the general atmosphere is bad, language must suffer. ..."

I am not a fan of the Wall Street bailout plan. But few people were not surprised when we let Lehman Brothers go bust, and fewer still were prepared to chance a collapse of the financial system. We just did not know what would happen.

On the other hand, we do know the effects of such programs as agricultural subsidies, of union featherbedding, of low out-of-pocket-cost health care, and of regulatory capture.

Regardless of whether someone thinks that government intervention in the economy is a good thing -- and I do not -- it is indefensible to pussyfoot around the topic by coming up with a clever name. This is but one step removed from Congress attempting to disprove Bastiat's broken window theory through their next stimulus package: the Refenestration for Economic Advancement and Leadership in America Act ("REAL America Act").

As Will states in his article, "In America, socialism is un-American. Instead, Americans merely do rent-seeking -- bending government for the benefit of private factions. The difference is in degree, including the degree of candor." He also notes that "temporary" measures prove to be much longer-lived than we expect.

In debates like this, I think of a line spoken by Melvyn Douglas in the 1963 movie Hud: "Little by little, the look of the country changes because of the men we admire." Little by little, this country inches toward socialism. We may not be there yet -- we may only be in the "assisted free enterprise" stage -- but we should not hasten the slide by creating pleasant-sounding euphemisms.

Political control over economic decisions must always be challenged. It is vital to confront such ideas with clear language and demonstrate their negative effects.


It's patriotic if it is for you

it's socialism if it is for the other guy.




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