06 October 2009

Markets are the physics of economic reality

I saw part of an interview of Michael Moore on the Sean Hannity show this evening. It was difficult to watch for a lot of reasons, but here are just a couple.

First, Hannity tries too hard to take the partisan line sometimes. In trying to focus on the Community Reinvestment Act as the cause of the so-called "mortgage crisis," he tried to make the case that it was only Carter's CRA, along with Clinton's later modifications of the Act, that were the root of the problems, and that it was only Democratic intransigence when Bush proposed reforms at Fannie Mae and Freddie Mac that allowed the final collapse. But this analysis ignores that at the time of the Democrats' resistance to Republican reforms, Republicans controlled the Congress. Further, it ignores that Bush, who quite vocally promoted an "ownership society," never advocated reining in the unsound lending practices encouraged by the CRA and subsequent modifications. Indeed, Bush fully shared the goals of those regulations. It's fine to name names, but to pretend that the party which controlled Congress for three-fourths of both the Bush and Clinton administrations have no responsibility for the problem is a dangerous position to take.

Second, and related to the above problem, Hannity never really called Moore on the central problem with the arguments (such as they are) which Moore makes. Indeed, Hannity seems to agree with Moore that the capitalist "system" is in need of reforms and improvements, he only disagrees on what form those improvements should take.

Yet for every bad thing, for every bad person that Moore holds up as an example of all that is wrong with the system, he fails to ever make a case that a "system" caused the problem, much less that the guilty system is capitalism. There will always be sad stories, there will always be bad people. Some of those people will be in politics, some will be in business, some will be in gangs, some will be in prison, and some will even be in Hollywood. That's not the fault of capitalism or any other system. It is a fact of human nature, and I don't understand why nobody simply asks Mr. Moore whether he believes there is a system that can possibly overcome human nature.

Capitalism, after all, is a term invented by Karl Marx to describe the world as he saw it. It is socialism which is a designed system. A better, and more accurate term for capitalism is "free markets." Markets, you see, are not a system to be designed or managed. Markets cannot be abolished or overcome. Markets are better described as the physics of our economic reality. You can no more change the fundamental operation of markets than you can change the law of gravity. That's why socialist economies never work. That's why the most efficient and best operating markets are free markets.

But there is probably no point trying to explain that to Mr. Moore. Perhaps a better question for him is how, if we are to consolidate more power over our economy and our freedom in the hands of a few people in Washington, we can be sure that those people won't be the same bad people who now cause bad things.

Free markets benefit from a value which Americans, more than any other people on earth, have always held dear: freedom. In a free market, power is not held by only a few, whether they be on Wall Street or Washington. No company is "too big to fail." To the contrary, all are free to succeed or fail, because all are subject to the same rules - the rules of markets.

The less free the markets, the less free the people.

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