What will we do when statism fails? Part three

To paraphrase F.A. Hayek, the time has come to take our ignorance seriously. It's not that the government doesn't have intelligent financial advisors who understand economics, it's that our complex economy is too much for any group of planners to manage, no matter how intelligent they are. Their ignorance is no shame, it's caused by the nature of limitations to handle such complexity through committees. When you add in uneconomic interference from social engineers, you have confusion and the continuous comedy of short term fixes, like whack-a-mole.

It's obvious we are witnessing the failure of American-style statism and central planning. Of course the cry will be to not debate economics but to stabilize a potential disaster and that will resonate with those who have the most to lose. When panic sets in the government is looked to provide a solution. The mess was created by government intervention, and since we have allowed this intervention, as a whole, for many decades, we all have to take responsibility for the stabilization. It's what we have to live with whether or not all individuals agreed with our form of government. Enough of us elected enough representatives to support our style of statism, now we all have to suffer through to a resolution.

As I said in the previous article, our main problem, as a whole, is one of perception. If this is framed as a failure of capitalism, we are quickly headed toward more rigid statism, further loss of freedoms and less calculation in market matters. If the perception is that without government interference, when companies fail because of bad judgment they simply go out of business and the market becomes stronger and more efficient, then we have an opportunity to turn back statism and establish a free market.

However, now, after years of government interference and social engineering, all calculations are off and the problems have grown to catastrophic proportions, we will need to take unusual measures to stabilize the unraveling of the magic scheme of eternal prosperity with no losses -- the plan to equalize all citizens in the wonder world of social justice. Returning to sound economics based on free choices, production and no social engineering will place us in a position to build a foundation enforced by real goods and services rather than meaningless and empty numbers.

I'm not an economist, but you don't have to be an economist to understand basic economic principles and to know that when calculation and long term planning are blocked there is no way to make good financial decisions. If government help is needed to stabilize the confusion they have created, then along with that needs to be a moratorium on government regulation and social engineering. We should keep the regulations that provide oversight to prevent fraud, but we should end all other government involvement in business decisions made in the free market. We all need to take our ignorance seriously, businesses as well. Businesses need to know that their decisions will not be softened by bail-outs or government favoritism, that they are free to make long term plans and they'd better plan well. No more corporate welfare of any kind.

One main reason auto manufacturers haven't re-tooled to make more energy efficient cars is that long term planning is hampered by the uncertainty of government interference. If the auto-makers knew they had the freedom to quickly respond to consumer demands without regulations destroying their investments, they would -- they want to make money, but it's best for them to maintain the status quo and not take risks when they have no assurance a new gang of legislators won't come along and change all the rules.

Lenders need to have the assurance they can make rational loans and not be penalized for social reasons of equality and justice. I don't know of any lenders who would not make a good loan regardless of social concerns. But if they are forced or enticed to make bad loans for social reasons, then calculation is off and we have what we have.

Business leaders are responsible for running efficient businesses using sound judgment -- if they offer money to anyone, then most people are going to take it. And if government is going to support bad loans then lenders will make them against their better judgment -- it's this "better judgment" that needs to be returned. I am going beyond blaming the government, now, though, and saying that businesses and consumers need to demand their freedom back, then take responsibility for it.

Governments grow out of control when they are not limited. Government is simply doing what governments do. But big, out-of-control, statist governments will fail, and they will drag all of us with them. Even if they get what they desire -- power -- it's a pathetic illusion, because without real productivity and economic growth, they merely have power over a failing, impoverished nation. We lose our freedom and pursuit of happiness and they get to lord over the misery. It can do nothing but fail without limitations.

We have to demand a free market where long term planning can be carried out and rational decisions made. If we don't demand it and vote for it, and make it happen, it won't happen -- government will continue to do what it does when left to its own devices, grow and control and deteriorate.