Big Government: Darn Handy in a Crisis

Wed, 2008-09-17 09:19Richard Littlemore
Richard Littlemore's picture

Big Government: Darn Handy in a Crisis

Slavish devotees to the free market must be mourning the news today as the U.S. government steps in to rescue the insurance giant AIG and (we're still hoping) to forestall a worldwide financial crisis.

This is what government does: it saves us from ourselves and from disasters we cannot anticipate. Good governments try to get ahead of that curve, setting policies and regulations that prevent totally stupid or predictable crises. I think its fair to say that this event suggests that good government has, recently, been in short supply.

Consider two obvious cases that we have before us: the financial meltdown and the global climate meltdown.

In the first case, you have a situation in which some clever (?!) souls gathered together to celebrate the overheated U.S. housing market by lending money to people who couldn't afford it, at interest rates that were destined to push the borrowers further and further into debt. These financial brainiacs then “securitized” the risk, selling all this (inevitably bad) debt to unsophisticated investors (Lehman Bros., Bear Stearns, etc.).

A reasonable argument can be made that this was predictable trouble - that a slightly more interventionist government could have prevented this crisis by noting that the underlying activity was rooted in greed rather than good judgment.

Now take the case of Exxon Mobil, the richest company in the history of companies and an organization that is reliant on a single, finite commodity. Irrespective that this commodity is in diminishing supply, and that its increasing use is threatening the habitability of the planet, Exxon has chosen to forsake all investment in energy alternatives - banking instead on its ability to convince gullible legislators and shortsighted people that the climate crisis might not be happening.

Now, aside from small town mayors in Alaska and U.S. Vice Presidential candidates, few people actually believe this, but the temptation to keep on making money is hard to pass up when your investments are doing poorly and the kids still need braces.

This, then, would be a perfect, and perfectly appropriate time for government to step in. This might be a time, for example, for responsible legislators to notice that during the period between 1972 and 2006, nearly 71 per cent of Americans thought government should be forcing automakers to make cars and trucks that use less gasoline. And during this same period, government did virtually nothing, while America's automotive free marketeers built bigger and bigger gas guzzlers that made climate change worse and put the country at greater risk because of its dependency on foreign oil.

Those car makers are now in crisis - slammed by a free market that allows smart consumers to buy Toyotas that are good on gas. And that puts American jobs and families at risk, both now, and in the future, when other jurisdictions will continue to outperform U.S. industry because they have been thinking ahead.

I'd like to think that foresight is also possible in the offices of Ford and Exxon Mobil - the lack of evidence notwithstanding. But for today, I'm left thinking that Churchill's withering criticism of democracy is equally applicable to the system of free markets: it is the worst imaginable - except for all the others.

I would not abandon free markets any sooner than Churchill would have foresaken democracy, but we should keep our heads, recognize that both systems are fallible and allow the strengths of one to support the weaknesses of the other.

Editor's note: the Progress Report has a very good article on this subject as well. 

Comments

http://tinyurl.com/5hgmf6

“`Small-government conservative’ = government should be stripped down to essential functions: cronyism and oppression.

“`libertarians’ 10% of the time= libertarianism; the other 90% of the time= deniable Republicanism, Republicanism under a false flag.

“By now, everybody should realize this.”

-=-=-=-=-=-=-=-=-=-=- frankbi.wordpress.com

from sockpuppet today Frank?

Apologies, my socks are on urgent leave at the moment. :) Something to do with the Heartland Institute suddenly taking its “conference proceedings” off the web, I think.

-=-=-=-=-=-=-=-=-=-=- frankbi.wordpress.com

You certainly make some points I can agree with in the article. Good forward thinking responsible government would be a plus. I don’t think there is much hope for that though from any of the parties or candidates on offer.

I think the “small government” talk from conservatives is just that - a bunch of talk. Governments of all brands are big and dumb. They amount to a whole bunch of people narrowly focused on winning the next election so they can make a name for themselves.

statesmen and some are just kleptocrats.

For what it’s worth, McCain is the one who saw the financial crisis coming and tried to put through some reform in the last few years. You might think he’d start talking about that in his ads. http://hotair.com/archives/2008/09/17/mccains-attempt-to-fix-fannie-mae-freddie-mac-in-2005/

Except that McCain’s been voting in lock step with Bush over 90% of the time. How on Earth is the American economy going to improve under McCain if he favours 90% of the Bush plan?

yeah I’ve heard that number too. I wonder if it’s actually based on something or it’s just made up. McCain always had the reputation of annoying his party by reaching across to the democrats. Now they say he was in lockstep with Bush. I have no idea what to believe.

No need to “believe”. Do your own math. That’s what “personal responsibility” is about, no?

Meanwhile, here’s something for starters:

http://tinyurl.com/6zqpmx

-=-=-=-=-=-=-=-=-=-=- frankbi.wordpress.com

Here’s some Obama math for you - It adds up to zero. http://hotair.com/archives/2008/09/18/mccain-goes-on-offense-links-obama-to-credit-crisis/

Reid Math http://www.politico.com/blogs/thecrypt/0908/Reid_dodges_AIG_bail_out_questions.html

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