“I know, my friends, that you are concerned about corporate power. So am I. So are many of my free-market economist colleagues. We simply believe, and we think history is on our side, that the best check against corporate power is the competitive marketplace and the power of the consumer dollar (framed, of course, by legal prohibitions on force and fraud). Competition plays mean, nasty corporations off against each other in a contest to serve us. Yes, they still have power, but its negative effects are lessened. It is when corporations can use the state to rig the rules in their favor that the negative effects of their power become magnified, precisely because it has the force of the state behind it. The current mess shows this as well as anything ever has, once you realize just what a large role the state played. If you really want to reduce the power of corporations, don't give them access to the state by expanding the state's regulatory powers. That's precisely what they want, as the current battle over the $700 billion booty amply demonstrates.
This is why so many of us committed to free markets oppose the bailout. It is yet another example of the long history of the private sector attempting to enrich itself via the state. When it does so, there are no benefits to the rest of us, unlike what happens when firms try to get rich in a competitive market. Moreover, these same firms benefited enormously from the regulatory interventions they supported and that harmed so many of us. The eventual bursting of the bubble and their subsequent losses are, to many of us, their just desserts for rigging the game and eventually getting caught. To reward them again for their rigging of the game is not just morally unconscionable, it is very bad economic policy, given that it sends a message to other would-be riggers that they too will get rewarded for wreaking havoc on the US economy. There will be short-term pain if we don't bailout these firms, but that is the hangover price we pay for 15 years or more of binge lending. The proposed bailout cannot prevent the pain of the hangover; it can only conceal it by shifting and dispersing it among the taxpayers and an economy weakened by the borrowing, taxing, and/or inflation needed to pay for that $700 billion. Better we should take our short-term pain straight up and clean out the mistakes of our binge and then get back to the business of free markets without creating an unchecked Executive branch monstrosity trying to "save" those who profited most from the binge and harming innocent taxpayers in the process.”
Steven Horwitz, "An Open Letter to my Friends on the Left" (28 September 2008).
http://myslu.stlawu.edu/~shorwitz/open_letter.htm
Steven Horwitz is Professor of Economics at St. Lawrence University in Canton, NY.
Both economists on the Right and on the Left are opposed to any bailout of Wall Street. Here a member of the “Austrian School of Neo-Liberalism” addresses his remarks to members of the Left.
The Austrian School follows three basic tenets:
1. Free markets are efficient and provide freedom of individual economic choice and social coordination through competition
2. Freedom of enterprise and consumer choice, and a strategic but very limited role for government
3. Democracy as minimal government in the economic and social realm
Consistent with this view, Horwitz and other Libertarians oppose any bailout bill.
Thanks to Larry Willmore and Michael Littlewood for the pointer.
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