I, Pencil

 Here is the classic essay I, Pencil.

 Milton Friedman wrote:

"I, Pencil" is a typical Leonard Read product: imaginative, simple yet subtle, breathing the love of freedom that imbued everything Leonard wrote or did. As in the rest of his work, he was not trying to tell people what to do or how to conduct themselves. He was simply trying to enhance individuals' understanding of themselves and of the system they live in. 

I.6

That was his basic credo and one that he stuck to consistently during his long period of service to the public—not public service in the sense of government service. Whatever the pressure, he stuck to his guns, refusing to compromise his principles. That was why he was so effective in keeping alive, in the early days, and then spreading the basic idea that human freedom required private property, free competition, and severely limited government.

 source

 Donald Boudreaux wrote:

There are two kinds of thinking: simplistic and subtle. Simplistic thinkers cannot understand how complex and useful social orders arise from any source other than conscious planning by a purposeful mind. Subtle thinkers, in contrast, understand that individual actions often occur within settings that encourage individuals to coordinate their actions with one another independent of any overarching plan. F. A. Hayek called such unplanned but harmonious coordination "spontaneous order."...

For its sheer power to display in just a few pages the astounding fact that free markets successfully coordinate the actions of literally millions of people from around the world into a productive whole, nothing else written in economics compares to Leonard Read's celebrated essay, "I, Pencil." This essay's power derives from Read's drawing from such a prosaic item an undeniable, profound, and spectacular conclusion: it takes the knowledge of countless people to produce a single pencil. No newcomer to economics who reads "I, Pencil" can fail to have a simplistic belief in the superiority of central planning or regulation deeply shaken. If I could choose one essay or book that everyone in the world would read, I would unhesitatingly choose "I, Pencil." Among these readers, simplistic notions about the economy would be permanently transformed into a new and vastly more subtle—and correct—understanding. 

source

Milton Friedman discussing the pencil.


 Thomas Thwaites:  How I Built a Toaster--from scratch
 

Students:
 Here is the assignment (with answer key)
 Your welcome.

I, Pencil remains relevant today.
Read and Friedman use the pencil to show the folly of central planning: Nobody can possibly know enough to manage the production of pencils. And indeed, history has proven that when governments create Pencil Ministries (metaphorically speaking), they fail – inevitably and spectactularly.
source

Friedman v Rothbard

How can you tell if a person truly advocates a free market economy? Simple. He prefers Rothbard to Friedman.

Here are a few excerpts from a recent exchange sparked by this article. Missing Milton Friedman.

Tim Lee writes:

If only the free-market right still had such a powerfully persuasive "technician advising the state how to be more efficient", our economy might now be slightly less screwed. Maybe it would help were "advising the state to be more efficient" less widely considered "evil work".

Gary North responds:

We need less efficient government. Friedman never grasped this. Rothbard did. The few Establishment economists and columnists who have read Rothbard have never forgiven him for this...

Friedman was the main apologist for fiat money in the free market camp. He believed in free market liberty, but not where it is really important: education (vouchers based on state-confiscated money) and money itself (central banking based on a grant of state power: a monopoly). Murray Rothbard challenged both ideas. He therefore remains a pariah to the Establishment.

George Selgin and Donald Boudreaux have also weighed in. Robert Wenzel details most of the debate here.

Free Market Solutions

Mark Thornton writes:

People often ask me, "What do you think the government should do instead of QE inflation?" My stock answer is that the government should not try to fight the depression with government spending and cheap credit. Trying to stop the market from correcting the errors of the past only delays the consequences and makes them much worse.

Government should balance its budget. There should be no new credit expansion by the Federal Reserve. Most importantly, government should not meddle in markets to try to soften the consequences of the correction. Specifically, that means no bailouts, stimulus packages, or new public-works projects. Do not prop up wages. Allow competition to lower the prices of land, labor, and capital. The only positive steps for government to take are implementing tax cuts and spending cuts, eliminating regulations, and allowing free trade.

Now, I have a name for this policy. It's called the "Lehman Bros. plan," after Lehman Brothers, the large financial firm on Wall Street that was allowed to go bankrupt in September 2008. This plan relies on allowing big firms to fail. Had this policy been followed from the beginning, I have little doubt that the crisis would already be over and we would not have added to the debt problem.

read the entire essay

Myth of a Free Market

Joel Bowman writes:

One of the more pervasive myths, perpetuated – either ignorantly or maliciously – by the mainstream media, is that the market tumult witnessed over the past few years is somehow a result of the free market having “run wild.”

The argument, as you are surely familiar with it, goes something like this…

Until recent and heroic intervention by the Feds, the world had been aimlessly bobbing about on a sea of unregulated, laissez-faire capitalism. Adrift in the cold, harsh, dog-eat-dog seascape, where rules were callously discarded and government vigilance eschewed, we clueless individuals simply made our way as best we could. Of course, it wasn’t long before we lost sight of the horizon. Then, the clouds of capitalist deceit obscured our view of the stars, by which we had previously been navigating our way across the perilous oceans. Sensing our vulnerability, the greedy capitalists stealthily moved in under the cover of “free market anarchism” to rock the markets and capsize our tiny, unguarded vessel.

What followed – around 2007-08 – was the painful aftermath of a great era of free market irresponsibility. Lessons were to be learned. Regulators, it was said, had failed to protect us (mostly from ourselves). The markets had been allowed to “run wild,” fleecing all and sundry of their earthly wares. The whole system was in danger of collapsing under the weight of its own free reigns and pundits from every corner of the boat were soon crying out for some form of central guidance, some direction, some calm. This, we were told, and not without a wag of the finger, is what happens to modern, mixed-market economies when they become adulterated by the blinding whims of free market capitalism.

And it would be a nice story, with a presumably easy remedy…if only it were true. Alas…

read the entire essay

Burning Down the House

Jason Hibbs reports:

The homeowner, Gene Cranick, said he offered to pay whatever it would take for firefighters to put out the flames, but was told it was too late. They wouldn't do anything to stop his house from burning.

Each year, Obion County residents must pay $75 if they want fire protection from the city of South Fulton. But the Cranicks did not pay.

The mayor said if homeowners don't pay, they're out of luck.

This fire went on for hours because garden hoses just wouldn't put it out. It wasn't until that fire spread to a neighbor's property, that anyone would respond.

Turns out, the neighbor had paid the fee.
[...]
It was only when a neighbor's field caught fire, a neighbor who had paid the county fire service fee, that the department responded. Gene Cranick asked the fire chief to make an exception and save his home, the chief wouldn't.

source

Jeff Tucker writes:

A strange argument emerged overnight that illustrates how little even informed people understand about the market economy and its implications. This time the debate centers on a interesting case of a man in rural Tennessee who did not pay his fire-services fee, so the fire department let his house burn down.

National Review’s Daniel Foster jumps in to say that this is why conservatives need to curb their enthusiasm for the market economy. A colleague in the “anarcho-capitalist” camp stuck his head into Daniel’s office to explain that fire protection is not a human right, so it makes sense that the house was allowed to burn. Paul Krugman (he never goes away) adds that this is a case against the market in general. “Do you want to live in the kind of society in which this happens?”

I don’t get this debate at all. It is not even a real debate. The fire-protection services were government services. The fee in question was a government-mandated fee. The county lines in which the fee was applicable is a government-drawn line that is completely arbitrary. The policy of not putting out the fire was a government policy enforced by the mayor. As he said, in the words of a good bureaucrat, “Anybody that’s not in the city of South Fulton, it’s a service we offer, either they accept it or they don’t.”

So why is the market being criticized here? This was not a real market. Instead, this is precisely what we would expect from government. In a real market, there is no way that a free-enterprise fire service would have refused to provide the homeowner service. They would be in business to provide that service. The fire would have been put out and he would have been charged for the service. It is as simple as that. It is the same as lawn-mowing services or plumbing services or any other type of service. Can we know for sure that the market would provide such services? Well, if insurance companies have anything to say about it, such services would certainly be everywhere.

As it was, the fire burned down as a result of government policy, a refusal of service because the homeowners did not pay what amounted to a tax! The poor homeowner begged for help and offered to pay. He had paid the year before and the year before, so his credit was good. Even so, the bureaucracy refused! (The whole thing reminds me of a scene from Gangs of New York.)

A market doesn’t just mean fee-for-service. The government cannot mimic the marketplace by merely setting prices on its services. A free market means that producers are responsible to consumers in a world of private property and free exchange. Why is this so difficult to understand?

source

David Henderson's response

Bob Murphy's response

Jacob Hornberger's response

Free Markets Create Jobs

Ron Paul writes:

In this struggling economy it is essential for politicians to take a step back and think about what government has been doing to business in this country. In less than 200 years, the free market, property rights, and respect for the rule of law took this nation from a rough frontier to a global economic superpower. Today, however, our nation and our economy clearly are headed in the wrong direction.

Of course, America has never enjoyed absolute free-market capitalism: creeping government intrusion and special interest political patronage have existed and increased since our founding. But America historically has permitted free markets to operate with less government interference than other nations, while showing greater respect for property rights and the rule of law. Less government, respect for private property, and a relatively stable legal environment allowed America to become the wealthiest nation on earth...

First and foremost, the role of government in business should be limited to resolving contractual disputes. As long as both parties of a contract enter into the arrangement willingly, without coercion, and with complete and accurate information, they should be expected to live up to their end of the deal. When a party cannot or will not honor the terms of a contract, it is acceptable for government to provide a court system to resolve disputes in a fair and impartial way.

Government should not dictate the terms of a contract to the parties involved. However, throughout the 20th century, our government became increasingly comfortable mandating terms that politicians find acceptable without regard to what businesses or their customers might want. This interference has had a chilling effect on the economy...

Freedom and a restrained government are what made us an economic power house. If we keep chasing businesses away with onerous taxes, mandates, and regulations, they will eventually leave. The best approach to our economic woes that will help the most people is simple: get back to the Constitution and demonstrate respect for free markets, private property, and the rule of law.

read the entire essay

Gulf Diaster and Free Market Solutions

Walter Block writes:

The BP Deepwater Horizon oil rig explosion of April 20, 2010 was a disaster for people located in or near the Gulf of Mexico. It outright killed 11 platform workers and seriously injured 17 others. It played havoc with the economic welfare of people in states stretching from Texas to Florida (none of which apart from Florida voted for Obama). But it was a great boon for socialists who like nothing more than to bash the free enterprise system...

What suggestion emanates from market fundamentalists such as me? Why, to privatize the entire Gulf of Mexico, of course. Why? Because with private ownership, external costs would be internalized. Any owner of the Gulf would have been much more careful than the MMS, because he would have lost, wait for it, profits! Had the Mississippi river been in private hands, the corporate owner would have gone broke, and this property turned over to more capable hands in the advent of the Katrina tragedy. Instead, those responsible for killing some 1500 of our neighbors, FEMA and the Army Corps of Engineers, are still in existence. This is in sharp contrast to BP, which of course, is (partially) responsible for this disaster. But, happily, based on free enterprise principles, that firm will suffer losses and even risk bankruptcy, unlike these statist institutions.

Ideally, users of the Gulf, its homesteaders, would become its owners. As a second best policy all those living within say, five miles of its coast, plus intensive users of its waters, would become stockholders in a new Gulf of Mexico Corporation. Take that, pinkos. If we learn anything from the study of economics, it is that private property rights systems, while far from perfect, function markedly better than their alternative, nonownership or government ownership.

read the entire essay

Capitalism v The Free Market

Economic Liberty Lecture Series: Sheldon Richman from The Future of Freedom Foundation on Vimeo.

Bryan Caplan responds:

If Sheldon were merely saying that libertarians' noun of choice should be "the free market," rather than "capitalism," he'd have a decent case. But for libertarians to reject "capitalism" as an alternate noun is overly defensive - and to announce that we "oppose capitalism" is completely confusing.

source

Stephan Kinsella responds:

I have myself for years now preferred the term anarcho-libertarian instead of anarcho-capitalist, mostly because libertarianism is about more than just free markets. But to the extent capitalism means the private ownership of the means of production–and I think this is a defensible meaning still–it is of course libertarian. We can expect any advanced libertarian society to be “capitalist” in that it would have an industrial, productive economy where the means of production is privately owned, characterized by the division and specialization of labor.

source

Jacob Hornberger: Capitalism Has Not Failed

Suppose you were to give a one-question test in public schools across the country and, for that matter, to all graduates of U.S. public high schools: “True or False: The Great Depression was caused by the failure of America’s free-enterprise system.”

There can really be no doubt about what the answer would be. The vast majority of respondents would answer: True.

Yet, the correct answer is False. As Milton Friedman, Ludwig von Mises, Friedrich Hayek, Murray Rothbard, and others have documented so well, the Great Depression was caused by the Federal Reserve, America’s central bank, a federal institution that is antithetical to free enterprise...

Alas, the deception and delusion are not limited to the Great Depression.

Today, we might well be witnessing the death throes of America’s welfare state and warfare state. Everywhere you look, the entire statist system is in crisis or chaos.

Social Security, Medicare, Medicaid, Fannie Mae, Freddie Mac, FDIC, the drug war, Iraq, Afghanistan, the dollar, federal spending, the national debt, stimulus plans, foreign aid, nationalizations, corporate and banking bailouts, and on and on.

The whole welfare-warfare system is busted, broke, bankrupt. With each passing day, it gets worse and worse, as federal officials continue to double down their bets in the hopes that somehow the system is going to come out fine.

But notice what the statists are saying: That it’s not socialism or imperialism that have failed, it’s free enterprise!

read the entire essay

Health Care Solution: Do Nothing

The second-best solution for the health-care crisis? Do nothing.

Of course, that drives the interventionists crazy. “Do nothing?” they cry! “Don’t you realize that we’re in a crisis? We can’t afford to do nothing!”

What they fail to realize is a fundamental principle about interventionism: It produces more crises. Therefore, any new health-care intervention, whether termed “reform” or “modification” or “improvement” is only going to make things worse than they already are. New interventions will produce new and bigger crises, thereby producing calls for more “reform” in the future.

What ultimately happens is that as the crises and interventions grow in number and intensity, people get so frustrated that they end up supporting a complete government takeover of that particular segment of society. In fact, that’s already happening in the health-care debate...

That, of course, leads us to an opposing diagnosis — that it’s not freedom and free enterprise that have caused America’s health-care crisis but instead the socialism and interventionism that have infected every aspect of the health-care field...

Thus, the prescription is obvious: radical surgery by removing all of this cancerous material from the body politic. No reform. Simply an immediately repeal of Medicare, Medicaid, health-care and insurance regulations, and medical licensure. End all government involvement in health care. Given the positive power of the free market and the enormous resiliency of human beings, the body politic will immediately begin recovering.

read the entire essay

Libertarians and the Economy

America was founded on the principles of a free market. What “free-market” meant was that market activity was free from government control. That is, “free market” didn’t mean less government control or regulation of market activity, it meant free of government control or regulation...

Unlike Republicans and Democrats, we recognize that Roosevelt didn’t save free enterprise with his socialism and fascism. He destroyed it. Thus, unlike the Republicans and Democrats, we libertarians don’t find ourselves exclaiming during the current economic crisis, “Oh, my gosh, free enterprise has failed again.” Unlike them, we understand that it’s their socialism and fascism that have failed again and that the only real solution lies in restoring the principles of economic liberty on which our nation was founded, which would include at a minimum the repeal of all welfare-state and regulatory programs and departments and the abolition of the federal income tax and the IRS.

read the essay

My thoughts: Both parties rejected free markets long ago. A few politicians espouse free market rhethoric, but their voting records do not back up their speeches. Ron Paul is the exception to this. Congress is infected with Keynesianism. The Democrats are left-wing Keynesians who emphasize government spending as the solution. The Republicans are right wing Keynesians who emphasize tax cuts as the solution. Neither side is committed to rolling back the welfare-warfare-interventionist state. Neither side is critical of the size and scope of the government. At best they will attack "waste, fraud, and abuse."

See Robert Murphy's essay "Cut Taxes for the Right Reasons" for a critique of right wing Keynesianism and their belief in "stimulus".

Schumpeter v. Keynes

"We're All Keynesians Again" shouted the Wall Street Journal's opinion page recently. The collapse of the financial markets and the subsequent recession, depression, banana, or whatever you want to call it, has the intelligentsia screaming for government money as prescribed by John Maynard Keynes so many years ago. And what with all college undergraduates receiving an economics education in Keynesianism and nothing but, no wonder government intervention is thought to be the cure for what ails the punk economy. Of course the fact is that the current funk is the result of Keynesian policies, and more of it will just prolong the downturn...

Schumpeter may not have been the strongest free-market advocate, but he would surely be dismayed by the current worship of Keynesian interventionism, which will ultimately stifle the entrepreneurial genius that drives capitalism and improved living standards.

read the essay

My thoughts: Here is "We Are All Keynesians Again" essay that was referenced. Keynesianism is continually discredited by economists who understand markets. Yet, politicians will never abandon the theories that justify their power and interference in the economy.

Credit Crisis and Free Markets

Q. But hasn’t the current crisis discredited “free markets”?

The history of markets is one of periodic crises (especially financial crises) and recoveries, including major episodes of creative destruction, but with steady positive long run growth despite severe fluctuations around the trend. The huge fallibility of human actors makes the case for markets stronger, not weaker. The market itself triggers the corrective actions by both public and private actors when these actors do stupid things, like give too many mortgages to people who were not creditworthy and then try to cover it up with fancy securitization. The collapse of financial markets was a severe wake up call to change this stupid behavior; creative destruction is wiping out firms that made huge mistakes (despite some well-publicized cases of individual CEOs getting bonuses despite their stupid actions). New firms or restructured firms will not make the same mistakes (even if they find new mistakes to cause some new crisis). Since we recovered from all the previous crises of capitalism, it seems likely we will recover from this one. A knee-jerk rejection of markets (especially in poor countries) will likely postpone rather than accelerate the recovery.

source

Economic Recovery: Free Markets vs. Big Government

Economic Recovery: Free Markets vs. Big Government
by Mario Rizzo

[w]e are at a crossroads with regard to the role of the state in our lives. This is a matter that no political economist can ignore. The impetus for a vast expansion in the role of the state is coming from our current financial and economic situation mediated by urgent macroeconomic policy advice....

1. We must remember that the current economic state of affairs was caused by the Federal Reserve's excessively low interest-rate policy the from about mid-2002 through the third quarter of 2006. This policy resulted in significant economic distortions or imbalances...

Recent research by John Taylor suggests that if the "Taylor Rule" had been followed during 2002–06 much of the housing bubble would have been avoided and therefore the subsequent price reversal and associated financial difficulties would have been much less severe.[2] (The Taylor Rule adjusts the federal-funds rate in accordance with the degree to which the actual and desired inflation rates differ, and the degree to which actual output differs from full-employment output. It would raise rates when inflation is higher than desired and lower them when output is below full
employment.)...

What should be done?

The first thing to keep in mind is that activities that prevent or inhibit the re-allocation of resources out of their bubble-induced misdirected uses will only prolong the current recession. This kind of stimulus is not better than nothing. It is worse than nothing...

My own preference is, first to allow market adjustments to take place.

Simple rebates and lump-sum credits, however, are not as likely to work as reduction in marginal rates. This is because rebates and credits do not offer incentives that will offset the disincentives to spend generated by generalized uncertainty...

However, to avoid the impact of later tax increases or inflation to pay for the current tax reductions, a credible commitment must be made to cut government spending later.

read the entire speech

My thoughts: More excellent insight. Markets work given time. Government interventions slow the market correction process.

Ron Paul on the Economy

Peter Schiff v. Obama's Stimulus Plan

Schiff:

We are not going to be able to spend ourselves into prosperity.

Socialism doesn’t work. Central government planning doesn’t work.

You can’t turn these market related functions over to government planning.

Our economy is going to be weakened dramatically as we move more and more away from free markets and capitalism towards socialism, toward centrally planned economy.

If the government tries to interfere some more, they going to re-create the Great Depression only this time it is going to a inflationary depression this time; it is going to be a lot worse.

Cartoon: Free Market v Bailout

The Austrians Were Right

Ron Paul Addressing the House of Representatives 11/20/08

Madame Speaker, many Americans are hoping the new administration will solve the economic problems we face. That’s not likely to happen, because the economic advisors to the new President have no more understanding of how to get us out of this mess than previous administrations and Congresses understood how the crisis was brought about in the first place.

Except for a rare few, Members of Congress are unaware of Austrian Free Market economics. For the last 80 years, the legislative, judiciary and executive branches of our government have been totally influenced by Keynesian economics. If they had had any understanding of the Austrian economic explanation of the business cycle, they would have never permitted the dangerous bubbles that always lead to painful corrections.

Today, a major economic crisis is unfolding. New government programs are started daily, and future plans are being made for even more. All are based on the belief that we’re in this mess because free-market capitalism and sound money failed. The obsession is with more spending, bailouts of bad investments, more debt, and further dollar debasement. Many are saying we need an international answer to our problems with the establishment of a world central bank and a single fiat reserve currency. These suggestions are merely more of the same policies that created our mess and are doomed to fail.

At least 90% of the cause for the financial crisis can be laid at the doorstep of the Federal Reserve. It is the manipulation of credit, the money supply, and interest rates that caused the various bubbles to form. Congress added fuel to the fire by various programs and institutions like the Community Reinvestment Act, Fannie Mae and Freddie Mac, FDIC, and HUD mandates, which were all backed up by aggressive court rulings...

The Federal Reserve created our problem, yet it manages to gain even more power in the socialization of the entire financial system. The whole bailout process this past year was characterized by no oversight, no limits, no concerns, no understanding, and no common sense...

All the programs since the Depression were meant to prevent recessions and depressions. Yet all that was done was to plant the seeds of the greatest financial bubble in all history. Because of this lack of understanding, the stage is now set for massive nationalization of the financial system and quite likely the means of production.

Although it is obvious that the Keynesians were all wrong and interventionism and central economic planning don’t work, whom are we listening to for advice on getting us out of this mess? Unfortunately, it’s the Keynesians, the socialists, and big-government proponents.

Who’s being ignored? The Austrian free-market economists – the very ones who predicted not only the Great Depression, but the calamity we’re dealing with today. If the crisis was predictable and is explainable, why did no one listen? It’s because too many politicians believed that a free lunch was possible and a new economic paradigm had arrived. But we’ve heard that one before – like the philosopher’s stone that could turn lead into gold. Prosperity without work is a dream of the ages...

The policies of big-government proponents are running out of steam. Their policies have failed and will continue to fail. Merely doing more of what caused the crisis can hardly provide a solution...

There are limits. A country cannot forever depend on a central bank to keep the economy afloat and the currency functionable through constant acceleration of money supply growth. Eventually the laws of economics will overrule the politicians, the bureaucrats and the central bankers. The system will fail to respond unless the excess debt and mal-investment is liquidated. If it goes too far and the wild extravagance is not arrested, runaway inflation will result, and an entirely new currency will be required to restore growth and reasonable political stability.

The choice we face is ominous: We either accept world-wide authoritarian government holding together a flawed system, OR we restore the principles of the Constitution, limit government power, restore commodity money without a Federal Reserve system, reject world government, and promote the cause of peace by protecting liberty equally for all persons. Freedom is the answer.

read the entire speech

My thoughts: Markets work, socialism doesn't.

Bush: Rhetorical Capitalist, Practicing Socialist

History has shown that the greater threat to economic prosperity is not too little government involvement in the market, it is too much government involvement in the market. We saw this in the case of Fannie Mae and Freddie Mac.

Because these firms were chartered by the U.S. Congress, many believed they were backed by the full faith and credit of the U. S. government. Investors put huge amounts of money into Fannie and Freddie, which they used to build up irresponsibly large portfolios of mortgage-backed securities. When the housing market declined, these securities, of course, plummeted in value. It took a taxpayer-funded rescue to keep Fannie and Freddie from collapsing in a way that would have devastated the global financial system. There is a clear lesson: Our aim should not be more government -- it should be smarter government.

All this leads to the most important principle that should guide our work: While reforms in the financial sector are essential, the long-term solution to today's problems is sustained economic growth. And the surest path to that growth is free markets and free people.

In the wake of the financial crisis, voices from the left and right equate the free-enterprise system with greed and exploitation and failure. It's true this crisis included failures -- by lenders and borrowers and financial firms, and by governments and independent regulators. But the crisis was not a failure of the free-market system. And the answer is not to try to reinvent that system. It is to fix the problems, make reforms, and move forward with the free-market principles that have delivered prosperity and hope to people all across the globe.

Capitalism is not perfect. But it is by far the most efficient and just way of structuring an economy. Capitalism offers people the freedom to choose where they work and what they do, the opportunity to buy or sell products they want, and the dignity that comes with profiting from their talent and hard work. The free market provides the incentives to work, to innovate, to save, to invest wisely, and to create jobs for others. And as millions of people pursue these incentives together, whole societies benefit.

read the essay

My thoughts: A great defense of free markets in a speech basically advocating more government interference in the market. At this point no rational person believes Bush supports free markets in the abstract or practical sense.

Sheldon Richman: Capitalism or Freedom

Capitalism or Freedom
October 17, 2008
Sheldon Richman

"These measures are not intended to take over the free market, but to preserve it," George W. Bush said in Orwellian tones Tuesday as he announced the partial nationalization of nine major American banks.

He was partly right, though not in the way he meant his words. There is no free financial market to take over. But that means there is no free market to preserve either. The moves he announced, which include government part-ownership of smaller banks too, were just more, albeit big, steps along the corporatist route the country has been following for generations...

There's an unfortunate phenomenon in politics. If a candidate says he favors markets but does little to actually free any markets once he becomes, say, president, lots of people will assume he's done so anyway. Evidence that he didn't won't matter. He will become known for his "laissez-faire, hate-the-government" policies -- even if such policies are nonexistent. Rhetoric gets all the attention.

But there's an asymmetry here. As noted, the most important deregulation of the last 30 years occurred, or at least was set in motion, by Jimmy Carter (trucking, airlines, banking, oil prices, telecommunications, and more) and Bill Clinton (banking). But no one accuses them of devotion to laissez faire. Yet Republicans who initiate little or nothing in this regard -- or worse, sponsor intervention such as protectionism -- are portrayed as Adam Smith reincarnate.

Do you sense that a political agenda overwhelms objectivity?...

The current political economy is a product of the past, and the past was not laissez faire...

The recent nationalization of the mortgage market and of major banks represent leaps in the degree of intervention. Still, they can be seen as a logical continuation of what has gone before. The crises produced by intervention summon forth further, more intense intervention. This is the way historical capitalism has worked.

Fortunately, we have an alternative: freedom and the free market.

read the entire essay

My thoughts: Perhaps it is time to totally abandon the word capitalism (the mixed economy verison) that is rapidly becoming corporatism. Supporters of freedom and free economy should embrace the terms free markets and laissez-faire.