Cleaning Up

The financial world is a mess, a statement that should raise few eyebrows. In the US, we are looking at several years of stagnation–if we’re lucky. In Europe the welfare state continues to lose its modesty as reality strips it bare for all the world to see.

What can we expect as the final days of crony capitalism and the welfare state play out? Did I say “final days?” Actually, I did. This cannot last. The edifice is crumbling and we are a witness to it. We may have a choice as to whether it unravels or implodes, but down it will come along with all pretense that collectivism has any place among civilized human beings.

Yet what in its place? That all depends on the lessons we learn or fail to learn from our experience. Here are a few to ponder.

1) Markets, in general, get people what they want. You and I may not approve of what others want, but if enough people want something, they will get it whether we like it or not. Look at the “war” on drugs.

2) Governments can influence markets by force, but they cannot control the secondary consequences of their decisions. The secondary consequences are rarely in line with the original intention and are often destructive.

3) When participants in a market get something wrong, they pay. This is why misallocations of resources in a free market are short-lived. The system is self-correcting. It is also why little problems become big problems when the government meddles. Witness TARP and the aftermath.

From toonpool.com

 

4) In a true free-market system, people who genuinely help others get rich. People who do the minimum to help others get rewarded accordingly. When government starts deciding who is deserving, wealth becomes more and more a matter of political pull.

5) Money is the medium through which people value things that they exchange. When government takes control of money, it invariably props up people with political power and punishes people without it.

In short, the filth comes from government tilting the playing board instead of serving as a neutral referee. The problem is, people now decide how to spend their time and money based on a government-heavy system that distorts all the signals we send to each other about what we want. Replacing the current system will require an earth-shattering change in the basic sensibilities of most of its inhabitants. All politicians and most liberals will have to be sedated while it sinks in that individual people are perfectly capable of deciding for themselves what to buy and how much to pay.

The clean up will take years, probably decades. After the Crash, recalcitrant crony capitalists will do their best to sell the same sham to everyone, claiming that a central authority is needed to “manage” the economy. They are snakes looking to raid the nests of you, me, and every other person they can find. We will have to sweep them out again and again.

If we find it in ourselves to resist, we will see after a time that we didn’t need them after all. They will be recognized for what they are–parasites. Bright, industrious people will prosper and mediocre people will too, as long as they are willing to work rather than whine. The poor will especially benefit as we stop coddling and start caring. The world will not be perfect, but it will be cleaner–better suited for the likes of us who are willing to get paid according to what we contribute and help those who truly need it directly rather than passively through the welfare state.

Will we see that day? I just don’t know. I do know this, though. We are about to lose the luxury of parking these issues in the backs of our minds. One way or another, each of us will soon have to decide what we want to replace this broken-down machine, whether we want another set of well-dressed dolts like we have now or manage things ourselves. As we pick up the junk scattered upon the ground, let us be mindful of that. Let us choose wisely.

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About Terry Noel

I am an Associate Professor of Management and Quantitative Methods at Illinois State University. My specialty is entrepreneurship.
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One Response to Cleaning Up

  1. Dick Richards says:

    Man, I hope you are right. I hope there are enough of us who see things for what they are, but I’m afraid. I’m very afraid. There are just so many people who have no clue.

    Like

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