Monday, October 6, 2008

West, Sowell and the Government Corruption of Markets and The Direction of the Campaign

An article at Townhall by Diana West, discusses the largely unreported facts of government involvement and manipulation of Fannie Mae and Freddie Mac. And, here is a link to an article at NR Online by Thomas Sowell, relative to the same subject:

Is it a nice sentiment to try to assist people in owning homes who as a group have traditionally been relatively disadvantaged in that regard? On the face of it, it certainly is. But, the problem is where the problem lies with most every liberal government intervention in and manipulation of the market: governments do not refine the market, either practically or by definition. The coercive element is corruptive of both the benevolent objective and the natural effectual discipline of the market.

A private effort to assist people will generally offer assistance while holding up a standard of self-improvement and betterment, just as a good parent may do in lovingly assisting a child. But, neither is there human encouragement to refine behavior or the discipline of a free market which holds lending organizations to the account of constructive and profitable operation. Whether in relative ignorance or political cravenness, McCain and Palin join in the liberal blame of “Wall Street executives” in “predatory loan practices.” Are executives primarily after profit more than charity? Of course. That is their job and how the market rewards them. They must offer a competitively profitable stock on the public market. It is reasonable to speculate that part of the allure of offering sub-prime loans was the general history of the appreciation of the real estate market. Even if borrowers defaulted, the property would appreciate…right? On that score, lenders took a roll of the dice and lost.

But, it is also a reasonable speculation that executives heard an implicit assurance of help in the “unlikely” event of failure of the encouraged risk of rash lending practices, which of course turned out to be the case. Republicans blame Democrats’ promotion of “fair” (read, “reckless”) lending practices. And Democrats blame the Republican propensity to “deregulate.” (which makes no sense in light of government imposition upon the operation of Fannie Mae and Freddie Mac). But, let’s be clear about the root of the problem, which is the same as all liberal corruptions of liberty and free markets: the intervention of government idealism and coercion lays the groundwork for market calamity. No government entity should catch the blame because the government nose had no business in the market in the first place.

Many years ago, the incomparably literate and intelligent but assiduously practical and realistic George Will conceded economic realities in America, saying, “We’re all Keynesians, now.” Only a young man at the time, I instinctively reacted, “The HECK we are!” Alas, the economic train wreck of recent weeks is the inevitable consequence of such common and insidious concessions.

The media narrative is that McCain’s campaign is abandoning the economic discussion to Obama to focus on character questions about Obama. The truth of that is questionable, but it would be stunningly foolhardy. It seems to sat something about education in America if a majority would buy the idea that we could tax and spend our way out of economic difficulties, an idea that history has proven futile despite its relentless allure to the public. But, it would also seem to say something about6 Republican desperation should it leave such a towering falsehood to stand.

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