There has been a lot of bogus explanations for what caused the Panic of ‘08 and its ensuing recession, but the most absurd comes from a well-respected financial website, DailyFinance.com, written by Peter Cohan. He blames our current economic mess on, of all things, small government:
The idea [of small government] has influenced American politics for almost 30 years, and helped create the ineffective regulatory agencies which allowed all kinds of questionable practices to thrive in American business, especially in the world of finance. By helping create a record debt bubble, which thrived in an era of weak regulatory oversight, small government nearly ruined the global economy last fall.
There is so much to critique in this nonsense, it’s hard to know where to begin. I don’t know which America he’s been living in, but this country hasn’t seen anything but gigantic and bloated government since since at least the middle of the 20th century. Ronald Reagan and George W. Bush may have paid lip service to small government, but their Administrations vastly expanded the size and the scope of the State.
Cohan also recites that oh so popular catchphrase of “deregulation” to explain our stagnating markets. If only government regulations had been stricter, the evil bankers and businessmen would have never preyed on an innocent American public. This faith in government regulation is extremely naive, since we have had (and continue to have) miles of pages of regulations enforced by thousands of government agents. The list of regulations is exhaustive, and it’s hard to imagine any aspect of our economy that our government didn’t or doesn’t regulate. Regulators have been nothing more than co-conspirating robots, extorting the public in the name of their interest.
Government is the only institution that when it doesn’t work, it asks for money or control (public schools, police departments, the Post Office, etc.)
Despite extensive oversight and an endless source of funds, regulators, with droning consistency, always fail in their intended goals. When they fail, there is always a demand to come up with new regulations and hire more empty suits to enforce them; a cyclical motion of corruption, residual failure, and waste.
The perfect example of this is the Federal Reserve. The Fed, a central bank operating in complete secrecy, distorts and manipulates the economy with its inflation and easy credit. The resulting effect is an endless cycle of booms and busts. When the economy does bust, like it did last September, the Fed and all of its statist partners blame “capitalism,” “free markets,” and “deregulation,” and then proceed to inflict a sickened economy with the cancers of more inflation and easy credit.
What it boils down to is that the government plays too big, not too small, of a role in the economy, and the financial sector especially. In a truly free-market capitalist economy without the government there to socialize their risks while privatizing their profits, bankers would act a great deal more prudently. They would have to; the disciplines of a free and competitive market combined with a sound currency encourages this. Currently, with our semi-fascist mix of government and private industry, we see banks creating secondary markets for IOU-backed mortgages to people who could never afford them , since the government is there to pick up the tab for these risky investments. No amount of regulations can control the reckless chaos of a Fed fiat-money economy.
For almost 100 years, the American economy has been guided by the destructive, immoral, and evil hands of the statist central planners in DC. Isn’t is time we give small and limited government a try?
Please also visit Robert’s Examiner blog.