Saturday, August 21, 2010

Economic Elitism is not the Solution

Last Tuesday we had what was called “The Summit on Housing Finance”. This was a get together of a group of individuals that were instrumental in the policy choices that caused The Housing Bubble, The Credit Crisis and The Great Recession. This is our “Economic Elite”. The government invited them to get together to figure out how to repair the system that they and others like them have destroyed.

Unsurprisingly the main suggestions from the event were that we need more unsustainable debt to taxpayers, more government control piled on top of our already dysfunctional markets and of course much more subsidies for the financial sector.

I looked back at all of the quotes from the economic philosophers of the past 2,500 years. And I couldn’t find any references that espoused unsustainable debt to manipulate asset prices, rewarding speculators at the expense of prudent savers or tightly controlling markets to reward government favorites.

No, actually there are a few economists that favored controlling free markets. Karl Marx is the most notable.

And I must admit there was a period where people felt that it was wise to give all of the resources of a country to a few very rich elite with the hope that this nobility would trickle some of the spoils back down to the rest of the populace. This “trickle down” economic period was called feudalism or more appropriately, “The Dark Ages”.

The tightly controlled markets of Karl Marx run by an Economic Elite of feudal lords sounds rather archaic. But that is how our economy runs today.

The Economic Elite have usurped our economy. Many of our markets are broken. The participants of “The Summit on Housing Finance” suggest that we break them even more.

The Economic Elite are saying that taxpayers must borrow ever more money and give it to the Government and The Financial Sector to waste, just like Japan.

But why do we want to emulate Japan? Japan’s economy is terrible.
Why can’t we emulate Germany? Or Canada? Or Australia?

Or better yet, why can’t we emulate the US economy at the point before our Economic Elite diverged from the philosophy of our forefathers?

Our country was based on free markets and rewarding good ideas. It was called capitalism. The market rewarded good ideas with wealth and power. The same free market severely penalized bad ideas with loss of wealth and power.

This freedom of markets has been removed and is now controlled by the Economic Elite through the government. Most of the people that ran our economy into the ground should be penniless and powerless. Instead they are put in charge.

This is not absolute tyranny but it is autocracy through subterfuge.

Economic doctrine has replaced free markets. This doctrine has become so complex, convoluted and conflicted that our economy doesn’t work properly anymore. Most of the policy we are using to solve our problems can’t be justified with logic, reason or common sense.

I feel that our economic policy needs to be simplified so it is in line with a time before our free markets were totally usurped by this failed experiment at government directed economic control.

The goal should be toward sustaining an economy with:

· A very large middle class.
· Free Markets for everyone where the government protects against collusion, monopoly and entities that become too large to compete fairly with the rest of the players.
· A government that runs like a business with a balanced budget.

I am suggesting that we replace the last 20 years of crony capitalism orchestrated by our nation’s economic elite with 200 years of successful economic governance by free markets.

I am also suggesting that no nation has ever prospered by:

· Tightly controlling investment markets to reward political favorites.
· Creating temporary bubbles to force an economy to grow.
· Robbing from savers to reward speculators.
· Robbing from future generations to live at a higher than sustainable standard of living today.
· Starving the productive private sector to create a bloated and inefficient non productive public sector.

Each of these policies would have been abhorrent to our founding fathers. They understood the nature of tyranny and economic elitism.

In the last 20 years we have thrown away a system that was put in place by our forefathers. It had worked perfectly for the previous 200 years.

We are refusing to emulate the United States of our grandparents. Instead the goal of our nation’s economic elite is to become an impoverished and feudalistic crony capitalistic version of Japan.

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