Artificial Constructs in the Economy

When I sit back and actually think about the artificial constructs in our economy, I’m not sure if the proper response is screaming or nausea.  You’re probably wondering what on earth is a “artificial construct.”  Well, to put it simply: an artificial construct is a segment of the economy which is not needed nor required in a truly free market.  In other words, an industry or segment which produces nothing of actual value– but yet is basically required by law to exist.

Allow me to start with an “easy” example…  Americans spend more than $300,000,000,000 to get their income tax returns prepared for them.  Can anyone really think that making a tax code so complex that it necessitates such expenditures just to fill in forms can be even vaguely rational?  Why not a flat tax?  No need to divert all those accounting minds away from things like discovering Enron’s malfeasance BEFORE it crashes…it’s more useful to use those minds to prepare 1040 forms….  Right?

Sticking with taxes… what about all the estate attorneys whose sole job it is to protect your wealth from inheritance taxes?  They would not be needed if we eliminate the Death Tax.  But, its not like we could use their help in things like advising prospective homeowners about the implications of 18% home loans or reviewing contracts to prevent bad corporate mergers and deals.  It’s much more useful to put brilliant legal minds to use working out creative ways to avoid paying taxes…  Right?

Think that airplanes are the best way to travel around the country?  Worried about carbon emissions?  Worried about travel safety?  Well, thanks to the Federally funded airport system, most people fly in airplanes…  But who cares that a train can move 1 Ton over 420 miles on a single gallon of diesel fuel (the average car can move 1 ton about 35 miles on a gallon of gas).  Of course, trains can’t be forced to knock down skyscrapers nor do they make appealing terrorist targets–not to even mention the whole thing about how the train simply stops if the engine goes wonky.  But, no one cares about that….  Right?

Then, what about the Federally funded highway system…  shall we even discuss the fuel required to move millions of tractor-trailers around the country since a single train can carry the load of hundreds and hundreds of trucks with a single engine? But, Washington knows that we’d prefer to have our roads full of trucks…. Right?

The list goes on and on, but I’ll stop here for now…  my point is this:  When Congress spends money, it creates artificial constructs in the economy which would not naturally exist–thus de-balancing the system.  Why is it so hard for people to understand that Congress and the President can do NOTHING to help the economy– they can only choose to get in the way or stay out of the way.  And the whole getting in the way thing hasn’t exactly been a success– just take a look at all the mortgages going bad because the CRE (community reinvestment act) encouraged/forced mortgage lenders to make bad loans all in the name of “equal access”.  Well, boys, the piper has come and its time to pay the bill!  What else could that money have been used for….?

Ayn Rand Saw This Coming

Ayn Rand Saw This Coming
October 9, 2008

Washington, D.C.– “Despite overwhelming evidence that government policies caused the current financial crisis, Congress is blaming businessmen,” said Yaron Brook, executive director of the Ayn Rand Center for Individual Rights. “What’s worse, the capitalists who have been shackled with unprecedented regulatory burdens are unable to defend themselves morally. Though the events are different, this pattern of abuse and submission is straight out of Ayn Rand’s Atlas Shrugged.

“The cycle starts with government intervening into the economy and imposing regulations and controls on business. This distorts the free market, leading to economic dislocations. When the problems caused by these distortions inevitably follow, everyone blames the free market and its greedy capitalists. The proposed solution? More government controls. Over the years, conservative critics of creeping government have repeatedly exposed this illogic but have always been helpless to explain why the cycle keeps repeating, decade after decade.

“The pattern keeps recurring because businessmen are willing to take the blame. From capitalism’s inception, its defenders have been morally disarmed by the widespread view that self-interest is morally suspect, and disinterested service to others is a moral ideal. So each new spate of controls has been grudgingly accepted as a fair price to pay for society’s toleration of the selfish pursuit of profit.

“Atlas Shrugged depicted a society in economic collapse due to this recurring cycle, and today’s parallels are obvious. Government manipulation of money, credit, and lending standards over several decades caused the mess we’re in. Now, the offered solution is more of the poison that sickened the economy–more bailouts, more cheap money, more government-guaranteed loans, and above all, more regulations.

“This chronic cycle will not end until businessmen accept that their production of profit is neither immoral nor amoral–it is the capstone of moral virtue. Once they shrug off the role of scapegoat, businessmen can demand with moral certitude that government punish fraud and enforce contracts but refrain from interfering with voluntary trades among consenting adults.

“When America’s markets are finally free of all coercion–in other words, when laissez-faire is achieved–financial crises such as the one we’re experiencing will never happen again.”

### ### ###

Yaron Brook is executive director of the Ayn Rand Center for Individual Rights. He is a regular contributor to Forbes.com and a contributing editor of The Objective Standard. His articles have been featured in major newspapers such as USA Today, the Houston Chronicle, the Chicago Sun-Times, the Providence Journal and the Orange County Register. Dr. Brook is often interviewed on radio and is a frequent guest on a variety of national TV shows, having appeared in the new Fox Business Network, FOX News Channel (The O’Reilly Factor, Your World with Neil Cavuto, At Large with Geraldo Rivera), CNN (Talkback Live and the Glenn Beck Program), CNBC (Closing Bell and On the Money), and C-SPAN. Dr. Brook, a former finance professor, lectures on Objectivism, capitalism, business and foreign policy at college campuses, community groups and corporations across America and throughout the world.

To interview Dr. Brook or book him for your show, please contact Larry Benson:
949-222-6550, ext. 213
media@aynrandcenter.org

For more information on Objectivism’s unique point of view, go to ARC’s Web site. The Ayn Rand Center is a division of the Ayn Rand Institute and promotes the philosophy of Ayn Rand, author of “Atlas Shrugged” and “The Fountainhead.”

Copyright © 2008 Ayn Rand® Center for Individual Rights. All rights reserved.

Ayn Rand was right– yet again.

“One of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making it unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary.”

—Ayn Rand, 1975

More than thirty years have passed and here we are seeing Ayn Rand proven right yet again.  The government has meddled and meddled and meddled and now we have the result… Instead of letting people fail–as they deserve for making bad decisions– for some reason, the Congress is seeking to allow people to escape the consequences of their actions (or inactions).

The talking chatterboxes on TV blame the free market, Obama blames deregulation, and McCain blames “Wall Street greed”– but none of them lay the blame squarely at the foot of failed welfare statist policies of Congress and the Presidents.

Enough is enough!  Stop meddling and face facts: Bad decisions have bad consequences. Period.

I’d rather suffer “worse” in the short term and recover more quickly than face a decade of Congressional bullhockey.

“The Federal Reserve is not the solution to the crisis, it is its root cause. By keeping interest rates artificially low and inflating the currency, it created the illusion that homes and subprime mortgages were can’t-miss investments.”

“Now, as we bear witness to the wreckage of the Fed’s previous central planning, the solution offered is even more Fed central planning. This is absurd. The way to prevent future credit crises is to get rid of the government’s arbitrary power to determine the money supply and the price of credit, and return to a gold standard.”

–Yaron Brook
Executive Director
Ayn Rand Institute

Hello?  Wake up and smell the coffee– or rather the evaporating value of our fiat currency!  Dr. Brook is right on with his comments.  The Fed needs to go.  With a commodity based currency (also known as the gold or silver standard), the government is fiscally incapable of running debts and financing the welfare state.

I’ve commented before on the need of individuals to live WITHIN their means, so now let me say clearly that I support this at a governmental level, most especially!