Had the giants been allowed to fail, the smaller banks would have been able to grow to fill that new vacuum. Yes, there would have been tough times but that is the cycle of a capitalist economy.
That's not entirely true. Business cycles of booms and busts are not a mark of a free market as it should be. It is an occurrence only in the presence of a central banking system, in our society the Federal Reserve System. Since 1914 the recessions that the Fed has been involved in “doing something” have resulted in an unsustainable boom in the 1920s, followed by a bust that lasted longer (hence the “Great” in “Great Depression”) than anywhere else. It is becoming more and more recognized in hindsight by more and more economists that FDR's New Deal did more to lengthen the Depression at the expense of a few temporary but unprofitable and unproductive jobs.

Many of the sustained institutional injustices (yes, amy, I did use that phrase! I've seen the light!) are largely the fault of the federal reserve system. It is a horrid institution controlling not only the money supply, but the credit supply, inflation, and it funds illegal wars without Congress's need to raise taxes. The income and wealth gap can likely be shown to be a fault of the monetary policies of the Fed. The poor can't get ahead because somebody else—the Fed—has complete control over the value of what little money they do earn, and that value has increasingly gone down in the past 100 years.

What caused the financial meltdown? Bad, or at least risky, practices by some very large banking and lending institutions and greed on the part of those that participated. What the repercussion of these bad practices? Well,nothing, because the government came in and rewarded them with bailouts. There was no natural, free-market consequence because the government intervened and propped them up.

Had the giants been allowed to fail, the smaller banks would have been able to grow to fill that new vacuum. Yes, there would have been tough times but that is the cycle of a capitalist economy.

I was listening to a historian on the radio who talked about one of the socialist dictators and their leading financial adviser (sorry, I can't recall the names, Lenin or Stalin or someone). The question was, which economic system is better, Capitalism or Socialism. The answer was Capitalism – an answer which cost the advisor his life, btw. The reasoning follows:

Economies are cyclic. They go through bad times. Every 60 years or so a capitalist economy resets, has a recession or depression which resets the values of everything after a period of “irrational exuberance”, if you will. The economy then goes through a growth period, a stable period, another exuberant period then, resets again. The point was that the reset is relatively short and mild when compared to the alternative – socialism.

In socialism, the government continuously props up the failing economy, mainly for political reasons. Bailouts, cash for clunkers, government “incentives”, government stimulus, all prop up a failing economy and gives the illusion of successful economy. What this adviser then stated was that because the economy was falsely propped up for so long, that it's foundation became so weak that the subsequent, predictable and cyclic collapse is far worse and far longer than the 'reset” that the capitalist economy would have suffered earlier in the cycle.

Government intervention during the Great Depression (only called the “depression” in the rest of the world) not only deepened the depression in the US but lengthened it approximately 7 years longer than the rest of the world.

Right now, and it started with TARP, the wrong policy of the Bush Administration, our government is propping up a failing economy. We should not have started it under Bush and we certainly should not be continuing it under Obama – but what President wants to preside over a depression? So, for political reasons they will continue to prop up the economy until, under it's own tremendous weight, it collapses.

This is why, other than to police the economy and ensure no illegality is occurring, the government needs to get out of the economy business.

Had the giants been allowed to fail, the smaller banks would have been able to grow to fill that new vacuum. Yes, there would have been tough times but that is the cycle of a capitalist economy.
That's not entirely true. Business cycles of booms and busts are not a mark of a free market as it should be. It is an occurrence only in the presence of a central banking system, in our society the Federal Reserve System. Since 1914 the recessions that the Fed has been involved in “doing something” have resulted in an unsustainable boom in the 1920s, followed by a bust that lasted longer (hence the “Great” in “Great Depression”) than anywhere else. It is becoming more and more recognized in hindsight by more and more economists that FDR's New Deal did more to lengthen the Depression at the expense of a few temporary but unprofitable and unproductive jobs.

Many of the sustained institutional injustices (yes, amy, I did use that phrase! I've seen the light!) are largely the fault of the federal reserve system. It is a horrid institution controlling not only the money supply, but the credit supply, inflation, and it funds illegal wars without Congress's need to raise taxes. The income and wealth gap can likely be shown to be a fault of the monetary policies of the Fed. The poor can't get ahead because somebody else—the Fed—has complete control over the value of what little money they do earn, and that value has increasingly gone down in the past 100 years.

What caused the financial meltdown? Bad, or at least risky, practices by some very large banking and lending institutions and greed on the part of those that participated. What the repercussion of these bad practices? Well,nothing, because the government came in and rewarded them with bailouts. There was no natural, free-market consequence because the government intervened and propped them up.

Had the giants been allowed to fail, the smaller banks would have been able to grow to fill that new vacuum. Yes, there would have been tough times but that is the cycle of a capitalist economy.

I was listening to a historian on the radio who talked about one of the socialist dictators and their leading financial adviser (sorry, I can't recall the names, Lenin or Stalin or someone). The question was, which economic system is better, Capitalism or Socialism. The answer was Capitalism – an answer which cost the advisor his life, btw. The reasoning follows:

Economies are cyclic. They go through bad times. Every 60 years or so a capitalist economy resets, has a recession or depression which resets the values of everything after a period of “irrational exuberance”, if you will. The economy then goes through a growth period, a stable period, another exuberant period then, resets again. The point was that the reset is relatively short and mild when compared to the alternative – socialism.

In socialism, the government continuously props up the failing economy, mainly for political reasons. Bailouts, cash for clunkers, government “incentives”, government stimulus, all prop up a failing economy and gives the illusion of successful economy. What this adviser then stated was that because the economy was falsely propped up for so long, that it's foundation became so weak that the subsequent, predictable and cyclic collapse is far worse and far longer than the 'reset” that the capitalist economy would have suffered earlier in the cycle.

Government intervention during the Great Depression (only called the “depression” in the rest of the world) not only deepened the depression in the US but lengthened it approximately 7 years longer than the rest of the world.

Right now, and it started with TARP, the wrong policy of the Bush Administration, our government is propping up a failing economy. We should not have started it under Bush and we certainly should not be continuing it under Obama – but what President wants to preside over a depression? So, for political reasons they will continue to prop up the economy until, under it's own tremendous weight, it collapses.

This is why, other than to police the economy and ensure no illegality is occurring, the government needs to get out of the economy business.

“Big Government” by David Woods
“Biblical Anarchism” by Stephen Carson
“The Bible, Government, and Christian Anarchy” by Greg Boyd (author of Myth of a Christian Nation)

I don't understand capitalism as a “system” so much as the natural outcome of people being permitted to peacefully trade and exchange goods and services with one another. The key principle here is peacefully. Toxic river dumps are not peaceful. The notion that free market proponents simply want unbridled, no holds barred capitalism is simply a straw man. Those who believe in free markets also believe in the enforcement of peaceful exchange, something I believe truly is the government's role in restraining evil. Greed is part of life, and we all “want”; governments have no ability to restrain that without aggression and legislation, both of which do not address the heart issue. Freedom to exchange under the protection of property rights, however, incentivizes the greedy to do something for others in order to get what they want. If I want something you have, I must do something for you in return that would be a greater value to you than what it is that I want.

Self-interest and greed are not the same, and self-interest is not inherently wrong. John Piper rightly points out that nobody can do something not in his own interest; there is no such thing as a purely altruistic action (Joey from Friends even pointed this out very easily). And since some people are excessively interested in their own gain (i.e. greedy), what better way to “make” them serve others than by providing something in return? Bill Gates may have been greedy (I doubt it), but his wealth accumulation was only because he provided something for society that it wanted, needed, or both.

Does it ever make you wonder why big business is in favor of more government regulation? The pharmaceutical companies want the FDA. Wal-Mart is in favor of mandatory employer health insurance coverage. Marlboro was in favor of the new cigarette taxes. Why? Because the FDA's regulations are barriers to entry to would-be competing firms, and therefore provide a cartel of sorts for the current companies. Wal-Mart very well knows that it can afford to take a hit with a few added expenses, but it will crush the medium to small businesses who compete with them that cannot afford to do provide health insurance. Marlboro makes a huge profit off non-nicotine cigarette products, and the new taxes will hurt their competitors more than it will hurt them. Government regulation may sound wonderful, but there are powerful interest groups lobbying for more and more regulation because of their personal gain at the expense of the rest of us.

I'm not familiar with the housing acts enough to comment, but what little I do know it seems that the housing act tries to solve a problem without a proper diagnosis. Or, as Brian McLaren aptly states, “It doesn't matter how good your answers are if you're not asking the right questions.”

The fundamental question for me with this is, “Who restrains evil and greed?” A purely laissez-faire system, guided by the invisible hand does not exactly protect against this. A common argument I have read at places like heritage, the wash journal, or cato, is that when each individual seeks their own best interest, it will balance out, and all the ships in the water will rise. At first glance, I like that because it appeals to my individualistic nature and independence.

However, it does not account for the fact that certain groups or collective institutions will always have more power than others, even if you are in a pure laissez-faire environment. It also does not account for unforeseen, sudden changes in the equilibrium of the system. IE- hurricane katrina, a flu pandemic, a crisis in a global market that restricts our access to something we need. Those are events of disequilibrium that capitalism cannot sort out in a reasonable amount of time to prevent loss of human life or severe hardship.

For example, it is more cost-effective to produce products in a manner that harms the environment. (this is an admittedly simplistic illustration, so it can only be taken so far) It is simply easier to dump waste in a river than it is to innovate, design, and implement mechanisms that keep it from doing harm to the whole system. I may, in a purely market driven system simply say, “well, then I won't do business with you then and buy your product.” Ok, but, then what happens when all of the industries do it that way because it's cheaper (ie- seeking their own good) and its something I legitimately need like medicine ? Who informs me that lead paint in my house is exacerbating my kids' developmental delay? (personal, true example). Lead paint was the most durable paint product ever invented, it just will kill you in the end.

In my view, these are fundamental functions of government to restrain greed, and the eventual outcome of capitalism unrestrained. I do not think capitalism is bad, evil, or a poor choice, but it must be regulated.

Here's another… What then do you do with housing discrimination? laissez-faire proponents in my experience really despise this law because they interpret it as impeding on individual freedom and free speech, etc. The argument then is that, the private homeowner can rent to whomever they choose , because they own the house, and it's their prerogative. Ok, but that only works so far. What happens when you are in a racist community and redlining is permitting an entire population from access to safe and affordable housing? A choice has to be made.

This is where concepts like 'utilitarianism' and others come in. ie-”the maximum amount of good/happiness, for the maximum number of people.” (john stuart mill). Is the fair housing act restricting the freedom of the racist homeowner? of course it is. But, the alternative is lack of access to housing to a massive portion of our population, which exacerbates social problems and ultimately costs us more money.

The argument at this point is generally that if the entire system was truly laissez-faire you wouldn't need the housing act in the first place. That is potentially true (if you don't believe in sin nature), but that is an ahistorical perspective that is not accounting for our unique racist history.

I've always wondered about “rights,” and it stands to reason that if health care is a human right, why didn't Jesus heal everyone he came into contact with?

“Power comes from God, to the people and the people loan power to the government.” This echoes your point made in the extra car analogy. As individuals we cannot take our neighbors car, cash or whatever, even for a good reason. We do not have that power. But somehow we have given that power to the government to take and redistribute another wealth and property on our behalf. How is it possible? We cannot loan to the government a power which we did not have to begin with!

Driving to the laundromat I had this thought and explained it to my wife: We have no more rights now than we did when we were cavemen. As a Christian I would say that we have no more rights now then we did when we, Adam, was created. It is a self-evident truth that we have the right to life, liberty and the pursuit of happiness/property/wealth (by any other name) – Others cannot take our life, our freedom or our stuff (either individually or collectively – reference my earlier point.)!

What I mean by “We have no more rights now than we did when we were cavemen” is that we have not been conferred additional rights simply because of the advancements made by culture or society. Simply because a society has developed health insurance, housing, transportation, higher education and labor saving electricity does not establish that those things are “rights” for the citizens of that society – not even a “neighborhood-declared right”. A true “right” obliges no other person in its fulfillment. I can't have a right to health care or an education that, in order to be exercised, requires someone else to pay for it. Similarly, although I have a right to life, if I am suffering kidney failure and need a transplant I cannot force someone to give me a kidney, or the government to take a kidney from someone on my behalf, even if they do have two kidneys and would likely be fine after the surgery!

Thanks for a good blog post!
John