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Brian Sorgatz
(rhymes with “cats”)
Arcata, Humboldt County, California, United States
What sort of man blogs about Playboy? I flatter myself to think that Kendra Wilkinson might call this blog intellectual pimping.
To see what I look like, click here.
ISFP “Composer Artisan.” Culturally and economically libertarian for reasons having nothing to do with Ayn Rand. The rabbit in the avatar is not mine. I stole the image from the House Rabbit Society home page. Favorite activities: reading, writing, crosswords, Jeopardy!, moviegoing, television (and proud of it), piano, didgeridoo, foreign languages (currently Spanish), light hiking, spiritual practice, friendship, sex.
Hollywood, California, is my spiritual hometown. I actually grew up in three other communities in California, but it hardly seems to matter which three. How could my heart take root anywhere under the tyranny of American public schooling?
I don’t have to work for a living. After my father died in December 1997, my family and I won a legal settlement.
A source of mild entertainment amid the financial carnage has been watching libertarians scurrying to explain how the global financial crisis is the result of too much government intervention rather than too little....Libertarian ideas have a perfect alibi against Weisberg’s charge. They were nowhere near the scene of the crime. Unlike Marxism, libertarianism as a consistent principle has not been tried and found wanting. At the aptly named magazine Reason, Jeffrey A. Miron explains libertarianism’s almost total absence from Wall Street:
... But to summarize, the libertarian apologetics fall wildly short of providing any convincing explanation for what went wrong. The argument as a whole is reminiscent of wearying dorm-room debates that took place circa 1989 about whether the fall of the Soviet bloc demonstrated the failure of communism. Academic Marxists were never going to be convinced that anything that happened in the real world could invalidate their belief system. Utopians of the right, libertarians are just as convinced that their ideas have yet to be tried, and that they would work beautifully if we could only just have a do-over of human history. Like all true ideologues, they find a way to interpret mounting evidence of error as proof that they were right all along.
To which the rest of us can only respond, Haven’t you people done enough harm already? We have narrowly avoided a global depression and are mercifully pointed toward merely the worst recession in a long while. This is thanks to a global economic meltdown made possible by libertarian ideas.
Whatever one’s views of libertarian policies, the incontrovertible fact is that the U.S. has not pursued such policies. Not in the past 10 years. Not in the past century. Indeed, except for a brief moment before Alexander Hamilton engineered the first U.S. bailout of financial markets, not ever. If the U.S. had truly been the “Libertarian Land” that Weisberg alleges, a huge range of policies that have helped fuel the current situation would have been radically different.Perhaps without conscious intention, Weisberg flatters our community of perpetual outsiders by choosing to pick this fight at this time. Reason editor in chief Matt Welch notices the irony:
In Libertarian Land, banks would not be chartered, defined, and regulated by government, as they have been in the U.S. for over 150 years. In particular, banks would have the right to “suspend convertibility,” meaning they could tell depositors, “Sorry, you can’t have all your money back right now,” during banks runs that threatened bank solvency. This is precisely what banks did in key financial panics during the pre-Fed period, when suspension was illegal but tolerated or encouraged by regulators. By so doing, banks reduced the spread of panics and solvent but illiquid banks did not fail in large numbers.
In Libertarian Land, the Federal Reserve would never have been created. This means the Fed could not have turned a normal recession into the Great Depression by failing to stem a huge decline in the money supply. This decline and the related bank failures occurred because the Fed’s existence was taken as indication that banks could not, or should not, suspend convertibility, as they had done successfully in the past. Thus in Libertarian Land, the Great Depression would probably not have occurred.
If the Fed had never been created, Alan Greenspan would never have been its chairman. Thus he would not have given investors inappropriate assurances about the riskiness of derivatives or the long-term viability of the stock market boom of the mid-1990s. Absent the Fed, no Alan Greenspan would have kept interest rates low for an extended period and thereby fueled the housing bubble that has played a key role in turmoil of the past two years. Market participants would have made judgments on their own, and these would plausibly have been more cautious as a result.
In Libertarian Land, the Securities and Exchange Commission, along with financial market regulation such as capital requirements, would not exist. This means investors would have no assurance that government can keep “excessively” risky or fraudulent securities out of the marketplace. Many small investors would stay on the sidelines, leaving the risky investing to those who could afford to lose.
In Libertarian Land, government would not promote increased home ownership, so it would not have created Fannie Mae and Freddie Mac, or encouraged these institutions to extend subprime loans, or implicitly promised to bail them out if or when these loans failed. Thus a key ingredient in the recent financial turbulence would not have arisen.
In Libertarian Land, government would not protect private agents from the downsides of their risky decisions. This means no rescues or bailouts for banks, airlines, or car companies. No deposit insurance, no pension benefit guarantees, and so on.
In Libertarian Land, individuals and businesses would take risks, but they would think long and hard about these risks. Some individuals and businesses would profit handsomely from smart risk-taking, but many would earn modest returns on average because their seemingly “excessive” returns in good times would be balanced by big losses in bad times.
Reasonable people can debate whether consistent pursuit of libertarian policies would have improved U.S. economic performance over the past two centuries. They cannot claim, however, that recent events demonstrate the failure of libertarian policies, since those policies have not been employed.
Is this the New Regime getting ready to round up the first ideological suspects against the wall? I’d suggest something far more comical. There’s something almost poignant about the bland Process Liberal center-left, with a financial crisis in its quiver and a super-majority wind at its back, still feeling wobbly enough to attack a set of ideas that are marginal at best to the two-party debate. Why, it’s almost as if Weisberg’s not confident that Americans will join him in Defending Government!(By the way, Weisberg was the first in this debate to capitalize the D and the G.) The Cato Institute’s Will Wilkinson, too, finds easy sport in mocking Weisberg’s Cowardly Lion act:
What’s going on here? I think Weisberg rightly sees that control over the popular narrative about the causes of the financial collapse could have a big effect on public opinion. And Democrats are about to win the White House together with a robust Congressional majority. So here’s the main chance! The long-awaited dream! The desperate desire! The rightful claim of establishment liberals to the commanding heights is imminent! Now is the time! The sense of entitlement is about to meet title! And the GOP is in utter disarray, having long ago lost any semblance of a coherent philosophy of government. The field is almost clear. Only the utopian punter, holding a tattered copy of Atlas Shrugged, guards the goal line. The embittered professors and graying editors-in-chief cannot bear to wait another season. They will wake to their triumphant dawn. The cry goes up: “Smear the libertarian queer!” And never mind the rules.
Bring it, Weisberg.
Posted by Brian Sorgatz at 3:29 PM
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