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COMMENTARY
October 15, 2008
Ominous growth
It does not matter how you voted yesterday, or how, if you are an American with the prospect still ahead, you will vote Nov. 4th. You have voted, or you will soon vote, for a lot more government. That you will be impoverished by this decision, should go without saying.Since we cannot alter the past, I take the current trend as inevitable. But even the inevitable comes in different flavours, and what most distresses me about the various "bailout" or "rescue" packages now being negotiated among rulers of the leading economic powers is their very "comprehensiveness." We began with a relatively simple proposal for the U.S. government to acquire as much as $700 billion-worth of bad debt, to clear the banks' liquidity problem. This after the same government had, over a couple of decades, pushed them to extend foolish mortgage and other consumer lending, for the sake of the government's own social engineering priorities (e.g. more home ownership for the poor and minorities), while on the other hand not pushing them to top up their reserve requirements against the inevitable disaster. While the acquisition of bad debt was itself a bad idea -- allowing banks to dump their most toxic assets onto the taxpayer is an invitation to recklessness, not a discouragement; it was moreover a reward to the worst-managed banks; and an encouragement to the best to feign illness -- it had the advantage that the government (and hence the taxpayer) might actually see some of the money again. After all, a certain proportion of bad debtors do eventually pay up. Worse quickly followed, as the imagination of the U.S. Congress became fully engaged in negotiating the terms of the "rescue." All kinds of irrelevant stipulations were added, but more to the point, the entire international banking system was put in a position to go on strike by a display of government weakness. By a quick freeze of interbank lending, they had the politicians lining up to offer that "more comprehensive package." The governments of the U.S., Britain, France, Germany, Italy, Spain are now taking equity positions in their respective major banks, to "shore up the system." Government deposit insurance schemes are being vastly extended, "temporarily" -- which means permanently, in our jaundiced experience. And other governments -- including the Canadian, watching over the world's most stable and cautiously regulated banking system -- are now under pressure to leap in. The American theory is that governments will buy preferred, non-voting shares, so to minimize bureaucratic intervention in business decisions, and leave the field clear for private investors to join in. The European theory is murkier; governments there have a long history of shamelessly nationalizing banks. But in either case the practice is different from the theory, for from the moment a government has assumed a huge stake, a government has also assumed a huge share of extra-regulatory power, together with the irresistible temptation to mix regulatory with non-regulatory measures to steer banks away from business decisions and into political benders. A gorilla is a gorilla even when he honestly claims to be vegetarian. He may eat only leaves, bark, pith, roots, vines, and wild celery, but he eats a lot. There are persons of an optimistic disposition -- President George W. Bush appears to be one -- who think, ah well, with the U.S. national debt and deficit where they already are, and the amount of future taxpayer money just now being flushed into the banking system, there'll be no money left for a Democrat president and Congress to indulge extravagant and ultimately ruinous schemes in medicare, welfare, daycare, schoolcare, climate care, and so on. Do not underestimate them. Even if McCain wins, we can expect another "stagflation party," of the kind we attended in the 1970s, though quite possibly on a 1930s scale. For in the time-hallowed tradition of party competition, the Republicans may now be offering even bigger giveaways than the Democrats in the hope of buying off swing voters. And while there is no unanswerable logical reason why the Canadian government should follow the rest of the West down the next plughole of the Nanny State, we heard the sucking sound throughout our short northern campaign season. The era of Thatcher and Reagan is over, and the era of Herbert Hoover has resumed. Of course I have only touched on money, and the freedom to retain your earnings and spend or invest as you think wise, in your own interest and that of your family, is only one aspect of freedom. It is a key aspect, however, for money talks, and a government that has appropriated most of it will have a lot to say about the rest of your habits. Through the last generation the consistent trend has been towards "liberal fascism": constantly escalating legal and quasi-legal pressure on people who do not agree with the direction society is taking. Look for more. David Warren
© Ottawa Citizen
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