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Politics
makes for strange contradictions
Melvyn D. Magree Originally published in the Reader Weekly October 9, 2008 Sam Cook wrote recently on getting away from the bailout hullabaloo by visiting a pond. He described the early morning scene as being shades of gray. He wondered why we don’t see our own opinions as shades of gray rather than pro-this and anti-that. I think there are more shades of gray than we care to admit in our quest for political advantage against our opponents who are pro-that and anti-this. Often we are anti-that or anti-this just because our opponents are pro-that or pro-this. These kinds of stances often lead to contradictions within a party. For example, many so-called conservatives are very much in favor of individual freedom and market forces. They also support armies going around the globe and large corporations. Armies and corporations subsume individual freedom; the individual is expected to be subordinate to the goals of the army or the corporation. Armies distort free markets by diverting resources from productive goods and services to destructive goods and services. Large corporations distort free markets by decreasing the number of sellers and sometimes, like Wal-Mart, decreasing the number of buyers. Let me digress with an economics refresher. Free markets depend on a large number of buyers and a large number of sellers. Both buyers and sellers should have all the information they need to come to an agreement. Both buyers and sellers should be free to leave and enter the market. And there should be no externalities, that is, consequences imposed on those who are not party to these transactions. Is a person with a life-threatening condition free to leave the market for care? Many so-called liberals claim to be for individual freedom, especially individuals in certain groups. They think that large corporations are exploiting people and are taking control away from individuals. But they ignore that many of the modern benefits we have would be impossible without large corporations. Can you imagine a few technicians in a garage turning out millions of chips for laptops and cell-phones? Even Wendell Berry, a simplicity advocate, who claims he writes with a pencil, has his wife transcribe his work to a computer. These so-called liberals who dislike large corporations want the federal government to intervene on behalf of their favorite causes. But the federal government itself is a large corporation, and rightly or wrongly, it doesn’t always act in the best interests of “the people” as we’ve seen in almost every administration. Interestingly, the so-called conservatives who claim to want limited government expect the federal government to have unlimited power against those they don’t like, whether it’s people who read the “wrong” books or have “strange” relationships. These contradictions are really highlighted by the bailout of the firms involved in the credit crisis. I’m writing this after giving up on the vice-presidential debates and before the vote in the House of Representatives on the bailout is known. As Gov. Palin did, many in Congress are not answering the questions and are diverting people’s attention. One of the diversions was “letting the free market work”. The free market didn’t work in the granting of loans. In hindsight we can say people should have read all the details of the contracts they signed. In all honesty, we have to admit that we ourselves rarely read all the details of contracts we sign. How many times have we clicked “agree” to the terms of an online agreement after reading a few paragraphs, if any? How many times have we signed an auto rental agreement without reading all that teensy-weensy print? And if we try to read the agreement completely, we often stop reading because of the obvious impatience of the company representative. Impatience deprives the buyer of “full information”, a basis for a free market. The bad deals between “ignorant” borrowers and “predatory” lenders have led to a major externality – a credit crunch. Banks that do have money become less willing to lend. You have a good idea for expansion of your business. Do you save some of your earnings until you have enough (conservative) or do you borrow from a bank (riskier)? The first may actually be riskier. While you are saving money, somebody else gets a similar idea, borrows money, implements it, and takes away many of your customers. However, if there is a credit crunch, neither of you will implement the idea, no new jobs will be created, and the two of you would have less money to spend on your businesses or yourselves. How about green investment? Much is being fueled by borrowed money. If there is a credit crunch, thousands of windmills and millions of solar panels will not be installed. We will need to depend on imported oil for many years more. How about “drill, baby, drill”? The oil companies finance their exploration, drilling, and extraction with borrowed money. If there is a credit crunch, none of the drilling permits will be worth the paper they are printed on. Someone thinks Duluth would be a cool city to move to, finds a job in Duluth, and is ready to move to Duluth. But before he or she moves, there is a house to be sold. If banks won’t lend money to potential buyers, the potential new Duluth resident stays put. Something must be done, but will it be the right thing? ©2008 Melvyn D. Magree |