Our rulers are destroying the economy. Not little by little, as they usually do, but in huge swaths. Each great assault on the free market, whether it be denominated a bailout, a stimulus, or some other species of purported salvation, brings us visibly closer to the complete ruin of an economic order that required centuries to build. Awestruck, as if we were observing a tsunami sweep across an island, we can only watch the rulers’ devastating actions, for which, strange to say, they expect the public to be grateful―and, truth be told, most people are grateful, and clamor for more of the same. We listen to the kingpins’ lunatic ravings as they describe their perceptions of the current situation and solemnly declare their determination to “do something” to restore the prosperity that they themselves have demolished by previously “doing something” of the very same kind.
They gaze out at a financial debacle rooted in various government policies that induced lenders to do business with millions of borrowers who had no realistic prospect of repaying the loans. And what do these überguardians propose? They aim to relieve the unfaithful borrowers of their contractual obligations, to purchase the disappointed lenders’ “toxic assets,” and to “get credit moving again,” so that new loans will be made, again at artificially reduced interest rates to borrowers who have no realistic prospect of repaying them. They are pouring credit madness on credit madness because they have no real understanding of how the economic world actually works and, even if they did understand, they are politically beholden to the owners and managers of failing economic behemoths who profited handsomely from the artificial prosperity of the boom and are now staring into the abyss.
Our forebears have stood in a similar position on previous harrowing occasions, and the sense of utter helplessness we feel now resembles the one they felt then. When the world was rushing toward total war in the late 1930s, every intelligent person could imagine the abattoir toward which the great leaders were dragging their nations, yet no one could pull them back from the appalling destruction into which they seemed hell-bent to plunge.
In 1939, in his poem “In Memory of W. B. Yeats,” W. H. Auden wrote:
In the nightmare of the dark
All the dogs of Europe bark,
And the living nations wait,
Each sequestered in its hate;
Stares from every human face
And the seas of pity lie
Locked and frozen in each eye.
Though everyone foresaw the catastrophe, no one could pull the leaders back from its execution.
I experienced this sense of powerlessness in 2002 as I watched the Bush administration rushing headlong toward its murderous attack on the Iraqis. On September 23 of that year, I gave vent to my feelings in an article called “Helplessly, We Await the Catastrophe Our Rulers Are Creating.” “Today,” I wrote,
The dogs of war are barking not in Europe, but in the District of Columbia, and again people are looking on helplessly as the tragedy unfolds. We see the disaster being designed and touted, we observe the intellectual disgrace staring from the faces of George W. Bush and his advisers, and we note the seas of pity lying locked and frozen in their eyes. Yet we can do nothing to prevent the makers of this coming calamity from carrying out the devastation.
The calamity that Bush and his government wrought in Iraq has now become a chronic, seemingly permanent condition, a pain that never eases, an emergency destined to continue as far as the eye can see, and nearly everybody has given up hope that anything good will ever come out of it, or even that its daily horrors will ever do anything but continue to erupt episodically in spasms of political madness and haphazard violence.
Iraq, however, is thousands of miles away, and few Americans could keep their attention focused on it for long, in any event. Now that the financial mess and the deepening recession are affecting all Americans and raising fears about the whole country’s future economic well-being, Iraq has been relegated to brief articles on page A-23 of the newspaper. The economic crisis had become overwhelmingly the foremost concern, and on this front, good news has been a very scarce commodity for the past year.
In the present situation, the formula our rulers employ to guide their actions is simple: borrow and spendthe more, the better. If reminded that the government cannot accumulate ever more debt without grave repercussions, they always answer that the present emergency is so pressing that concern about the future must be set aside until the present exigencies have been met. It is not clear that they sincerely believe the economic drivel they dispense to the news media. Perhaps they are merely cunning enough to appreciate Rahm Emanuel’s admonition, “You never want a serious crisis to go to waste.” My sense, however, especially when I ponder the way in which they describe the economic situation and justify their proposals for repairing it, is that they have virtually no sound understanding of basic economics, and no interest in acquiring such an understanding, either. If the top dogs of the power elite are already living their lives in a reprehensible manner, it probably does not contribute to their happiness to dwell on the possibility that, in the process, they may also be contributing to public ruin.
Whether they are fools or charlatans, or both, as I suppose them to be, their actions amount to a genuine tragedy, because their leadership, so long as the people tolerate it, portends only devastation. The people, in the main, are afraid, and they are immoral, so they are happy to seize any momentary advantage or enrichment the government will hand them, regardless of the moral breach this coercive transfer of wealth represents. The rulers understand the people’s moral weakness and exploit it at every turn. Their own example of thoroughgoing corruption, of course, only coarsens the entire society’s moral character―after all, what sort of people tolerates, much less affirmatively supports, such creeps in high places? In the body politic, however, the masses are the tail, not the dog. The rulers, like tigers who lie in wait near a spring, knowing that their prey will eventually come there to drink, tempt the people to indulge their appetites for ill-gotten gain, and, sure enough, the masses need not be invited twice. It does not occur to the diners that this repast consists of tainted meat, and therefore that in due course they must suffer the consequences of having swallowed toxic fare.
Artificially easy credit, rapid monetary growth, subsidized homeownership for people who cannot make the mortgage payments, exclusive privileges granted to dishonest bond-rating agencies, explicit and implicit government guarantees of bank accounts, bonds, and other financial assets―these policies and others that tend in the same direction have created our present economic difficulties. To suppose, and to act on the supposition, that precisely these same kinds of policies will repair the day is supreme folly. To augment these mistakes by expending a trillion borrowed dollars in new government outlays for whatever suits the grasping members of a totally corrupt Congress only compounds the folly on a cosmic scale. Yet, no struggling firm or family wants to fail, and each prefers to survive the day without having to make painful adjustments, even if doing so requires supping disgracefully at the state’s filthy trough.
The entire spectacle is painful to behold. The good that the people and their leaders expect to come of these foolish measures can provide, at most, only temporary relief. Not far down the road, the devil is waiting to collect his due.
Robert Higgs is Senior Fellow in Political Economy at The Independent Institute and Editor at Large of the Institutes quarterly journal The Independent Review. He received his Ph.D. in economics from Johns Hopkins University, and he has taught at the University of Washington, Lafayette College, Seattle University, and the University of Economics, Prague. He has been a visiting scholar at Oxford University and Stanford University, and a fellow for the Hoover Institution and the National Science Foundation. He is the author of many books, including Depression, War, and Cold War.
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