Free-market vs Progressive-socialist Theory

The election in November will contrast two very different economic theories – free-market and progressive-socialism. The latter is a combination of progressiveism - in which “elites” seek to control all aspects of the economy – and socialism which does the same except the state actually owns most of the economy. What we now have in America is a combination since the state actually owns much of GM and most of AIG and controls much of the economy through bailouts, subsidies and fiscal policy. Free-market theory puts the “control” with the buyers and sellers with minimum government control. It states that a centrally-planned economy – even with the most capable managers using the most powerful computers – cannot efficiently control the billions of transactions which occur each day.

We have experienced progressiveism and seen the results. The national income tax and the Federal Reserve were created in 1913 under progressive administrations. Progressives need these to “level the playing field” - and significantly grow government and transfer wealth. The income tax was “passed” when voters were told that only the “rich” would pay it. The Federal Reserve was created to fulfill a short list of enumerated functions. Both together allowed an almost limitless increase in the size of government. In 1933, FDR and a Democrat-controlled Congress passed the National Industrial Recovery Act. The blue eagle was the symbol of compliance and posters were only allowed in the windows of businesses which accepted NIRA cost controls and other provisions. The government actively discouraged doing business with non-blue-eagle businesses. The Supreme Court declared the NIRA unconstitutional in 1935. By 1937, FDR was fed up with the Supreme Court and threatened to “pack the Court.” The Court backed down and became more accepting of progressive legislation.

The Great Recession that we are currently experiencing is due to massive government intervention. Each President for decades has pushed the American dream of owning a home. Attorney Generals threatened discrimination suits if loans were not granted. Congress made the legal environment lax and provided minimal oversight. The Federal Reserve kept interest rates too low with an “exuberant monetary policy.” The “greedy Wall Street bankers” took advantage of lax restraints, and created incredibly dangerous and unregulated financial instruments. When the bubble burst, the “boys from Goldman-Sachs” (Paulson/Geithner) covered Wall Street losses 100 cents-on-the-dollar with taxpayer money. Obama ignored centuries of bankrupcy law and gave the unions billions. Few – except for Ponzi-scheme crooks – went to jail. Like Boesky of the mid-1980s (Gordon Gekko character in the Wall Street movie), they retired to their villas in France or elsewhere.

History is on the side of free-market theory. If we ignore history, then we condemn ourselves to repeat the mistakes!