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Consider this – some experts feel that markets still have another 40% more to drop. This means that the economic decline is only half finished. If that is true, than the scope for state interventionism, in the guise of 'saving this or that', will be increased at some accelerating and proportional rate to the this near future decline. In mathematical terms every 10% drop in the markets will 'force' politicians to spend 20-30% more money. It will lead to ruin.
The only outcome of such a mathematical increase in government will be the establishment of state power to such a degree that we will witness a rapid decline in all varieties of freedom – from our choice of 'energy' usage; to free speech; to making profit; to trying to start a new business. Hayek's road to enslavement, which was already well underway before the current credit bubble burst, will be paved with yellow bricks of paternalistic rhetoric, and 'compassionate' plans as governments assure that they, and only they can 'save us'. We will retard our political-economic development by 80 years or more, when this is all finished.
Consider this. Under the Prophet Obamed [blessed be the new savior etc.] the US will incur a structural deficit of $2 to $2.5 Trillion dollars in 2009 and 2010. This spending will not be reversed post 2010. And that is just what has been seen and announced thus far. $2.5 Trillion is 18% of US GDP or a doubling in government spending from the mid point of G.W. Bush's terms in office. $2.5 Trillion is 2.5 times the size of Canada's entire economy, and represents a systemic deficit of $8300 per US citizen. $2.5 Trillion is simply an unsustainable spend and will add 25% to the current US debt per year.
Within 2 years, the US Federal debt will be at 100% of GDP. Within 10 years it will be 200 % - and that ignores the bankruptcy of social security and health care. Americans will need to increase their borrowing just to pay the interest on their massive debt. It is a financial cycle which cannot last and will end in far higher taxes and perhaps even a default through inflation, in which America prints money to inflate its currency, and thereby reduce its debt obligations. This is the policy that banana republics such as Argentina and Italy pre 1992, engaged in. Such a scenario is not that fantastical and would represent a further economic contraction and a de-facto US debt default.
There are many ways to deal with the 'crisis' – one brought about and encouraged by government policies, preferences, subsidies and constant demands that people spend more and take on ever more credit. It was a bubble economy – a fantasy in many ways – resembling the markets and false euphoria's which distorted the English market economy in the early 18th century during its 'South Sea bubble'; or that of France at about the same time during the 'Mississippi Land Scam' bubble; or that of Holland in the 17th century during the 'Tulip bubble' in which a tulip bulb would have the same value as a small village. Government's culpability in forcing up land prices through speculation and greed is something rarely mentioned today. The array of subsidies, programs, and government sponsored lending is the main fact in creating and distorting the basic functioning of a proper land prices, premised on normal supply and demand conditions. Governments destroyed that normalcy.
As the Marxist Hillaire Belloc – yet another French 'thinker' – stated so accurately: “The control of production of wealth is the control of human life itself.” Indeed it is. The state owning wealth, capital, banks and the means of production ensures that the individual loses his status of freedom and becomes merely a worker for the state, an individual no longer, but a knave supporting government policy and preferences.
Hayek knew that economic motives – whatever they might be – were not in themselves the reasons why people did things. These 'motives' were simply used to achieve something else. A nicer home, some savings, a good education for the children, a trip to somewhere exotic – and the specie of money was a liberating factor, not only in consumptive choice, but in supplier innovation and technical advancement.
“It would be much truer to say that money is one of the greatest instruments of freedom ever invented by man. It is money which in existing society opens an astounding range of choice to the poor man – a range greater than that which not many generations ago was open to the wealthy.”
So when a politician such as the Prophet Obamed proposes that nationalisation; profit control; wage controls; or more government spending and welfare [now called in the modern age a 'stimulus'] is good for the economy, the world, and even poor, distraught, feverish mother earth; the average man, the average poor man even, should give pause.
Giving the state control over banks, capital and vast areas of the economy will not only decrease the economic motive in society; it will lead to a reduction in product innovation; supply, consumer choice, wages and ultimately in the ability of society to help the poor raise themselves up to a higher level. Controlling money and capital is one of the essential elements in a plan of communalism embedded in state control and state culture. Once the government gains control over production and money, it does not easily relinquish it.
Hayek sums up the danger best, “Economic control is not merely the control of a sector of human life which can be separated from the rest; it is the control of the means for all our ends.”
Indeed it is.
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