The Ayn Rand Center published three great press releases on the financial crisis lately. First:
How Not to Defend Free Markets
October 3, 2008Washington, D.C.–In response to the financial crisis, traditional defenders of free markets have criticized certain controls passed by U.S. regulatory agencies, but are not calling into question the legitimacy of the agencies themselves. But, argued Yaron Brook, executive director of the Ayn Rand Center for Individual Rights, “It is insufficient and indeed counterproductive to criticize a few failed policies of the Fed and the SEC, without challenging the existence of these market-dictating agencies in the first place.
“As Exhibit A, consider the response to the SEC’s recent war on short selling. The Wall Street Journal, regarded as a strong defender of free markets, wrote that ‘[T]he SEC first clamped down on so-called naked shorting–a reasonable move under any circumstances, even if there’s no evidence of widespread naked shorting of financial stocks in this panic. But Mr. Cox didn’t stop there. The SEC has also temporarily banned any short selling of hundreds of financial stocks, a list that has grown to include the likes of General Motors. Then, when the SEC was reminded that selling a stock short is a legitimate part of many unimpeachable hedging strategies, it relaxed the prohibition for certain types of sales while continuing to expand the list of “protected” stocks. . . . If the SEC wants to help restore calm, it would stop issuing new emergency rules in the dead of night and bring some transparency and calm to its own rule-making.’
“In praising some of the SEC’s actions, while criticizing others, the Wall Street Journal is conceding a disastrous principle: that financial markets should be controlled by government at all.
“Under capitalism, the proper role of the government in financial markets is to protect individual rights by banning force and rooting out fraud. This requires objective laws that do not permit would-be central planners to tinker with markets when they don’t like the results. But the SEC’s regulatory authority allows it to coercively prevent individuals from engaging in voluntary transactions like short selling whenever it decides those transactions do not serve the ‘public interest.’
“Since the ‘public interest’ is an indefinable standard compatible with any interpretation or rationalization, this means in practice that SEC goons can arbitrarily unleash their regulatory club on financial markets whenever they feel it’s warranted. For example, see Chris Cox’s blitzkrieg of contradictory emergency orders attacking short sellers.
“The basic principle behind regulation is that the government can use force, not to protect individual rights, but in an attempt to engineer ‘socially desirable’ outcomes, i.e., outcomes different from what would result from the voluntary choices of individuals on a free market. That is the same premise that underlies all disastrous attempts at central planning–from the Soviet Union to modern-day Venezuela.
“If the Wall Street Journal really wants to defend capitalism, this is the premise it must oppose. Instead of prodding government regulators to be better central planners, it should call for a complete end to government control of financial markets. This is the lesson all defenders of capitalism must learn: you cannot defend capitalism by conceding the legitimacy of its opposite.”
Ayn Rand Saw This Coming
October 9, 2008Washington, D.C.– “Despite overwhelming evidence that government policies caused the current financial crisis, Congress is blaming businessmen,” said Yaron Brook, executive director of the Ayn Rand Center for Individual Rights. “What’s worse, the capitalists who have been shackled with unprecedented regulatory burdens are unable to defend themselves morally. Though the events are different, this pattern of abuse and submission is straight out of Ayn Rand’s Atlas Shrugged.
“The cycle starts with government intervening into the economy and imposing regulations and controls on business. This distorts the free market, leading to economic dislocations. When the problems caused by these distortions inevitably follow, everyone blames the free market and its greedy capitalists. The proposed solution? More government controls. Over the years, conservative critics of creeping government have repeatedly exposed this illogic but have always been helpless to explain why the cycle keeps repeating, decade after decade.
“The pattern keeps recurring because businessmen are willing to take the blame. From capitalism’s inception, its defenders have been morally disarmed by the widespread view that self-interest is morally suspect, and disinterested service to others is a moral ideal. So each new spate of controls has been grudgingly accepted as a fair price to pay for society’s toleration of the selfish pursuit of profit.
“Atlas Shrugged depicted a society in economic collapse due to this recurring cycle, and today’s parallels are obvious. Government manipulation of money, credit, and lending standards over several decades caused the mess we’re in. Now, the offered solution is more of the poison that sickened the economy–more bailouts, more cheap money, more government-guaranteed loans, and above all, more regulations.
“This chronic cycle will not end until businessmen accept that their production of profit is neither immoral nor amoral–it is the capstone of moral virtue. Once they shrug off the role of scapegoat, businessmen can demand with moral certitude that government punish fraud and enforce contracts but refrain from interfering with voluntary trades among consenting adults.
“When America’s markets are finally free of all coercion–in other words, when laissez-faire is achieved–financial crises such as the one we’re experiencing will never happen again.”
Are We All Socialists Now?
October 10, 2008Washington, D.C. –The Treasury Department, as part of its ongoing assumption of control over the financial industry, is preparing to inject cash into U.S. banks in exchange for preferred shares of bank stock.
“Are we all socialists now?” said Yaron Brook, executive director of the Ayn Rand Center for Individual Rights. “Have we learned nothing from the devastation that socialist policies wrought worldwide in the twentieth century? Government intervention distorts markets and causes economic dislocations, no matter whether Uncle Sam controls private companies by regulation or assumes public ownership outright.
“A crisis doesn’t transform poison into medicine. Over decades, government manipulation of money, credit, and mortgages poisoned this economy and left it dangerously weak. Now Hank Paulson and his comrades are hooking up IV tubes filled with more of the same poison–bailouts, loan guarantees, cheap money, and more burdensome regulations–and hoping we will lie still and trust in their cure.
“But the real cure is capitalism, not more doses of socialism. We should act quickly to put government in its place, by rolling back the interventionist measures that caused the present emergency. Government’s proper role is to punish fraud and enforce contracts, not to own and manage the economy. We cannot achieve financial health unless we are willing to free the markets.”
