Democratic Republic or Financial Aristocracy?
Synopsis
Government policies helped to trigger America’s current financial volatility. Those policies contravened a long history of sound economic doctrine. New survey evidence shows American college educators are mostly failing to intellectually prepare elected government leaders and citizens to discern between persuasive and less persuasive economic reasoning and policy.
1. Introduction
First create a bank and then secure government assistance for it. That is not what Robinson Crusoe did when he became stranded on a deserted island. Nor did the European settlers coming ashore in America at Jamestown and Plymouth Rock, nor did the Indians that preceded them. However, they all practiced banking in the primitive sense of saving up provisions and depositing them in storage. Withdrawing those provisions on occasion proved a matter of life and death during the ocean voyages, as well as surviving irregular harvests and hunting.
Hence, economic instability and hardship did not suddenly appear today, coincident with the advent of global markets and financial institutions. Banks helpfully balance supply and demand over time. But bankers often exacerbate downturns and over-extend themselves during boom periods, especially with speculative price balloons. Nevertheless, today’s financial turbulence and uptick in unemployment is not somehow the beginning of the end of America’s mostly free economy. Nobel Laureate economist, Gary Becker, observed several weeks ago that, “The crisis that kills capitalism has been said to happen during every major recession and financial crisis ever since Karl Marx prophesied the collapse of capitalism in the middle of the 19th century.”
