The Free Market as Regulator

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Since
the bailouts last fall, lawmakers have been behaving as quasi-owners
of the bailed-out banks and businesses, leading to calls for increased
regulation of executive compensation and other wasteful expenditures.
We have heard much about bonuses and executive pay packages that
sound more like lottery winnings than an honest salary.

Many lawmakers
voted in favor of these unconstitutional bailouts, believing that
these corporations were too big to fail, and allowing them to go
under would precipitate widespread economic disaster. This second
wave of citizen outrage at the bailouts has left these lawmakers
with a bit of egg on their face, and once again, they feel the need
to "do something" to "fix" it. Shouldn’t there
be a regulatory structure in place governing executive compensation?
Politically, it seems quite feasible. People are outraged that the
system has once again gutted the many to make a few at the top fantastically
wealthy. But they are incorrectly demonizing the free market.

What we need
to realize is that there WAS a regulatory structure in place that
was attempting to stop bad management, including overpaying executives.
That regulatory structure is the free market, and when poor management
brought these companies to the point of bankruptcy, Congress circumvented
the wisdom of the free market, and inserted its own judgment at
our expense. And now because of that intervention, we will be burdened
with massive new regulations. We can be certain this effort will
fail.

The free market
is a naturally occurring phenomenon that can’t be eliminated by
governments, not even totalitarian ones like the former Soviet Union.
It can be regulated, over-taxed and manipulated until it is driven
underground. Lately it has been wrongly accused of doing so many
things it just doesn’t do, that are really the fault of crony corporatism
and convoluted government policies that brought on the crisis. Too
many people equate the free market with big business doing whatever
it wants, but that is not the free market. Unconstitutional taxpayer-funded
bailouts are what allow giant corporations to run roughshod over
the economy. The free market is what puts them out of business when
they misbehave.

The free market
is you and your neighbors working hard to produce what you produce,
and exchanging goods and services voluntarily, in mutually agreeable
arrangements. The free market is about respecting property rights
and contracts. It is not about building up oligarchs and monopolies
and confiscatory tax theft — these are creatures of government.

We must watch
out when government comes up with interventionist solutions to interventionist
problems. The root of our problems lies in interventionism. Trusting
the free market is the solution.

See
the Ron Paul File

August
20, 2009

Dr. Ron
Paul is a Republican member of Congress from Texas.

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