The Sponge Is a Mess!

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It's been over
fifty years since I first heard Leonard Read make the comment, "The
market is analogous to a sponge. The market can absorb a lot of
government mess until, like a saturated sponge, it becomes a mess
too!" Looking back, it's been almost fifty years since Leonard
(he was my best man at our wedding) told me marriage and the market
share this similar trait, so keep your sponge dry. While our marriage
has done so, sadly the same cannot be said about the free market
economy over these past fifty years.

Today I find
myself reflecting on another Read comment, but this one related
to human progress. He often noted that a social order advances through
folks overcoming adversity, and thus periods of what he liked to
call devolution, are essential to achieving that end. Of course,
Leonard's abstract idea sounded a lot better to me fifty years ago
than it does from experiencing it today!

It's frightening
to me how much individual liberty has been lost during my lifetime,
and especially since the birth of my father. When my father was
born near the end of the nineteenth century, the only awareness
that a federal government even existed in his family's life was
the local postman delivering the mail. Today, that same government
is about to force some people to purchase medical insurance with
fines and jail threatened if they do not comply. These are apt anecdotal
reminders showing how the concept of government has radically changed
when compared to more than a century ago. Unfortunately, an omnipotent
and omnipresent plundering state has become today's replacement
for that old nineteenth-century relic.

Two questions
which arise today are whether economic liberty will continue to
decline in the years ahead, and whether our economic plight is now
hopeless. It seems to me the answers are yes and no respectively.
One would have to possess the myopic vision of a Karl Marx in the
1850s not to see the loss of liberty which government has inflicted
upon our social order over the years. The result today is massive
wealth destruction from years of pursuing a neo-fascist anti-capitalist
mentality, monetary inflation, and radical interventionism, all
of which now virtually assures a continuing decline in this nation's
material standard of living.

One factor
alone guarantees such a bleak outlook. The burden of debt, both
public and private, has reached such a magnitude that it's financially
impossible for that debt to ever be repaid in real terms. Today's
unfunded liabilities of the Federal Government alone are now over
one hundred trillion dollars, a sum which cannot be grasped by anyone.
Clearly, the free market sponge has become heavily saturated by
the accumulated burden of government edicts over many decades. The
belief that markets ultimately respond remains true, but having
been hampered by years of neo-fascist government edicts, today's
economic plight will not likely lead to any hoped for economic recovery.
That's asking too much of "hope & change"!

Instead, I
see our economy headed into a period of dire "pay-back time."
Economic laws of cause and effect are always at work with the only
unknown being how people will respond as the force of these inexorable
economic laws come down upon us. Whatever comes surely will be unpleasant
because of the massive economic harm that government has already
inflicted upon our economic liberty and the market order. Government
caused malinvestments and past pricing distortions must be eradicated
for any real recovery to evolve, demanding a necessary time of "devolution"
before any real economic progress can be realized.

I'm convinced
our social order has surpassed "critical mass" on its
path toward a neo-fascist command order. Further, it seems unlikely
that this path will soon reverse, thus leading to more economic
liberty being lost with our material standard of living declining
as well. I see only two political options ahead for government,
both undesirable: either continue on a course toward hyperinflation
or accept the financial failure of government itself followed by
a severe depression. Which will occur cannot be known for certain,
but whatever the political path ahead, the consequences will be
social chaos and economic suffering.

While I concur
with Ludwig von Mises, who wrote in his book Socialism
that "no one can find a safe way out for himself if society
is sweeping towards destruction," at least an understanding
of the political forces which brought forth such destruction must
be grasped. Let there be no doubt that a threat to the social division
of labor, an institution which has brought mankind to where we are
today, is not some trifle to be ignored. For not just the quality
of life is at risk, but life itself for millions of people if the
advanced social division of labor collapses.

I believe an
awareness of this reality is generally understood, which is why
the less bad path will likely be taken over pursuing the worse alternative.
The worst political choice would be a path of hyperinflation which
will destroy the medium of exchange, the banking system, owners
of monetary assets, and our social division of labor, which will
impoverish everyone. Hyperinflation will not just destroy the market
order, it will also lead to unimaginable social conflict and domestic
violence. It's a choice even most politicians will come to see as
too costly!

The alternative
is to "take the cure" by reducing taxation and anti-capitalist
edicts, curtailing deficit spending, and ending monetary expansion.
Certainly unpleasant consequences would result immediately from
such actions, but such actions will lead to future desirable outcomes:
taking the cure would not only restore some semblance of a free
market order, but equally desirable, such actions would expose the
fallacy of the welfare state and the political system which has
imposed its wealth transfer edicts upon us.

Since I'm convinced
the financial collapse of the welfare state is inevitable anyway,
would it not be much better for it to come through the financial
failure of the government itself rather than from the collapse of
the social division of labor brought on by hyperinflation? Frdric
Bastiat certainly saw its fallacy in the nineteenth century when
he observed that the State is that great fiction where everyone
believes they can live off of everyone else through the political
process. The welfare state evolved from such a fantasy premise as
it forcibly took from the many and disbursed its largess to the
few. Over time, however, this "limited-plunder racket"
evolved into the omnipotent neo-fascist state that dominates our
lives today.

The good news
is that economic and financial realities assures the political demise
of this command order welfare state with only the how and when
it will happen yet to be discovered. We must remain confident
that the market order and economic liberty thereafter will be rediscovered
so freedom, which has always served the general welfare of humanity
better than concentrated political power and legal plunder, can
prevail. While such a time will certainly come, it cannot happen
until a better understanding of economics and politics prevails
than the appalling ignorance which surrounds us today. Do I need
tell you we ain't there yet?

23, 2009

Anderson [send him mail]
taught economics at Hillsdale Collage and was executive secretary
of FEE.

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