The Sponge Is a Mess!

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.

The Anti-capitalistic ... Mises, Ludwig von Check Amazon for Pricing.

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"!

Socialism: An Economic... Ludwig von Mises Best Price: $6.00 Buy New $1.99 (as of 06:20 UTC - Details)

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.

The Bastiat Collection... Fru00e9du00e9ric Bastiat Best Price: $30.11 Buy New $95.95 (as of 09:50 UTC - Details)

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 Left, The Right an... Llewellyn H. Rockwell Jr Best Price: $7.33 Buy New $40.00 (as of 07:55 UTC - Details)

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?

November 23, 2009