Saturday, May 26, 2012

The Biggest Mistakes in History Part 3

“Government cannot make man richer, but it can make him poorer." - Ludwig von Mises

The next big mistake the administration made was to continue the bailouts.  First, let’s understand what a bailout is, where the idea comes from and what it is intended to accomplish.  A bailout is charity for millionaires.  It could be called welfare for multi-million dollar corporations.  It is also an aspect of crony capitalism.

To fully understand the bailouts, we must understand how businesses must function and the obstacles they face.  When a group of individuals operate as a private corporation, they must be constantly alert, constantly striving to be the best in order to beat the competition.  The corporation must operate like a well-oiled, high precision machine hitting on all cylinders and producing the maximum output.  Any failure or mistake by one poorly trained or lazy individual could do serious damage to the the organization or end it.  That one failure may be the one weakness that competitors exploit.  In fact, anything that gets in the way of top corporate efficiency could kill the company.

This is a critical point if we want to understand what capitalism thrives upon...and that is competition.  In a competitive situation, the minutest distraction or delay can be deadly to the outcome of winning in the marketplace.  Such distractions and delays threaten the survival of the company.  Any factor that impedes the best production, the best management and the highest profits could be deadly to the company and the survival of the employees who work for it.  These deadly factors could be government regulations and other unnecessary rules, onerous taxes and crony capitalism that uses government to destroy the competitors of the government's favorites.  It consists of trade unions that subvert the relationship between a company and its employees and create tremendous obstacles to the company's attainment of the highest production levels and the best quality.

Simply put, the only rule for the organization is: provide value.  But how this value is provided and how much value is achieved is the province of the art of management.  If a company succeeds at pleasing the customer, it is rewarded with profits.  If it fails, or is forced to fail by government or unions it must go out of business, take whatever investment capital it has left and invest it in an entirely new business.  In fact, going out of business is not a dead end; it is the beginning of a new process that applies left-over capital to a new purpose.  It revitalizes that capital and puts it to work toward a better idea.  In fact, when a business folds, what it is really doing is discarding  a bad idea, releasing employees to find jobs in profitable businesses and starting a new process of more intelligently using capital to begin value creation again.  Companies such as Bain Capital provide tremendous benefits to the economy because their basic goals are to re-oganize companies, make them profitable again, or when this is not possible, ensure that whatever is left of the failing company can quickly be put to productive use again.

Contrary to the views of anti-capitalists, businesses are about value and positive living. In fact, they can only be about these concepts.  The idea that business owners and managers seek to exploit the workers, that they deceive customers, that they only want to steal production and leave the employees destitute is a lie told by those who don’t understand what it takes to manage a successful company.  A great company hires the best people and pays them well.  It trains them and sets the company Mission toward a positive goal.  Employees, making what they are worth, will work hard, develop pride in their abilities, lead better lives, enjoy their free time and love their families. 

One of the big killers of successful companies is the trade union.  The trade union muscles in on the employee’s pay and promises collective bargaining in situations where it is not necessary.  A trade union subverts the goals of the company and turns the corporate priority from the practice of making a profit to that of providing welfare for unproductive employees.  Union leaders think it is ok for employees to subvert the company by being unproductive, argumentative, hyper-legal and anti-capitalist.  Yet, all of these attitudes require that the managers of the company find ways to mitigate the damage done to the organization by the union. 

Now, imagine a situation where the union forces wages so high that the company is no longer competitive.  The solution offered by the union leaders is to have the government declare the corporation too important to fail.  The unions ask the government to give the company someone else’s money so union workers can keep their jobs.  Every dollar of bailout money is good money chasing bad and, in most cases, there is no way to turn it around without a total collapse of the system and a re-establishment of the profit motive in the industry – which often means the just disenfranchisement of the union. 

Bailouts are evil because they take money from productive workers and give it to unproductive workers.  It is theft made possible by political corruptions and campaign payoffs.  The result is that government makes people poorer.

The belief that a government has the authority to issue bailouts is based on the idea that government should manipulate the actions of men to improve economic conditions.  The premise is that business organizations represent a set of levers that can be intelligently manipulated to produce a better outcome.  If one industry is getting too powerful, then the government can shrink it down to size by taxing or fining it at a higher level than its competitors. 

Bailouts do not work and there is no good outcome except in the short-term.  While damage is done to the people who provide the money for the bailout, politicians only talk about the boost that the bailout gave to the corporation.  It considers this boost a success but the bailout only mitigated the eventual demise of the company.  The bailout actually created distortions in the marketplace and left the managers of the bailed out company with no cognitive indication of how their decisions will affect profits.  Competitors who did not receive bailouts are benefited because their decisions will be immediately reflected in their bottom line and they will know how to react to the changing marketplace.  The best thing for the bailed out company to do is give back the bailout money so it can get back to a position where the bottom line is the only indicator of its success.  Politics and cronyism are not indicators of corporate success…but of a corrupt corporate culture.

The only exception that I’m aware of is the previous Chrysler bailout a few decades ago.  In that situation, an exceptional CEO took over the company and successfully steered it to recovery.  He took the bailout as if it were a loan and proceeded to make the changes necessary to save the company and pay the government back.  After much hard work and intelligent planning, Chrysler was saved.  Today, that will not happen because most businesspeople who clamor for a bailout do not have the intelligence, ability or desire to actually compete in the economy.  They would rather ride the company boat as long as the tide is up, but they’ll bail out themselves as soon as the obvious becomes known; that bailouts are not a solution for a failing company.  Bankruptcy is.

Today, President Obama touts the GM bailout as a success while the company continues to survive on the “charity” of the US taxpayer who no longer wants to buy their cars.  What can you expect when government gives someone a bunch of money he did not earn?  These bailouts were given to GM specifically to protect the jobs of one of the President’s biggest contributors among the powerful unions.  You can be sure that the money will be wasted.   

In fact, you can be sure the bailout is failing when you see a union thug (who visits the President every week) on “Face the Nation” telling you about his concern for the jobs of Americans, smiling like an all-American boy, honest and true.  Few people notice that his whole existence is made possible by stepping on the backs, not only of the union members forced to work under him, but of the American taxpayers.  The fact is that this very individual is responsible for GM failing in the first place.  That he pretends to be an all-American boy (rather than the thug he is) proves that there is corruption at the highest levels of our government.

Keynesian principles coincide easily with the idea of a “socialized” government; where all decisions are based upon “the good of society” and where all forms of coercion are within the government’s authority.  Keynesianism advocates an essentially fascist government where citizens own property but government decides what they should do.  These principles release into society (to function with impunity) looters, thugs and thieves who use the gullibility of the American public to proclaim that they are saving a difficult situation by means of their coercive actions.  These people have no intention of saving anything.  They are actually using the situation to loot every ounce of money produced by honest citizens.  Keynesianism is the looters’ argument made by people who will leave us all with empty bank accounts.

Keynes accepted as fact the Marxist idea that capitalism creates unfairness and other disparities that must be corrected by government.  Such “disparities” as wealth accumulation and monopolies require that government act to fix “macro-economic” distortions.  It establishes the lie that government economists have the ability to analyze and identify these disparities and recommend solutions.  Keynesian economics brought the birth of the technocrat who thinks he knows better what people should do with their lives and who ushers in an era of coercive "solutions" that do not work.

However, classical economists such as Ludwig von Mises saw the problems of Keynesianism and sought to warn us that the market did not respond well to coercive measures; he taught that government intervention actually created the disparities that Keynesian economists and politicians claim to be fixing.  Classical economists like Mises told us that there is nothing wrong with capital accumulation; it actually makes bigger and better businesses possible.  They told us that monopolies were virtually impossible in a truly free market.  They even pointed out that only government can create monopolies by barring entry into a field. Classical economists countenanced a free market where individual rights were honored and protected by government. 

Classical economists will also tell you that any form of government interference in the marketplace causes distortions which affect the ability of businesses to earn profits.  For the sake of “social justice” Keynesians will make it difficult for some businesses to survive and easier for others, all of which causes the very problems and distortions that government claims is today’s “emergency”.  An example of this is the intervention that brought about the mortgage crisis precipitated by Fannie Mae and Freddie Mac in 2008.  This was an entirely government-manufactured crisis made possible only by government manipulation of bank lending practices.

I have also commented in the past that the President’s men seem to have a cavalier dismissal of American businesspeople to the point of insulting them and treating them as virtual slaves.  This attitude is a result of Keynesian and Marxist principles that assign to bureaucrats the ability to violate the right to property.  The result of this attitude is that the President’s men have no problem with “solutions” that involve coercive measures against once free people.  If something is wrong, in their minds, that means someone should fix it; and that “someone” is always government.  Little do they realize that all they have to do is stop tinkering with the economy and free people will make the right decisions for themselves.   Little do they realize that the problem is not capitalism; the problem is their tinkering with the economy.  They are the problem.

While reading the book, “The Escape Artists”, I noticed this attitude to be rampant among the President’s advisors.  I commented upon it in the first installment of this series of blog posts.  These men, the President’s key advisors from 2009 to 2011, acted like desperate dictators clamoring to control the entire economy.  They acted as if the economy could only be saved by finding villains to vilify, parading a few executives in handcuffs, engaging in lots of anti-business propaganda and imposing rampant regulation to ensure that businessmen feared the President.  None of them said, “Wait a minute.  This isn’t our property.  We don’t have the authority to violate individual rights.  We aren’t doing the right thing when we issue decrees.  This isn’t how law is made in America.”  It didn’t matter that businessmen were innocent of wrong doing, that they haven’t broken any laws or that they bend over backwards to follow government regulations.  What mattered is that someone else be blamed for the consequences of government action and that the victims be vilified publicly in order to maintain the (false) image that the government is working for the people.  The basic attitude was that businesspeople were slaves to the state now that the President had been inaugurated.  The only important issue for them was saving the President’s political skin and making sure he wasn’t blamed for the corruption between him and his cronies.

How did we get to the state in the U.S.A. where politicians and Presidential advisors can do anything they want and say anything they want?  How did we get to a point where the Constitution is not even an after-thought?  I think the answer to this question will prove enlightening, especially for those among us who are confused by everything coming out of the government today.

The administration’s basic approach is philosophical dishonesty.  The real lies implied by the actions of the government are philosophical in nature: that truth is what people believe, that you have to create the truth by repeating lies and that people vote according to which party spends the most money distorting the facts – and that bailouts actually bail out companies if people believe it.  This philosophical premise is known as subjectivism, the idea that reality is created by a collective mind and that the only thing needed is to educate the people so their beliefs will create the reality the manipulators hope for.

What do they hope?  They hope that wishing makes it so, that whims will create the truth, that we can continue robbing Peter to pay Paul and that there will never be any consequences for their robberies.  They hope that if the people will just believe it, then all their evasions of reality, all their coercive measures, all their lies and distortions will somehow cause reality to bend to their will.

I've said for years that progressives must engage in "reverse think" in order to succeed. They must tell us everything in reverse... because they don't know how to affect reality except by lying to people – and many times, they don’t even know that they are thinking in reverse. Just listen to them and you’ll see that everything out of their mouths is true in reverse. Listen to the Keynesians. They tell you that capitalism has caused our financial crisis, that the real cause, government, must be given more power, that the solution (that has not worked) must be engaged even more (rather than stopped), that capitalists are thieves, that the rich are not paying their fair share...all of these "facts" are actually "lies".

To quote from John Young’s Blog:

“Remember, as the Declaration of Independence noted, governments derive their JUST powers from the consent of the governed. Obviously, I cannot give someone else “consent” to do something that is highly illegal for me to do as well. That’s why people who hire assassins go to jail just as if they had conducted the assassination personally. Well, then … as I have no right to go taking away other people’s stuff, I can’t give government “consent” to do so on my behalf, either. Thus, the entire Keynesian premise flies in the face of the underlying tenets of our system of government and is ipso facto UNJUST.” (1)

This last is the TRUTH.  It is the very truth that the President would like to ignore because, were he to acknowledge the fact that his policies cannot work, that his words cannot make them work and that he cannot get away with stealing peoples’ money; not only would his inner universe collapse but, in his mind, so would the entire universe. 

The President’s belief that capitalism has created disparities in wealth is an excellent example to prove my point, another example of reverse think.

John Young’s Blog responds again:

“In any free market, there will always be natural disparities in wealth. Some people are smarter than others, some people are more industrious than others, and some people are just plain lucky. Sometimes very bright people find themselves following a calling or cause that doesn’t pay well. Some people just don’t care about money. Others are incredibly acquisitive. This is just the way the world works, and government shouldn’t be interfering to make things work any differently.”(2)

And this is the point about the bailouts.  The President and his men act as if this country was their possession to manipulate at will.  They act as if they had the right to just move any amount of money around and give it to anyone they long as they have an "emergency" that allows them to ignore the facts of reality.  They act as if the election had given the President a mandate to ignore the Constitution, that they can decide which men will receive good treatment and which will be excoriated.  They advance measure after measure of highly questionable and immoral decrees that other people should follow under pain of punishment.  They advance the idea that people should sacrifice for the sake of the collective, or else.  They believe that profits are evil and that men will always do what is wrong unless they, the most insulting characters around, can dictate to us what is proper.  Men who have never worked an actual day in their lives are telling those of us who have worked for many years how to conduct our business – and it is considered proper that we give them the time of day.  In any other situation in our country's past, they'd have to sit on the street and beg for other peoples' money.  Not today. 

Bailouts are an ideologically-based idea that has been stripped of its ideological context by intellectuals in order to mainstream the idea that bailouts are rational solutions.  This intellectual mind trick has a sinister influence on people who do not realize that bailouts are essentially fascist and socialist in nature.  The divorcing of bailouts from their ideological context represents an effort to fool people into accepting dictatorship.  If you accept bailouts, you can accept more bailouts.  And you must also accept government coercion of all varieties.  You must accept political bribes, graft and unconstitutional decrees.   You must accept the immoral as moral and you must learn to think in reverse.  When you hear a lie, it is social truth.  When you tell the truth, it is a capitalist lie.  When you accept higher taxes, you are “engaging” to solve problems.  When you cannot afford to live, it is Justice.  But don’t worry; our bailed out industries will continue to function and provide us with what we need.  Our sacrifice will save us because the President "knows" the future.  That we can’t afford a car that does not work very well is an indication that our government is forcing us to be socially responsible.  And we should live with that and vote for the President who is struggling to save us. 

That a single individual (who has not actually earned his millions by means of productive work) has been given the power to impose upon us his singular philosophy of sacrifice indicates how much “reverse think” is rampant in society todeay.  That we think that a person (dedicated to forced altruism) can actually make the right decision on any issue should make any thinking American pause. 

How can sacrifice be the answer to every economic problem?  When has it ever been successfully implemented in society and when has it succeeded in creating a vibrant economy?  Certainly not in the Dark Ages ruled by Christianity.  Certainly not in Soviet Russia, Nazi Germany, Fascist Italy, Communist China and Communist Cuba to name a few. 

Yet, we are to consider that a man who has shown himself capable of only making this one decision when facing all issues…is qualified to lead a country built upon the principle of freedom and self-interest?  Can we expect anything other than a destruction of our society at his hands?  His every decision is to re-distribute; his every action is to demand sacrifice, to regulate, to stimulate, to ease monetary printing, to punish the successful and to make sure his friends are not touched by his decisions.  This is the essence of the man we elected.  What did you expect, the roaring twenties?

Are the Presidents Czars and regulators beholden to a principle such as individual rights?  No, don’t ask them to be throttled by restrictions on their actions; they are too busy fighting against the “evil” profit-seekers, against the very people who bring us our computers and cell phones and iPads.  They are too busy destroying the symbols of success because they think they are an evil conspiracy to steal.  Yet, look whose doing the stealing...those very Czars and regulators. 

The President’s principle of altruism holds that it is proper for men to sacrifice for the sake of others.  He gets his authority to force men to sacrifice, not from the Constitution (which prohibits theft and coercion), but from God and a democratic vote that was presumed to be a repudiation of the Constitution.  The President’s altruism, which also has a Marxist context (from each according to his ability to each according to his need) is what we supposedly voted for.  At least, that’s what he and Michelle believe.  More reverse think.

The President seems to be missing his job description. It is not about being the re-distributor-in-chief or the altruist-in-chief or the regulator-in-chief or the Keynesian-in-chief.  His job is to execute the laws of the land and to do so in a way that is Constitutional.   It is not that difficult to just leave people free to solve their own problems. 

The founders knew that future leaders would attempt to create emergencies that enabled them to take power and violate the Constitution and they sought to prevent it by created a system that would span generations before it could be totally invalidated. 

The President is just one of those leaders attempting to circumvent the Constitution.  And reality will show that he cannot create a new definition of fairness that requires unfairness.  He cannot invent of new type of government without having to suffer the consequences that have always come from the old types (fascism, socialism, communism, welfare-statism).  I'd rather have a former businessman than a former (or current) Marxist as my President. 

It is not within the President’s authority to take money from American taxpayers and give it to anyone – especially people who have donated heavily to his campaign.  As John Young's Blog tells us, theft is illegal.  The bailouts were not only fruitless, they were immoral.  Not only did they save some companies from having to compete, they put off the eventual debacle into the future – a debacle that will be caused by the President’s policies.  Not only have the President’s anti-ideological views empowered immoral, non-productive people like his advisors, but they are destroying the successful people who got wealthy through their own diligence. 

The President needs a rocking chair.

(2)    Ibid

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