Thursday, January 21, 2010

Commentary: Socialism vs. Free Markets

The supporters of the current US administration claim that now we can get away from this foolish idea of a free market, and make this society work as it should.I have a couple of comments about that.

First, we do not have a free market, nor have we had in any of our lives. Therefore, those who say the free market has failed us are either lying or don't know what they are talking about. This society hasn't tried a free market.

Obama is now demanding a new federal agency to oversee and control all banking entities. He claims that this is necessary to prevent further predatory lending practices that caused failures of banks due to people not being able to make their payments, and resulting in the government having to spend the people's money to bail out these banks. Now Obama wants to punitively tax these (and all) banks to get the people's money back, and add controls to prevent further occurrences of this sort of abuse.

Here's the real deal: in a free market, no bank would have made such poor decisions and granted wholesale loans with a high risk of loss of capital. The fact is, these loans were passed on to just a few huge banks that specialized in such loans and mortgages; banks that were insured against failure by the government. Any bank doing so, without such government backing, would have simply failed and been bankrupted, with the assets being sold on the open market. That is how it is supposed to work.

But these banks were encouraged by the government to issue such loans, and when the economy suffered a setback, the government lived up to its promise of stealing our money to bail out the banks. That is not a free market.
Now these punitive taxes are not actually on those who created the problem, but rather added taxation on those who save and invest, with the beneficiary being the same government that created the problem in the first place.

And as for the new regulations Obama wants to impose, this is simply a demand for even more governmental control over our money, in a time when free-thinkers such as Ron Paul for calling for ending the Federal Reserve.
I side with Ron Paul.

By the way, I have a perfect example of socialism versus free market, in the form of residential trash pickup. Here is how free market trash pickup works:

Joe buys a truck and starts a trash pickup business. He hires a couple of people to help him. He advertises his business and signs up customers. He could even buy some really nice trash cans to sell or lease to his customers. His potential customers don't have to buy his service. They can elect to hire a different company, or haul their own trash to the landfill (another business, where they have to pay to dump), or they can pay their nephew who needs a job to haul it to the dump for them, or whatever.
But suppose a particular homeowner does decide to buy Joe's service, and further, to buy or lease a can from Joe. At the time that the homeowner pays for the can, the can is delivered. No can, no pay.
Then, Joe picks up the trash on a set schedule. If he agrees to pick up on Thursday mornings, he makes sure that he or his employee shows up every Thursday morning and picks up the trash. If he misses a pickup, he doesn't charge the customer for that pickup, but he really tries to not miss a pickup.
Now, if he misses a pickup or two in a month and sends the customer a bill for the full amount, that customer will not be happy and will probably refuse to pay until the bill is adjusted. If Joe is a jerk about it or continues to render poor service, the customer will fire Joe and find another way to deal with the trash. That is free market.

Now, the communitarian/socialist way: A new resident moves into a house. They soon receive a letter demanding that they sign up for trash pickup, at a certain amount per month. The letter is addressed to them by name, because this is a government "service" and they got the name from some other government  or quasi-government agency. If they don't respong, they soon receive a bill for trash pickup that has not occurred, along with a letter threatening to have them arrested if they don't comply and remit payment within, say, 10 days.
Not wishing to go to jail over it, the resident pays. He expects to see a nice, wheeled trash can show up soon, just like everybody else has, but it doesn't show up. So he has to go to Wal-Mart and buy a can to utilize the "service" for which he is being charged.
Sometimes, the trash can actually gets emptied on Thursday mornings. Other times, a couple of weeks go by without a pickup. The truck just drives by and doesn't stop. Certainly, if an animal gets into the cheap Wal-Mart can and turns it over, scattering the trash in the road (which wouldn't have happened with the nice, heavy can the "service" was supposed to provide), it is up to the resident to pick it up because there is no way the lazy, overpaid government employee is going to stoop to actually touching the trash.
Also, if a year and a half goes by without a can being provided despite repeated complaints by the resident, that resident will still be forced to pay the full amount every month, under threat of criminal charges.
See, the "service" is provided at the government entity's convenience, and has no real connection to the bill. The bill is a non-voluntary tax, pure and simple. The sanitation department couldn't care less if anything is ever picked up at your home, but you will pay the monthly bill, regardless.
Does it sound as if I am speaking from experience?

No comments: