The Objective Standard Blog

The Objective Standard Blog: November 2008

Don't Say Grace, Say Justice by Craig Biddle
The Menace of Pragmatism: How Aversion to Principle Is Destroying America by ARC Media
Drop the SEC Investigation Against Cuban by ARC Media
Bush Is No Champion of the Free Market by ARC Media
Stop Blaming Capitalism for Government Failures by Yaron Brook and Don Watkins by ARC Media
Special Edition of G. Gordon Liddy Show on Ayn Rand by ARC Media
Financial Trauma: Causes and Possible Cures by TOS Admin
The Left and the Right vs. Free Speech by ARC Media
National Surveys Show Atlas Shrugged Is Widely Read by ARC Media
End the FCC’s War on Free Speech by ARC Media
The Maestro vs. the Market by Alex Epstein and Yaron Brook by ARC Media
Supreme Disappointments by Thomas A. Bowden by ARC Media
Let Them Fail by Amit Ghate by ARC Media

Saturday, November 22, 2008

Don't Say Grace, Say Justice

Posted by Craig Biddle at 8:23 PM

The religious tradition of saying grace before meals becomes especially popular around the holidays, when we all are reminded of how fortunate we are to have an abundance of life-sustaining goods and services at our disposal. But there is a grave injustice involved in this tradition. It is the injustice of thanking an alleged God for the productive accomplishments of actual men.

Where do the ideas, principles, constitutions, governments, and laws that protect our rights to life, liberty, property, and the pursuit of happiness come from? What is the source of the meals, medicines, homes, automobiles, and fighter jets that keep us alive and enable us to flourish? Who is responsible for our freedom, prosperity, and well-being?

Is freedom a gift from God? It is not. Freedom, the absence of physical coercion, is a political condition resulting from the rational, principled thought and action of men—men such as Aristotle, John Locke, the Founding Fathers, Frederick Douglass, and American soldiers.

Did God make the ambrosia that melts in your mouth, or the asthma medicine that keeps your child alive, or the plush recliner in which you relax, or the big-screen TV on which you watch your favorite show? Did God create the jetliners that bring friends and family from afar, or the stealth bombers that keep the barbarians at bay, or the music that warms your heart and fuels your soul?

Since God is responsible for none of the goods on which human life and happiness depend, why thank him for any such goods? More to the point: Why not thank those who actually are responsible for them? What would a just man do?

Justice is the virtue of judging people rationally—according to what they say, do, and produce—and treating them accordingly, granting to each man that which he deserves. If someone spends the day preparing a wonderful meal, justice demands that he, not God, be thanked for doing so. If someone provides his family with a warm, safe, comfortable home, justice demands that he, not God, be thanked for providing it. If a policeman or fireman or doctor saves someone’s life, justice demands that he, not God, be thanked. If a loving spouse or child or parent or friend provides you with great joy, justice demands that he, not God, be acknowledged accordingly. If a philosopher discovers the principles on which freedom depends—and if others put those principles into practice—justice demands that they, not God, be given credit.

To say grace is to give credit where none is due—and, worse, it is to withhold credit where it is due. To say grace is to commit an act of injustice.

Rational, productive people—whether philosophers, scientists, inventors, artists, businessmen, military strategists, friends, family, or yourself—are who deserve to be thanked for the goods on which your life, liberty, and happiness depend. This holiday season—and from now on—don’t say grace; say justice. Thank or acknowledge the people who actually provide the goods. Some of them may be sitting right there at the table with you. And if you find yourself at a table where people insist on saying grace, politely insist on saying justice when they’re through. It’s the right thing to do.

Labels: Business and Economics, Foreign Policy and War, Philosophy, Religion, Science and Technology, The Arts

Friday, November 21, 2008

The Menace of Pragmatism: How Aversion to Principle Is Destroying America

Posted by ARC Media at 1:14 AM

Who: Dr. Tara Smith, professor of philosophy at the University of Texas and speaker for the Ayn Rand Center for Individual Rights.

What: A talk explaining the influence and the destructive nature of pragmatism in our culture. A Q&A will follow.

Where: National Press Club, 529 14th Street NW, 13th floor, Washington, DC 20045.

When: Monday, December 8, 2008, at 6:30 pm.

Admission: FREE. The public and media are invited.

Description:

Shouldn't we be pragmatic?

While Americans disagree vehemently about all manner of moral and political issues, beneath that disagreement rests the shared presumption that the way forward is always through moderation and compromise. In intellectual method—i.e., in our way of addressing problems and disagreements—Americans are united as pragmatists. Contrary to pragmatism’s image of reason and practical good sense, however, pragmatic methodology is actually self-destructive.

This talk explains what pragmatism is and the countless ways it is manifested across the cultural spectrum. It analyzes the major elements of pragmatism’s appeal as well as its fundamental errors. It also surveys the vast damage that pragmatic methods inflict, damage that is spiritual as well as material. Finally, the talk considers the most effective means of dethroning this pervasive—and destructive—mindset.

Bio: Tara Smith is a professor of philosophy at the University of Texas, where she currently holds the Anthem Foundation Fellowship for the Study of Objectivism. She is the author of the books Moral Rights and Political Freedom, Viable Values: A Study of Life as the Root and Reward of Morality, and Ayn Rand's Normative Ethics: The Virtuous Egoist, as well as numerous articles.

For more information on this talk, please e-mail media@aynrandcenter.org.

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Dr. Tara Smith is available for interviews now and after her talk.

Contact: David Holcberg
E-mail: media@aynrandcenter.org
Phone: (949) 222-6550, ext. 226

For more information on Objectivism’s unique point of view, go to ARC’s Web site. The Ayn Rand Center is a division of the Ayn Rand Institute and promotes the philosophy of Ayn Rand, author of “Atlas Shrugged” and “The Fountainhead.”

Labels: Announcements, Events, Philosophy

Thursday, November 20, 2008

Drop the SEC Investigation Against Cuban

Posted by ARC Media at 12:48 AM

Washington, D.C.—Billionaire Mark Cuban is under investigation for “insider trading” by the SEC.

“This case is a travesty,” said Alex Epstein, an analyst at the Ayn Rand Center for Individual Rights. “Cuban is accused of selling his stock in Mamma.com after the CEO told Cuban that the company would be making a new stock offering that Cuban thought was a bad idea. But there is nothing wrong with this whatsoever—unless Cuban had a contractual obligation or fiduciary duty not to act on the information. And if Cuban violated a contract, which there is no evidence of, then that is the injured party’s—the company’s—job to pursue, not the SEC’s. In all likelihood, if there is anyone who violated a contractual obligation, it is the CEO who divulged confidential, unsolicited information—not the famous billionaire recipient who just happens to make a juicy target for SEC bureaucrats thirsting for another high-profile case to justify their regulatory power.

“The question of ‘insider trading’—when employees and investors of a company can act on certain information—should be left entirely up to private contract, such as restrictions on CEOs shorting their own stock. The criminalization of ‘insider trading’ has authorized the SEC to terrorize those whose only sin was to be a savvy investor. The Mark Cubans of the world deserve to be left free to make investment decisions under a government with clear laws against force, fraud, and breach of contract—not to spend years of their lives enduring witch hunts and prisons.”

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Mr. Epstein is an analyst at the Ayn Rand Center for Individual Rights, focusing on business issues.

Mr. Epstein’s op-eds and letters to the editor have appeared in such publications as the Wall Street Journal, San Francisco Chronicle, Philadelphia Inquirer, Canada's National Post, and the Washington Times. He is also a contributing writer for The Objective Standard, a quarterly journal of culture and politics. Mr. Epstein has been a guest on numerous nationally syndicated radio programs.

Alex Epstein is available for interviews.
Contact: Larry Benson
E-mail: media@aynrandcenter.org
Phone: (949) 222-6550 ext. 213

Labels: Business and Economics, Individual Rights and Law

Tuesday, November 18, 2008

Bush Is No Champion of the Free Market

Posted by ARC Media at 8:23 PM

Washington, D.C.—In a recent speech on the financial crisis, President Bush said, “If you seek economic growth, if you seek opportunity, if you seek social justice and human dignity, the free market system is the way to go.”

According to Yaron Brook, executive director of the Ayn Rand Center for Individual Rights, “It’s true that free markets are the source of economic prosperity and individual liberty--but President Bush, while he may pay lip service to free markets, has been a consistent opponent of them.

“Did Bush abolish the countless regulations and controls strangling businessmen? No. But he did sign into law Sarbanes-Oxley--the largest expansion of business regulation in decades. Did Bush consistently push for free trade? No. But he did give us a new steel tariff. Did Bush attempt to roll back America’s massive welfare state? No. But he did pass the prescription drug benefit, the largest new entitlement program since Lyndon Johnson’s Great Society. Did Bush curtail government spending? Far from it. Bush presided over an unprecedented increase in the federal budget: from $2 trillion at the time he took office to more than $3 trillion today. This is to say nothing of Bush’s response to the financial crisis. He has completely evaded his administration’s responsibility for the Fed and housing policies that created the housing bubble. Instead, he has led the chorus blaming the market and calling for unprecedented handouts, bailouts, and nationalizations as the cure.

“If Bush is a friend of the free market, who needs enemies? By praising the free market while systematically undermining it, Bush has done more to discredit capitalism than any open critic could. Like a con artist who undercuts the reputation of Mercedes by selling lemon look-alikes, Bush has now led people to associate his failed policies with capitalism. That association needs to be erased. We must make it clear: Bush is no friend of free markets.”

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Yaron Brook is executive director of the Ayn Rand Center for Individual Rights. He is a regular contributor to Forbes.com and a contributing editor of The Objective Standard. His articles have been featured in major newspapers such as USA Today, the Houston Chronicle, the Chicago Sun-Times, the Providence Journal and the Orange County Register. Dr. Brook is often interviewed on radio and is a frequent guest on a variety of national TV shows, having appeared in the new Fox Business Network, FOX News Channel, CNN, CNBC, and C-SPAN. Dr. Brook, a former finance professor, lectures on Objectivism, capitalism, business and foreign policy at college campuses, community groups and corporations across America and throughout the world.

To interview Dr. Brook or book him for your show, please contact Larry Benson:
949-222-6550, ext. 213
media@aynrandcenter.org

Labels: Business and Economics, Individual Rights and Law

Friday, November 14, 2008

Stop Blaming Capitalism for Government Failures by Yaron Brook and Don Watkins

Posted by ARC Media at 6:51 AM

Speaking of the financial crisis, French president Nicolas Sarkozy recently said, “Laissez-faire is finished. The all-powerful market that always knows best is finished.”

Sarkozy was echoing the views of many, including president-elect Obama, who assume that the financial crisis was caused by free markets—by “unbridled greed” unleashed by decades of deregulation and a “hands off” approach to the economy. And given this premise, the solution, they say, is obvious. To solve this crisis and prevent another one, we need a heavy dose of Uncle Sam’s elixir: government intervention. Whether it’s more bailouts, stricter regulation, a new round of nationalizations, or some other scheme, the only question since day one has been how, not whether, government is going to intervene.

And the issue is wider than the financial crisis. Millions of Americans don’t have health insurance? Well, says Obama, that’s because we’ve left the health-care system to the free market. The solution: a complete government takeover of medicine. A few companies engaged in accounting fraud? It must be because we didn’t impose enough regulations on businessmen. The solution: rein in corporations with Sarbanes-Oxley.

But while capitalism may be a convenient scapegoat, it did not cause any of these problems. Indeed, whatever one wishes to call the unruly mixture of freedom and government controls that made up our economic and political system during the last three decades, one cannot call it capitalism.

Take a step back. In the lead up to the “Reagan Revolution,” the explosive growth of government during the ’60s and ’70s had left the American economy in disarray. A crushing tax burden, runaway inflation, brutal unemployment, and economic stagnation had Americans looking for an alternative. That’s what Reagan offered, denouncing big government and promising a new “morning in America.”

Under Reagan, some taxes were reduced, inflation was subdued, a few regulations were relaxed—and the economy roared back to life. But while markets were able to function to a greater degree than in the immediate past, the regulatory and welfare state remained largely untouched, with government spending continuing to increase, as well as some taxes. Later administrations were even worse. Bush Jr., often laughably called a champion of free markets, presided over massive new governmental controls like Sarbanes-Oxley and massive new welfare programs like the prescription drug benefit.

None of this is consistent with capitalism. As the economic system that fully recognizes and protects individual rights, including the right to private property, capitalism means, in Ayn Rand’s words, “the abolition of any and all forms of government intervention in production and trade, the separation of State and Economics, in the same way and for the same reasons as the separation of Church and State.” Laissez-faire means laissez-faire: no welfare state entitlements, no Federal Reserve monetary manipulation, no regulatory bullying, no controls, no government interference in the economy. The government’s job under capitalism is single but crucial: to protect individual rights from violation by force or fraud.

America came closest to this system in the latter half of the nineteenth century. The result was an unprecedented explosion of wealth creation and consequent rise in the standard of living. Even now, when the fading remnants of capitalism are badly crippled by endless controls, we see that the freest countries—those which retain the most capitalist elements—have the highest standard of living.

Why then should capitalism take the blame today—when capitalism doesn’t even exist? Consider the current crisis. The causes are complex, but the driving force is clearly government intervention: the Fed keeping interest rates below the rate of inflation, thus encouraging people to borrow and providing the impetus for a housing bubble; the Community Reinvestment Act, which forces banks to lend money to low-income and poor-credit households; the creation of Fannie Mae and Freddie Mac with government-guaranteed debt leading to artificially low mortgage rates and the illusion that the financial instruments created by bundling them are low risk; government-licensed rating agencies, which gave AAA ratings to mortgage-backed securities, creating a false sense of confidence; deposit insurance and the “too big to fail” doctrine, whose bailout promises have created huge distortions in incentives and risk-taking throughout the financial system; and so on. In the face of this long list, who can say with a straight face that the housing and financial markets were frontiers of “cowboy capitalism”?

This is just the latest example of a pattern that has been going on since the rise of capitalism: capitalism is blamed for the ills of government intervention—and then even more government intervention is proposed as the cure. The Great Depression? Despite massive evidence that the Federal Reserve’s and other government policies were responsible for the crash and the inability of the economy to recover, it was laissez-faire that was blamed. Consequently, in the aftermath, the government’s power over the economy was not curtailed but dramatically expanded. Or what about the energy crisis of the 1970s? Despite compelling evidence that it was brought on by monetary inflation exacerbated by the abandonment of the remnants of the gold standard, and made worse by prices controls, “greedy” oil companies were blamed. The prescribed “solution” was for the government to exert even more control.

It’s time to stop blaming capitalism for the sins of government intervention, and give true laissez-faire a chance. Now that would be a change we could we believe in.

Yaron Brook is the president of the Ayn Rand Center for Individual Rights. Don Watkins is a writer at the Ayn Rand Center. The Ayn Rand Center is a division of the Ayn Rand Institute and promotes the philosophy of Ayn Rand, author of Atlas Shrugged and The Fountainhead.

Labels: Business and Economics, Individual Rights and Law

Special Edition of G. Gordon Liddy Show on Ayn Rand

Posted by ARC Media at 6:41 AM

RadioAmerica’s G. GORDON LIDDY is devoting a SPECIAL BROADCAST of his nationally syndicated three-hour talk radio show to Ayn Rand, her philosophy, and understanding the current state of events through the lens of Objectivism.

The broadcast will air live on Monday, November 17, 2008, beginning at 10 a.m., Eastern Standard Time.

The Ayn Rand Center’s Yaron Brook, Onkar Ghate, Elan Journo, Thomas Bowden and Eric Daniels will be the exclusive guests for this extended broadcast. They will discuss the financial crisis, Bush’s claimed defense of capitalism, today’s challenges to free speech, and the situations in Iraq and Afghanistan, among other topics.

The broadcast will air on 200 radio stations across the country as well as on XM satellite radio (on a delayed basis). Live streaming audio will be available on http://www.radioamerica.org/ or at http://www.radioamerica.org/PRG_ggordonliddy.htm.

G. Gordon Liddy encourages call-in questions from listeners across the country.

Labels: Announcements, Ayn Rand and Objectivism

Monday, November 10, 2008

Financial Trauma: Causes and Possible Cures

Posted by TOS Admin at 10:20 PM

What: A Lecture followed by Q & A

Who: Mr. John Allison, President and CEO of BB&T Corporation

When: November 19, 2008, 3:30 PM, Griffith Theatre, at the Bryan Center, Duke University (Directions)

The event is FREE and open to the public.

As the world struggles with the current financial crisis, we should listen to the executives of successful financial institutions. BB&T is such an institution.

Mr. Allison will outline the causes of today’s financial chaos, including the errors that led to the crisis. He will discuss the broader implications for the economy, including the effects on the housing and mortgage industries, and offer economic and political suggestions for both short-term and long-term cures.

John A. Allison became CEO of BB&T on July 7, 1989. At the end of 1989, BB&T was ranked 96th largest bank in the nation with $4.8 billion in assets. After 60 bank and thrift acquisitions, and the implementation of innovative training and measurement programs, the former eastern North Carolina farm bank has grown to become the nation’s 14th largest financial holding company. Assets have increased from $4.8 billion, when Allison began his tenure as CEO, to $137 billion today.

Sponsor: The Program on Values and Ethics in the Marketplace, Duke University

Contact: John Lewis, john.d.lewis@duke.edu

Labels: Announcements, Business and Economics, Events

Thursday, November 06, 2008

The Left and the Right vs. Free Speech

Posted by ARC Media at 10:52 PM

Washington, D.C.—Calling for a return of the Fairness Doctrine, Senator Chuck Schumer noted that some of the same people who oppose such “equal time” mandates support restrictions on broadcasting they deem offensive. According to Don Watkins, a writer for the Ayn Rand Center for Individual Rights, “Schumer’s comments highlight an ominous fact: that both the left and the right are opponents of free speech.

“Conservatives have long supported the FCC’s war on so-called indecency, arguing that broadcasters should not have the right to engage in ‘offensive’ speech. The liberals, meanwhile, have been eagerly trying to resurrect the so-called Fairness Doctrine, which would allow the government to dictate which ideas deserve how much airtime, and lead many radio stations to avoid discussing controversial issues altogether.

“In fact, this is a disagreement without a difference: both sides endorse the principle that the government should be dictating what Americans can and can’t say—they just want to use the censor’s pen to support their own political agendas.

“Whoever values free speech should oppose government regulation of the airwaves. Freedom of speech is the freedom of every American to say whatever he wants, regardless of how offensive others find it, through any medium he can rightfully access. There seem to be no such defenders among liberals or conservatives--and that is truly offensive.”

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Don Watkins and other Ayn Rand Center experts are available for interviews on this topic.

Contact: Larry Benson
E-mail: media@aynrandcenter.org
Phone: (949) 222-6550, ext. 213

For more information on Objectivism’s unique point of view, go to ARC’s Web site. The Ayn Rand Center promotes the philosophy of Ayn Rand, author of Atlas Shrugged and The Fountainhead.

Labels: Individual Rights and Law

Wednesday, November 05, 2008

National Surveys Show Atlas Shrugged Is Widely Read

Posted by ARC Media at 8:45 PM

Washington, D.C.—For the second year in a row, a question included in a Zogby International omnibus telephone survey of American adults indicated that 8.1 percent of respondents have read Ayn Rand’s novel Atlas Shrugged. The surveys conducted in October 2007 and again in October 2008 indicated that more than 17 percent of U.S. college graduates have read the novel. That is a remarkable number for a serious, intellectual novel of more than 1100 pages whose theme is the role of the mind in man’s existence.

Sales of Atlas Shrugged since its publication have reached a total of 6,500,000, with a record annual sale of 180,000 copies in 2007—the 50th anniversary year of the novel. The numbers indicated in the Zogby surveys implies three or more readers of each copy sold.

These millions of readers of Atlas Shrugged must recognize recent political and economic events as a disconcerting echo of scenes from the novel. The novel records a future society gradually collapsing from the cumulative effect of ever-increasing government intervention in the economy and in the individual lives of citizens—with catastrophic consequences. Each step in the disintegration of society becomes a justification for further government intervention and suppression of freedom until the economy is abandoned by its few remaining productive citizens.

In her 1964 lecture “Is Atlas Shrugging?” Ayn Rand described writing Atlas Shrugged “with a brief rule I had set for myself: The purpose of this book is to prevent itself from becoming prophetic.” The commitment of the Ayn Rand Center is to serve that purpose in two ways, by insuring an ever-increasing readership for Atlas Shrugged, and by the application of her ideas as the best antidote to contemporary economic folly and threats to individual rights.

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Ayn Rand Center experts are available for interviews on this topic.

Contact:
Larry Benson
949-222-6550, ext. 213
media@aynrandcenter.org

Labels: Ayn Rand and Objectivism, Business and Economics, Individual Rights and Law, The Arts

End the FCC’s War on Free Speech

Posted by ARC Media at 11:36 AM

Washington, D.C.—On November 4, the Supreme Court heard arguments in Federal Communications Commission v. Fox Television Stations. At issue is whether the FCC can declare “fleeting expletives” indecent and fine broadcasters for violations.

“The government should put an end to the non-objective ‘indecency’ laws that permit the FCC to dictate what Americans can say and hear on the airwaves,” said Don Watkins, a writer for the Ayn Rand Center for Individual Rights.

“The Supreme Court has defined ‘indecency’ as speech that ‘depicts or describes sexual or excretory activities and organs in terms patently offensive as measured by contemporary community standards.’ But which Americans count—and don’t count—as part of the community? Why are they king? And how are broadcasters to divine the community’s supposedly shared standards?

“As the history of the government’s anti-indecency regime has shown, these questions are unanswerable. The only way for broadcasters to play it safe is to engage in self-censorship, cutting any material regulators might declare indecent.

“And once the government becomes the enforcer of ‘community standards,’ no speech is safe. How long until the courts start rubber-stamping the Bible Belt’s efforts to suppress the theory of evolution on the grounds that it is offensive, corrupts young minds, and undermines community values?

“It’s time for the government to stop telling Americans what we can say and hear on the airwaves, and to protect our constitutionally guaranteed right to free speech.”

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Don Watkins and other Ayn Rand Center experts are available for interviews on this topic.

Contact: Larry Benson
E-mail: media@aynrandcenter.org
Phone: (949) 222-6550, ext. 213

For more information on Objectivism’s unique point of view, go to ARC’s Web site. The Ayn Rand Center promotes the philosophy of Ayn Rand, author of Atlas Shrugged and The Fountainhead.

Labels: Individual Rights and Law

The Maestro vs. the Market by Alex Epstein and Yaron Brook

Posted by ARC Media at 9:16 AM

Alan Greenspan claims that the free market failed to prevent the financial crisis, and that he is “shocked” that his professed “free-market ideology” turned out to contain a “flaw.”

But why should we take him seriously? Greenspan, while once associated with laissez-faire philosopher Ayn Rand, hasn’t advocated genuinely free markets for decades. Remember, this is a man who for two decades reveled in being, as the New York Times put it, “the infallible maestro of the financial system.”

Free markets don’t have “infallible maestros”; they liberate us from such “maestros”—the central planners who have time and again falsely claimed the ability and the right to orchestrate millions of economic lives. Free markets enable each of us to be our own maestro, conducting our own affairs, producing and trading as we judge best, and taking responsibility for the consequences when we fail.

Alan Greenspan’s entire tenure at the Federal Reserve was one devoted to distorting market outcomes in the pervasively controlled financial markets, including the mortgage market. The Fed by its nature wields enormous power over the market as it dictates the money supply and interest rates, which in turn determine lending, borrowing, and bank leverage throughout the economy. Early in Greenspan’s tenure, some expected the onetime opponent of the Fed and supporter of a gold standard to minimize the Fed’s distortion of markets. Instead, Greenspan became our Manipulator-in-Chief, repeatedly inflating the money supply and artificially lowering interest rates to allegedly magnify prosperity. Further, he voiced no substantial opposition to related market-distorters such as Fannie Mae and Freddie Mac (which incentivized lenders to make trillions in loans that they wouldn’t have made on a free market) and the cartel of government-supported rating agencies (whose absurd models gave AAA ratings to mortgage-backed securities).

Thus, when Greenspan speaks, he does so not as the voice of a (non-existent) free market in finance and housing, but as the voice of government central-planning—a voice with every incentive to blame the market rather than the Fed’s market-distorting policies.

It is certainly not the voice of the Alan Greenspan who denounced the Fed and defended the gold standard in Ayn Rand’s 1960s compendium Capitalism: The Unknown Ideal. That Alan Greenspan understood what free markets are, and explained how they encourage rational, self-interested behavior, so long as individuals were responsible for their own risks. He also explained how government handouts and bailouts reward irrational, destructive behavior. For example, when the government inflates the money supply and manipulates interest rates, it gives financial institutions new currency not backed by real assets, currency that gets funneled into certain sectors of the economy (such as dot-com stocks or houses), and creates artificial booms followed by catastrophic busts. Observe Greenspan’s 1966 analysis of the boom preceding the 1929 crash: “The excess credit which the Fed pumped into the economy spilled over into the stock market—triggering a fantastic speculative boom.” Sound familiar? What would that Greenspan identify as the cause of the speculative housing boom at the center of today’s crisis—the market or the maestro?

Greenspan is entitled to change his mind, of course; but it is intellectually dishonest to pretend that the market he manipulated for 20 years was genuinely free. And those questioning Greenspan’s actions as Fed chief should not be asking him what he didn’t do to prevent the financial crisis; they should be asking what he did do to cause the crisis by using his enormous power to reward irrational behavior. They should ask him how he can deny that his inflationary printing press, along with the housing welfare state, created the false promise of ever-increasing home values that was at the root of all the market irrationality—from “flipping” houses endlessly for fun and profit to interest-only “liar loans” for poor people to Wall Street’s slicing, dicing, and gambling on dubious mortgage contracts.

If anyone wants to understand the free-market explanation of financial crises, they should read Ayn Rand, or Ludwig von Mises, or even Alan Greenspan of 42 years ago. But to listen to today’s Alan Greenspan talk about free markets is like listening to a Chinese censor talk about free speech.

Nothing good can come, intellectually or politically, from blaming our problems on something that didn’t exist—whether the mythical free market of the housing boom or Greenspan’s mythical free-market ideology. Americans need to understand Greenspan’s true nature as the bureaucrat manipulating the market so that we can investigate the government controls that are the real cause of the present mess, and save ourselves from disasters caused by an even less free market in the future.

Alex Epstein is an analyst at the Ayn Rand Center for Individual Rights (ARC). Yaron Brook, Ph.D., finance, is president of ARC. The Ayn Rand Center is a division of the Ayn Rand Institute and promotes the philosophy of Ayn Rand, author of Atlas Shrugged and The Fountainhead.

Labels: Business and Economics, Individual Rights and Law

Monday, November 03, 2008

Supreme Disappointments by Thomas A. Bowden

Posted by ARC Media at 10:23 PM

No matter who wins the presidency—and with it, the power to appoint Supreme Court justices—America’s judiciary will remain locked into a crucial error that corrupts their interpretation of America’s bedrock constitutional principle: individual rights. That error consists in regarding rights as gifts from society, with judges as diviners of the so-called social will.

The most fundamental question a Supreme Court justice must answer is what in fact do the individual’s rights to life, liberty, property, and happiness include? Only then can he determine if a certain law or government action is securing or violating those rights. But no justice asks this question anymore because none believes it objectively answerable.

Instead, and broadly speaking, judicial conservatives ask what privileges did American society at the time of ratification grant the individual. So when modern legislators make criminal offenses out of abortion, contraception, homosexuality, and other acts said to be frowned upon centuries ago, conservative judges feel duty-bound to stand aside and do nothing. To conservatives, it’s meaningless to ask whether the right to liberty in fact includes the right to use contraception (a question 18th-century Americans may have answered incorrectly). The only question is whether society at that time meant to permit this action.

John McCain has pledged to appoint judges in this conservative mold.

Judicial liberals reject this worship of bygone days. Instead, liberals see constitutional values evolving like a motion picture, constantly updating to reflect current social mores. So when Congress declares federal dominion over every nut, bolt, and button of American industry, liberal judges feel duty-bound to stand aside and do nothing—not because earlier Americans intended to allow such controls, but because modern Americans want them. To liberals, it’s meaningless to ask whether the right to liberty in fact includes freedom of trade and contract (a question that a majority of Americans may be answering incorrectly today). The only question is whether the “will” of today’s society favors permitting such actions.

Barack Obama has pledged to appoint judges in this liberal mold.

But conservatives and liberals are both wrong about rights. It cannot be true that rights come from society. The very concept of a right identifies the actions you can take without anyone’s permission. Rights are not social privileges but objective facts, identifying the freedoms we need to live our lives—whether a majority in society agree or not. This is why the Founding Fathers dedicated their new government to the protection of each individual’s already-existing rights to life, liberty, and the pursuit of happiness.

Thus, the Fifth and Fourteenth amendments forbid the government to deprive you of “life, liberty, or property” (except when you have violated someone else’s rights, and even here the government must follow due process, such as holding a trial). The Ninth Amendment safeguards all “rights” not listed elsewhere. These principles encompass all the innumerable actions required for your survival and happiness over a lifetime—the right to make a contract, earn a profit, build a house, make a friend, speak your mind, and so on.

Because the Constitution is the “supreme Law of the Land,” judges are duty-bound to strike down statutes that violate rights. This is not improper “judicial activism” but the robust, constitutional power of judicial review.

Judges must never bow to social opinion, historical or current, when exercising judicial review. For example, laws that institutionalized government discrimination against blacks in military service and voting deserved to be struck down, even if political majorities in both the Founders’ generation and modern times favored such rights violations.

To their discredit, today’s judges—conservatives and liberals alike—have all but abandoned this essential safeguard of our liberties.

The arch-conservative Robert Bork once declared that Ninth Amendment “rights” carry no more meaning than an accidental inkblot on the constitutional parchment. And according to Justice Antonin Scalia, there’s nothing in the Constitution “authorizing judges to identify what [those rights] might be, and to enforce the judges’ list against laws duly enacted by the people.” As for life, liberty, and property, government can smash them at will, if society so wishes. “Does [the Constitution] guarantee life, liberty or property?” asks Justice Scalia rhetorically. “No, indeed! All three can be taken away. . . . It’s a procedural guarantee.”

Judicial liberals don’t dispute that a judge must bow to the “social will”—they simply divine it differently. As one liberal Justice declared, the Constitution “must draw its meaning from the evolving standards of decency that mark the progress of a maturing society.”

While conservatives and liberals squabble about whether society permits you this action or that, they are defaulting on their sacred constitutional duty of judicial review.

America desperately needs a new generation of judges who understand that their function is not to uphold social opinions but to protect our rights.

Thomas A. Bowden is an analyst at the Ayn Rand Center for Individual Rights. Mr. Bowden is a former lawyer and law school instructor who practiced for twenty years in Baltimore, Maryland. The Ayn Rand Center is a division of the Ayn Rand Institute and promotes the philosophy of Ayn Rand, author of Atlas Shrugged and The Fountainhead.

Labels: Individual Rights and Law

Saturday, November 01, 2008

Let Them Fail by Amit Ghate

Posted by ARC Media at 11:33 AM

Everywhere today politicians are blaring that they must save America’s financial institutions, alleging catastrophic risk to the economy were any to fail. Paulson and the entire Bush administration, in a discernible panic, are now pouring $700 billion into the big banks, having already bailed out AIG, Fannie Mae, Freddie Mac, and Bear Stearns to the tune of $300 billion.

Capitalism doesn’t work, they declare, but fortunately the government is here to rescue us.

Sadly, they have it all backwards. The credit crisis is just more evidence that whenever the government supplants the free market and attempts to “manage,” i.e., control, the economy—disaster ensues.

Overlooked here is that in a free market business failures are not just normal, they’re crucial for the best products and ideas to emerge. Most restaurants fail in their first three years because customers have other preferences. Many mom-and-pop grocers go out of business because Walmart offers better selection and lower prices. Even whole industries—think typewriters, 8-tracks and horses and buggies—vanish because new inventions and competitors arise.

None of these failures are a problem, nor do they threaten the system. On the contrary, they are an inherent part of the progress which only capitalism makes possible.

So why would failures in the financial industry be any different?

Typically, the answer given is also the one used to rationalize the creation of the Federal Reserve, the FDIC, the FSLIC and any number of other government agencies and regulations intended to “manage” the banking system: financial firms carry systemic risks for the nation’s economy and therefore can’t be allowed to fail. As evidence, bank failures from 1870 to 1913 (pre-Fed) are cited, followed by the assertion that their number was simply “unacceptable.”

But every business forms part of the economic system and thus has “systemic” impact. If Microsoft were to fail, thousands of suppliers, customers, and workers would be affected, as would their customers, suppliers, workers, etc. Yet this would be no reason to bail them out. We know that new businesses would arise to fill the void, better for having learned from Microsoft’s mistakes.

And as a historical fact, the U.S. economy during the period 1870 to 1913 grew significantly faster than it did after the Fed was established. True, there were many bank failures in this period, but there were also many business failures in general: banks were actually less likely to fail than were other businesses. The number of bank failures speaks to the dynamism of the period, not to anything fragile in the financial system. Precisely because market mechanisms were permitted to work, depositors, creditors and counterparties all kept a close eye on banks, monitoring leverage and withdrawing funds at the first sign of problems.

When the free market functions—and failure is allowed—people become viscerally aware of risk, with the result that they voluntarily assume less of it.

Conversely, when the government tries to “manage” the economy—when the consequences of risky behavior are shifted from self-interested actors to taxpayers, as was done by the creation of the Fed and its various insurance programs, or when weak financial firms are propped up rather than being allowed to fail—people take on risks they would not otherwise. Banks are less careful, depositors no longer evaluate their institutions, and risks are concealed and amplified until they become catastrophic.

So pre-Fed we had runs on banks, some undoubtedly severe—but with the Fed we’ve had the Great Depression, the S&L meltdown and now perhaps the greatest worldwide credit crisis ever.

An analogy may be helpful here. Historically certain types of forests naturally experienced frequent, but small, wildfires. Because their frequency kept deadwood at a minimum, the fires never grew into large conflagrations. However, when government forestry services instituted fire suppression policies, they eliminated most small fires, but caused deadwood and other fuel to accumulate. When at last a fire came that could not be suppressed, it grew into a devastating inferno.

Learning from their errors, forestry services have abandoned fire suppression policies.

It’s time for our government to do likewise. First, by immediately abandoning its bailout binge, and then by phasing out all of the economic controls by which it attempts to “manage” the financial system—from the FDIC to the Federal Reserve itself. Nothing less can reestablish the freedom essential for a sound and vibrant economy.

Amit Ghate is a guest writer for the Ayn Rand Center for Individual Rights. The Ayn Rand Center is a division of the Ayn Rand Institute and promotes the philosophy of Ayn Rand, author of Atlas Shrugged and The Fountainhead.

Labels: Business and Economics, Individual Rights and Law