Can a truly free market save the American economy?
In the late-1990s and early 2000s, I worked for a financial news website called America-Invest.com. The now-defunct dot com covered the economy and financial markets the way many sites do these days. Our business model and general framework most resembled that of TheStreet.com.
One of my editorial columns there was titled “The Radical Capitalist.” It was my take on the world through the eyes of a proponent of unfettered, laissez-faire capitalism advocated by economic and philosophic giants such as Ayn Rand, Ludwig von Mises, Murray Rothbard, Frédéric Bastiat, Henry Hazlitt, Carl Menger and of course, Friedrich Hayek.
Today, I’m donning my Radical Capitalist hat and responding to the current backlash against capitalism coming from our presidential candidates, the film industry and mainstream media sources such as Time magazine.
Starting with the presidential candidates, we all know that criticizing the current state of economic affairs is in vogue on the campaign trail. Hillary Clinton wants to make sure she punishes the rich via higher taxes, and she wants to basically shutdown industries she deems as unfit for existence, such as the coal industry.
Meanwhile, Donald Trump wants to punish companies that choose to leave the country based on sound economic reasoning such as high taxes, intense regulations and high labor costs. Then Trump also wants to erect virtual (and literal) walls with other countries, including the job-killing, economy-killing levy of tariffs on goods from countries such as China.
Then we have socialism’s most avuncular spokesman, Sen. Bernie Sanders. He wants the U.S. to look like a European socialist country, complete with bloodletting tax rates and rules governing myriad industries in the name of economic equality for all.
Not one of these candidates has preached what I see as the real answer to America’s economic malaise, and that is to unshackle the American taxpayer, the American entrepreneur and the American corporation from the current high-tax, high-regulation chains.
We need more freedom, not more tariffs, more taxes, more regulation and more of the federal leviathan encroaching on our commercial lives.
On the film front, we have the latest Hollywood hit piece on Wall Street, Money Monster, starring George Clooney. Now I haven’t seen this film, and I probably won’t until it comes around to Netflix or premium cable. Yet just reading the synopsis of the film I can tell it won’t paint Wall Street in a positive light.
Then there’s the newest edition of Time magazine, where the cover story promises to save us all from, “American Capitalism’s Great Crisis.”
The premise here is that “financialization,” a term for the trend by which Wall Street and its methods have come to reign supreme in America, is wreaking havoc on the economy, and leading to such negative consequences as:
“…the rise of debt-fueled speculation over productive lending; to the ascendancy of shareholder value as the sole model for corporate governance; to the proliferation of risky, selfish thinking in both the private and public sectors; to the increasing political power of financiers and the CEOs they enrich; to the way in which a ‘markets know best’ ideology remains the status quo.”
Now, there is a lot to unpack here, and a full vetting of this article is beyond the scope of this article. Yet I will say that the issues associated with financialization are largely the consequence of too much federal government meddling in the financial markets.
This includes too much overreach from rules such as Dodd-Frank, too much support for ailing Wall Street banks in the form of too-big-too-fail taxpayer bailouts, and the presence of much too much easy money from the Federal Reserve, which skews the natural risk tolerance of banks, financial institutions and corporations.
Sadly, not once in the Time article was there a mention of an actual embrace of laissez-faire economic principles as a solution to what the author sees as a broken financial system.
Instead, there are more calls for tax reforms to reduce inequality, a more direct role for government in job creation, and using the power of government to better realign Wall Street’s interest with that of the broader economy.
I agree that Wall Street’s interests should be aligned with the broader economy. Yet the only way to do that is to let banks thrive or fail on their own, without the moral hazard of big government bailouts.
Stated differently, the only real way to make Wall Street work for America is to let Wall Street do what it was intended to do in the first place: Raise capital and invest it in job-creating ventures, create wealth and real prosperity for all.
I say let’s give that free-market approach a try first before trying to punish industries for reacting to problems created by government in the first place.