Controls breed controls - part 2 — VOICES for REASONVOICES for REASON

In my previous post I described how controls breed controls: when politicians intervene in the economy, they create distortions and problems which, unless corrected by rescinding the controls, necessitate further controls–a process ultimately resulting in total control by the government over the economy. We can see this process at work in the two domestic issues that have dominated headlines over the last year: the debate over health care and the financial crisis.

In both cases, the conventional wisdom has been that the free market created problems only government intervention can solve. In both cases, the conventional wisdom is wrong: it was government controls that created the problems.

In his push to radically expand government control over medicine, President Obama has portrayed the many real problems in America’s medical system as the result of too much freedom in health care. As my colleague Jeff Scialabba has pointed out in a terrific series of posts, that is a joke. From perverse regulations and tax incentives to Medicare, Medicaid, and SCHIP to a laundry list of insurance mandates that drive up the cost of insurance, decades of government intrusion into American medicine are responsible for today’s health care quagmire. Absent these interventions, there would be no health care crisis.

Same for the financial crisis. Since last September, government control over markets has increased in ways that would have been unimaginable a couple years ago–and this trend shows no signs of abating. All of it stems from the view that the free market unleashed all sorts of destructive activities, which government must correct. But, once again, this so-called free market was anything but free. As ARC’s Alex Epstein observed:

Obama’s core explanation of all the destructive behavior leading up to today’s crisis is that the market was too free. But the market that led to today’s crisis was systematically manipulated by government. Fact: this decade saw drastic attempts by the government to control the housing and financial markets–via a Federal Reserve that cut interest rates to all-time lows, and via a gigantic increase in Fannie Mae and Freddie Mac’s size and influence. Fact: through these entities, the government sought to “stimulate the economy” and promote homeownership (sound familiar?) by artificially extending cheap credit to home-buyers. Fact: most of the (very few) economists who actually predicted the financial crisis blame Fed policy or housing policy for inflating a bubble that was bound to collapse.

(I’ve only scratched the surface of government’s role in these realms. Our website has extensive commentary on both health care and the financial crisis.)

Part of the reason people would be shocked by Ayn Rand’s view that “[t]here can be no compromise between freedom and government controls” is because they think the free market has to be curtailed, or else will produce disasters like we face today in the  health care and financial industries. But actually it is government intervention that creates those kinds of disasters.

Far from refuting Rand’s claim, these disasters are powerful testaments to her warning that “to accept ‘just a few controls’ is to surrender the principle of inalienable individual rights and to substitute for it the principle of the government’s unlimited, arbitrary power, thus delivering oneself into gradual enslavement.”

Image: Wikimedia Commons