I have made the case on numerous occasions that the Global Financial Crisis was not a “failure of capitalism” or “free markets”. I’m reading a great little book called Shakedown Socialism by Russian emigre Oleg Atbashian which I think sums it up very nicely, I hope Mr. Atbashian does not mind that I plan to post some choice excerpts from his excellent book here.
What can go wrong when self-righteous campaigners for economic equality in the government order the banks to issue risky loans to the poor? Only a ripple effect. The demand goes up, real estate prices rise, chances of repaying the loans get slimmer, the government further pressures the banks to turn a blind eye, the banks begin to repackage bad loans, the bubble bursts, the banks collapse, a recession ensues, borrowers lose jobs and can’t afford payments, and the financial system goes down.
In the worldwide crisis that follows, countless poor people overseas, who will never own a house, become even poorer than they were before the US government decided to enforce “economic equality and justice”.
Predictably, the fiasco is blamed on capitalist greed and selfishness.
The word selfishness is a trademarked fighting word, synonymous with immorality. Leftist ideologes liberally use it to club defenders of capitalism over the their ruggedly individualistic heads.
However, the same ideologues never decry selfishness when it is practiced by a group – either assuming selfishness by definition cannot be collective, or that by being collective, selfishness gets an upgrade to a higher moral status, as if things perpetrated in the name of the many cannot be immoral.
What this book does a great job at, is examining the faulty premise of “forced equality”, which is the theoretical endgame of collectivism. Since achievement is unequal, rewards and material circumstances will naturally become unequal as well. When a group tries to force equal distribution they by definition end up redistributing wealth from those who earned it (a.k.a “the selfish”) to those who didn’t (a.k.a “the needy”).
But what exactly is “selfishness?
A moral strength that motivates one to succeed in life through one’s own effort and self-improvement can be described as selfishness. But the collectivists make no distinction between an individual’s rational constructive pursuit of self-interest – and the irrational, destructive selfishness that drives one to sacrifice other people’s lives or property for one’s own personal gain or to become a leech on society. The two kinds are worlds apart – and yet they are often lumped together, especially when the purpose is discrediting successful people and their businesses.
What happens frequently is irrational, destructive self-interest becomes synonymous with “free markets” and is held up as an example of why “capitalism fails”, while a truly free market, free from coercion and manipulation in the interests of “economic equality” would have preempted a given injustice from occurring.
The housing bubble once again being a case-in-point, where the laws of economics (allowing interest rates to find their market rates) and prudent capitalism (some loan sanity) were suspended in the interests of getting disadvantaged Americans into “home ownership”.
Great book. I recommend it to all.