I'm at my second IHS seminar for the year, Scholarship and a Free Society. It's a wonderful experience. I can't recommend it highly enough to those who are interested in classical liberal ideas. There are very few places in the world where you can gather with other like-minded professionals and talk about a whole range of topics. In addition, it gives you access to some of the best minds in the profession and great starting points for research.
In fact, it gave me the inspiration for this blog post. I'm punching a bit above my weight here because my background is in social work not global justice (and certainly not banking). However, I've happened across two arguments from my Occupy-minded friends on the left that misconstrue where libertarians and classical liberals would fall on vital issues related to the market.
1) Icelandic financial crisis. In 2008, Iceland went bankrupt as part of the global financial crisis. The reckless actions of their banks prior to that (their GDP to debt ratio was at nearly 900%) made them one of the first dominoes to fall. Libertarians may disagree with the decision to nationalize all the banks, and I will claim incompetence in arguing that point. However, what libertarians celebrated was the Icelandic people's refusal to pay back the loans that were made to those banks. By referendum, the public decided that it would not be held liable (to the tune of ~100/month per person for the next 15 years) for the idiotic decisions of their major banks. Loans are made with risk built in--hence, interest rates! After a short and hectic period of readjustment, their economy is now the fastest growing in Europe.
2) Global debt forgiveness. In my last IHS seminar, I was amazed at how a libertarian perspective on global justice and debt made a bunch of classical liberals sound like Occupy wall street acolytes. A conversation arose about how to deal with debt that was incurred by a despot of a poor nation. Are the international banking powers who provided those loans allowed to recoup their losses on the backs of the citizens of that country who, in this case, deposed their evil autocrat? The universal response was hell no! Loans involve risk, and when banks loan to despots in poor countries, they assume the risk that they might be deposed and a new government may not honor those commitments (as the person who made them is dead or in exile). In addition, it is against the interests of justice to make those loans in the first place. If you want to help poor people in poor nations, you trade with them, eliminate subsidies in your home country, and buy as much of their stuff as you possibly can. You don't give lots of money to despots who then seem like benevolent dictators who hand out pittances to their subjects while squirreling away most of the loot for themselves. That is the objection to foreign aid that libertarians make. It supports despots. So, even if you were for some reason disposed to help out these banks who made loans on the assumption they would be paid back by a poor nation, you can't square that with any sense of morality to helping those in need. Yoking their fate to debts made by long-deposed tyrants who impose their will at gunpoint is anathema to libertarianism, respect for free markets, and the importance of contracts.
In both of these examples, the main takeaway is that libertarians believe in a system of gains and losses in the market. When an actor can privatize gains and socialize losses, he is a crony capitalist and the institutions that support him are unjust and should be overthrown. It is a false caricature of libertarian and free-market ideology to assume that we would side with bankers making loans. We don't. We side with the people who rise up and say they are not liable for contracts made by someone else. That's why libertarians were against the bailouts of the financial sector and automotive sector. If you want to help homeowners or autoworkers, I don't agree with that but there are better ways to do it than eliminating the losses made by those in charge, keeping them in their high-paying jobs, and proving to them that they are not responsible for their actions because the government will make sure they never suffer the losses of making mistakes.
Occupy people, we have a lot of common ground here. We may disagree on the constitution of justice, but you will find a lot in free-market thought that you can agree with. You will also find many people on this side willing to engage you in debate, argument, and conversation. We're here. Come talk with us!
-rule of law, enforcement of contracts
-profit and loss
-public choice, monies interests, mercantilists, elites
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