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Economic Meltdown, Only Entrepreneurs Can Save Us

Economics / Recession 2008 - 2010 May 19, 2010 - 04:31 AM GMT

By: LewRockwell

Economics

Best Financial Markets Analysis ArticleJim Davies writes: As the absurd machinery of government staggers daily towards total breakdown, to be "rescued" however temporarily by this or that stimulus of printed money, I'm hearing the view that the end is near, that freedom is just around the corner, that the collapse of the statist paradigm is almost upon us. Please, not so fast!


I see two errors in this kind of wishful thinking: firstly it seriously underestimates the ability of government to continue in existence for long after its alleged utility has clearly ended, and secondly it assumes without a shred of proof that if and when it does fold, a free society will take its place. If such a collapse is in our future there isn't much anyone can do to stop it, but at least freedom-seekers can avoid those errors and prepare accordingly.

First, then, will it soon happen? – quite possibly it will, but I don't think so. Here's why.

The present fiasco is very mild, compared with others that governments have already shown they can survive. Example #1: the "Great Depression." It was caused by government from start to finish, first by printing money in the 1920s, then by furiously but irrationally interfering in the 1930s to "fix" the problems it had caused, so preventing market mechanisms doing that job in quite short order. What would have been a two-year problem lasted seventeen (1929–1946) and ended only when government spending was slashed, following a murderous 4-year war. During those 17 years Americans suffered privations we have not even begun to experience in the present recession; double-digit unemployment not cushioned by welfare, confiscation of gold, starvation, regimented work force, and finally a war that killed not 4,000 Americans but a hundred times as many. And yet, in spite of it all, government was not blamed or rejected; F. D. Roosevelt, the architect of most of it, was and is almost universally honored, and elections in 1944, 1946 and 1948 were well patronized. His relentless propaganda that "capitalism" had been to blame but that he had "saved it" from Communism (though why he should want to do that, if it really was to blame, isn't clear) was swallowed whole.

Example #2, across the ocean in Germany. Consider two snapshots there. First in 1923 the bottom dropped out of the Reichsmark; facing the impossibility of paying the reparations imposed at Versailles, the government printed trainloads of them and so caused immense suffering including destruction of the prudent class – those who had saved cash for a rainy day. Then the presses were switched off; a fatuous formula was announced about tying a new Mark to "German land" and, as usual, the population swallowed the fairy tale. Currency value stabilized – because that plug had been pulled. This wanton process, which so disrupted society, did not bring freedom at all; incredibly, it did not even turn public opinion against the institution of government or even its control over money! The only discontent it brought was with the then current government, the democratic, left-of-center Weimar one; and so greatly facilitated the rise of the authoritarian N.S.D.A.P.

The second snapshot is taken two decades later: Germans supported their government fully through 1943, and reluctantly for the two years following, even as doom closed in from both sides. Incredibly, even as their cities were literally crumbling from massive, daily bombing raids, they kept living, functioning, working, producing – so well that they put up a tough military resistance all the way to the bitter end. Certainly, most of them had by then abandoned their infatuation with one government, but I know of no evidence that they ever wished to abandon trust in any or all of them. We in America have never suffered anything close to that carnage, yet there was no sign in mid-40s Germany (or since) of a realization that government per se was the cause of it all.

One other reason why I doubt the doomsters: they say a serious possibility is that of FedGov default. Its debt is so large that some say it cannot even be serviced; that is, that it cannot even afford to pay the interest promised, let alone repay the $12T principal. The problem perceived is that if taxes are raised to make good that shortfall, the increase will choke off any recovery and prolong the recession and so kill the golden-geese taxpayers; alternatively if the shortfall is met by printing more, the value of the debts already held will be diluted and so nobody will lend any more but will, rather, call-in existing debts. It's scary, and it's possible; but as I see it, improbable. Holders of paper dollars are not going to take any action that will inevitably destroy the value of their holdings. It is in their direct interests to do everything they can to shore up the tottering US economy.

So no, I don't think the FedGov is anywhere close to going out of business because of widespread, manifest failure. We hardly know what failure is. As things get worse – and they quite likely will – the spin doctors will refine their techniques, and maybe silence dissidents. Recently the Chinese one showed how: massively censor the Internet, and then write a law that requires any web site owner to obtain a government license. Simple. Coherent opposition is cut off at the knees, in two easy moves. But one way or another, they will stay in power.

But secondly, suppose I'm wrong; suppose the chaos deepens to the extent that government ceases to function. Would that lead to a free society? – I don't think so.

One reason is that when government fails, some well-armed group of thugs will step in to take over. The group may or may not call itself a "legitimate government" but since it will certainly do its work by imposing force, a replacement government is just what it will be. A failing and allegedly democratic government will just be replaced by another. Example: Russia, 1917. The chaos there was greater than anything we've seen here by orders of magnitude; a collapsing, starving army trudging back to cities no longer served by food from the countryside, a total breakdown. So the Bolsheviks took command and shot any resistors, and made sure at gunpoint that the food trains ran; they beat Mussolini to that achievement by several years.

Chaos is not the friend, but the enemy of anarchism. It does not lead to liberty, any more than anarchism leads to chaos.

A separate, pre-eminent reason why a free society cannot emerge from just a government meltdown: almost nobody would know what to do, even if one were to make an appearance. Its essence as we know is that individuals trade, on terms each party has expressly agreed, without coercion. But that means "entitlements" vanish; nobody will be entitled to anything not covered by a contract somebody made with him, presumably concerning an exchange. Since the vast majority of the population has been brought up to expect "entitlements" to be provided, a great howl will sweep the land – like the recent rampaging in the streets of Athens, where "people-rule" was invented, by government employees demanding that their salaries not be cut – but a hundred times worse and with all kinds of parasites participating, not just employees. Theft will be ubiquitous. It's ubiquitous now, of course, but is called "tax" and is fairly predictable; the new theft will be random. Starvation will drive people to become very ugly. Few will understand what a free society is, so few will desire one, so a free society will not result.

It's really foolish, as I see it, ever to suppose one might. What would be the motivators or driving forces to make one happen?

One answer I've heard is that as chaos looms, bright entrepreneurs will arise to offer services that government is no longer providing, and so form the structure of a free society in spite of government hostility. This is quite close to what I believe will really happen, in the next couple of decades, but with one vital difference: in the "collapse and breakdown" scenario, the bulk of the population is to be led around like a flock of sheep, not understanding what is happening or why and not contributing to the change in any way but rather obstructing it vigorously as above. By contrast in the scenario that I envisage, detailed in my book Transition to Liberty, entrepreneurs offer those replacements because ordinary folk have already learned why they would be desirable, and are helping to bring them about – from the grass roots upward – mostly by withdrawing their labor from government. A fictional example of how that process will gain traction appeared here. The difference between the two progressions is that the former would be highly vulnerable to whatever residue of (or replacement for) government chose to prevent it, while the latter will be unstoppable.

Jim Davies [send him mail] is a retired businessman in New Hampshire who led the development of an on-line school of liberty in 2006, who expects to experience a free society in his lifetime, and who in 2008 wrote the books A Vision of Liberty, Transition to Liberty, and, in 2010, Denial of Liberty and To FREEDOM from Fascism, America!

    http://www.lewrockwell.com

    © 2010 Copyright LewRockwell.com - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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