Are we Living in the Nightmare that Rand Predicted?
Is our current economic situation the result of massive government intervention? The Randians certainly think so.
I must confess, based on what I have read and the clips I have seen, I am hardly planning on camping out to see Atlas Shrugged (Part I). See, for example, James Joyner’s write-up on his experience of the sneak preview.
One thing that the movie will do, however, is spark conversation about Ayn Rand and, especially given the current zeitgeist, one about the role and scope of government in general.
To wit, a piece at NPR from yesterday: The Rampant Rise Of Ayn Rand-O-Mania which includes the following that struck me:
The similarities between the world Rand describes in Atlas Shrugged and contemporary America “are striking” and explain the rise of the Tea Party, according to a video by the Ayn Rand Institute. “In Atlas we see a world crumbling under the weight of government interventions and regulations. The economy has ground to a halt. Each day more and more businesses are shutting their doors. The government blames greed and the free market, and frantically imposes further controls. But the crisis only deepens. Sound familiar?”
The thing is: no, it doesn’t (although I can understand why the Ayn Rand Institute would like to assert such).
Here’s the thing: one of the basic sources of the recent economic downturn was the result of the housing bubble. The housing bubble was driven primarily by two factors. First, it was driven by consumers who wanted more house than they could afford and driven by the assumption that said homes would continue to increase in value to the point that they used said homes as piggy banks (via home equity loans) and/or as profit centers (via flipping and the like). This voracious appetite for real estate was enabled by a second factor: the willingness of financial institutions to loan money, often using any number of risky instruments (like interest only loans) that put consumers in a bind once they found themselves in homes no longer worth the purchase price. And, of course, lots of consumers looking for ever-more-expensive homes and financiers willing to loan money meant builders building too many houses.
Beyond housing, per se, we have to remember that the Great Recession was started as a crisis of financial institutions, linked largely to the above-noted loans. The crisis in financial institutions sparked a wider array of economic difficulty.
While one can argue that such government policies as low interest rates, Bush’s “ownership society,” the mortgage interest deduction, and other policies encouraged the above cycle, it is rather difficult to state that it was excessive government intervention and regulation (especially of the financial sector) that led to the housing bubble and the above-noted shuttered businesses.
Further, the massive government interventions that we have seen of late, i.e., TARP in 2008 and the 2009 stimulus bill, the 2010 tax compromise (which was also a stimulus) were after the Great Recession was underway. As such, the issue is not businesses shuttering because the government had engaged in massive interventions, but rather the government intervening to prevent further businesses from shuttering. Indeed, regardless of what one things of the policy, it was direct government intervention that stopped any number of financial institutions from shuttering, not to mention General Motors and Chrysler. As such, the above quote has some basic cause and effect problems (to say the least).
Indeed, the appropriate Randian solution to the Great Recession should have been massive shuttering of financial services companies and two major auto manufacturers. While I can understand why one might think that the market should have been allowed to engage in ye olde “creative destruction” in these cases, it is difficult to make the case that it was the government’s fault that businesses were going under when, in fact, the government stepped in to prop them up.
There is also the fact that we are hardly in the most regulated era of our history (think back to the 1970s, for example).
All of this is to say that while there is a legitimate debate to be had about the relative size of government and its role in the economy, but such debate need to be honest ones.