July 3, 2010

The Downside of Freedom

Originally posted March 16, 2010

Not a day goes by, that I don’t thank God that I live in a free country.  For as a citizen of the Good Ole USA, I enjoy rights and privileges that are the envy of the world.  Even better, any kid from the neighborhood can get rich.  Or become president.  Or anything they like.  And even more amazingly, more often than not, the system actually works.  No other country, in the history of our planet, has ever been blessed in this way.

But as they say, freedom isn’t free.  And the highest courts of our land have consistently ruled that our rights are not absolute.  For in the interest of maintaining a peaceful orderly society, we must strike a balance.  We have a right to freedom of speech, yet we can’t shout “fire!” in a crowded theater.  We can practice any religion we like, but we can’t sacrifice a virgin to the Moon God at will.

Hence, the downside of this abundant freedom is that we must also respect the rights of others.

A free press means that we must put up with hateful rhetoric and pornography.  A right to due process means that criminals sometimes go free.  In our capitalist system some people become fabulously wealthy, while others remain desperately poor.  And so on.

A short history lesson seems fitting here: Let’s recall some of the brutal dictators of recent times: Ferdinand Marcos in the Philippines, Hugo Chavez in Venezuela, Saddam Hussein in Iraq, or Nicolae Ceauşescu in Romania.  All were initially supported by their people.  Hence the downside of democracy is that we must live with the choices we make.  Shall we now institute benevolent monarchies around the world, to assure that we don’t elect another Hitler?

I don’t think so, and neither do you.  The path of wisdom is rarely found in extremes.

This is the land of opportunity, yet the downside of this prosperity is that some of us feel compelled to take more than our share.  Some have felt the impact of this malaise more than others, particularly the employees and creditors of Lehman Brothers, Washington Mutual, AIG, and General Motors.  Banks made mortgage loans to people who they knew couldn’t afford them, and the investment companies bundled them into sophisticated financial instruments that no one could understand.  Yet the money kept flowing, and it seemed as if it would never end.  Until it did.

Clearly, the financial markets failed us at almost every level.  Our government encouraged the irresponsible lending, the regulators failed to intervene, and the ratings agencies endorsed the whole scheme. Bernie Madoff was allowed to continue his deception unchecked.  And the rest of us are left to pick up the pieces.

Now some in Congress have proposed a new round of crushing regulations for the financial services industry.  They have the full support of our president, who fancies himself a defender of the little guy yet clearly has little understanding of how the financial markets work: The reason the little guy has a job, is because the big guy made a profit.  How simple is that?

This prospect is positively frightening.  Do we really want the federal government – which has never had to make a profit on anything – to micromanage the affairs of large companies?  Shall we do away with free markets and set wages and prices by government mandate, as they did in the Soviet Union?

I don’t think so, and neither do you.  The path of wisdom is rarely found in extremes.

Some time ago I served on my town’s rent control board.  On one occasion we scheduled a public hearing for a landlord who wanted to raise his rents by six percent (instead of the normally permissible five).  He presented his audited financial statements, and I was quickly impressed.  Turns out, he hadn’t raised his rents for three years.  Further, his expenses for utilities, maintenance, and labor had increased as his profit margin plummeted.

But that didn’t matter to the dozen or so people who arose to speak in protest.  One was disabled, one was living on a small Social Security check, another was raising six small children while working in a fast-food restaurant.  They couldn’t afford the higher rents, and the property owner was just an evil capitalist pig.  To them it didn’t matter that their landlord had risked his life’s savings, years before, to build a business.  They didn’t know, or at least didn’t care, that he had come close to financial ruin at several points along the way.  They had no understanding of the real estate business, or that it cost a fortune to heat the swimming pool.  Even at the new prices, their rents would remain close to the lowest in the county.  The tenements down the street were a few dollars cheaper, but not half as nice.

In short, these people felt entitled.  They felt that someone owed them a living.  They thought it criminal that someone should make a profit from their hard-earned wages.  Guess how I voted?

If our president and Congress truly wish to reinvigorate our economy, the worst thing they can possibly do is impose a pile of new rules.  All they really need to do, is to enforce the rules they already have.  Instead of inventing a new regulatory agency (as has been proposed), perhaps they can simply shake up the ranks of the agencies they already have, ordering them to do the jobs they were hired to do.

The last thing we need, is a bigger government.

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