STAFF NEWS & ANALYSIS
Bush Defends Capitalism on Eve of Economic Summit
By - November 14, 2008

President George W. Bush fervently defended U.S.-style free enterprise Thursday as the cure for the world's financial chaos, not the cause. He warned foreign leaders ahead of a weekend summit not to crush global growth with restrictive new rules. "We must recognize that government intervention is not a cure-all," Bush said from Wall Street, setting his own tone for the two-day meeting that begins Friday in Washington seeking solutions to the economic crisis that has spread around the world. "Our aim should not be more government," he told the business executives. "It should be smarter government." The president acknowledged that governments share the blame for the severe economic troubles that have hit banks, homes and whole countries. He spelled out his prescription, which includes tougher accounting rules and more modern international financial institutions. But he stopped short of the tighter oversight and regulation that European leaders want. All his ideas came with a warning: Don't disturb capitalism.

"In the wake of the financial crisis, voices from the left and right are equating the free enterprise system with greed, exploitation and failure," Bush said. "It is true that this crisis included failures, by lenders and borrowers, by financial firms, by governments and independent regulators," Bush said. "But the crisis was not a failure of the free market system. And the answer is not to try to reinvent that system." That warning about the dangers of too much government intervention came not long after he championed the biggest bailout in U.S. history: a $700 billion taxpayer-funded plan to rescue the financial industry. His government has also signed off on costly rescues for housing, insurance and other financial institutions. – AP

Dominant Social Theme: Republicans revert to form.

Free-Market Analysis: The strangeness of the late 2000s media dialogue continues. Now America's President George Bush has issued a warning to other countries: "Don't mess with capitalism." The article, excerpted above, points out his belief that capitalism is the best system for unlocking human potential and supporting the progress of civil society.

"In the wake of the financial crisis, voices from the left and right are equating the free enterprise system with greed, exploitation and failure," Bush said. "It is true that this crisis included failures, by lenders and borrowers, by financial firms, by governments and independent regulators," Bush said. "But the crisis was not a failure of the free market system. And the answer is not to try to reinvent that system."

But the article also points out what Bush himself said recently in an unguarded moment, that Wall Street "got drunk and now it's got a hangover." This points out the dichotomy of Bush's defense of the free-market system and his prescription of smarter rather than larger government. Under Bush, the US federal government spent nearly eight years getting fatter. He nearly doubled the public debt to over $10 trillion while creating whole new government departments, such as the inaptly named Homeland Security and one-size-fits-all federal programs such as No-Child-Left-Behind.

As far as government working smarter, when exactly was that? Around the time FEMA tried and failed to help victims of Hurricane Katrina in New Orleans – then gave up and simply stuffed them in a stadium without air-conditioning or running water? Or perhaps it was the financial bailout bill Bush himself just signed, that turns out not to be a bailout at all – but a big bank giveaway. Or is it the endless lines at airports of people waiting patiently to have their shoes and toothpaste tubes checked for traces of explosives.

What is strangest about this article and others like it is that no one ever seems to want to take a swing at the biggest conundrum, which is why Bush espouses free-markets at all. He obviously doesn't believe in them. So what it is about them that attracts his rhetoric? Why now has he decided to give a speech endorsing them, here at the end of his tenure? An article that investigated the reasons for this sudden rediscovery of the marketplace would be kind of interesting.

Unfortunately, the article, like many mainstream articles these days is far more interested in advancing the current regulatory meme than in figuring out how Bush could govern from the left for eight years without a Libertarian peep – until now. Much of the second part of the article is devoted to teasing out areas of agreement between Bush and the Europeans who want a great deal more market regulation in the wake of government/central banking ineptness.

White House aides play down Bush's differences with other nations, saying the leaders have much in common, as evidenced by the gathering itself. Bush's list of possible areas for agreement include:

– Bolstering accounting rules for stocks, bonds and other investments so investors have a clearer sense of the true value of what they buy.

– Requiring "credit default swaps" – a type of corporate debt insurance – to be processed through a central clearinghouse. That would help provide crucial information on the parties involved in these complex, unregulated products.

– Taking a fresh look at rules aimed at preventing fraud and manipulation in trading of stocks and other securities.

– Better coordinating financial regulations among countries.

– Giving more countries voting power at the International Monetary Fund and the World Bank.

Of course, the chances of any of the above stopping the kind of fiat-money meltdown that has just begun is a big fat zero. Central banks in America, Britain and Europe printed too much money, caused a boom that turned into a bust. Very simple. You can't disconnect the money supply from the governor of the market (the invisible hand) and expect a smooth run. You won't learn any of that in the article, though. Instead, you will come to understand, incorrectly, that Bush favors free markets (even though he didn't care to honor them during his term in office), and that he recognizes there are certain regulatory initiatives that would help ameliorate the kind of worldwide financial crisis now taking place.

Very confusing. No wonder people are throwing in the towel when it comes to figuring out the way the world works. A president who doesn't understand or care for free-markets is cast as their defender and the compromise plan he favors to head off the next crisis has about as much chance of working as the more severe regulatory plan European leaders seem to favor.

After Thoughts

When central banks print too much money and cause an investment mania, all the painstakingly erected regulatory structures will be swept away, or at least cease to operate properly. That is the definition of a mania. The only way to stop capitalism from lurching from one crisis to another is to return to market based money – gold and silver – and allow such money metals to circulate freely. If Bush had walked to the podium to espouse such a solution, he really would have been backing a free-market solution to the current crisis. But then, given the mainstream's bias against such simple – though effective – solutions, it might not even have been reported.

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