Thomas Sowell wrote a short but accurate appraisal of government efforts to solve economic problems.
We don’t look to arsonists to help put out fires but we do look to politicians to help solve financial crises that they played a major role in creating.
How did the government help create the current financial mess? Let me count the ways.
Which he does. If you're not up to speed, click above to read the full article.
Yet, when that limb began to crack, the first reaction in politics and in the media has been to look to government to solve this problem because — as always — it was called the market’s fault, the lenders’ fault, and everybody’s fault except those politicians who created this dicey situation in the first place.
Markets often get blamed for conveying a reality that was not created by the market...
Markets were also blamed for the Great Depression of the 1930s and New Deal politicians were credited with getting us out of it. But increasing numbers of economists and historians have concluded that it was government intervention which prolonged the Great Depression beyond that of other depressions where the government did nothing.
The stock market crash of 1987 was at least as big as the stock market crash in 1929. But, instead of being followed by a Great Depression, the 1987 crash was followed by 20 years of economic growth, with low inflation and low unemployment.
The Reagan administration did nothing in 1987, despite outrage in the media at the government’s failure to live up to its responsibility, as seen in liberal quarters. But nothing was apparently what needed to be done, so that markets could adjust.
The last thing politicians can do in an election year is nothing. So we can look for all sorts of “solutions” by politicians of both parties. Like most political solutions, these are likely to make matters worse.
So far, Congress has done little. Yet we've seen President Bush merely make a symbolic move in repealing the ban on offshore drilling, and the market has bounced back in a hurry as gas prices have had their biggest one-week drop in history. So it's not necessarily that government can't help, but the way that they can help is by allowing the free market to work properly without interference.
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