Bailout Blues
Franz Oppenheimer explained a hundred years ago there are only two methods by which a person can acquire wealth: The first method is by producing a good or a service and voluntarily exchanging that good for the product of somebody else. This is the method of exchange, the method of the free market; it is creative and expands production; it is not a zero-sum game because production expands and both parties receive the exchange benefit. Oppenheimer called this method the "economic means" for the acquisition of wealth.
The second method is seizing another person’s property without his consent, i.e., by robbery, exploitation, looting. When you seize someone’s property without his consent, then you are benefiting at his expense, at the expense of the producer; here is truly a zero-sum game--not much of a "game," by the way, from the point of view of the victim.
Can you think of any other methods?
You can spend days on the question and not come up with an alternative. Oppenheimer was right. You either produce something to exchange for food, raiment, and shelter or you live out of the pockets of someone who produces something. Period.
The lesson appears to become complicated when protestors point out that small children cannot fend for themselves and therefore must "live out of the pockets of others." Namely, their parents. Or, they will say the elderly and infirm can't be expected to work to sustain themselves and must rely on the largess of others to keep them going. The same for the disabled, and so on.
That a generous people let their pockets be picked to care for those unable to look after themselves doesn't in any way change Oppenheimer's point. Either you work to acquire the means of sustaining yourself or you live off the efforts of others. This includes people who have inherited wealth. However, the old person living off the proceeds of his/her savings and investments is living off the accumulation of personal past prudence and not out of the pockets of strangers
The Social Security question is murky. After a retiree has received all the money he or she (and employers) paid into the FICA system, that person then becomes the direct beneficiary of other people's efforts and can be said to be living out of the pockets of workers....usually their children and grandchildren. They may argue that these gifts of money are a right promised by the government, but the money comes directly from the pockets of today's workers and the government is merely the intermediary. Oppenheimer's point stands.
All of this brings us to the matter of the federal government's yen to bail out "troubled homeowners" - people who committed to buy houses they really couldn't afford - especially after the interest rates edged higher. These people complain they will be deprived of the American Dream of home ownership if they must give up their houses because they can't meet the payments. Prudent people who were not suckered into the real estate mortgage traps during the go-go boom years will be required in several direct and indirect ways to subsidize the sour mortgages so the borrower and lender can escape punishment for their foolishness. In other words, the prudent pay and the imprudent benefit. It's back to Oppenheimer's theme of people dipping into the pockets of the productive classes all over again.
Until the election of 1932, and the onset of the slow descent into the debt economy, the United States didn't work this way. If, for whatever reason, an individual or business foundered and couldn't pay their bills the government didn't step forward to pay them. They went bankrupt and their assets were liquidated so that creditors could collect a dime on the dollar, or whatever resulted. It seems harsh by today's standards, but the U.S. Constitution made no provision for the federal government to go into debt, itself, in order to pay people's bills. It may win re-election for politicians, but it does nothing for the future generations who are stuck for the debt.
Reward the imprudent? Punish the prudent? That's exactly what Congress and the Administration aim to do. And, to our shame, we - the people of the USA - will egg them on.
John Wrisley -April 2, 2008
IOU-nothings
Scuttled; The Ship of
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