Government: The ex post facto “Investor”
Peter Schwartz has a great op-ed this week, “Mob Rule Comes to Washington.” In it he asserts that arbitrary, unchecked use of government power is tantamount to mob rule and that this is what exists today. President Obama even made a concrete reference to the force of the mob when he reportedly told bankers behind closed doors that his administration “is the only thing between you and the pitchforks.” But is this hyperbole? I mean, there isn’t really a mob of people with pitchforks out there, right? What does Swartz mean by “mob rule” and how does it manifest itself in today’s crisis.
The answer is in the arbitrary use of government power, in other words, the imposition of force, or the reversal of previous actions based upon whim. One of the clearest examples of this type of action is the ex post facto taxation of AIG executive bonuses. Congress used it’s legislative powers to essentially rewrite the terms of previously granted TARP investments to AIG. The government issued TARP investments under certain terms, typically as warrants for stock or as preferred stock. The terms of these investments are typically passive as far as company operations are concerned. That is, the investments do not allow the entity providing funds to exert control over the bank’s operations. Yet, the government, after the fact, exerted just such control.
But why is such action so destructive? This action took the form of a law passed by a legislative body, yet it is a blow at the very idea of rule of law. It destroys the idea of a contractual agreement, since the original investment terms mean nothing. And that will destroy man’s ability to use his rational faculty to live, by destroying decisions he has previously made. Had AIG known before hand that such terms would be imposed they might have chosen not to accept TARP funds. Yet they did not know and could not have known that such actions would be taken. These actions are forms of tyranny.
What precipitated this government action? Public outrage over the fact that bonuses were given. It was popular opinion expressed as displeasure to our elected officials. But the concept of rule of law is intended to prevent such expressions from resulting in arbitrary force.
Other examples of arbitrary actions include strong-arming of several of the large banks to “accept” TARP investments in the first place, firing CEO’s as preconditions of investment funds, proposed legislation to regulate any and all salaries at companies, refusing to take back TARP funds, and demanding such things as programs for investment in green auto technology.
Yet, if these companies were in bankruptcy some of the same actions, such as removal of executives, might occur as conditions or restructuring. Is this not the same thing? Clearly not. When we first defended CEO bonuses here, we had a commenter who suggested otherwise.
and i know government played its (small) part in the crisis, but we live in democracy. and as long as this plan is going forward, put into place by our elected officials, i think there should be ACCOUNTABILITY. since i have become a shareholder, so to speak, i say: don't take the money if you can't pay the price.
While I can certainly understand those who rightly fume at the government handing out TARP funds, and feel as though their money should be managed properly, the principled course to take is one that preserves the rule of law, does not unleash the mob, and accomplishes the same thing. This process exists already. It is bankruptcy.
What about the idea that such actions are just because these bank executives (or auto executives ) are deserving of the punishment they receive? Justice is not the arbitrary use of force. The sense of satisfaction that one feels when they see an executive being punished cannot be called justice if obtained in any manner whatsoever. There is a difference between justice in a courtroom and “justice” on the guillotine. The latter is not justice at all, but tyranny, and it is what we see the signs of today.
Schwartz is right. The mob is loose, and arbitrary government action is it’s harbinger.
Labels: bankruptcy, bonuses, Obama, TARP, Wall Street
The Fatigue of Central Planning
Maybe that's because he is literally trying to do the work of millions.
A market economy is the result of an uncountable number of individual decisions and actions, coordinated through price signals which provide crucial information on the availability of every imaginable resource. Profit and loss calculations provide essential feedback on the relative efficiency with which a multitude of producers use those recourse to meet the needs and desires of an even larger number individual consumers.
Central planning consistently fails because it is impossible for a small number of individuals, let alone one man, to obtain the requisite information, create the necessary plans and subsequently attempt to implement them.
Mr. Obama, meet the Fatal Conceit.
Labels: Obama
As Wall Street Bonuses Go, So Goes the Liberty of All of Us
So we receive President Obama’s declaration that Wall Street bonuses must be cut. According to him, now is not the time for those bonuses, although he allows that there will be a time – determined by him – when bonuses will again become acceptable.
When Obama arrogates to himself the authority to determine whether, when, and in what amount payments shall be made by an employer to an employee, do not think that such power will only be used to lighten the wallets of Wall Street executives. Such a power demanded today becomes one that will be used in the future to cut the wage or bonus that any American is paid, if doing so should please the Presidency.
If you doubt that, consider that at several times in history the American government fixed the wages of nearly all Americans. It happened during World War II and it happened again in the early 1970s. It is neither a Democratic nor a Republican issue, with the former happening under Democratic President Roosevelt and the latter under Republican President Nixon.
It needs to be said, because Americans have become so used to having their liberties encroached: a man’s ownership of his labor is parcel of the ownership of his own life. If he cannot freely contract with an employer to offer his labor at voluntary, mutually agreed upon terms, then his life is no longer his own. Instead of being a free agent offering his services at a voluntary, mutually agreed upon rate to a willing employer, he becomes a serf, whose labor and life is controlled by his lord and master.
That is the meaning of Obama’s attack on Wall Street bonuses. Attacking the private right of employer and employee to voluntarily agree on salaries and bonuses is an attack on the freedom of both parties. In calling for Wall Street executives to be treated like serfs, President Obama is setting the precedent that will make all of us serfs in the future.
Do not be fooled by the issue of government bailouts. Government had no right to hand out that money. It does not belong to government; it belongs to each one of us. Moreover, this crisis would have ended on its own without any government “rescues.” Recessions always end through the economic adjustments of all participants in the economy. It happens on its own, without a “rescue” or despite it. The current recession is no exception and will end, despite Presidents Bush and Obama’s profligate showering of trillions of dollars of taxpayer money on the problem.
However, government committing a wrong by handing out bailout money does not give it the right to compound its wrong by using that as a justification for further violating the rights of employers and employees. Government should not be handing out bailouts, nor should it be telling employers whether they can pay bonuses.
No one, including President Obama, has the right to forcefully tear apart the private employment relationship between employer and employee. When a private individual does it, it is considered fraud or theft. When the President does it, he takes on the scary personage of a dictator.
Labels: bonuses, Obama, Wall Street