The political pundits all seem to be in agreement this morning that the automakers' bailout is in trouble. It has passed the House, but now seems stalled in the Senate. Wall Street and the financial markets are unsure which way to jump, or even whether to buy long or sell short to make as much money as possible on other people's uncertainty. ("Wall Street lower amid auto bailout worries," AP, 12/11/08)
Once again the political and the financial powers-that-be are missing the point — just as they've missed the point for over a century on the difference between credit extended for consumption, speculation, and government expenditures ("bad credit"), and credit extended for self-liquidating capital investment ("good credit"). There is a very deeply superficial understanding about ends and means in this country, possibly the result of the riptide of moral relativism that has inundated human thought and behavior for more than a hundred years. If the end appears good, e.g., greater consumer buying power, meeting government deficits without recourse to taxation, saving the automobile industry — whatever — how it is done matters very little, if at all.
The problem is that choosing the wrong means to achieve even a greatly desired, even necessary end can result in the opposite of what was intended. The restrictions proposed for the auto industry make sense in light of the method chosen to bail them out — but is a bailout the best or only way to accomplish the desired end? With the State dictating what products shall be developed, how much can be produced, setting compensation, and so on, what results is a "command economy," more popularly known as socialism or communism. We are faced with the supreme irony that, given the Keynesian economic framework, the only way to save the free market is to destroy it, that is, change it from a free market into a centrally-planned "command economy."
Instead of Keynes, then, the economic and political powers-that-be should be looking at Kelso and Adler, and studying the possibility of saving the automakers — and the rest of the economy — by means of applications based on the principles of Kelsonian Capital Homesteading and ownership, not Keynesian full employment and inflation.
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