In his book The Crisis of Interventionism, Ludwig von Mises pointed out that one government intervention will inevitably lead to more interventions. Why? The initial intervention will inevitably produce a crisis that public officials will say needs to be addressed with new interventions. Ultimately, the continuous series of interventions leads to a totally controlled economy and a loss of economic freedom for the citizenry.
It would be difficult to find a better example of Mises’s dictum than the U.S. financial and banking industry. The roots of the crisis were sown in 1913 with the creation of the Federal Reserve System, which was supposed to stabilize the monetary system. That intervention led to the Great Depression, which led to decades of welfare-statism, unrestrained federal spending, banking regulation, financial regulation, paper money, dollar depreciation, FDIC, the SEC, the confiscation of gold, abandoning the gold standard, the savings and loan debacle, Fannie Mae and Freddie Mac, the home-mortgage crisis, and the recent bailout of investment firms, to mention just a few of the many interventions during the past several decades.
This morning, Americans have learned that the federal government plans to use some of its investment bailout money to force American banks to sell some of their stock to the federal government. In Latin America and other third-world countries, this is a process known as nationalization. It’s reminiscent of the 1930s when U.S. officials nationalized gold by forcing Americans to turn in their privately owned holdings of gold to the federal government, on pain of a felony conviction for failure to comply, at a price set by U.S. officials.
Americans also learned today that the federal government is now insuring all small-business bank deposits, even those that exceed the new FDIC coverage of $250,000, a limit that was recently raised from $100,000.
Why is all this happening? Wasn’t the whole point of having a central bank and a regulated economy supposed to be that financial and banking crises could be avoided? What good is central planning and interventionism except to provide the crises that call for new interventions? Why wouldn’t we better off with a totally free market — that is, a market totally free of a central bank and government control and regulation? Sure, life would be insecure, but isn’t life insecure with government control? Aren’t people who are free and insecure better off than people who are not free and insecure?
As Mises pointed out, the end of the interventionist road is omnipotent government and a total loss of economic freedom. This is the centrally planned economy, one which characterized the Soviet Union and that still characterizes the Chinese, Cuban, and North Korean economies.
In the midst of all the economic chaos and crises, it’s important that we not lose sight of the fact that we’re also experiencing the effects of interventionism in foreign affairs. U.S. interventionism in the Middle East led to terrorist blowback on 9/11, which led to a series of interventions involving torture and sex abuse, warrantless searches and seizures, spying on Americans, telecom immunity, murder, kidnapping, renditions, Guantanamo, military tribunals, denial of due process, denial of speedy trial, denial of trial by jury, denial of right to counsel, cancelation of habeas corpus, and more.
Let’s also not forget the three decades of continuous interventions in the drug war, a war that is now being integrated with the so-called war on terrorism and the occupation of Afghanistan.
Thus, Americans are in the unfortunate position of being squeezed by both sides of the welfare-warfare vise. On the domestic side, interventionism is leading to the loss of economic liberty. On the foreign side, interventionism is leading to the loss of civil liberties. It’s a lose-lose situation.
It might be tempting to become depressed and despondent over this state of affairs. On the contrary! It shows that God has created a consistent universe, one in which a bad system produces bad results. What would be depressing is if central planning, interventionism, and regulatory schemes produced good results.
What would also be depressing is if there wasn’t an alternative to the socialism, interventionism, and imperialism that holds our nation in their grip. The good news is that there is an alternative — libertarianism — namely a system based on individual freedom, free markets, private property, and limited government. In other words, a system entailing the absence of central planning, interventionism, and regulatory schemes.
The free market system is the one our nation was founded. It produced the freest, wealthiest, and most prosperous, peaceful, harmonious, and charitable society in history. Too bad 20th-century Americans abandoned it. It’s not too late for 21st-century Americans to restore it.