Monday, June 21, 2010

Capitalism And Creative Destruction

Free Market Capitalism, with all its warts and boom and bust cycles, is the greatest economic system ever devised in human history guaranteed to create broadly based wealth and prosperity. Clearly, history demonstrates over and again that Socialism, Communism and Fascism have led to poverty and tyranny. Yet, President Obama and the Socialists that control Congress do not support Free Market Capitalism. And, in spite of historical facts, at every opportunity, these Socialists "never waste a crisis" to impose big government solutions that always make matters worse.

While it was appropriate in the short term during the financial crisis for the Bush Administration to bail out the banks because the banks are the foundation of our financial system, all other bail outs implemented by Obama have been counterproductive. Let me count the ways. The bail out of General Motors and Chrysler subsidized failed management and the United Auto Workers Union that has helped bankrupt both companies. It would have been better to have both auto companies go bankrupt, which occurred anyway, without any government tax payer assistance so that complete restructuring could have taken place.

And, if one or more of these auto companies went out of business in the process of "creative destruction", the entire auto industry would have been stronger because it would have eliminated capacity that is not necessary. Yes, some number of union workers and management employees would have lost their jobs; but that is happening anyway. General Motors once employed 400,000 employees worldwide. Today that number is about 60,000. This drop in size has occurred because for years General Motors has produced low quality cars that many people didn't want to buy; well dah! The fact is, it would have been better if Chrysler was allowed to go bankrupt in the 70's because it has never been a strong car company. When the Federal government steps in to save a failing company, it distorts the entire industry. Ford took no bail out money and they are doing fairly well. The government bail out of GM and Chrysler was actually unfair to Ford, which perhaps should have been the surviving American car company. And, let's not forget that many of the Toyota's and Honda's on our streets are made in the United States, so this is really not a jobs issue.

And, there is always the law of unintended consequences when ever the government steps in to regulate, or manage Free Market Capitalism. We have an oil spill disaster that was made much worse because of deep water drilling that is happening because environmental wackos and the government would not allow drilling in shallow water closer to shore. The banks that were bailed out have paid back their loans with interest; but the government has required them to maintain much higher reserves, which has resulted in very high credit card interest rates and fewer loans to small businesses, retarding economic growth and job creation. Obama's Trillion dollar SwindleUS Plan has saved thousands of state government jobs that are the basis for state overspending and bankruptcy. However, for every state government job saved, perhaps two private sector jobs have been lost; hence the reason unemployment is still high. Most important, subsidizing bloated state governments is preventing the lay offs that are needed to get state spending under control.

I know, I know, Conservatives are heartless because the Free Market Capitalism that we support with its resultant "creative destruction " can cause job loss, the demise of industries and companies and generally painful societal readjustment. But without "creative destruction", there can be no innovation, or economic growth. No doubt if there was Socialist government intervention when the automobile became predominant, it is highly probable that the buggy whip industry would have been saved even though once horse power was by engine instead of real horses, there was no longer a need for buggy whips.

And then there is Fannie Mae and Freddie Mac, both of which have been nationalized. Socialist politicians insisted that mortgage companies make sub prime loans to people (their PEEPS) who could not meet normal qualification requirements. Under threat of Congressional action, the mortgage companies complied with the help of Fannie Mae and Freddie Mac that invested in those loans. This government intervention into the Free Market caused the financial crisis. Frankly, Socialist members of Congress like Nancy Pelosi, Harry Reid, Barney Frank, Chuckie Schumer, Chris Dodd and many others should be in jail rather than in Congress for the part they played in this fiasco.

It is now estimated that Fannie and Freddie will require a Trillion dollars of tax payer bail out money to deal with all the sub prime mortgage foreclosures. And, helping people stay in homes they can't afford, by government intervention, to avoid foreclosures for the most part has not worked. Doing so just distorts the real estate market and makes matters worse. Though painful, it would be better to let those homes go into foreclosure resulting in lower prices so that young families and others, who can afford them, can purchase those properties to end the cycle and get the housing market back on track.

Free Market Capitalism is the only way to restore economic growth and prosperity in the United States and around the world. Since President Obama and the Socialists that control Congress neither understand, nor support Free Market Capitalism, we must sweep them out of office by electing Conservatives in 2010 and 2012 who support limited government, lower taxes and less regulation, a balanced budget, term limits, a strong national defense including securing our border and fighting Terrorism, real energy independence and health care reform, the right to bear arms, the sanctity of life and family values. Most important, we must elect Conservatives who support the Constitution, as written by our Founding Fathers, not as contrived by Socialists Obama, Reid, Pelosi, former Presidents, Congresses, or the Courts. We must take back our country in 2010 and 2012. We can do it. We will do it for the sake of our children and grandchildren.

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