Thoughts On The New Year: How Quickly Libertarians Forget

By Manifesto Joe

Ironically, they got bailed out, too

It's been three years, two months and five days since Jacob Weisberg's essay "The Libertarians' Lament" appeared in Newsweek magazine's edition of that date. On that day -- Oct. 27, 2008 -- the country had gone into an economic recession that could easily have been a worldwide depression, but for the meddling of the federal government.

Now, as 2012 is dawning, U.S. Rep. Ron Paul, R-Texas, the Libertarian Party nominee for president in 1988, appears to have a good chance of at least placing second in the Republican Iowa caucuses. And, his ideology of "free markets" and absolutely minimal government seems to have as many adherents as ever.

Not much more than three years ago, Weisberg mordantly commented:

The best thing you can say about libertarians is that, because their views derive from abstract theory, they tend to be principled and rigorous in their logic. ... "Let failed banks fail" is the purist line. This approach would be a wonderful lesson in personal responsibility, creating thousands of new jobs in the soup kitchen and food-pantry industry.

Here's a link to the entire Weisberg article. The Daily Beast got it early and ran it online on Oct. 17.

I was agreeing wholeheartedly with everything Weisberg wrote as I first read this piece. Now, unfortunately, it's clear that he was wrong in his last paragraph:

The worst thing you can say about libertarians is that they are intellectually immature, frozen in the worldview many of them absorbed from Ayn Rand. Like other ideologues, libertarians react to the world failing to conform to their model by asking where the world went wrong. Their heroic view of capitalism makes it difficult for them to accept that markets can be irrational, misunderstand risk and misallocate resources — or that financial systems without vigorous government oversight constitute a recipe for disaster. They are bankrupt, and this time, there will be no bailout.

I wouldn't say he was wrong at all in his assessment of libertarians. It was actually his last sentence in which he erred.

The federal bailout of the big, floundering banks was not, as it turned out, merely that. It was also a bailout of "free market" ideology, even as the government's action belied that worldview.

We didn't get to see the reality of what would have happened had the "free market" been left to its own devices, as the Hoover administration did in 1932. Not that things didn't go badly for a lot of people -- but we didn't see 25% unemployment, mass evictions, soup kitchens, widespread hunger, food riots, or any of the other symptoms of economic disaster on the scale that Americans saw back then.

It now looks as though it will be necessary for people to see such things, yet again, for the lesson to be learned, at least for another 75 years. Talk to many Americans now, and it's as though the events of the past few years never really happened.

Ideologues tend to shape their worldview based on preconceived ideas, rather than on observable facts. The world can behave as it will -- no matter to libertarians. I'm reminded of a scene from the movie Citizen Kane, in which Kane is being told off by Boss Jim W. Gettys. "You're going to need more than one lesson," Gettys tells Kane. "And you're going to get more than one lesson."

Sadly, this time the libertarians didn't endure the lesson they so richly deserved. And the reason they didn't get it is that too many other people throughout the world would have suffered at least equally, and probably worse, for libertarian follies. It was their insistence upon deregulation of financial markets that pretty clearly caused the debacle of 2007-08.

But, how soon most people forget, especially the victims of ideology. Markets do not regulate themselves, yet Americans are once more being implored to let them do that voodoo that markets are alleged to do so well. Many are buying it, despite the repeated lessons of history.

There are some simple reasons for this. The financial industry is very powerful, and certain people are making as much money as ever off a relatively unregulated system. For obvious reasons, they want to keep it that way, and will twist the necessary arms.

But perhaps the most frustrating reason is that, generally, a full-fledged disaster has to happen before people will modify their worldview. That happened to many Americans in the 1930s, but this time the debacle wasn't profound enough to have that effect on enough people, and certainly not on economic libertarians. Bailouts gave them the opportunity to rewrite history in their own way.

Once more, the mixed system of regulated welfare capitalism appears to have become a victim of its own success. Shielding people from the worst excesses of "free-market" capitalism has ironically worked against the mixed system, not in its favor.

The libertarians were due for a lesson that they didn't get. Apparently, it's going to take a far more profound disaster than the Great Recession to make realists out of ideologues. The Great Depression II?

Manifesto Joe Is An Underground Writer Living In Texas.