Sunday, February 17, 2013

On the fatuity of bailing out banks

In this recent speech at the Oxford Union, Daniel Hannan puts it just as brilliant as we have come to expect from him:
"There is a world of difference between being pro-business and being pro-market. Sometimes those two positions happen to coincide, often they do not. Corporatism is not the same thing as capitalism." 
"It was the cost of compliance that drove the small providers out of the market. It was the regulation that forced the consolidation which is what created this rigged too big to fail-phenomenon in the first place." 
We should not aim at a "system where a bank can not fail, but a system where a bank can fail without it being a problem - Without the taxpayer having to come and rescue it. In other words where there is a plurality of small providers each striving to offer a better service. We have the precise opposite of that, we have a series of zombie banks."

It somehow reminds me of The Five Steps of Corporatism:
1) LargeCorp cannot compete for customers, so it lobbies the government to regulate its industry. 
2) Government impose expensive rules LargeCorp lobbied for, planned for, and can afford. But some of LargeCorp's competitors cannot. 
3) With fever competitors LargeCorp grows into MegaCorp. It now can afford to buy other competitors. 
4) The people get suspicious of the size of MegaCorp and industry consolidation. They demand more government regulation. 
5) Repeat step 2, 3 and 4 indefinitely.

So much for the "too big to fail argument". That is why the leftists aiming their anger at the libertarians on this matter are erroneous, as those who with steady consistency have argued against the bailing out of both banks and companies with public funds, have been the libertarians. The same is very much true for those who enduringly, and with fierce agitation, have fought the battle against the printing of cheap money - Creating inflated capital to feed the above mentioned banks and companies, and to feed politicians wanting to score points with serving special interests.

Conservatives (i.e. not "Neoconservatives") may have disputes with the libertarians over certain important issues, but not on the topic of too much love for bloated governments.