If you’re reading this you’re open minded enough to look beyond the simple narrative and are interested in the deeper causes of the crisis and possible solutions.
If you’ve heard of Libertarians before you’ve probably been told we’re ‘hippies of the right’ or shills for big business. This is not the case. We are in favour of real free markets, the current system is best described as corporatism or crony capitalism.
If you’re worried about corporations having too much power then really you need to realise that they only have power because politicians give it to them. Favourable laws, bailouts and lucrative contracts go to those that lobby most effectively. Regulations are favoured because they create barriers to entry and reduce competition. The real way to limit corporate influence is to maximise competition, maximise accountability to the market, and a level playing field under the law.
Pissed off? So are we.
Regarding the current crisis, we get that you’re pissed off with the financial sector. So are we! But the key villains are not the big bankers but the central bankers, especially the Federal Reserve chairman and Governor of the Bank of England. They had the task of controlling interest rates, which for the last decade were held artificially low. This meant money was cheap and credit readily available, which fuelled the housing boom in both the USA and UK.
Banks like Northern Rock followed risky strategies based on the availability of cheap borrowing, and as soon as central banks started to raise interest rates they failed. Add in that since the 70′s money has been fiat money backed by nothing but the Government’s promise that it is worth something. That promise is paid for by the goods and services you have not yet produced, making you a slave, but worse is the fact you can print as much fiat money as you like. Laws enacted in the US forced banks to lend to individuals that can’t afford to repay. Government guarantees like deposit insurance and limited liability protect bankers from the consequences of the risks they take. Losses were therefore socialised in advance, not just afterwards. It is clear that politicians share a huge part of the blame for the crash.
Another key claim is that financial markets were unregulated. As if! There was lots of regulation but it was badly written and enforced. Regulation was little more than box ticking as no one really understood what was going on. The FSA gave Northern Rock a clean bill of health weeks before it collapsed, while the US Securities and Exchange Commission failed to spot Bernie Madoff’s crimes. Do you really think we need more regulation? What is needed is clarity and effective enforcement of existing rules not new rules.
The crisis was a failure of Laissez-faire capitalism, it is claimed, but governments control the supply of money, interest rates and write the rules. Then is violated them by bailing out firms. In a true laissez-faire economy does not do bailouts.
The Bonus culture lead to banks to take excessive risk – true, but only because the structure of the industry means individuals are not held responsible if things go wrong- the problem is limited liability (a creation of an 1855 Act of Parliament) and moral hazard created by previous government interventions (especially the US bailout of LTCM in 1998)
The government needs to stimulate the economy- every penny of stimulus has to come from somewhere. Governments can either print money (causing inflation and rising bills), borrowing (that needs to be paid back) or taxation (which takes money out of the productive economy and transfers it to those best at lobbying). The best way to get the economy growing is to get out of the way and let individuals judge best what their priorities are.
To conclude here are six policies we would like to see implemented that we’d hope you could also support:
- Remove setting of interest rates from central banks,
- Sound, commodity-based money politicians can’t debase,
- No more bailouts for the financial industry – firms must be allowed to fail,
- Reform limited liability laws so financiers are personally responsible for their actions,
- Reduce barriers to entry so new firms can enter the sector and increase competition.
- Reform individual taxes so that the poor do not pay income tax.
Essentially, it’s a choice. Right now we have cronyism and capitalism and the combination has messed up our economy. We value capitalism. It feeds us, clothes us and entertains us. If we rid the world of capitalism we loose all of that, and keep only the cronyism. We believe we should rid the world of cronyism, of the favours and protection offered to companies by the Government. We should let the market and the judiciary hold corporations to account and insist they stand on their own two feet.
We hope this letter has been eye-opening and given you plenty to think about. Whether you agree or if we’ve still to persuade you, we wish you well.