Thomas E. Woods, the author of Meltdown, takes on a leftist blogger known only as Che. Personally I don’t know why somebody of Woods’ intelligence would bother to respond to something that looks like it was produced by a raving leftist cliché generator, but the results are amusing nevertheless:
Che: I love it when right wing economists talk about “market forces” and “letting the free market run our economy.” They make it sound like the free market is some altruistic being that always knows exactly what to do and when to do it.
Woods: I do not know of anyone who subscribes to this junior-camper caricature. For one thing, no free-market economist is dumb enough to use a phrase like “letting the free market run our economy.” The free market is merely the matrix of free exchanges entered into by individuals. How can a matrix of free exchanges “run” anything?
Che: If free market principles were allowed to rule, like Schiff wants, what that means is everything is based on maximizing profit.
Woods: At this point we are all supposed to gasp at what a terrible prospect this would be. After all, the track coach and Michael Moore have told us about the wickedness of “profits,” so what more is there to say, really?
But as we’ve seen above, profit is simply society’s way of ratifying a firm’s past production decisions. It indicates what consumers want, and (by the process of imputation) the best process for producing it. Profits attract further investment in a given line of production, until the increased supply of goods in that industry brings the rate of return there back down to the level that exists elsewhere in the economy. This is how we ensure that our limited resources are not wasted, and that the most urgently desired goods are produced.
In the absence of profit as a driving force, how exactly would Che like to see resources allocated? We can either allow consumer preferences to guide production, or let the personal preferences of a monopolist (i.e., government) dictate what should be produced and how. When the question is posed this way, the choice is pretty clear, which is why the question is never posed this way.
Che: Holding the government accountable for its actions is called Democracy. Holding a CEO accountable for his or her actions is called impossible.
Woods: Could these be the most laughable lines of the whole piece? Che has swallowed the propaganda he got in school without a peep of independent thought.
I could write a whole book on this, so let’s stick to a couple obvious points. Our government launched a war in 2003 on ludicrous and transparent pretenses that led to as many as a million people dead and four million displaced. Prior to that, in the 1990s, we had a bipartisan sanctions regime that killed half a million Iraqi children. (Note that our leaders do not deny that statistic; they merely say the price was “worth it.”)
Who, my dear Che, was held “accountable” for that? Anyone? What alleged sins of any US corporation even approach that?
The Federal Reserve System, which enjoys a government monopoly on the creation of legal-tender money, created the conditions that led to the present economic crisis. (I give some of the contours of the argument here and in Meltdown, my latest book.) Was anyone held “accountable” for that?
Are you telling us that the government bailouts were an example of public-spiritedness, rather than a transparent payoff to friends and allies of the regime? The bailouts, in fact, were an example of government intervention to prevent the free market from holding CEOs accountable.
You want to keep a CEO accountable? Stop buying his product. How do I stop buying the government’s “product”? Oh, I forgot, I don’t buy it — the money to fund it is seized from me.