Libertarianism 101: Beware of False Profits

Tip: The heads of central-planning agencies generally are NOT libertarian.

Question: Can you spot the evasion and misrepresentation of libertarian arguments in the following article?

The Libertarians’ Lament
Their heroic view of capitalism makes it difficult for them to accept that financial systems without vigorous government oversight constitute a recipe for disaster.
By Jacob Weisberg | NEWSWEEK
Published Oct 18, 2008
From the magazine issue dated Oct 27, 2008

Answer: First the evasion. In the first paragraph, Jacob Weisberg lists the #2, #3, and #4 libertarian explanations for the financial crisis, but dismisses them without explanation. Simply listing these arguments and following them with the statement: “But libertarian apologists fall wildly short of providing any convincing explanation for what went wrong,” is an audaciously poorly developed counterargument.

Now the misrepresentation: While Alan Greenspan has described himself as a libertarian, Weisberg falsely imputes Greenspan’s beliefs and monetary policies to all libertarians. Weisberg states:

[Senate Banking Committee Chairman Phil Gramm and SEC Chairman Christopher Cox] share with Greenspan, the only member of the trio who openly calls himself a libertarian, an aversion to any infringement of the right to buy and sell. That belief, which George Soros calls “market fundamentalism,” best explains how permissive lending standards during a boom led to a global calamity that spread so far and so fast.

I, too, share this aversion to any infringement of the right to buy and sell, but the permissiveness of Greenspan’s centrally-planned lending standards have nothing to do with that. Rather, these standards have everything to do with the circumstances under which people decide to buy and sell. Scarcity is one of the important factors that determine the prices at which people decide to buy and sell. A central bank’s permissive standard leaves the artificial impression that money available to lend is less scarce than it really is. The result is a spate of malinvestment. Libertarians actually agree that these standards during a boom have led to a the global calamity that spread so far an fast. Weinberg simply plagiarized and adopted the libertarian’s #1 explanation for the calamity, yet he proceeded to libel libertarians anyway. I’m actually pleasantly surprised that he even mentioned the fed’s role in creating the crisis. Most writers don’t even bother.

The true libertarian position is that there should be no central authority determining monetary policy for the entire country. Rather, lending institutions should make these determinations within the (undistorted) circumstances of each transaction.

Congratulations! You now know more about libertarianism than does Jacob Weinberg, the editor-in-cheif of Slate magazine!

Update: Required listening for anyone who believes Alan Greenspan is the quintessential libertarian.  Jeff Riggenbach discusses J. R. R. Tolkien and Lord Acton’s maxim: “Power corrupts, and absolute power corrupts absolutely.”

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