Thursday, May 28, 2009

"What's Wrong with a little Wealth Redistribution anyway?"

Word that the Obama Administration may have used its power over Chrysler's restructuring process to shut down dealerships whose owners donated to Republican candidates, while leaving open dealerships that donated to Obama is spreading across conservative blogs. But while this kind of abuse of government power is shocking, it really shouldn't be.

Government is an engine of wealth redistribution, and when it gains control of businesses, it redistributes wealth in a way that benefits its supporters. That is what government always does, no matter how it disguises it.

That is why despite all the leftist wishful thinking in the world, centrally planned economies are corrupt, inept and inefficient.

The free market operates based on profit motive. A store owner's goal is to sell products in order to earn a profit. If he provides discounts, he has to do it based on an economic incentive, for example selling at a lower cost per unit to a purchaser who buys large quantities. A store owner who sells products at a lower price to Democrats and at a higher price to Republicans, or who sells at a lower price to whites and at a higher price to blacks... is hurting his own profit margins and so is really hurting himself.

The profit motive "purifies" economic behavior in the free market to a degree. By contrast within government there is no "purifier", except the legal system, which is also controlled by the government.

A government's economic behavior is controlled by politicians who have only one goal, Patronage. Politicians gain control of resources in order to reward their supporters. This takes the form of providing government contracts or jobs to the individual supporters. It also takes the form of providing general forms of aid targeted at their base, e.g. welfare, union jobs.

When government gains control of businesses, it naturally goes into wealth redistribution mode and begins providing patronage to the supporters of the ruling party. Communist countries are a example of the system taken to its limits, with the entire economy controlled by the ruling party and wealth distributed to supporters of the party, based on their level of support and affiliation.

The more wealth the Federal government took in and gave out, the more it got into the patronage business. And that corrupted the free market and the national economy. Where individual businesses have economic disincentives for practicing discrimination or handing out wasteful contracts, the government has none.

Where individual free market profit is economic in nature, governments spend money in order to reward supporters and expand their base of support. Everything the Obama regime has done is textbook Machiavelli, but it is also the inevitable result of letting the same government that has treated the national budget as a pork barrel take holds of banks and the auto industry.

No doubt there is a long list of industries that Obama will be happy to "bail out", and by bail out, we mean of course spend billions in taxpayer owned debt to take over, carve up and hand out to their supporters.

The rape of the American auto industry by Obama and his henchmen was a classic case of a gang of politicians robbing the country blind in order to provide patronage to their backers, both at the union and the dealership level. But that is par for the course.

Obama promised to fix the capitalist arrogance of the free market with some wealth redistribution, which is a lot like a mugger telling you that he can cure your credit card debt by taking all your money. Now we're seeing just how far that mugging went and how many victims it's leaving behind. And we're not done yet.

If the initial phase was the mugging, the next phase is that the beating the mugger dished out transmitted a disease which is now in the veins of his victim. When government takes control of an industry, it immediately promotes rent seeking behavior in order to increase its own wealth and power. This naturally drives up the cost of everything, produces inferior products and adds layers on bureaucracy on top of everything.

CAFE and a big package of regulations will insure that Chrysler and GM produce cars that meet the standards of the left, and that no one will actually want to buy or drive. The government naturally will buy the cars, both for itself, and subsidize their purchase for the "disadvantaged." Sallie Mae and Freddie Mac will have an auto buddy who exists to insure the "right" of everyone to own a car, with loans to people who can't pay them, for cars they can't afford.

If Obama gets his way, the US auto industry will wind up looking like its Soviet counterpart, a government subsidized white elephant that will benefit no one but politicians and their supporters. And it will once again serve as a textbook example of what's wrong with wealth redistribution, and how absolute government power over the free market, corrupts it absolutely into patronage.

 (Note: Due to the Holiday of Shavuot, there will be no further posts until Saturday Night)


Lemon said...

National Socialism was what Hitler did.
This is fast becoming a tyranny.
I don't think the younger generations have a clue as they didnt grow up with much different.
It is now like frogs in increasingly hotter water.

susan h said...

I saw a picture recently of Obama's "training" big heavy set young people for his "civilian community service", which reminded me of the group of THUGS in Germany that became known as the S.S.

renaissancelady46 said...

Someone at my husband's company probably a union member keeps posting fliers saying FORD took money from the government too which is a patent lie. Hubby removes the false advertising. Ford will recover before the CAFE standards take effect...and they will be ready with vehicles that meet the standards but won't kill us.

Trust me you are right Lemon the younger set doesn't understand yet...I have 2 twenty daughter is beginning to see the big picture but not my son so much. Until he feels the effects of the current administration on his wallet he won't get it. It must be personal for him.

As for GM and Chrysler wholely owned subsidiaries of our government not so much.

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