Letters by a modern St. Ferdinand III about cults

As governments everywhere expand to soon control 60% of the economy from their current levels of 40-45 % directly; and 8-12 % indirectly [via regulation], it is worth noting that historically, economies, firms and indeed nation states go bankrupt from governmentalization, or by growing government so that it directly controls the fate of economic actors. This is termed Statism or welfare-capitalism in the modern parlance but these varieties of socialism will fail, since socialism in any form is a failure. Statism and socialism will fail at the program level. It will fail at the state level. It will fail at the international level. No exceptions exist.

When government is so large and powerful that it can dictate to industry what it can and cannot do, you will not only destroy market incentives and prices; but you will generate corruption, fraud and payoffs as firms attempt to avoid obliteration by buying off regulators, politicians and central government. The housing-finance implosion in 2008 is a prime example. Banks, mortgage lenders, the weirdly named Freddie and Fannie all engaged in illegal corruption and fraud. They bought off the Great Man – the Obama – and most of the high ranking members of his party and of their competitive party the GOP. This interstition of politics, corruption and big business usually leads to a disaster whose primary victims are innocent citizens who are caught by an economic meltdown of some variety.

Rest assured another financial collapse will occur thanks to the collapse of nation state finances and another quite related, banking and financial system contraction and bankruptcy.

An able economist and historian Ben Shapiro recounts the detritus left behind by governmental interference:

The growth of government – and the threat of government involvement in industry – has eventually crippled virtually every major industry in America over the past century and a half.  Businesses are started by entrepreneurs; when they grow successful, government intervenes to take its pound of flesh; entrepreneurs respond by parlaying with government, hamstringing their own businesses in an attempt to government wrath.  Those businesses gradually become decrepit, dependent on the whims of the capricious Washington D.C. deities.  Overseas competitors begin to compete, and the now-slow-moving businesses require government subsidies to survive.  This is how businesses turn from American assets into American sinkholes.

Almost every industry since the railroads has undergone this horrific decay from pure capitalism to corporatism to irrelevance.  James J. Hill, the man who built the Great Northern Railroad, derided government aid, explaining, “The government should not furnish capital to these companies, in addition to their enormous land subsidies, to enable them to conduct their business in competition with enterprises that have received no aid from the public treasury.”  As Thomas DiLorenzo brilliantly documents here, Hill started off as a grocery clerk, then worked in a variety of industries before pooling his cash with several partners to enter the world of the railroads.  His business model was a paradigm of pure capitalism.  Teddy Roosevelt’s trust-busting converted the railroad industry into a shell of its former self, and converted its “robber baron” leaders into public villains.  Now today, President Obama tells us that we must publicly fund rail systems so as to compete with the Chinese.

In the oil industry, the Rockefellers of the early 20^th century gave way to the heavily regulated firms of today – and not coincidentally, the foreign oil dependence that now shapes our foreign and domestic politics.

In the automobile industry, Henry Ford entrepreneurialism gave way to government-supported unionization, subsidization, and finally, bankruptcy.

When President Obama praises the fact that we are “the nation that puts cars in driveways and computers in offices,” he neglects to mention that we are also the government that kills the car industry and ships the computer industry overseas; when he lionizes us as “the nation of Edison and the Wright brothers,” he ignores the fact that Edison has given way to government-sponsored GE, a company whose stock fluctuates with each presidential press conference; when he effervesces over Google and Facebook, he blithely overlooks the fact that his own intervention will help make those companies archaic before their time.

This is what liberalism does to industry.  It kills it.  Industries would be wise to acknowledge that inevitability before committing to the dark road of corporatism.

Businesses might be able to buy time and pay off the predatory beast of government. But eventually the bureaucracy will kill them off. The road to serfdom is littered with the pitiful remains and carcasses, of once great firms.