Sara's Shame

Cameron at The Crossed Pond discussed a quote from Jeffrey Frankel:

“They say there are no atheists in a foxhole,” said Harvard economist Jeffrey Frankel, a former Clinton administration official. “Well, there are no libertarians in a financial crisis, either.”

This quote resonates with me for a number of reasons. One, if you don't know me already or can't devise from my post on the stimulus package or coming posts having to do with economics and/or politics, I am a libertarian. I have worked for libertarian organizations in the past and regularly attend conferences sponsored by the Institute for Humane Studies and Liberty Fund.

Two, I am having a hard time defending the principles of libertarianism in the face of such a devastating economic crisis. I can point to the number of graphs that prove this is (so far) a comparatively mediocre recession. And yet, I feel certain it is only going to get worse in the coming months. I can point out that governmental meddling lead to many of the worst aspects of this crisis (Fannie Mae and Freddie Mac, mandated lower mortgage rates, subsidized risks for the largest banks). And yet, I know that corporations and private speculators contributed as much, if not more to the situation. I can decry the "porkulus" package (*shudders* What a horribly clunky term!) as a slippery slope to socialism and nationalized banks. And yet, I want something done to help bolster the economy as much as anyone.

Cameron at The Crossed Pond laments the fact that libertarians have little real comfort to offer those suffering in hard economic times. We can hardly tell people that for the market to succeed and help everyone in the long run, sometimes people have to fail miserably in the short run. Evolution and Invisible Hand defenses make Libertarians seem cold-hearted and cruel.

Cameron's solution? Shutting up. He assures us his libertarian principles are sound and the imminent failures of multiple markets will not sway his ideology. While this is ideologically admirable, it may be a bit unsound practically.

As I constantly reassure my fiance, I am not an anarchist. While there are components of the theory that appeal to me, it seems to be much too Utopian to think that if everything were to be left alone, the invisible hand would take care of things. In fact, it is because I understand the unsavory parts of the invisible hand theory that I am reluctant to espouse laissez-faire in all things economic. It is part of the principles of spontaneous order and the invisible hand theory that those who cannot compete, necessarily fail. In many situations this is perfectly acceptable. If a pin factory can make thousands of identical pins in a single day, the solitary pin maker who fails to produce as much goes out of business. The competitively and comparatively advantage succeed, while those who lack the skills and management to thrive must find something else to do.

But when entire industries fail because of rampant corruption, misapplication of speculative risk, or just plain mismanagement, thousands upon thousands of people lose their livelihoods. Factory workers are left with little recourse when the only source of income in their town shuts down. They are left with inadequate means to support their families.

The libertarian purist would point out that the factory worker can move to a new town, develop new skills to compete in new industries, develop a new business model, or suck it up and work at McDonald's. And it is true that most of the people in failed industries will find new jobs, sometimes for lesser pay or in new locations. Yet there is a time of adjustment. There may be months or years while individuals learn to cope in a new situation, acquire skills, or relocate. And it is in that adjustment period where the suffering is almost completely unalleviated by the market.

It is to that period that I find myself defending government intervention. I understand that the government is wasteful, inefficient, and ill-equipped to centrally direct the adjustment. I understand that taxpayer money is better left to the taxpayer herself. I understand, too, that the unintended consequences of government intervention in the markets sometimes create horrible disasters down the road.

But I ask myself, which sacrifices am I willing to accept? Do I accept that government spending is too often inefficient, impractical, and ill-applied? Do I accept that support of government programs is ideologically distasteful, possibly causing great harm in the future? Or do I accept that some people may have to forgo basic necessities? That children of those laid-off factory workers may go hungry, get kicked out of their homes, and forgo medical treatments all because of an ideology?

What it comes down to is the fact that there are some sacrifices I'm not prepared to make. If I have to pay more in taxes, forgo building a small business, or cut back on my own consumption, I'm more willing to sacrifice that than thousands of people's lives. Sure, the free market may respond with a much better solution, but the free market takes time. And in that time, a lot of people will suffer. It may be inefficient, impractical, and ill-advised in the long run to run up deficits, stifle entrepreneurship, and pay higher taxes today, but at least tomorrow, some child's father will have a paycheck. And I can live with the ideological inconsistency.