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jwirenius has written a few posts regarding the recent economic and mortgage mess. I have argued that it was government regulation which caused this mess. Meanwhile, like most on the left, he has argued in favor of more government regulation and attacked those who support deregulation.
Some of those on the political Right are casting about for "market friendly" explanations of our Current Kerfuffle, because, of course, we know that the Giant Invisible Hand can never be wrong. The first such explanation, courtesy ofA response is necessary. I want to make it very clear. All government regulation is not always bad, and a completely Laissez Faire deregulated society is not always good. Ok, so what regulations are good and what are bad? The answer:
Regulations which create Equality of Opportunity: Good
Regulations which create Equality of Result: Bad
Government laws can create justice and equality, which would not exist in an "Ayn Rand" libertarian fantasy world. Without regulation, workers and the public could easily be exploited by those with power and money. Popular examples of the "evils" of no regulation in the early 1900's are the Triangle Factory Fire and the conditions of meat markets exposed by Upton Sinclair. Since, I like clean meat and am against workplace deaths, I fully support and encourage government regulations to enforce workplace safety, food cleanliness, anti-discrimination, enforcement of fair contracts, etc... Since government has the power of law, it has the power of force. Hence, those who lack money and power have the same access and equality of opportunity as those who do have power and money.
On the other hand, when government tries to ordain equality of result, that is when problems occur. The ideological base of Communism and Socialism is to impose equality on society. Hence, when leftist politicians talk about taxing the rich more in order to help the poor or imposing price caps on consumer products, this is nothing more than the redistribution of wealth by force. Why not just give every poor person $1,000,000 to spend as they see fit? The answer is that when governments engage these "progressive" tactics, incentive disappears, price inflation skyrockets and eventually the whole scheme falls apart. The government compelled banks to give risky loans to homeowners who were unable to meet the financial obligations. Look how well that worked out.
While those who support equality of result may have their heart in the right place; history shows that it simply doesn't work. Just like LBJ's "War on Poverty" and numerous attempts at meddling with free-market systems, government meddling creates more problems than it solves. Often, the assumption is that conservatives are heartless and don't care about the downtrodden, while liberals do care. So why is it that liberal policies tend to create a cycle of government entitlement and dependence which only enhances poverty?
Well, the direction our politicians are going recently, we are going to see the impact of yet more government regulation...