Misrepresenting "How We Arrived at This Moment"

By Alex Epstein

What must be done to recover from this financial crisis? Barack Obama rightly stresses that we first must understand how today’s problems emerged. It is “only by understanding how we arrived at this moment that we’ll be able to lift ourselves out of this predicament.”

Unfortunately, Obama (along with most of the Washington establishment) has created only misunderstanding. In calling for a massive increase in government control over the economy, he has evaded the mountain of evidence implicating the government.

For example, Obama’s core explanation of all the destructive behavior leading up to today’s crisis is that the market was too free. But the market that led to today’s crisis was systematically manipulated by government. Fact: this decade saw drastic attempts by the government to control the housing and financial markets–via a Federal Reserve that cut interest rates to all-time lows, and via a gigantic increase in Fannie Mae and Freddie Mac’s size and influence. Fact: through these entities, the government sought to “stimulate the economy” and promote homeownership (sound familiar?) by artificially extending cheap credit to home-buyers. Fact: most of the (very few) economists who actually predicted the financial crisis blame Fed policy or housing policy for inflating a bubble that was bound to collapse.
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Ayn Rand Center Launches New Blog: "Voices for Reason"

Washington, D.C., February 9, 2009—Today, the Ayn Rand Center for Individual Rights has launched its blog Voices for Reason, where its experts will provide daily commentary on breaking news from the perspective of Ayn Rand’s philosophy, Objectivism.

According to Debi Ghate, vice president of Academic programs, “Every weekday, we will post new commentary on current events on topics such as the financial crisis, environmentalism, foreign policy, free speech, and property rights. We will also explore the principled solutions Ayn Rand’s philosophy offers for tackling today’s political, economic and cultural problems.

“It is our goal to make Voices for Reason the go-to source for our unique perspective on the most important news of the day and the state of our culture. Our writers will share their insights, evaluating current events using Ayn Rand’s philosophy of reason, individualism, and laissez-faire capitalism as their guide.”

Voices for Reason will also carry announcements and updates from the Ayn Rand Center and the Ayn Rand Institute.

The Maestro vs. the Market

By Alex Epstein and Yaron Brook

Alan Greenspan claims that the free market failed to prevent the financial crisis, and that he is “shocked” that his professed “free-market ideology” turned out to contain a “flaw.”

But why should we take him seriously? Greenspan, while once associated with laissez-faire philosopher Ayn Rand, hasn’t advocated genuinely free markets for decades. Remember, this is a man who for two decades reveled in being, as the New York Times put it, “the infallible maestro of the financial system.”
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Let Them Fail

By Amit Ghate

Everywhere today politicians are blaring that they must save America’s financial institutions, alleging catastrophic risk to the economy were any to fail. Paulson and the entire Bush administration, in a discernible panic, are now pouring $700 billion into the big banks, having already bailed out AIG, Fannie Mae, Freddie Mac, and Bear Stearns to the tune of $300 billion.

Capitalism doesn’t work, they declare, but fortunately the government is here to rescue us.

Sadly, they have it all backwards. The credit crisis is just more evidence that whenever the government supplants the free market and attempts to “manage,” i.e., control, the economy–disaster ensues.
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How Not to Defend Free Markets

Washington, D.C. – In response to the financial crisis, traditional defenders of free markets have criticized certain controls passed by U.S. regulatory agencies, but are not calling into question the legitimacy of the agencies themselves. But, argued Yaron Brook, executive director of the Ayn Rand Center for Individual Rights, “It is insufficient and indeed counterproductive to criticize a few failed policies of the Fed and the SEC, without challenging the existence of these market-dictating agencies in the first place.
 
“As Exhibit A, consider the response to the SEC’s recent war on short selling. The Wall Street Journal, regarded as a strong defender of free markets, wrote that ‘[T]he SEC first clamped down on so-called naked shorting–a reasonable move under any circumstances, even if there’s no evidence of widespread naked shorting of financial stocks in this panic. But Mr. Cox didn’t stop there. The SEC has also temporarily banned any short selling of hundreds of financial stocks, a list that has grown to include the likes of General Motors. Then, when the SEC was reminded that selling a stock short is a legitimate part of many unimpeachable hedging strategies, it relaxed the prohibition for certain types of sales while continuing to expand the list of “protected” stocks. . . . If the SEC wants to help restore calm, it would stop issuing new emergency rules in the dead of night and bring some transparency and calm to its own rule-making.’
 
“In praising some of the SEC’s actions, while criticizing others, the Wall Street Journal is conceding a disastrous principle: that financial markets should be controlled by government at all.
 
“Under capitalism, the proper role of the government in financial markets is to protect individual rights by banning force and rooting out fraud. This requires objective laws that do not permit would-be central planners to tinker with markets when they don’t like the results. But the SEC’s regulatory authority allows it to coercively prevent individuals from engaging in voluntary transactions like short selling whenever it decides those transactions do not serve the ‘public interest.’
 
“Since the ‘public interest’ is an indefinable standard compatible with any interpretation or rationalization, this means in practice that SEC goons can arbitrarily unleash their regulatory club on financial markets whenever they feel it’s warranted. For example, see Chris Cox’s blitzkrieg of contradictory emergency orders attacking short sellers.
 
“The basic principle behind regulation is that the government can use force, not to protect individual rights, but in an attempt to engineer ‘socially desirable’ outcomes, i.e., outcomes different from what would result from the voluntary choices of individuals on a free market. That is the same premise that underlies all disastrous attempts at central planning–from the Soviet Union to modern-day Venezuela.
 
“If the Wall Street Journal really wants to defend capitalism, this is the premise it must oppose. Instead of prodding government regulators to be better central planners, it should call for a complete end to government control of financial markets. This is the lesson all defenders of capitalism must learn: you cannot defend capitalism by conceding the legitimacy of its opposite.”

Yaron Brook is executive director of the Ayn Rand Center for Individual Rights. He is a regular contributor to Forbes.com and a contributing editor of The Objective Standard. His articles have been featured in major newspapers such as USA Today, the Houston Chronicle, the Chicago Sun-Times, the Providence Journal and the Orange County Register. Dr. Brook is often interviewed on radio and is a frequent guest on a variety of national TV shows, having appeared in the new Fox Business Network, FOX News Channel (The O’Reilly Factor, Your World with Neil Cavuto, At Large with Geraldo Rivera), CNN (Talkback Live and the Glenn Beck Program), CNBC (Closing Bell and On the Money), and C-SPAN. Dr. Brook, a former finance professor, lectures on Objectivism, capitalism, business and foreign policy at college campuses, community groups and corporations across America and throughout the world.

The Ayn Rand Center Responds to the Financial Crisis

Washington D.C. – Americans are now facing an historic economic crisis. What was the cause? What is the cure? How do we prevent it from happening again? 

While pundits and politicians blame the current housing and financial crisis on “greedy” businessmen and lax regulators, and are frantically urging the government to expand its control over our economic lives, the Ayn Rand Center for Individual Rights has launched a new Web page to defend a different view—that the actual cause of the crisis is government intervention, and the only cure, laissez-faire capitalism. 

We invite you to check out our collection of essays, op-eds, lectures, and interviews arguing for a rational approach to this crisis—an approach you will not find anywhere else.