Tuesday, March 03, 2009

The Driver - part XII - The Driver shows the way out.

Click here for Parts 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 and 11 of my review of The Driver.

In Chapter 15, the main character testified before a Congressional committee in the aftermath of the battle described in Chapter 14. He provided a lesson in free market economics and the true resolution to any panic/recession/depression. I provide some plot spoilers here because the following exchange provides lessons for today:

Q [from the committee counsel]: But you will admit that you are very rich? . . .

[The left has been against wealth for so long, they are finally getting their wish as the "very rich" are disappearing in our own time. Being rich is something one "admits" to, much like alcoholism or crime. - editor]

A: Yes . . . I suppose I am.
Q: Well, as briefly as possible, will you tell this Committee how you made it?
A: . . . . I'll tell you. I made it buying things nobody else wanted. I bought Great Midwestern when it was bankrupt and people thought no railroad was worth its weight as junk. When I took charge of the property I bought equipment when it was cheap because nobody else wanted it and the equipment makers were hungry, and rails and ties and materials and labor to improve the road with, until everybody thought I was crazy. When the business came we had a railroad to handle it. I've done that same thing with every property I have taken up. . . . . In the next twelve months the Great Midwestern properties will spend five hundred million dollars for double tracking, grade reductions, new equipment and larger terminals. . .
Q: . . . [D]o you realize what it means for one man to say he will spend five hundred millions in a year? That is half the national debt.
A: I know exactly what it means . . . It means for once a Wall Street panic won't be followed by unemployment and industrial depression. . .
pp. 269-270 (original edition)

In the decades since publication of The Driver, the government has rigged the game so that the above scenario could never rescue the economy:

  1. The government will not allow prices to fall to the point where a risk-taking entrepreneur could purchase assets and make the best use of those assets. The current administration is, at this moment, trying to reinflate the bubble.

  2. Regulatory burdens prevent companies and investors from making necessary investments like those set forth in our main character's testimony.

  3. Tax burdens serve as a major disincentive against new investment. This is especially true for the taxes that will be needed to finance the spending bills of just the past few weeks.

The government has removed the "driver" from the economy. We are left with unfocused public "investments," limitless public borrowing and gradual devaluation of the currency. Entrepreneurs have been marginalized and blamed for the actions of the government. They have been taxed and regulated into virtual non-existence. It is no coincidence that with the "driver" in chains, a reference to 500 million dollars as "half the national debt" would now seem quaint. Public borrowing is no substitute for a driver.

Click here for part 13 (the conclusion).

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