September 18, 2008

Government vs. Business

In my best estimation, it's the job of business to make as much money as possible. Generally, this involves making good products so as to encourage consumer confidence in the company and to be a good corporate citizen so that the corporate image isn't tarnished to the point that nobody will buy from them or allow them to do business in a given area... but that's not the primary concern of business. The primary concern of a business is to make money.

The primary concern of a government is the protection of its citizens. This takes on a lot of roles, but the primary calling of governance is the establishment of order and the protection of citizens from various threats that citizens are, in and of themselves, incapable of defending against.

When it comes to business, a government's first role is to be sure that its citizens are protected from the malicious actions of a business. After all, sometimes, a business is all to willing to poison the nation's dogs in the name of making profit because that's what makes the most money. I'm discounting, at the moment, the shortsightedness of a business that might (and often does) lead it to do malicious things. Simply put, at the best of times, what is good for business may not be good for the citizens of the country, and the government is then beholden to protect the citizens of the country.

"But Cynic", you cry, "it's not that simple. Business is run by citizens also and if you hurt business you hurt not only those citizens but also the citizens that business employs." And you are correct, it isn't that simple. But this is only somewhat a case of Machiavellian intrigue and balancing the good of the many with the pain of the few. It should also be noted that no matter how many people profit from it, there are some things that are still wrong. And really, willful criminal activity tops the list.

The real question is about things like the recent bank crisis. And in that case it's a mixed matter.

1) There was some willful criminal activity going on. I'm not saying that it went all the way to the top (I'm also not saying that it didn't), but there are a lot of well-documented cases of loan officers fraudulently signing people up for loans by filling out the paperwork with straight-up lies. And that's not to mention the people who were, themselves, lied to about what sort of loan they were being signed up for.

2) Companies Freddie Mac and Fannie Mae were instructed, by the government, to relax their rules in order to increase home ownership. Starting back in the Clinton administration and continuing through to relatively recently, deregulation and bending the rules for these two lending giants was the order of the day so that home ownership could increase across America, especially for those who traditionally couldn't afford a house. Why couldn't you traditionally afford a house? You couldn't make the payments. How do we change that? Fundamentally, that's not something that you can change without a bunch of smoke and mirrors... and you see where that's gotten us.

3) Servicing mortgages is a very lucrative business... assuming those mortgages pay out and don't foreclose. This very basic premise is something similar to the adage "Investing early in internet companies is a very lucrative business... assuming those internet companies don't go bankrupt." For those of you who can't see where this is going, companies like Country-Wide, Indie Mac, Fannie Mae, Freddie Mac and others simply could not help themselves when it came to buying up mortgages, and when they couldn't buy mortgages fast enough, they started buying up subprime mortages, "liar loans" and other shady loans. As one insider was noted to say "If we didn't buy those loans, someone else would and we'd be losing money." ... Or not, as it turns out.

In the end, my problem on picking a candidate, or really, the Republican vs. Democrat thing in general comes down to an unwillingness on either side to see the needs of the constituencies of their rivals. Democrats are generally clueless when it comes to respecting the rights and needs of business, as evidenced by the brouhaha over NAFTA in the Democratic primaries. Republicans, on the other hand, seem all too inclined towards the vice of P.T. Barnum and just move to ensure that business is good. Comically enough (well, it will be with hindsight), both attitudes seem to have combined for this perfect storm.

I should also note that, in this matter, my Libertarians are actually no better and probably worse than either party. While Libertarians certainly would never have created Freddie Mac or Fannie Mae, you'd be a fool to think that they'd step in to protect consumers from... well... anything short of poisoned food, and maybe not even that. When a Libertarian says "caveat emptor", he means it.

Posted by Vengeful Cynic at September 18, 2008 07:31 AM | TrackBack