Caroline Baum: John Galt Plan Might Save US Financial System
Mr. Thompson, President of the United States: The country is in a terrible state. People are starving and giving up, the economy is falling to pieces, nobody is producing any longer. We don’t know what to do about it. You do. You know how to make things work. Okay, we’re ready to give in. We want you to tell us what to do.
John Galt: I told you what to do.
Mr. Thompson: What?
John Galt: Get out of the way.
– Atlas Shrugged (1957, 35th anniversary edition), Ayn Rand, p. 1099
The following day, Fed Chairman Ben Bernanke encouraged mortgage servicers to write down a portion of the principal on home loans, which would give owners some equity and discourage foreclosure. He advocated a bigger role for the Federal Housing Administration, a Depression-era agency that insures mortgages. Congress envisions an even larger role for the federal government.
Any day, I expect some government official to unveil the John Galt plan to save the economy.
Galt, the hero of Ayn Rand’s magnum opus “Atlas Shrugged,” stops the world by going on strike. He and the “men of the mind” literally withdraw from the world after watching their wealth confiscated by the looters (the government).
Toward the end of Rand’s 1,000-plus page novel (or polemic), the economy is in shambles. Desperate, the looters kidnap Galt and prod him to “tell us what to do.”
Galt refuses, or rather tells them “to get out of the way.”
Road Is Cleared
You probably can sense where I’m going. Today’s economic and financial crisis would resolve itself more quickly and efficiently if the government got out of the way. Yes, there would be pain. Some banks would fail. Others would clamp down on credit to atone for the years of lax lending standards. Homeowners-in-name-only would become renters. Housing prices would fall until speculators found value.
That’s not going to happen. The bigger the mess, the more urgent the calls for a government solution, the more willing government is to oblige.
We want laissez-faire capitalism in good times and a government backstop against losses in bad times. It’s a tough way to run an economy.
– Caroline Baum, “John Galt Plan Might Save US Financial System”, Bloomberg, March 10
Ultimately, the price will have to be paid and the excesses of the boom worked off and dealt with. All these government attempts to mitigate the pain and get the economy back on track merely slow down the process of healing and reallocation.
The fastest path to recovery would be for the government to get out of the way and let individuals and businesses make decisions about what they need to do in the current environment. As they made decisions about jobs, capital investment and spending, there would be pain but at some point things would be back on a firm footing and poised to move forward.
Just get out of the way!!! But it’ll never happen.