Not that President Bush -- a Harvard MBA, mind you -- knows this. Nor, apparently, does Secretary of the Treasury Henry Paulson, or Chairman of the Federal Reserve Ben Bernanke. And they are not alone.
Truth, however, is difficult to refute.
Henry Hazlitt begins chapter VI of his Economics In One Lesson with a simple assertion:
Government "encouragement" to business is sometimes as much to be feared as government hostility. This supposed encouragement often takes the form of a direct grant of government credit or a guarantee of government loans.
It is well worth reading Hazlitt's 1946 classic, available online here, and here.
I highly recommend buying a copy, because you'll want to highlight passages and make notes in the margins.
A lot.
But Henry Hazlitt deserves to have the last word. "The government," he writes, "never lends or gives anything to business that it does not take away from business." Ah, so true, and:
In any case, the net result of government credit has not been to increase the amount of wealth produced by the community but to reduce it, because the available real capital (consisting of actual farms, tractors, etc.) has been placed in the hands of the less efficient borrowers rather than in the hands of the more efficient and trustworthy.
Too bad we can't put fish hooks, gold coins, and canned beans and tuna in our 401(k) accounts. We're gonna need 'em.
Posted by Craig Ceely at October 1, 2008 12:23 AM