Friday, May 29, 2009

from NY to Israel Sultan Reveals The Stories Behind the News















"What's Wrong with a little Wealth Redistribution anyway?"


Posted: 28 May 2009 04:32 PM PDT



Word that the Obama Administration may have used its power over
Chrysler's restructuring process to
shut down dealerships whose owners
donated to Republican candidates, while leaving open dealerships that
donated to Obama is spreading across conservative blogs.

But while this kind of abuse of government power is shocking, it really
shouldn't be.
Government is an engine of wealth redistribution, and when it gains
control of businesses, it redistributes wealth in a way that benefits its
supporters. That is what government always does, no matter how it
disguises it. That is why despite all the leftist wishful thinking in the world,
centrally planned economies are corrupt, inept and inefficient.

The free market operates based on
profit motive. A store owner's
goal is to sell products in order to earn a profit. If he provides discounts, he
has to do it based on an economic incentive, for example selling at a lower
cost per unit to a purchaser who buys large quantities. A store owner
who sells products at a lower price to Democrats and at a higher price to
Republicans, or who sells at a lower price to whites and at a higher price
to blacks... is hurting his own profit margins and so is really hurting
himself.

The profit motive "purifies" economic behavior in the free market to a
degree. By contrast within government there is no "purifier", except the
legal system, which is
also controlled by the government.

A government's economic behavior is controlled by politicians who have
only one goal, Patronage. Politicians gain control of resources in
order to reward their
supporters. This takes the form of providing
government contracts or jobs to the individual supporters. It also takes
the form of providing general forms of aid targeted at their base, e.g.
welfare, union jobs.

When government gains control of businesses, it naturally goes into
wealth redistribution mode and begins providing patronage to the
supporters of the
ruling party. Communist countries are a example of
the system taken to its limits, with the entire economy controlled by
the ruling party and wealth distributed to supporters of the party,
based on their level of support and affiliation.

The more wealth the Federal government took in and gave out, the
more it got into the patronage business. And that corrupted the free
market and the national economy. Where individual businesses have
economic disincentives for practicing discrimination or handing out
wasteful contracts, the government has none.

Where individual free market profit is economic in nature,
governments spend money in order to reward supporters and
expand their base of support.

Everything the Obama regime has done is textbook Machiavelli,
but it is also
the inevitable result of letting the same government
that has treated the national budget as a pork barrel take holds of
banks and the auto industry.

No doubt there is a long list of industries that Obama will be happy
to "bail out", and by bail out, we mean of course spend billions in
taxpayer owned debt to take over, carve up and hand out to their
supporters.

The rape of the American auto industry by Obama and his henchmen
was a classic case of a gang of politicians robbing the country blind
in order to
provide patronage to their backers, both at the union
and the dealership level. But that is par for the course.

Obama promised to fix the capitalist arrogance of the free market
with some wealth redistribution, which is a lot like a mugger
telling you that he can cure your credit card debt by taking all
your money. Now we're seeing just how far that mugging went and
how many victims it's leaving behind. And we're not done yet.

If the initial phase was the mugging, the next phase is that the
beating the mugger dished out transmitted a disease which is
now in the veins of his victim.

When government takes control of an industry, it immediately
promotes rent
seeking behavior in order to increase its own
wealth and power. This naturally drives up the cost of everything,
produces inferior products and adds layers of bureaucracy on
top of everything.

CAFE and a big package of regulations will insure that Chrysler
and GM produce cars that meet the standards of the left, and that
no one will
actually want to buy or drive. The government naturally
will buy the cars, both for itself, and subsidize their purchase for the
"disadvantaged." Sallie
Mae and Freddie Mac will have an auto buddy
who exists to insure the "right" of everyone to own a car, with loans
to people who can't pay them, for cars they can't afford.





If Obama gets his way, the US auto industry will wind up looking like
its Soviet counterpart, a government subsidized white elephant that
will benefit no one but politicians and their supporters. And it will
once again serve as a textbook example of what's wrong with
wealth
redistribution, and how absolute government power over the
free m
arket, corrupts it absolutely into patronage.

(Note: Due to the Holiday of Shavuot, there
will be no further
posts until Saturday Night)














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