The Net Over The Abyss

Once upon a time, someone asked Winston Churchill what he believed about government welfare. This was, of course, at a time when most of the world’s nattering classes believed that socialism and the welfare state were not only the best possible idea, but in fact inevitable.

Churchill, a conservative, responded “I propose not to level out the peaks to fill in the valleys, but to put a net over the abyss”.

That, for me, has always been one of the tenets of being “center-right”, as opposed to a paleoconservative; government has a place – in the few places were the free markets don’t have a presence.

As re the current economic crisis? I’m not nearly smart enough to be an economist.

King Banaian is smart enough – so much so that he is in fact an economist. And a conservative.

And a proponent of some kind of bailout:

The free market has taken an enormous amount of abuse as regards the current financial crisis. It shouldn’t; it had nothing to do with it, as many of the other authors in this series have pointed out (and will). To the extent that the market has failed, it has done so largely because of government coercion over the years.

The “free market” did not get us into this mess, but we need the free market to get us out. For that to happen, the free market needs government as a partner, whether conservatives like that idea or not.

But the free market solves everything,right?

Well, yeah – as long as there is a market. As King points out, this is not like the Great Depression, or any of the depressions before it; those were liquidity crises. This is a credit crisis; the engine of recovery, in our economy, is credit. And much of our credit market is based on assets – crummy mortgages, exotic derivatives based on other numbers – that may or may not have any value.

And without a market for credit? No recovery.


Free markets do not mean always private markets. Free markets mean markets with an absence of coercion. It is possible for government to step forward for a missing market and not be coercive. A bailout that did not consume taxpayer dollars would be one example. Forcing banks to alter their lending standards would be coercive and unfree.

The problem we face is the absence of a market. Government can help create a free market where none exists today, and that would be a good thing. It may be that we cannot avoid costs associated with previous government meddling in the market that helped create this crisis, but we can all hope that the costs will not extend beyond those already sunk.

Which is not to say that any government intervention doesn’t need to be watched closely to prevent it becoming the pork-fest the House Democrats tried to inflict on the nation last week. Government may need to act; it doesn’t need to be stupid.

Read King’s entire article – and the Center of the American Experiment series of which it’s a part.

UPDATE:  Government doesn’t need to be stupid.  But it seems to come naturally, as Kevin Ecker notes.  Kevin – every bit as paleo as i am – is willing to be convinced.


However, my willingness to be convinced diminishes greatly, when I read through the bill and see things like this:

  • Sec. 308. Increase in limit on cover over of rum excise tax to Puerto Rico and the Virgin Islands.
  • Sec. 310. Extension of mine rescue team training credit.
  • Sec. 311. Extension of election to expense advanced mine safety equipment.
  • Sec. 316. Railroad track maintenance.
  • Sec. 317. Seven-year cost recovery period for motorsports racing track facility.
  • Sec. 324. Extension of enhanced charitable deduction for contributions of book inventory.
  • Sec. 325. Extension and modification of duty suspension on wool products; wool research fund; wool duty refunds.
  • Sec. 502. Provisions related to film and television productions.
  • Sec. 503. Exemption from excise tax for certain wooden arrows designed for use by children.

Look expanding FDIC and things like that I get.  You’re giving yourself the tools necessary to fix the economy.  But if you had the time to be concerned about wool research and motorsports tracks I start getting the impression that you aren’t taking this seriously.

Yeah.  That’s a problem a lot of us are having with this proposed “fix”.

I wasn’t aware that “film and television production” was that essential to the economy.

7 thoughts on “The Net Over The Abyss

  1. But what plan? Do we give up what freedom we have left for this plan? Do we leave one man in charge of nearly $1 trillion with no oversight?

    A plan is needed. but to rush through the first thing that’s thrown up, with no consideration of the long term consequences, because of fear? Doesn’t seem too smart.

  2. boot Paulson and preston.
    gingrich for HUD sect.
    use most of $700B to fund FHIC
    continue to broker buyouts, seize and liquidate investment banks that cant meet accounting stds (whoever has been brokering buyouts
    has been doing great – keep those people).
    use some of $700B to unbundle and transfer/foreclose on the worse 50% of the mortgages and transfer those mortgages to small buiness
    servicers or foreclose.
    have someone develop boilerplate defense for claims from derivative securities holders claiming title to property.
    revoke charters of fannie and freddie (see
    repeal community reinvestment act

  3. Pingback: Dissent | Shot in the Dark

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