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The lessons of 2009

Dec. 9, 2009
There is more to recovery than starting over. There has to be a new recognition of the principles that shape freedom and prosperity, and the danger of discarding these out of fear or confusion.

It’s nice to think that once December ends we might leave behind all of the disappointments and difficulties of 2009, and there is some evidence of an economic recovery underway that might make that possible. But, there is more to recovery than starting over: Considering what a year we’ve just lived through, it seems fitting to ask what have we learned? I’m not certain that I’ve learned anything new in 2009, but I’ve gained a new conviction about some things that ought to be taken more seriously.

1. Business and government are separate things, and they ought to remain that way. Business (manufacturing, retail, services) is the way that a free society encourages individuals to apply their abilities in order to improve their circumstances. Government — including executives, legislatures, courts, law enforcement and regulatory agencies, and schools — are to maintain civility and protect the rights and property of individuals.

In order to maintain the proper roles of businesses and government, we have to restore a proper understanding of the rights of individuals. Both businesses and government represent individuals, but in different ways. They should not assume each other’s functions.

Furthermore, neither a business nor a government agent should be allowed to coerce or compromise an individual in order to enhance its own authority. The past year has witnessed a lot of such efforts, and we have to recognize them as the power grabs that they are.

2. Nothing is too big to fail. (Nothing in this life, that is.) The notion that some business or institution is so important that a government agency must rescue it from default seems ludicrous now that we’ve watched it happen more than once. Those who get “saved” are not deserving of rescuing because they’re big, but rather because they’re well connected. They have the influence to get rescued, which is a further reminder that business and government are (or ought to be) separate.

More important, they don’t get “saved.” The government-owned entities that result are tainted, suspected, and generally hampered from functioning as a viable business. I predict that in 2010 we won’t hear “too big to fail” as much as we have in 2009. The right label will be simply “too big”; failure will be assumed.

3. Spending cannot increase revenue. Every business and most individuals know this. Spending may create opportunities for revenues to increase, and spending can be done prudently to address specific needs, but, the simple act of spending creates only debt for the spender, which most of us understood long ago.

Expenditures are choices we make in our own behalf as individuals or as businesses, and if we make them prudently we may prosper. If not, we may be overdrawn or overextended, but in any case we’re responsible for our spending.

Governments don’t function with the same understanding because they have no money of their own. Governments don’t struggle to earn money. They don’t sacrifice to save it. Government money consists of deposits made by individuals, who entrust it to the government to be managed responsibly. When a government creates debts, it is creating debts for individual citizens to resolve.

4. Economic growth cannot be coerced. Growth and prosperity can be stimulated with incentives, but forcing individuals or businesses to pay for things (via excessive taxes) or to conform in other ways (via excessive regulation) limits their choices (aka, their freedom.) Worse, it may encourage them not to participate in growth, which leads generally to decline. It may also lead, eventually, to civil unrest, which discredits the government and undermines security and prosperity.

Have we learned anything new in 2009? Perhaps it’s too soon to know, but we ought to understand better the principles that shape our freedom and prosperity, and the danger of discarding them out of fear or confusion. Doing so will help us avoid more of the confusion and decline that have characterized 2009.

Robert E. Brooks