….From where I sit, the United States government has embarked on two pieces of social engineering in the last few years. One was to make oil expensive as expensive as possible to drive people to greater use of alternative energy sources - because anything less would be irresponsible and destructive to the environment. The other was to enshrine home ownership (i.e., easy-to-obtain mortgages) as a new American right - because anything less would be unequal and racist.
None of us voted on these decisions - indeed, neither was even spoken about directly, much less debated. But nevertheless, both became national policy… and both have sparked national, now international, crises. Then, once they became crises, both were blamed on ‘greedy capitalism’, instead of what they really were: legislative interference into market forces.
Fine. We’ve been through this before, and no doubt we will see similar, government-induced crises again - inevitably accompanied by Administration officials and our elected representatives pointing at everyone but themselves.
But what makes this particular economic crisis so appalling, at least from this vantage point, is the sheer scumminess, corruption, short-sightedness and general incompetence of everyone involved. At least in the business world, especially in the take-no-prisoners world of high-tech that kind of venality and ineptitude either gets you fired or kills the company; by comparison, in Washington, it puts you in charge of the recovery effort.
Nobody in this mess has covered himself or herself in glory. President Bush seems to have had the right instincts on this, but as a lame duck who long-ago burned up all of his public support, he mostly seems dithering and toothless. The Democrats declare that the nation is at risk… then go about as usual turning the bailout bill into another yet another partisan pay-off scheme to fund the next round of crisis-creating social engineering. It is a measure of just how corrupt the Dems have become that Senators Dodd and Frank, who perhaps more than anyone in Washington are responsible for this crisis, not only are allowed to keep their committee seats, but run the press conference on the bail-out. Quis custodiet ipsos custodes?…
…As it happens, out here in Silicon Valley, we have been conducting our own social engineering experiments. Three, in fact, have been at least as sweeping as Freddie Mac’s changing of mortgage eligibility rules. One of them has been to wire the entire world in a huge, high-speed global information grid (the Internet). Another has been to restructure the entire entertainment industry and its pricing model (the iPod). And the third has been to empower the citizenry to form groups based upon common interests rather than the limitations of physical proximity (Web 2.0 - social networks).
Here’s the thing. All three of these multi-billion dollar projects have been pay-as-you-go, driven largely by individuals and companies that assume their own risk, they have instantly rewarded smart decisions and punished bad ones, they are tested every millisecond against human nature (i.e., the marketplace), they are biased towards efficiency over seniority, and most of all, they are voluntary.
And they are all succeeding.
We will get out this current financial mess - not by government fiat, but because entrepreneurs and smart corporate executives and hard-working everyday people will innovate us out of it. They will come up with the new financial instruments that restructure this debt, the new technologies that will generate the wealth to make up for this loss (as they did after 9/11) and ultimately create more jobs than are right now being lost.
And if Washington really wanted to help Americans (and there is no indication right now that it does) it would, the instant it passes the bail-out bill, get to work not adding more regulations in response to this crisis, but stripping away the destructive ones we created after the last big one. And a good place to start would be Sarbanes-Oxley, which brilliantly keeps wealth out of the hands of regular workers (by keeping start-up companies from going public), all while costing, by my reckoning, $200 billion over the last six years….
