It Can Happen Here

On a terrible day in the not-so-distant future, the stock market will close below the lows it made on October 10th. When it does, it will become apparent to many more Americans that transferring wealth from middle class taxpayers to wealthy bankers will not revive the economy.

I call that day terrible because when faith withers, what is left? America will be a faithless country—a country without faith in the fantasy that government and its anointed financial “experts” can engineer the economy; and most importantly, a country without faith in the founding principles that brought us liberty and prosperity.

Nature abhors a vacuum, and so does politics. Out of that faithlessness, populism with totalitarian tendencies will take root—a National Populism if you may. The mood is already angry, fearful, and bitter; and we have experienced only the first snowflakes of the long economic winter to come. The future politicians who prey on this anger, fear, and bitterness will reflect these emotions and channel them to their own advantage.

Barring some unforeseen circumstances, the next president of the United States will be Barack Obama; and for far too many of the faithless, he will be America’s first “dear leader.” No longer trusting the experts and never having believed in America’s principles, all that is left to the faithless is to create a cult of personality around a human being. This behavior is worthy of a totalitarian state—but not worthy of a free people.

Now, it is true that the Obama administration’s unconstitutional misdeeds are unlikely to exceed those of the Bush administration. But, as the economic situation continues to deteriorate and the social mood along with it does too, the growing populist movement will be more and more dangerous. Worshipping an individual human being gives rise to the most primitive of political systems.

Last week, I asked my family to view with me two YouTube videos. One was of California school children singing the praises of Obama, while the other was of Kansas City school children chanting for Obama. If you haven’t seen these chilling videos, both are only intermittingly available as they are removed as fast as they are posted.

My thirteen year old son was shaken by the videos. He turned white, almost started to cry, and he said: “Dad, this is just like the Hitler youth. These children don’t even understand what they are singing.”

Read none of this as an endorsement of McCain. Like Obama, McCain has run a campaign devoid of any articulated principles; and his shoot-from-the-hip style is ill–suited to American constitutional government. His campaign has begun to attract angry crowds that have been shouting “traitor” and “terrorist” at the mention of Obama’s name.

Why this anger? And, why this desire to worship a human being? Many want to believe that they are innocent victims. Others think a political savior can save them and their “innocence.”

Nobel laureate Friedrich Hayek wrote The Road to Serfdom in 1944, but his words echo today. In the following passage he helps us understand why people would believe that we can get out of our economic crisis without pain:

That people should wish to be relieved of the bitter choice which hard facts often impose upon them is not surprising. But few want to be relieved through having the choice made for them by others. People just wish that the choice should not be necessary at all. And they are only too ready to believe that the choice is not really necessary, that is imposed upon them merely by the particular economic system under which we live.

Let Hayek’s words sink in. The successful American politicians of the future will be those who increasingly blame the “system.”

And what will replace the “system”? It will be whatever politicians define as the “common good,” and these politicians will say that nothing should get in the way of that “common good.” Hayek provides many cautions as to why this leads to amoral totalitarianism:

The principle that the end justifies the means in individualistic ethics is regarded as the denial of all morals. In collectivist ethics, it becomes necessarily the supreme rule; there is literally nothing which the consistent collectivist must not be prepared to do if it serves “the good of the whole” because “the good of the whole” is to him the only criterion of what ought to be done.

It’s not hard to predict where this is going. The economic climate will worsen over time. When Barack Obama takes office, we will be in or on a cusp of an economic depression. With the Republicans discredited and the Democrats controlling both Congress and the presidency, the pressure will be enormous for government to do even more than what has already been tried.

Obama speaks frequently of hope. My hope for Obama is that he is a decent enough man so that he will never exploit the power that many Americans will be prepared to give him.


10 Responses to It Can Happen Here

  1. frankvv says:


    History has shown that in hard times the masses do tend to follow someone that projects a glimmer of hope: a superman image of sorts. And when times are tough people want to place the blame on something or someone and are thus attracted to individuals with leadership characteristics who in turn support their negative ego-driven thinking. And to further exasperate the situation, people become sheep-like when they are herded into a group, blindly following some glimmer of perceived hope. The same mindless following that Obama has garnered, is also occurring in McCain’s camp. Here we see hatred, prejudice and blame being directed toward Obama and his team, which is pretty scary in its own right. It is my opinion that in small groups people can generate rational thoughts. But en mass many become unthinking zombie-like creatures and the damage that they can inflict on themselves and the rest of mankind when this occurs is down right staggering. It is our goal as American’s not to give our government too much power and ensure that checks and balances are left in place. In the last eight years we as American’s have given up a lot of our rights and privileges to our leaders. And that was during relatively good times. As the economic storm starts to affect more and more people, I do fear that we are going to give up more of our freedoms in the name of bettering our lives. That would be gross error of judgment on our part if we do. But in zombie mode, that is a real possibility.

  2. I think you are constantly too negative about our government, leaders, and the future. School children singing Obama – your child crying? Give me a break. People just like Obama and they want something new and fresh, good. It is no different how tons of women craved Palin at first and she became an instant public speaking success.

    As an economic professor you of all people should know our economics runs in business cycles and currently we are overheated and blowing off steam because we spent too much and paid too high. The markets were predicted to fall years back. This fall isn’t even that bad. The president hasn’t been elected – uncertainty in the markets creates volatile buy/selloffs. I’m not worried in the least. Like any civilization it takes years even more decades for big change like creating denser cities with more light rails, getting rid of cars that have had the same mpg since the 1980’s. New energy is coming which will bring back jobs, bring people together, clean up a lot of polution, and as far as for lying politicians I don’t think that will end but clearly “the government” has systems in place to get rid of presidents they don’t want. Legal or illegal let’s face it conspiracies run wild in America.

    I still have faith and I think you are blowing our “current” economic “crisis” way out of proportion as a negative paranoid professor (although I love what you write because you write really awesome).

    So can you write a post on your actual theories on how we can better the economic crisis besides bashing current and future presidents, markets, fed? Of course they control the majority of our lives, but what are some positive words on our current cycle?

    Hmmm. Homes are20-30% below market value with tons of equity for new and exisiting home owners to become landlords. Stocks will likely go lower but there are real buying opportunities. Obama, who is likely to be our new president by popular demand does seem young, hip, and wanting for something different (although how much can he change anything?)

    anyway. nice post.

  3. Lastly, if you are so negative and paranoid about America there is always Canada YOU can move to. I for one will capitalize over everyones fears.

  4. Ninja,

    Thanks for sharing your ideas. Allow me to comment on a few points.

    America is the only country founded on the transcendent ideas that promote liberty and prosperity. I have written extensively about that and I am hardly negative about America. I am negative about politicians who subvert the founding principles of the country.

    I have also written extensively about the business cycle and how the Fed exaggerates them. The malinvestment of the past must be liquidated and attempts to prevent that from happening only worsen the crisis. The market process is far wiser than any expert and will correct our crisis if allowed to.

    Home are not 20 to 30% below market value. The market value of a home is what it will sell for today. Overpriced homes caused by the housing mania are a symptom of our crisis.

  5. igli1969 says:

    Financeninja sounds like many of my friends an co-workers with whom I have been having conversations for the last few weeks. While mostly they have been about their confusion about the causes of this mess, and their ignorance of what a (truly) free market is, compared to a socialist, government-controlled system, many have expressed confidence in the government and its “leaders.”

    This is the same government and leaders who played a major role in creating the current mess, who have given us the Postal Service, Medicare, FEMA, and the other myriad of regulatory agencies, not to mention Waco and Ruby Ridge. The mindset that brings us (at the state level) the DMV is not suited to doing anything with a market economy other than laissez faire.

    Dr. B – I re-read “The Road to Serfdom” on a regular basis, as it helps to center me. And while I have not personally seen the videos you mentioned, I know the genesis of such things, and the frighten me as well. Most people are herd animals, and tend to follow that herd, even when being led into grave danger. I recently listened to a podcast of some radio DJs in NYC asking African-Americans if they would vote for Obama, then attributing McCain’s positions to Obama. They all agreed with any position the questioner said was held by Obama. While this ignorance of issues is certainly not exclusive to blacks (per frankvv’s post), it does not bode well for the future of the government, as you laid out.

    I am far more fearful of an authoritarian government than I am of market forces, even ones as regulated as ours. (I had an email exchange with a former co-worker over the past week. He was a stockbroker many years ago, and still dabbles. He contended that our current problems are a result of far to little regulation. I tried to explain the difference between regulation and overisght, as in watching for criminal activity, but he cannot understand the difference. He wanted more government. He always has been a liberal, but this surprised me.)

    My 401(k) is way down, but I am confident that over the next 8-9 years (before I plan to retire) things will have more than recovered. I am not so confident that the government will leave me alone enough for me to enjoy any retirement, especially since I am a gun-owner. The next two years, before the 2010 mid-terms, will be interesting, in the sense of the Chinese proverb.

    Chris C.

  6. Chris,

    I don’t think your 401(k) will be worth more in real terms in 8 or 9 years. Maybe 28 or 29 years! Heck I can even see a special tax being levied on 401(k) earnings on the grounds that those who have so much need to help others in our time of crisis.

    As you know government intervened massively in the 30s beginning with Hoover. This deepened the depression. Expect much more intervention this time around. In America’s Great Depression, Murray Rothbard wrote of the 30s:

    The guilt for the Great Depression must, at long last, be lifted from the shoulders of the free-market economy and placed where it properly belongs: at the doors of politicians, bureaucrats and the mass of ‘enlightened’ economists. And in any other depression, past or future, the story will be the same.

    We haven’t learned yet!

  7. Steve P says:

    It will be interesting to observe how Obama and his fellow populist do-gooders will attempt to “do more” with alot less. “Spreading the wealth” from an increasingly shrinking productive pie is likely to leave many of the entitlement seeking crowd rather disappointed. Obama and his interventionist friends can produce nothing themselves. The policies they attempt to implement to squeeze wealth from legitimate producers will produce less and less with each successive squeeze.
    The present presidential race is difficult for me to watch. It’s like a bad Monty Python sketch; just as absurd, but lacking the humor. Perhaps Obama recognizes the Bush-Hoover parallels and fancies himself the next FDR coming to the rescue. Is he in for a shock when the realities of an economic depression greater than that faced/caused by FDR overwhelm him and his amateur squad of central planners. To get a better idea of the potential for how bad the economic/financial crisis can become, try to imagine the absurd context of a Suzie Orman show on Zimbabwean television. American cultural banter regarding 401K plans, investment diversification, tax deductions, etc… might at some point become just as absurd a proposition as it is in some other parts of the world. Like you, I sincerely hope Obama is a decent man. The measure of his legacy may be inversely related to what he tries to “do”.

  8. Steve,

    Your wise comments are sobering even to those of us who see the world through a similar lens. It is amazing me to how many are looking forward to as you aptly say Obama and “his amateur squad of central planners.” Many who are, are decent, well meaning, “educated” people who simply have no idea how wealth is created and sustained.

  9. mhrb26 says:

    This is a very frustrating election. I don’t think there is any candidate that I really feel all that confident about. My family and friends are in love with Obama, which I find somewhat troubling, because I find much of their loyalty to be unshakable regardless of whatever position Obama takes. I really don’t say very much at family gatherings about politics simply because I know most of them aren’t receptive to hearing anything that doesn’t reinforce their belief in Obama. Equally troubling is John McCain’s inability to lay out an agenda that is based off any set core principles. It’s painfully obvious during debates that McCain doesn’t believe in less government or less government intervention. It seems to me that his campaign has spent the last 3 months being Hillarylite, attempting to beat Obama at his own game of just giving out as much government handouts as a way to win votes.

    I think it’s pretty evident that Obama will be the next president, unless the American people shock us once again, but I think the thing that troubles me most about Obama isn’t his redistribution of wealth as much as his personal attacks against media networks and commentators, who don’t sing his praise. I find the attacks from him and the left against Fox News and their commentators to be very troubling. I think the most vital member of our free society is our press or the media. When politicians can effectively discredit all commentators that dare to criticize them, then we all should all be troubled. Whether it’s MSNBC going against conservatives or FOX News going against liberals, each is needed to protect our free society. Hopefully these attacks aren’t a sign of things to come.

    I wish we had better candidates, but more than that I wish we had a smarter electorate. I’m not sure how far we will be willing to go to regulate things before we see the error in our ways. Part of me thinks we really need Obama as president, so these ideas can be put to test, so we can once and for all put them to rest.

    Mike H.

  10. Mike,

    Thank you for your astute comments.

    As far as putting these ideas to the test, there is no way to win at that game. When the ideas fail the true believers will simply say that Obama didn’t go far enough–this will set the stage for candidates far worse than McCain or Obama.

    Eventually there will be a paradigm shift, but will it be too late?

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