The political philosophy of bailout
All politics is redistributive. Although this is often hidden from view through appeals to the social contract, democracy, and the common good, the recent attempts to reward unsound business practices with taxpayers’ money make even the most sophisticated appeal to the “common good” look suspicious. Although advocates of liberty have offered persuasive accounts about the involvement of the U.S. government and the Federal Reserve Bank leading up to the current “crisis,” the root problem is the teleological mindset that sees the market and government as instruments to achieve certain goals.
Looking at the (long term) consequences of an act is an important part of individual decision making. This is so obvious that we are led to believe that such consequentialism is possible for society as a whole. Political consequentialism can take two forms. In its first incarnation, it is assumed that society is a collective effort toward shared goals. This view regards society, and as a consequence “the economy,” as one organism. A good example of this mindset is displayed by Republican Senate Minority Leader Mitch McConnell when he says, “Our whole economy you could think of as the human body and the credit markets as the circulatory system.” Presumably, any measures that are made to restore circulation will benefit us all.
Unfortunately, we see a similar outlook on society among advocates of liberty who talk about promoting “growth” or “efficiency.” Although their policy recommendations may be less intrusive, the assumption of shared goals is the same. Equally troubling is the acceptance of concepts like “market failure” and “government failure” as if these concepts are purely technical in nature, instead of implicit value judgments.
In its second incarnation, different interests and values among individuals are acknowledged but it is believed that policies can be designed to optimize a “social welfare function.” This position is a non-starter on epistemological grounds, as evidenced in real life by the lack of consensus among its advocates. This should not be surprising because consequentialism is not possible without guesswork and making personal value judgments. As the political philosopher Anthony de Jasay has argued, at some point someone needs to make decisions that will be binding for all, and consequentialism will ultimately collapse into authoritarianism, plain and simple. Nevertheless, this view has obvious appeal to people who advocate government intervention and redistribution of incomes.
In times of crisis (imagined or real), the latter position is simply abandoned for the former, as documented by Robert Higgs in his book “Crisis and Leviathan: Critical Episodes in the Growth of American Government.”
The interventions that led to the current problems, and the proposals to solve them, suffer from the same activist, fanatical, mindset that looks at society and its institutions as something that can be “improved” through collective choice.
