The Prime Mover in this case appears to be the collapse of the housing market, brought on by toxic mortgages. Without getting too mired in detail, it is an incontrovertible fact that mortgage corporations were lending money to people who couldn't possibly pay their debts, or at least debts of that magnitude. How is this capitalism? Capitalism is many things, which socialists frequently decry, but it isn't illogical. Money is lent with the expectation that profit will be made. You don't "lend" five dollars to a panhandler; you "give" it to him. Mortgage corporations are not registered charities, so how did these people get loans? President Jimmy Carter's Community Reinvestment Act, that's how. Before anyone accuses me of oversimplifying, I am in fact aware that the crisis is more complex than that. Follow my logical train all the way to the station if you can before judging.
Capitalism is frequently accused of being too hard on "the poor". Poor people cannot afford mortgages on homes, and the middle class can only afford modest domiciles. Capitalism is often seen as discriminatory in the USA, because large numbers of visible minorities are poor. This is false causality. Minority groups are not poor in the USA because capitalism breeds discrimination. Discrimination is anti-capitalist: the skin colour of a job applicant is irrelevant when considering his capacity to generate wealth or perform labour. Discrimination is a social issue. If ethnicity is the sole greatest cause of poverty in the developed world, how do you explain the grinding poverty of Northern New York?
The CRA was President Carter's effort to "level the playing field" and "make up for past injustice". Here's the problem: correcting past injustices by punishing those who were not alive to commit an offence, or rewarding those who were not alive to be offended, only creates more injustice. So the CRA forces banks to make favourable lending practices to minorities who otherwise wouldn't be able to afford mortgages. While it is a lovely gesture, this does not alter the reality that these people couldn't afford mortgages! And when one group gets special consideration, everyone wants in. Low income groups get mortgages they can't afford, so middle income groups start getting mortgages that are more expensive than they can afford. Suddenly, you see corner-store clerks in 150 thousand dollar homes, and mill-workers in 750 thousand dollar homes. What do the banks do? They invent complex financial vehicles to try to make profit off of fundamentally unprofitable ventures. The chickens come home to roost in 2008.
Capitalism is a fundamentally fair system: work is performed, and wealth is created. Capitalism, like true Justice is blind. I am proof of this. My grandfather was a low income Italian immigrant. My father joined the military, got his degree and served honourably for 26 years. He's in the top tax bracket. Canada, and the USA, is filled with people with stories like mine. It boggles the mind that people can still doubt the capacity for human flourishing created under capitalism.
Things go off the rails when government intervenes too heavily. From President Carter to President G.W. Bush, and from Prime Minister Pearson to Prime Minister Harper, people have assumed that the government is the solution to all of life's problems. Strange how Great Britain didn't experience a revival until Thatcher mercilessly reduced government.
You can't say capitalism has failed when you live in a society that can't resist the urge to try to force Smith's invisible hand.
Capitalism is frequently accused of being too hard on "the poor". Poor people cannot afford mortgages on homes, and the middle class can only afford modest domiciles. Capitalism is often seen as discriminatory in the USA, because large numbers of visible minorities are poor. This is false causality. Minority groups are not poor in the USA because capitalism breeds discrimination. Discrimination is anti-capitalist: the skin colour of a job applicant is irrelevant when considering his capacity to generate wealth or perform labour. Discrimination is a social issue. If ethnicity is the sole greatest cause of poverty in the developed world, how do you explain the grinding poverty of Northern New York?
The CRA was President Carter's effort to "level the playing field" and "make up for past injustice". Here's the problem: correcting past injustices by punishing those who were not alive to commit an offence, or rewarding those who were not alive to be offended, only creates more injustice. So the CRA forces banks to make favourable lending practices to minorities who otherwise wouldn't be able to afford mortgages. While it is a lovely gesture, this does not alter the reality that these people couldn't afford mortgages! And when one group gets special consideration, everyone wants in. Low income groups get mortgages they can't afford, so middle income groups start getting mortgages that are more expensive than they can afford. Suddenly, you see corner-store clerks in 150 thousand dollar homes, and mill-workers in 750 thousand dollar homes. What do the banks do? They invent complex financial vehicles to try to make profit off of fundamentally unprofitable ventures. The chickens come home to roost in 2008.
Capitalism is a fundamentally fair system: work is performed, and wealth is created. Capitalism, like true Justice is blind. I am proof of this. My grandfather was a low income Italian immigrant. My father joined the military, got his degree and served honourably for 26 years. He's in the top tax bracket. Canada, and the USA, is filled with people with stories like mine. It boggles the mind that people can still doubt the capacity for human flourishing created under capitalism.
Things go off the rails when government intervenes too heavily. From President Carter to President G.W. Bush, and from Prime Minister Pearson to Prime Minister Harper, people have assumed that the government is the solution to all of life's problems. Strange how Great Britain didn't experience a revival until Thatcher mercilessly reduced government.
You can't say capitalism has failed when you live in a society that can't resist the urge to try to force Smith's invisible hand.
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