Let's stop bailing out these 'former' Communists

By Vin Suprynowicz
web posted October 1998

In his book "The Myth of the Robber Barons," historian Burton Folsom Jr. draws a distinction between real free-market entrepreneurs -- the kind who ask only that government stay out of their way as they develop new markets by giving customers better kerosene or steel or steamboat travel, at ever-lower prices -- and a different type of "entrepreneur," the "political entrepreneur" who invests his time hanging about the halls of the capital, cajoling or buying government favors.

The subsidized enterprises cobbled together by such grafters have rarely worked out well, Folsom reports. When the U.S. government helped fund the building of steamships through mail subsidies in the mid-19th century, graft and corruption permeated the process, and the resulting "cost-plus" ships -- though impressively huge -- ended up slow and barely seaworthy. Private entrepreneurs like Cornelius Vanderbilt scorned the subsidies and beat the socks off the government glad-handers, winning away passengers and freight alike by offering transport that was faster and cheaper, with an admirable safety record.

Unfortunately, many Americans today have forgotten these lessons of history. Instead, our public schools teach that self-made "robber barons" like Vanderbilt, Carnegie, and Rockefeller were heartless exploiters -- ignoring the way the tireless efforts of these men raised standards of
living around the world, allowing masses of people for the first time to turn their attention to better health care, better nutrition, even such luxuries as the arts.

The very success of these great Americans is held against them -- their ability to buy out their competitors or drive them out of business seen today as marks of "concentration" and evil "trust-building."

This twisted view of history has real-world ramifications as foreign nations today despair of such failed and blood-soaked experiments as communism, and seek American advice on how to restructure their economies.

The proper answer would be to emulate the American system as it existed up until the Civil War (to some extent, up till 1912.) The main role of a central government would once again be to provide a strong court system and a consistent rule of law - a way for contracts to be enforced while theft, fraud and extortion were promptly punished -- while otherwise staying out of the way of free banking and consensual commerce.

Instead, supplicants are all too often advised these days to take out huge international bank loans to finance or maintain big centralized farms, factories or dams -- "entrepreneurship" on the model of the federal Department of Housing and Urban Development.

When such projects inevitably fail, "bailouts" are offered by the International Monetary Fund -- with a few hooks embedded: even higher taxes, even more centralization, the continued "propping up" of fiat paper currencies with the real worth of toilet paper.

In Russia, when communism "fell" in the early '90s, there was never any real catharsis. The old leaders were never required to publicly admit their complicity in theft, murder and fraud on a massive scale. The heirs of those whose properties were seized from 1917 to 1921 were never sought out and compensated; no Communist mass murderers were put on trial.

Instead, foreign loans were sought to maintain the same old unprofitable government-owned factories -- paying their workers to continue churning out goods no one wanted -- postponing real ground-up reform while enriching the same old bosses.

To this day, Russian law still prevents average citizens from owning real estate, or buying and selling goods at a profit "without a license." Tax rates are so high that the only way merchants can survive is to pay "protection" to private gangsters, to kneecap any official tax collectors who may happen along.

The old gangsters simply put on new suits. Yet as this system finally collapses, what will be blamed? Why, thanks to the lazy lip service paid all this "reform" by the Bush and now the Clinton administration -- praising such cosmetic costume-changes as "democracy" -- this whole mess will soon be condemned under the false label of "a failure of the American-style free market."

About as "all-American" as the way Al Capone ran Chicago!

There has been enough "propping up" of old evils in Russia.

Let the most recent $22 billion of IMF cash be the last. President Clinton should give the Russian people the harsh news: They need to establish their own private banks and stock markets, writing a legal code that will protect the pooling and investment of their own wealth to build a free-market economy from scratch.

Russia cannot just be ignored -- 7 000 nuclear warhead see to that. But this "buying time" against real reform -- endless billions in bad loans with the ever-more-stretched U.S. taxpayer left on the hook -- must end.

Vin Suprynowicz is the assistant editorial page editor of the Las Vegas Review-Journal. Readers may contact him via e-mail at vin@lvrj.com. The column is syndicated in the United States and Canada via Mountain Media Syndications, P.O. Box 4422, Las Vegas Nev. 89127.

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