Government Sucks, or is that Goldman Sachs?

I am not yet sufficiently informed on the many faults of Goldman Sachs to write an extensive and knowledgeable post on its many shenanigans.  But, it is very clear that Goldman Sachs has long had much too cozy a relationship with the federal government.  The financial institutions have long been subject to extensive and intrusive regulation by the government.  As usually happens when the government regulates an industry, the government turns to people from the industry to explain what goes on in the industry and in turn winds up taking direction from industry insiders on what government policies toward the industry should be.  Even more broadly, in the case of the financial industry, the more and more active role of the government in generally trying to centrally plan the economy and to regulate it, has required the government to seek out expertise in the many arcane matters of industrial and service industry finance. Companies such as Goldman Sachs will often conclude that further growth of government involvement in the economy as regulator and central planner can be made to work to the advantage of Goldman Sachs.  Hence, it provides very generous campaign contributions to politicians who want to increase the power of government and also to pay them off so they will not increase that power at the expense of Goldman Sachs.

I find Goldman Sachs and its relationship with the government to be very distasteful.  Goldman Sachs undoubtedly performs legitimate and vital tasks in the private sector.  But, when faced some time ago with a too powerful and meddling government, Goldman Sachs decided that the combined need to protect itself from a capricious and dangerous government and the advantages of directing that government's efforts to give it a competitive advantage, made it very useful to the company to develop a cozy relationship with big government.  This is a choice that many companies have to make.  The consequences of the choice mount as the size of the company increases because government finds there is more wealth to be expropriated from large companies.  Some industries are also more under scrutiny than others, either because many depend upon it or because its business is hard to understand.  In the 1800s, the most scrutinized industry was the railroads.  Later, steel and banking, then still later electric utilities became very regulated industries.  Once the voracious government starts meddling with an industry, it becomes very hard for many companies to resist the temptation to join what they cannot beat, so they can at least beat their competition.  This is very much what Goldman Sachs did.  It has largely become a company not of market entrepreneurial effort, but one of political entrepreneurial effort.

This has clearly paid off.  Goldman Sachs played a big role in selling securitized sub-prime home mortgage bundles to other companies, which their close relationship with government probably aided with almost insider relationships with Freddy Mac and Fanny Mae.  They received bailout money, when Lehman Brothers did not.  It would not be surprising if the many Goldman Sachs ex-employees in the government, especially this one, provides its management with many useful heads-up warnings about actions the government is about to take.  It must be nice that it has people who influence future interest rates and the like.  Note that Goldman Sachs was not pressured into taking over an overvalued Merrill Lynch the way Bank of America was.  Neither was it pushed into taking over Wachovia Bank, the way Wells Fargo was.  There have been advantages in being in bed with the government.

But, this whole process is a means of broadly thieving from the American People.  And, there is no honor among thieves.  So, the Obama administration and his radical Democrat Congress are now desperate to try a populist tactic out on the American People in which they pretend to protect them from evil business interests.  They long ago ducked the greater responsibility of the government itself for this recession and they have consistently blamed that on big business and supposed failures of the Capitalist system and free markets.  This is their excuse for seeking still more regulatory authority over the financial markets which they are trying to push through Congress now.  To prove how badly this is needed and to distract the People as much as possible from the sorry state of the economy and the role of the government in making it so, the government has decided this is the time to turn upon Goldman Sachs.  To be sure, the government cannot name some of its worst offenses, since the government was involved collaboratively in many of those.  But, a series of smaller offenses can be exposed to Obama's advantage.

Obama has previously turned against other industries or constituencies which thought they had agreements with him to interfere with the markets to their advantage.  Among these are the health insurance industry and AARP.  He also has betrayed his major constituency of young adults, by forcing them to heavily subsidize the health care insurance policies of older people.  And, he has taxed, and will tax much more heavily, the middle class he pretended to champion during the presidential campaign.  Obama is a redistributionist, so he requires a constant series of victims from whom he takes wealth using the force of government and then he redistributes it to others to curry their favor.  If he did not control the government, he would universally be recognized as a thief.

Given the special interest and spoils politics that must characterize any government's actions when it begins to expand its powers beyond those limited powers needed to protect the equal, sovereign rights of the individual to life, liberty, and the pursuit of happiness, this business environment is inevitable.  The only way to keep companies from facing the decision that Goldman Sachs made to protect itself and to gain insider advantages over their rivals is to reduce the scope and power of government.  Instead, we almost always hear that the power of government must be increased so it can better regulate the Goldman Sachs of the world.  This misses the point that the Goldman Sachs of the world are made by excessive government power.  The only realistic solution to such problems is to return to the excellent vision of the Founding Fathers and the Framers of the Constitution for a very limited government and a very independent free market.  Only a very limited government can perform its legitimate function of equally protecting the individual rights of the People.  Only when one has such a government can one have free and independent markets in a fully developed Capitalist system.

Powerful government can never equally protect individual rights, because it is driven to redistribute all the good things in life.  That process is too complex for it to do so equally, even if it really wanted to do so.  Practical politics, unguided by proper Constitutional principle, will never seriously attempt to provide equal protection.  This is clearly the history we have seen of big government.  It is time to take the lessons of that history, though frankly, a little thought would have predicted such a result in any case.