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Crisis and Leviathan

Here’s a letter to the Washington Post:

Discussing the proposed financial “reform,” Robert Samuelson uncharacteristically lets hysteria cloud his judgment (“Financial reform’s big unknowns,” April 26).  Why else would he grant the validity of Peter Wallison’s concern that “close regulation of too-big-to-fail financial organizations will give them a privileged status and make them ‘tools of the U.S. government'” and then immediately dismiss this concern by saying “Nevertheless, something seems better than nothing”?

Mr. Samuelson should review economic history.  A good place to start is with How the West Grew Rich, a 1986 book by Stanford University economic historian Nathan Rosenberg and his co-author L.E. Birdzell, Jr.  In this one straightforward sentence on page 24, Rosenberg and Birdzell summarize an indispensable key to western economic growth: “The West’s sustained economic growth began with the emergence of an economic sphere with a high degree of autonomy from political and religious control.”  In other words, our prosperity flowered only when the state started resisting the urge to do “something.”

It’s scary that the economy’s autonomy from political control is now shrinking fast.  And it’s sad that many normally sensible people such as Mr. Samuelson – reacting to this single economic downturn whose causes remain hotly disputed – so cavalierly call for this autonomy to shrink even further and faster.

Donald J. Boudreaux