Zakaria: Cheerleader of Regulation
Tibor R. Machan
Over a decade ago I read an essay in The New Republic on the topic of business ethics written by the then Harvard graduate student Fareed Zakaria. It was insightful and lacked the standard ingredient of mainstream discussions of the ethical dimensions of business, namely, business bashing. Quite the contrary. It was refreshingly free of cant.
I sent a note to Zakaria asking him if he may be a champion of the free market and his response indicated that my suspicion was right. Since then I have sent him emails now and then and have on occasion received replies. He has since then written several books and one of these, The Future of Freedom, was especially poignant in distinguishing between liberal and illiberal democracies throughout history and around the globe in our time. Genuine supporters of the free society have always insisted that while democracy as such may have the virtue of inclusivity, it can be just as tyrannical as more direct command systems unless restrained by a well crafted constitution.
When a couple of months ago Zakaria became host of CNN's public affairs program "GPS" (which stands for "Global Public Square")--not long after giving up hosting Foreign Exchange with Fareed Zakaria for PBS, another good program focused on foreign affairs--I was hopeful that finally someone has emerged in mainstream media who will not join the cheerleaders of contemporary mercantilism, of the ubiquitous government intervention in the market place. And for a while this hope seems to have been fulfilled. Zakaria didn't immediately join with the rest of the statists on the tube, even if he wasn't quite the Harvard (JFK School) educated version of John Stossell.
Alas, then came the current financial debacle which, of course, was precipitated by the federal government which had been ordering various institutions under its command to lend money at very cheap rates, to go easy on folks who couldn't or wouldn't cover their debts, especially in the housing market (where over the last five decades, at least, a policy of populism has prevailed, with low interest rates and little collateral for many borrowers and with incentives such as mortgage interest deductions). This is when I would have liked and indeed expected to see a courageous journalist speak up about how it is the perversion, corruption of the free market that has produced the mess. Sadly, it wasn't to be.
After I returned from a lecture tour in Europe this last summer, I started checking out Zakaria's new CNN program and gradually learned that the host has joined with the rest of the government-loving commentators, such as The New York Times columnist Paul Krugman, claiming that what is needed to deal with the problem is, you guessed it, more government intervention. In his column for the September 29 issue of Newsweek, the international edition of which he himself edits, Zakaria intoned as follows:
"As of this writing, we don't know the details of the plan that is being crafted by Henry Paulson [US Secretary of the Treasury] and Ben Bernanke [head of the Federal Reserve] to restore confidence in the U.S. financial markets. It is impossible to know that it will work. But the administration and the Federal Reserve were right to intervene in a large and systemic manner. Modern capitalism depends on credit, and credit depends on confidence. By the middle of last week, fear was pervasive and no one was ready to lend money to anyone for any purpose. [This is plain wrong--I have personal knowledge that proves it!] It turned out that only government intervention could change this psychological paralysis. The lesson of the almost 100 (smaller) financial crises of the past three decades is that only government intervention can stabilize the system when it chokes."
Of course, the system choked because of government intervention, because of the easy money policies of the past several decades, because of the politically motivated efforts of the likes of Bill Clinton to gain favor with the electorate by doling out almost entirely unsecured loans to every Tom, Dick, and Harry who came asking for something he could not afford. That is not a market phenomenon but one typical of the mixed economy's welfare state. Free markets did not produce the current crisis and it will do no good, in the long run, to continue with government interference which is always subject to the pressures identified in public choice theory, namely, politicians and bureaucrats engaging in self-dealing and being mostly ignorant as to what is needed to sustain and, when necessary, restore confidence in bona fide markets.
Maybe the pressure from colleagues and other cheerleaders of government meddling in people's lives was too much for Zakaria to resist. Or maybe he has just signed up to championing a bad set of economic ideas for some other reason. In any case, he has now joined the group whose complicity in promoting the political economy of the mixed economy brought about the mess we are in now.