Peter Schwartz

Mob Rule Comes to Washington

By Peter Schwartz (Providence Journal, April 13, 2009)

In dealing with AIG [American International Group], why are people pussyfooting around? They believe that the bonus money was stolen from the public and must be retrieved by any means possible. So why not bypass the niceties and just send in some well-armed “enforcers” to confiscate the bonus recipients’ cars and houses and bank accounts?

If this raises fear about ushering in mob rule, it’s too late. AIG employees have been crudely vilified, they have been targets of death threats, a U.S. senator has urged them to kill themselves, protestors “tour” their homes, they have had to hire security guards and AIG has removed its name from the front of its Manhattan offices.

This mass hysteria is being fueled by the government, which is proceeding on the premise of: “Get the money back first, rationalize later.” The House passed an extraordinary piece of punitive–and unconstitutional–legislation to tax away almost all the bonus money. New York’s attorney general, abetted by the threat of making their names public, has gotten many of the recipients to “voluntarily” return their bonuses. Perversely, the rights of captured Islamic jihadists generate greater concern in Washington.

All these actions are tantamount to rule by mob action.

A mob is driven by rampant emotionalism, with no concern for facts–facts such as: Are these particular recipients guilty of anything? Are they competent individuals, necessary to keep the company operational? Would they have resigned without the inducement of the bonuses? Didn’t Washington consent to the bonuses at the time of the bailout? Aren’t the recipients entitled to the bonuses by contract?

The essence of mob rule is arbitrary and unchecked force, in disregard of all rights. If so, then when the government spends our money with virtually no limits–when trillions of dollars are gleefully disbursed through unrestrained horse-trading and arm-twisting among members of Congress–when trillions more are poured down the rat holes of failing companies at the uncontrolled discretion of bureaucrats–when government “czars” can select a company’s CEO and dictate its product line–then what we have is government by mob rule. That is, we have government with arbitrary, unchecked power to do as it wishes–which means: government unconstrained by the principle of individual freedom.

Like any mob, Washington desires a scapegoat. It blames capitalism for the mortgage and credit crisis, in order to divert attention from the real culprit: government intervention. Every housing-related measure taken by Washington has made the standards for homeownership looser than they would be in a free market. Government has stepped in to override private companies’ aversion to undue risk. Regulators criticized banks for turning down too many mortgage applications. FNMA and FHLMC were created to encourage the issuance of mortgages that would not be prudent in a free market. The FDIC anesthetizes depositors against risks taken with their funds. And the entire Federal Reserve exists to pump paper money into the economy, and to keep interest rates artificially low–often below the rate of inflation–so that more lending occurs. Yet when this house of cards collapsed, it is capitalism that was denounced, and more government power that was demanded.

The administration’s latest proposal, for a “systemic risk regulator,” should leave little doubt that it seeks carte blanche in ruling the economy. This is a plan for an economic dictator, an “enforcer” who will have the frightening authority to oversee every decision that, in his opinion, significantly influences the economy.

Of course, once the mob-rule mentality takes hold, everyone becomes a potential target. If you obtain a mortgage or a college loan, the government may subject you too to “risk regulation.” You may be told that you can’t buy a plasma TV or take a vacation or quit your job, because the risk to your finances is “unacceptable.” But isn’t that a purely private decision?–you will indignantly demand. If government power keeps expanding, however, there may no longer be any private decisions.

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