Wednesday, April 15, 2009

The Hartford Tea Party



“A little frightening how you cats jump straight to revolutionary violence when faced with a political loss. I know you’re joking here, but that shit is for real for a whole lot of people” – a frightened blogger

Okay, let’s at least try to get the history of the Boston Tea Party right. There were genuine revolutionists among the “Indians” who threw the tea into Boston harbor. The principle organizer was Sam Adams, as fine a made in America revolutionist as you are likely to find anywhere.

But the issue that propelled the dumping was THE TEA.

In an attempt to save the East India Company, an early government supported entity (GSE), the British government gave a subsidy to the company in the form of a tax reduction that allowed the company to reduce the price of its tea. Americans drank a lot of tea in those days because Starbucks as yet was not in business, and the British knew they could undercut the market by lowering the price of tea produced by their principle GSE. So they loaded all the tea from their warehouses ships – and they had a lot of it, because the American had for sometime been buying their tea from Holland – and shipped it to Boston.

The merchants in Boston did not want to disturb their tea business and resented the GSE scam; so it was pretty easy for Sam Adams, a much better community organizer than Barack Obama, to turn Boston against the British.

The British government was always over-reacting. When the British imposed a stamp act on their colony, Bostonians resisted the act and managed to get it rolled back. Then came the Townsend Act and the so called Intolerable Acts. These were attempts by the British government to collect from Bostonians revenues that the government needed to protect their shipping from the likes of Sam Adams and the merchants of Boston, who were free traders.

The Bostonians resented that they were taxed to provide revenue to a far away government used by the government to pay for unruly troops to monitor the trade of Boston merchants, bully citizens on the street and knock young boys on the head with their rifle buts.

One thing led to another, shots were fired, and the rest is history.

Now, there are several lessons here, the most important of which is that GSE’s are bad. Pity we had to learn this lesson all over again with Countrywide, Fannie Mae, Freddie Mack and other government sponsored entities and support systems like AIG.

I was at the Harford tea party and am happy to report back that no shots were fired. The phrase most often repeated at the party by the revelers was something along the lines of, “Lets take our country back.”

This may help leftist who fear revolution to breath easier.

The signs displayed by the revelers were humorous mostly – “Hell No! We won’t Owe,” “America’s Newest Minority, Taxpayers,” “Honk If You’re Paying My Mortgage,” “Chris Dodd, Resign.”

And, best of all, Richard Blumenthal was not in attendance.



The movement itself is probably bigger than parties. No doubt people will try to appropriate it for their own purposes. We now have a government too big to fail attempting to bailout companies too big to fail. This suggests the problem with the companies is – they’re too big. I’ve said elsewhere that Fannie, Freddie, Countrywide and AIG were government supported entities, really government supported monopolies. So was the East India Company. The reaction to all this from the Bostonians was instinctively right. There is a connection between government created entities that are big and a deprivation of liberty. The same is true of Big Government, which wants to regulate everything but itself. That is the spirit I find animating this movement. And it was infectious at the rally. All this movement needs is a Sam Adams. As for revolution, we are the sons of revolution. The only thing to fear about revolution is fear itself.

First, it’s important to understand the principle involved. GSE’s (government supported entities) enjoy a tilted playing field in the free market because the government in such cases provides favored companies with advantages not available to other of its competitors. In a free market, such favored companies will necessarily drive others from the field, Companies too big to fail are too big for a reason. As competitors disappear, the favored companies tend to become monopolies. In an economy in which securities add to profits, the drive towards monopoly will be accelerated.

This is what happened in the case of Fannie Mae, Freddy Mac, Countrywide and also AIG, which provided fail safe insurance to institutions buying new toxic products from AIG and others.

Over a period of time, GSE’s tend to become monopolies – in the case of Fannie and Freddie, with the assistance of legislators who had a political interest in providing mortgages to people who could not afford down payments or even monthly mortgage payments. The combination of legislative easements, the evisceration over several decades of Glass-Steagall and regulatory failure resulted in a lowering of banking standards, easy credit and high credit rating for dubious products and services, all of which has contributed to the mess we see before us.

It’s interesting, I think, to consult the assessment of a non-Tory publication like Worker’s World:

“Today, Fannie Mae is a publicly-traded company on the stock market. Its primary aim is to accumulate huge profits for its corporate heads and big-time investors.

“Fannie Mae is a Government Sponsored Enterprise (GSE)—a monopoly with special privileges, including borrowing money below market-interest rates, exemption from state and local taxes, and a credit line at the U.S. Treasury.

“It is the largest non-bank financial services company in the world. Fannie Mae and its junior partner, nicknamed Freddie Mac, have grown rich on these freebies. Their combined assets are 45 percent greater than those of the nation’s largest bank. On the other hand, their combined debt is equal to 46 percent of the current national debt.”
The way into the problem itself suggests a way out.

Instead of creating monopolistic structures through special interest legislation, the free market should be enabled by beating down monopolies. The US government would never allow a single media source to dominate the information sector; still less would legislators create the conditions under which this would be possible. Legislation insuring a free market in ideas, everyone will agree, would enhance the spirit of the First Amendment.

This is not the same thing as muzzling a media source that in a competitive marketplace has risen to the top. It is rather the adoption of a legislative ethic that says, “First, do no harm.” In a genuinely democratic economy, only government can create monopolies. Prohibitions should rest on that side, as indeed they do in the First Amendment to the Constitution: “Congress shall make no law…”

The sense among tea party participants in Hartford was that the present crisis – never permitted in the age of Rham Emmanuel to go to waste -- has in great part been caused by the same unresponsive government to which the petitioners in Hartford were directing their messages.
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