Too big to fail?

An evil never comes alone. After forcing "Joe the Plumber" to bail out Wall Street, some in the government now plan to extend a helping hand to the auto industry. The rationale? You guessed it: "TOO BIG TO FAIL."

John McCain correctly labeled Barack Obama's "spread-the-wealth" tax philosophy as socialistic. And the most socialistic element of the next "New Deal" comes in the form of limiting the freedom to fail. The unspoken justification is the Marxist belief that technological progress automatically leads to the establishment of a more progressive social order. The natural next step: bureaucratic decisions stabilizing the market prices.

The unhealthy alliance of interventionist governments with obsolete industries and corporations threatens the stability of national economies. I grew up in Bulgaria under communism and continue to track what has happened to big organizations such as the Bulgarian metallurgical giant Kremikovtsi. Its smoking chimneys once were seen as symbols of ideological triumph. Market conditions have changed and now the only reasonable solution is liquidation. Unfortunately, what makes economic sense does not always bring about political advantages. Special treatment of Bulgaria's Big Industry keeps draining the economy of juices that are vitally needed in so many other areas.

Not only does state sponsorship waste scarce resources, it creates a vicious cycle affecting both body and soul. It breeds corruption, restricts competition, discourages experimentation, diminishes innovation, slows down productivity growth, and results in lower living standards and moral decay. Bureaucratic intrusions aimed at easing the pain from the process of creative destruction has contributed to the slow pace of transformation in post-socialist Bulgaria. And congressional bailouts in the United States aimed at reducing the suffering from the expected slowdown will only protract the healing process.

On more than one occasion during 2008, Washington went against the historic wisdom of its people. They accepted from the start the creative destruction of capitalism, suffering the short-run pains to reap the long-run prosperity. Economic freedom in the United States is a key ingredient of a package that has launched the former backward British colony to its current place of global supremacy. Today's "losers" happen to be well organized in industrial cartels and labor unions. They get connected with party elites and find ways to rig the political system in their favor. It has to stop. American and Bulgarian leaders would do best to discard the "too big to fail" arguments and let market participants either stand on their own feet or crumble.