For Ballot Issue No. 2

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For Ballot Issue No. 2 LET’S GET BACK TO REALITY, FOLKS B Y T H E A R K A N S A S D E M O C R A T -G A Z E T T E Thursday, October 7, 2010

LITTLE ROCK — YOU’VE heard of children’s imaginary friends. Adults have a powerful imagination, too. Just look at the wonderful menagerie of fabled critters that roamed the earth in medieval time: centaurs and dragons and mermaids and everyone’s favorite, the lovely unicorn no one could catch because, alas, it didn’t exist. As any newspaperman knows, the smallest mundane details have this annoying way of ruining the best stories. Ah, those were the days, circa A.D. 1000. All kinds of wondrous beasts roamed the earth- basilisks and manticores and the amphisbaena, the hoop snake with two heads, one on each end. This twoheaded wonder could put one inside the other when approaching a hill and just roll down it instead of crawling. A few are still told of in the Ozarks. And such stories retain their appeal to kids of all ages. Back in medieval times, it scarcely mattered that no one had ever actually seen such creatures, though authors eager to produce a best-seller might claim they had. For example, Sir John Mandeville’s stories of giants on faraway isles who raised giant sheep to match were quite popular. These legendary monsters always inhabited distant if not mythical places so Sir John could tell his tales without fear of being fact-checked. Ah, those were the days! Today’s wilder bloggers and makers of docudramas would have fit in perfectly. But these days, the world is full of spoilsports demanding facts rather than fancy. It’s quite a step down. TO MATCH its legendary animal kingdom, the Middle Ages also had cherished beliefs about the economy, such as it was back then.Many of those ideas survive to this day, and might still be widely accepted by economists if a dour Scotsman like Adam Smith and his Wealth of Nations hadn’t come along to spoil the fun. He pretty much exploded the old assumption that a nation’s wealth is only a matter of how much gold it can accumulate. We still have some goldbugs with us. It should not surprise to learn that Alan Greenspan was one in his youthful, Ayn Rand stage before he grew up, achieved guruhood and invented fables of his own, many of which were taken quite seriously before the latest financial panic debunked them, as financial panics will. Yet some medieval ideas are so well rooted in the mind of the species that they don’t just persist but flourish in these, our oh-so-advanced, times. Like the almost instinctive belief in a Just Pricethat there is one ideal price that can be decreed for every commodity and, even more fabulous, that governments, or at least guilds, can set it and enforce it. To heck with the market-what can it know? And yet, unlike hoop snakes and mermaids, the market exists, and no command economy seems able to abolish it, as the commissars discovered in the now defunct Soviet Union. For a beautifully written account of economic ideas in the Middle Ages and how they came acropper, R. H. Tawney’s Religion and the Rise of Capitalism is hard to beat. His sympathy for the unicorns of economic beliefs is undisguised and even winning, for who in his heart of child’s heart, doesn’t want to believe in unicorns, the Just Price, and that interest rates can be set by fiat? Oh, the harm that the most eloquent and best-intentioned of men have wrought in this never easy to fathom world! Professor Tawney, the patron saint of Britain’s Labour Party, was a kind of Christian Marxist poet who had everything going for him except a grip on the economic realities, and how Homo Economicus actually operates. Professor Tawney’s account of the medieval church’s attempts to control, if not bar, interest on loans goes back to biblical times, at least, and the surest result over the long ages has been an ever more modern economy’s ingenious ways of getting around them.

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For Ballot Issue No. 2

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Time and again, such ways have had to be invented by the leading thinkers of each era to keep the economy going-from talmudic sages like Hillel, who had to deal with a Jubilee Year in which all economic activity was just supposed to stop, to puzzled chairmen of the Fed like Ben Bernanke. The more things change . . . . Arkansas, too, has played this fanciful, futile game by writing a limit on interest rates not just into law but into its basic law, such as it is in this state-the ever longer and more convoluted state constitution (1874- ). With the usual result: Capital tends to dry up when an unrealistically low limit on interest rates discourages lenders, driving them elsewhere in search of higher returns. Meanwhile, good people grow increasingly desperate for credit, and resort to high-interest credit cards instead of going to their local, once-friendly bank. Governments local and state find themselves unable to finance needed projects at reasonable rates. All in all, such restrictions on interest don’t make for best of worlds. ALL OF which is why the ballot this election season includes Issue No. 2, which is favored by businessmen, bankers, the state’s chamber of commerce, and just about everybody with an entrepreneurial rather than medieval cast of mind when it comes to economics. Because the way loans are now “regulated,’’ the desperate are driven to patronize loan sharks legal and illegal, whether they call themselves credit card companies or payday lenders. Not a good system. Indeed, it’s not much of a system at all. It’s more of a way of getting around outdated laws that no longer work. It happens every time unrealistic laws are imposed on the flow of credit. Money has this way of just going where it wants to go despite man’s best efforts to dam it up-much like water, as any farmer with a flooding problem can tell you. And not all the Miniver Cheevies in the world sighing for medieval grace can impose their will on it. The constitutional amendment proposed in Ballot Issue No. 2 would repeal the now archaic cap on the interest rates of government bonds and loans, and let the Legislature change the limit to suit the all too unpredictable economic times. (If only it can get past the inevitable, now pending court challenge that that even the best proposals attract.) At the same time, it preserves the 17 percent cap on interest rates for consumer loans. If this change becomes law, it would encourage both private and public investment in Arkansas, which needs both kinds. Last time we checked, Arkansas has the most severe restrictions on interest rates in the Union, which can be good news only to other, competing states.The natural enough result is that, in the Natural State, loans are hard to come by these days. For the legal rates are far below what the market will bring, and lenders are either hoarding capital or investing where the returns are better. It can prove expensive, being stuck in medieval times. No wonder the state’s economy, while not struggling, isn’t thriving, either. When the time comes to cast their ballots this election season, voters with a sense of reality can remove this crippling barrier by voting For Issue No. 2. Editorial, Pages 16 on 10/07/2010

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