ELIMINATE THE MIDDLEMAN
William Shepherd

American Thinker
July 23 2008
WA

Once again villainous speculators have emerged as a scapegoat. There’s
a lot of history to this practice.

Those who are familiar with the work of economist and social
commentator Thomas Sowell, if asked, could easily find the common link
between groups as diverse as Jews, the overseas Chinese, Armenians,
and the Ibos. They are all middleman minorities. Such groups have
served as segregated components of a larger society who also provide
essential economic services, typically somewhere between production
and consumption, that benefit the areas they live in.

For example, Jews, the most prominent historical example in the
Western world, engaged in usury during the Middle Ages. They were
exempt from canon law that proscribed lending money at interest by
members of the Roman Catholic Church [1]. The Lebanese, in several
nations, grew to prominence in the clothing trade by starting as
bottom level peddlers, and from there working to form enduring brands
such as Haggar and Farah. While peddling was not prohibited to the
native populations in the same way as usury in the earlier example,
it was a harsh enough trade to be left to immigrants.

Middleman minorities, as a result of their hard earned success and
segregation, have also been a victim of horrendous violence. Pogroms,
The Holocaust, and other forms of Anti-Semitism are well known to
anyone with even a modicum of historical awareness. Lesser known
examples are legion. The genocide of Armenians by Ottoman Turks during
WWI, the massacre of Chinese migrants in Saigon in 1782, and the mass
slaughter of Ibos during the Nigerian civil war are just a few of the
examples of how political demagoguery and economic ignorance can be
positively catastrophic. Cowardly leaders, such as Sultan Abdul Hamid
II during the Hamidian Massacres, have used their peoples’ prejudices
and lack of economic literacy — primarily originating in the physical
fallacy [2] — to displace ire that they should rightfully bear.

Now, let’s look at another group and see if we can discover their
common link: Brazilian President Silva, the airline industry and Bill
O’Reilly [3]. Guessed it yet? That’s right, they blame the current
surge of oil prices on speculators.

And while the history of middleman minorities may seem unrelated to the
current witch hunt for oil speculators we are currently experiencing,
their overlap is substantial. More to the point, looking at the
latter in the light of the former goes a long way towards proving
George Santanya’s classic admonition that "Those who cannot remember
the past are condemned to repeat it."

The follies we are repeating are twofold. First, those in power are
using a vital economic group, in this case speculators, as a scapegoat
for their own ineptitude and cowardice. CNN reports that bills are
floating around Congress that would regulate oil speculators.

Meanwhile, the repeal of drilling bans, which are in accord with one
of the basic principles of microeconomics — as supply increases and
demand remains constant prices drop — has been stifled by Senate
Majority Leader Harry Reid, who fears losing a floor vote. But
hey, maybe we should allow China to tap all the oil in the Gulf of
Mexico. They were there first after all.

The second point, which dovetails with the first, is the exploitation
of economic ignorance. Claptrap about the evils of speculation
only gains traction because the American people as a group simply
lack knowledge of basic economics. The fact that the American Left,
either by design or misinformation, promulgates debunked economic
theory is sad. The fact that the average American has a better chance
of naming all of the Seven Dwarfs than defining the word "arbitrage"
is tragic. As such, the stability that speculators add to the crude
market is never brought to the attention of the public. Likewise the
economic benefit of stockpiling certain commodities while supplies
are heavy to ward off shortages in less plentiful periods.

Here is the point in the punditry where I’m supposed to
really seethe and lambaste certain politicians by name. But I
won’t. Because I can’t. Truth is, we are to blame for this, us and
no one else. Politicians could not exploit our fears if we knew the
rudiments of free enterprise.

Granted, I don’t fear for the safety of speculators. They are far
better off than even the luckiest of middleman minorities. On the
other hand, they should be protected by hate crime laws jut to be on
the safe side.

There is one final point we need to be cognizant of in this detour
through history. Middleman minorities are not the only group who
suffer as a result of persecution. The persecutors often hurt
themselves. After all, if you suppress a group that performs a
valuable economic activity, you lose the benefit of that activity. If
we actually allow Congress to further meddle in the economy, we will
loose the benefit of the free market. And in the end, the free market
alone will solve the energy crisis.

While this piece is heavily indebted to, and indeed, would be
impossible without, the work of the good Dr. Sowell, the opinions
herein should in no way be viewed as enjoying his endorsement or as
being representative of his views.

1. "The Church, basing itself upon a mistranslation of the text Luke
vi. 35 interpreted by the Vulgate "Mutuum date, nihil inde sperantes,"
but really meaning "lend, never despairing" (see T. Reinach in
"R. E. J." xx. 147), declared any extra return upon a loan as against
the divine law, and this prevented any mercantile use of capital by
pious Christians. "

2. "Not only Marxism or socialism in general, but a wide variety of
other revolutionary or reform movements incorporate a belief that
those who directly handle physical objects are ‘really’ the producers
of economic benefits." Knowledge and Decisions, pg. 69, Thomas Sowell.