As it becomes clear that the current economic downturn was substantially created (intentionally or otherwise) by, and has been managed for the benefit of (intentionally), Goldman-Sachs and other big corporate players, it’s worthwhile to look at the nature of “bubbles” and how they are created.

Modern society is characterized by two conflicting attitudes on the subject of economic growth. The “capitalist” right holds it up as an unmitigated good which improves the lives of all it touches, the “socialist” left as an unmitigated bad which threatens the health of the planet and accelerates alienation of the worker from that which he produces.

The market anarchist, it seems, is the moderate in the mix. We who aim for the stateless society recognize that “economic growth” comes in two varieties — natural and artificial — and that the variety matters.

The “growth” which the right touts and the left decries is artificial: Driven by the admixture of state power and corporate influence, it continually skews the operations of the market away from their natural balance, and uses the resulting problems as fuel for further skewing.

For example, take the artifice of “limited liability” — a privilege bestowed upon corporations by state fiat. In a free market, the owners of an enterprise would shoulder 100% of any liability that enterprise might incur. In the state-regulated market, the owners’ liability is limited to only those assets actually invested in the enterprise itself.

One obvious effect of this state-bestowed privilege is that it reduces incentives for corporations to act responsibly, by artificially reducing the possible penalties for not doing so.

A secondary, less often noticed, effect is that it frees up capital — capital which, absent the privilege, might have been set aside by by its owners in a “rainy day liability” fund or used to purchase insurance against possible liabilities — for growth. Or, to put a finer point on it, this state-bestowed privilege subsidies growth which would not have occurred in a free market.

The response of the political “right” to this phenomenon is that growth is inherently good and that the privilege is therefore a good thing. The response of the political “left” is that growth is inherently bad … but that the solution to it is for the state to somehow magically shake itself free of the influence of privileged elites while continuing to dispose of the powers which those elites crave control of.

The anarchist response is that “natural” growth — growth which takes place as an honest side effect of the free exchange of goods and services — is a good thing which carries with it the solutions to any problems it may cause. In other words, the problem is not growth per se, but growth as a distortion of the market created by state/corporate collusion; and the solution to that problem is to remove the state from the equation entirely.

As we look back at the factors which led to the current recession (or possibly depression — some smart people say it’s already the latter), it should become obvious that the things which have happened couldn’t have happened without state intervention extending far beyond “limited liability” and into the notion that the state has everyone’s back and is ready to “bail out” any and every boat which might capsize on the rising tide engineered to lift it.

Until it became clear that a collapse was imminent, we never heard about a “housing bubble.” What we heard about was “growth” which the “right” loved and which the “left” bemoaned but in some aspects (housing for “the poor”) tolerated and promoted.

The “housing bubble” was created by government, from end to end and in its entirety. Fannie Mae and Freddie Mac would never have survived, let alone become major players, in a free market. The basis of their credibility was their status as government-connected firms. Nor would banks and mortgage companies have extended themselves into the risky sub-prime market in the way that they did had they not expected the state to rescue them if their fortunes went south. Finally, big investors would never have bought into shady debt-as-asset “derivatives” had those securities not carried government regulatory seals of approval.

For that matter, the individual home buyer would have generally been more careful and less inclined to commit himself to a 20- to 30-year payment regime had his purchase not been subsidized with mortgage interest deduction from his taxes, guaranteed by FHA, or otherwise “talked up” by government as the thing to do.

State-subsidized “growth” really is growth — of the cancerous variety.