Reprint of a post dated Monday, September 29, 2008
Do we want a command economy?
The most persuasive evidence that Barack Obama is unfit for the presidency is the frequency with which he deploys one phrase, "I will invest." The implication is inescapable. He plans to install a command economy. He will decide which path to the future is the right one.
This is not what the framers had in mind, nor is it the formula the United States has followed in building the world's mightiest economy.
The president did not tell the Wright brothers to build an airplane.
The president did not tell Thomas Edison to design a light bulb.
The president did not tell Henry Ford to build a car.
The president did not tell Jonas Salk to find a remedy for polio.
The president did not tell Babe Ruth to hit 60 home runs in a season.
Each of these pioneers saw a potential market and tried to accommodate it, confident that rewards would follow.
There have been many other pioneers, some driven by benevolent impulses, others by a desire to get rich. Some got lucky and stumbled across useful products while working on something else.
It is comonplace now, especially among leftists, to disparage wealth-seeking, but without it we wouldn't be where we are.
Paradoxically, it seems to be acceptable among leftists to stuff one's pockets if one is doing so in a government office. Executives of Fannie Mae hauled in tens of millions of dollars each in a few years, at times by cooking the books to inflate profits.
Where are the howls of outrage about this form of wealth-seeking?
In writing the constitution, the framers were influenced by the initial publication of Adam Smith's "The Wealth of Nations" in 1776. The book highlighted the role of free markets and laid the foundation for modern capitalism. Its principles are woven into the law of the land.
The book remains relevant today, as was pointed out by Robert Reich, secretary of Labor in the Clinton administration, who wrote this in an introduction: "Smith's mind ranged over issues as fresh and topical today as they were in the late 18th Century - jobs, wages, politics, government, trade, education, business and ethics."
Elections are, of course, free market principles applied to politics.
It is not hard to find examples of a command economy. Cuba is one. Zimbabwe is another. Russia was a superb example until its empire collapsed and it had to adapt to the modern competitive world.
As the empire teetered, Time sent correspondents to Russia to take the pulse of the people.
When asked to describe the Russian system, a blue-collar worker said, "We pretend to work and they pretend to pay us."
Posted by TheRightFieldLine at 9:10 AM
Labels: Adam Smith, economics, Obama, politics, U.S. constitution,
Update:
Eight months into his presidency, Obama has made good on my worst fears. Through legislation and executive actions he has demonstrated across-the-board contempt for free markets.
He seized control of General Motors and Chrysler, ram-rodded a $787 billion "stimulus" that is largely a gigantic pile of earmarks targeted for Democrat interest groups and has refused to even consider markets as an antidote to rising medical costs.
Through legislation, Obama could restore competition to the medical insurance industry by allowing companies to market their products across state lines. Instead, he has brushed the idea aside in favor of more government controls on medicine and medical insurance. One of his objectives is a new government insurance option, which could forego profits, operate at lower costs, and eventually drive private insurers out of business.
Even in authoritarian countries, such as China, however, free markets have important fans, and China now is likely to deprive Obama of one of his most prized objectives.
Taking advantage of low production costs, China has become a trading giant and is regularly adding new coal-fired power plants to its industrial base. China rejects any suggestion that it damage its competetive advantage by assessing a tax on carbon emissions.
In Washington, a cap and trade scheme that would impose such a carbon tax has been passed by the House and is pending before the Senate. If Obama continues to push the cap and trade bill, and the Senate goes along, the U.S. government will have handed the Chinese a significant price advantage in international markets, and U.S. companies will take another hit.
My bet: markets will prevail. Obama will be deprived of at least one of his two must-pass bills. The other must pass bill, an overhaul of health care, remains on life support. The voter market does not like the seemingly inevitable rationing of health care under the reform proposal.
Showing posts with label command economics. Show all posts
Showing posts with label command economics. Show all posts
Sunday, September 27, 2009
Friday, May 8, 2009
A preening fascist sets out to destroy capitalism, finds willing allies among failed MI politicians
"Our story begins with the slow downfall of Chrysler, which succumbed to bankruptcy after experiencing a steep sales decline of 48 percent in one year. During its slide, Chrysler borrowed money from lenders and in return signed a contract promising that as so-called senior creditors, they'd get paid before anyone else if the company went under.
These creditors, by the way, represent something of a cross-section of America: the University of Kentucky, Kraft Foods' retirement fund, the Bill and Melinda Gates Foundation, pension funds, teachers' credit unions, and so on.
A normal bankruptcy filing would be straightforward. Senior creditors get paid 100 cents on the dollar. Everyone else gets in line.
But President Obama and his allies don't want that to happen. So they interfered on behalf of unions (the junior creditors) and publicly upbraided the senior creditors who were asserting their contractual rights and threatening to head to bankruptcy court.
Last week Mr. Obama lambasted them as "a small group of speculators" who "endanger Chrysler's future by refusing to sacrifice like everyone else."
Rep. John Dingell, a Michigan Democrat, sent reporters a statement calling the creditors "vultures" and "rouge hedge funds." Michigan Gov. Jennifer Granholm piled on, taking aim during her radio address at a 'few greedy hedge funds that didn't care how much pain the company's failure would have inflicted on families and communities everywhere.'"
http://www.cbsnews.com/stories/2009/05/07/politics/
otherpeoplesmoney/main4997900.shtml
These creditors, by the way, represent something of a cross-section of America: the University of Kentucky, Kraft Foods' retirement fund, the Bill and Melinda Gates Foundation, pension funds, teachers' credit unions, and so on.
A normal bankruptcy filing would be straightforward. Senior creditors get paid 100 cents on the dollar. Everyone else gets in line.
But President Obama and his allies don't want that to happen. So they interfered on behalf of unions (the junior creditors) and publicly upbraided the senior creditors who were asserting their contractual rights and threatening to head to bankruptcy court.
Last week Mr. Obama lambasted them as "a small group of speculators" who "endanger Chrysler's future by refusing to sacrifice like everyone else."
Rep. John Dingell, a Michigan Democrat, sent reporters a statement calling the creditors "vultures" and "rouge hedge funds." Michigan Gov. Jennifer Granholm piled on, taking aim during her radio address at a 'few greedy hedge funds that didn't care how much pain the company's failure would have inflicted on families and communities everywhere.'"
http://www.cbsnews.com/stories/2009/05/07/politics/
otherpeoplesmoney/main4997900.shtml
Sunday, April 12, 2009
George Will: What's next? Will government take money from Wal-Mart and give it to Kmart?
WASHINGTON-Rampant redistribution of wealth by government is now the norm. So is this: It inflames government's natural rapaciousness and subverts the rule of law. This degeneration of governance is illustrated by the Illinois Legislature's transfer of income from some disfavored riverboat casinos to racetracks.
Illinois has nine licensed riverboat casinos and five horse-racing tracks. In 2006, supposedly to "address the negative impact that riverboat gaming has had" on Illinois horse racing, the Legislature -- racing interests made huge contributions to Gov. Rod Blagojevich -- mandated a transfer of 3 percent of the gross receipts of the four most profitable casinos, those in the Chicago area, to the state's horse-racing tracks. This levy, subsequently extended to run until 2011, will confiscate substantially more than $100 million.
What is to prevent legislators from taking revenues from Wal-Mart and giving them to local retailers? Or from chain drugstores to local pharmacies? Not the tattered remnant of the Constitution's takings clause."
http://townhall.com/columnists/GeorgeWill/2009/04/12/
racing_past_the_constitution
Illinois has nine licensed riverboat casinos and five horse-racing tracks. In 2006, supposedly to "address the negative impact that riverboat gaming has had" on Illinois horse racing, the Legislature -- racing interests made huge contributions to Gov. Rod Blagojevich -- mandated a transfer of 3 percent of the gross receipts of the four most profitable casinos, those in the Chicago area, to the state's horse-racing tracks. This levy, subsequently extended to run until 2011, will confiscate substantially more than $100 million.
What is to prevent legislators from taking revenues from Wal-Mart and giving them to local retailers? Or from chain drugstores to local pharmacies? Not the tattered remnant of the Constitution's takings clause."
http://townhall.com/columnists/GeorgeWill/2009/04/12/
racing_past_the_constitution
Thursday, March 12, 2009
Obama's hyperbole reveals antimarket intentions
Barack Obama, the would-be central planner, unwittingly signaled Thursday that he intends to impose government controls on the American economy totally foreign to the blueprint of the founders.
He is, of course, doing it for us. He wants to get rid of those troubling ups and downs that have, time and again, caused upheavals in households, businesses and government bodies.
It is through those hiccups that the economy works out imbalances that inevitably result from millions of decisions made by families and businesses, each in pursuit of its own objectives. People decide what to buy. Businesses take account of what's selling and produce more of some goods and less of others. Then tastes change, and businesses wind up with unsold products.
In the late 1990s, the huge promise of computer technology resulted in a red-hot market for computer-related stocks, which rocketed to levels that could not be sustained by the actual performance of technology businesses. The bubble burst, and many investors lost money.
It was nothing more than free markets adjusting expectations to reality. It was the small price we paid for a free consumer-driven economy.
To Obama, however, such hiccups are dire and must be overcome. On Thursday, addressing a gathering of chief executives, Obama bemoaned the "endless cycle of bubble and bust," and said he would attempt to build a new foundation for future growth.
Translation: the Obama administration intends to wrest control of the economy from the hands of individuals, families and businesses. The current recession, Obama said, can't serve "as an excuse to keep ignoring the long-term threats to our prosperity."
That prosperity, of course, was brought about by the energizing potential of an economy that allows people from the most humble beginnings to prosper. Obama apparently believes we'd be better off with a government-run economy along the lines of Cuba or Zimbabwe.
This would be startling even in the absence of the obvious fact that the most dangerous recent threats to American prosperity have come from government. It was Democrats, during the Carter administration, who embarked on a decades-long social engineering campaign to expand home ownership, resulting in an erosion of lending standards that previously had required borrowers to have a record of credit-worthiness to obtain a mortgage.
It was government-sponsored entities, Fannie Mae and Freddie Mac, that facilitated this erosion by camouflaging risk and and elevating home mortgages to the level of big-time investments that flourished in world financial markets. The result was a huge bubble in the U.S.housing market.
The Bush administration not only went along with the boom, but pumped it up. During the Bush years, use of the Carter-era Community Reinvestment Act actually increased. Meanwhile, the Federal Reserve system kept interest rates too low for too long, further inflating the housing market, while the Securities and Exchange Commission somehow failed to detect danger in the high-flying mortgage-based securities.
Alan Greenspan, who was chairman of the Federal Reserve at the time, recently admitted as much, saying he had over-estimated the ability of private corporations to look after their vital interests, including survival. He forgot to mention that elected officials and bureaucrats, along with pressure groups such as ACORN, had been pummeling the mortgage market for decades in service of their social engineering project.
We no longer had a free market in mortgages. We had a government-driven market through which Democrat politicians obtained favorable mortgages for themselves, and in some cases became millionaires.
Now we have a government-made recession, which Obama is falsely attributing to free market excesses and is using to justify new government intrusions in the economy. This is in keeping with his "stimulus" package, whose premise is that government, rather than rank and file taxpayers, will spend newfound money to the best effect.
Less than half of the stimulus is allocated to tax cuts, which leave spending decisiions in the hands of individuals and families. Most of the money will be spent by government. Will bridges to nowhere become a common feature of the American landscape? Will we have more Big Digs of the sort pioneered in Boston?
How long will it take for the American economy to rise to the inspiring level manifested by Cuba and Zimbabwe?
He is, of course, doing it for us. He wants to get rid of those troubling ups and downs that have, time and again, caused upheavals in households, businesses and government bodies.
It is through those hiccups that the economy works out imbalances that inevitably result from millions of decisions made by families and businesses, each in pursuit of its own objectives. People decide what to buy. Businesses take account of what's selling and produce more of some goods and less of others. Then tastes change, and businesses wind up with unsold products.
In the late 1990s, the huge promise of computer technology resulted in a red-hot market for computer-related stocks, which rocketed to levels that could not be sustained by the actual performance of technology businesses. The bubble burst, and many investors lost money.
It was nothing more than free markets adjusting expectations to reality. It was the small price we paid for a free consumer-driven economy.
To Obama, however, such hiccups are dire and must be overcome. On Thursday, addressing a gathering of chief executives, Obama bemoaned the "endless cycle of bubble and bust," and said he would attempt to build a new foundation for future growth.
Translation: the Obama administration intends to wrest control of the economy from the hands of individuals, families and businesses. The current recession, Obama said, can't serve "as an excuse to keep ignoring the long-term threats to our prosperity."
That prosperity, of course, was brought about by the energizing potential of an economy that allows people from the most humble beginnings to prosper. Obama apparently believes we'd be better off with a government-run economy along the lines of Cuba or Zimbabwe.
This would be startling even in the absence of the obvious fact that the most dangerous recent threats to American prosperity have come from government. It was Democrats, during the Carter administration, who embarked on a decades-long social engineering campaign to expand home ownership, resulting in an erosion of lending standards that previously had required borrowers to have a record of credit-worthiness to obtain a mortgage.
It was government-sponsored entities, Fannie Mae and Freddie Mac, that facilitated this erosion by camouflaging risk and and elevating home mortgages to the level of big-time investments that flourished in world financial markets. The result was a huge bubble in the U.S.housing market.
The Bush administration not only went along with the boom, but pumped it up. During the Bush years, use of the Carter-era Community Reinvestment Act actually increased. Meanwhile, the Federal Reserve system kept interest rates too low for too long, further inflating the housing market, while the Securities and Exchange Commission somehow failed to detect danger in the high-flying mortgage-based securities.
Alan Greenspan, who was chairman of the Federal Reserve at the time, recently admitted as much, saying he had over-estimated the ability of private corporations to look after their vital interests, including survival. He forgot to mention that elected officials and bureaucrats, along with pressure groups such as ACORN, had been pummeling the mortgage market for decades in service of their social engineering project.
We no longer had a free market in mortgages. We had a government-driven market through which Democrat politicians obtained favorable mortgages for themselves, and in some cases became millionaires.
Now we have a government-made recession, which Obama is falsely attributing to free market excesses and is using to justify new government intrusions in the economy. This is in keeping with his "stimulus" package, whose premise is that government, rather than rank and file taxpayers, will spend newfound money to the best effect.
Less than half of the stimulus is allocated to tax cuts, which leave spending decisiions in the hands of individuals and families. Most of the money will be spent by government. Will bridges to nowhere become a common feature of the American landscape? Will we have more Big Digs of the sort pioneered in Boston?
How long will it take for the American economy to rise to the inspiring level manifested by Cuba and Zimbabwe?
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