An Entire Economy Of (Ahem) Shots In The Dark

Our labor force participation rate is such that employment, for all the jabbering about the current ~7% rate, is scarcely better than it was in 2009.  Investment is still glacial (except in the stock market – which is not the same as “investing in the economy”. 

Kevin Williamson at the National Review may be the single best writer in America on the subject of government and its effect on the nation, the economy, and The People.  He combines off-handed humor with blistering, airtight analysis. 

And as such, I highly recommend you read his New Years’ wrapup, “A Year of Fear“.  The whole thing is worth reading.  But I’m pulling out the conclusion, about the effect  uncertainty has in crippling an economy. 

“But wait”, lefties say; “my pension fund is going great guns!  The Dow is over 15,000!”

Yeah, it is.  And that’s a little like seeing your car idling at 10,000 RPM and assuming that’s because it’s raring to go. 

The conclusion is the big beef, here; I’m adding emphasis:

The Obama administration has achieved a special distinction here: Investors are faced with considerable uncertainty vis-à-vis how it might interpret rules as compared with the Bush or Clinton administrations — and also about how it might interpret rules as compared with the Obama administration the day before yesterday. Now you see a mandate, now you don’t. And as bad as it is in 2013, the seething hostility of Elizabeth Warren is ascendant on the left, a fact that offers very little encouragement to entrepreneurs and investors considering illiquid, long-term positions — things like factories, stores, and buildings, as opposed to easily liquidated investments in financial instruments.

Another common lefty complaint?  “Companies are too focused on profits!”

Many on the left complain about the “financialization” of the U.S. economy, while unwittingly helping to encourage that very phenomenon. Given a choice between dividing up his investments between a couple of hedge funds and financial firms or locking it up for ten years in an assembly line in Indiana, a sane man will consider the question of uncertainty and predictability. And under current conditions, the assembly line is a risky bet.

Perhaps 2014 will be the year in which we learn the value of predictability. Who can say?

Read the whole thing. 

Better yet, get an Obama supporter to read it.

10 thoughts on “An Entire Economy Of (Ahem) Shots In The Dark

  1. Market orders are complex and organic; political orders are relatively crude and artificial. Obamacare, to take the year’s most dramatic example, is an attempt to impose a simpleton order on a much more sophisticated order, like trying to make microchips with cookie cutters. Such attempts generally end badly, succeeding only in bringing chaos out of order. Friedrich Hayek described the process in The Road to Serfdom: The plan never pans out the way it was expected to, and the planners are obliged by political necessity to take ever more arbitrary and authoritarian steps in order to give the appearance of success to an enterprise that cannot in fact achieve its goals.

  2. TDS, you mean like when religious organizations give pushback on having to give free birth control and that sort of thing to their employees, Obama just orders insurance companies to “give” “free” items to those employees.

  3. I’ve yet to understand why birth control items are considered part of a basic health maintenance program. While they prevent unwanted pregnancy (which certainly has physical ramifications) with fair reliability, those who wish to prevent one may do so with 100% reliability without them.

    Except, perhaps for that wild group, the Little Sisters of the Poor.

  4. Hayek is somewhat dated, but just as Marx’s dated criticism of capitalism still rings true for many, so do Hayek’s prescriptions of freedom and free markets. The Road to Serfdom is not a recipe for running a society, any more than Das Capital was. Both are fundamentally criticisms of a certain style and set of assumptions about government, markets and capitalism, particularly government’s influence on economic life. For someone who wishes to understand the 20th century (and ongoing) debate on the role of government in managing the economy, those two books are still admirable endpoints, from which one can start to fill in the complicated ground in between.

    Adam Smith’s key insight was that more good has been done in the service of greed than has ever even been dreamt of in the service of altruism. The invisible hand of the market is its self-organizing nature. People who freely exchange goods and services do so because both parties benefit. There is a need for altruistic good deeds in our society, just as there are tasks best carried out by a regulated monopoly, but these are secondary forces which correct for the imperfections of the market, not a replacement for that market. Governments that do not take care to make sure the market is producing excess wealth through unfettered commerce generally find that there is little wealth left for altruism, or even basic governance.

  5. In short, they will need to rediscover Adam Smith, and abandon Ayn Rand. Smith, after all, was extremely clear that government regulation was necessary for capitalism to function effectively.

  6. Two things: I can’t say I’m totally up on it, but the real brain-iac libertarians don’t care much for Ayn Rand, from what I can see.

    Ann Coulter is always making a big deal about the distinction between a Richard Epstein style libertarian and the ones that you hear more about in the news like Ron Paul and the pro gay marriage pot legal-izers. Something to think about. Epstien has a very good podcast, too.

  7. Another thing driving companies to being financially driven is Sarbanes-Oxley. If the CEO has to sign the financials on pain of imprisonment, it sure helps to be a finance guy yourself so you can understand what you’re signing and keep an eye on the accountants. My company’s executives speak financialese so fluently, I’m pretty sure they don’t even realize what they’re doing.

  8. Sarbanes-Oxley, Dodd-Frank, Volker rule are all bad according to the people I follow. The financial world isn’t any safer, and it just gives the big boys an edge because it’s so complex.

    Risk up, GDP DOWN.

  9. Regarding Emery’s comment, Hayek isn’t dated, but rather is more appropriate than ever. He predicts the disaster of Obamacare pretty well, after all. You simply cannot run a market that big. Smith’s commentary on reasonable regulation does not apply here because….suing nuns to force them to pay for the Pill hardly qualifies as reasonable. No?

    FedSux: yup, and I’d argue that one of the big reasons the economy is slower is because you weight down every company with finance guys–and at the same time push out the guys whose strength is that company’s line of business. Nothing against finance guys, but I think any honest men among them would have to admit that this is hardly an ideal situation.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.