119th Edition
Markets and the purpose of American Politics
I have been rather amused by the recent tit for tat between Vice President Vance and Matthew Hennessey, a columnist for the Wall Street Journal. The issue they are arguing over is not really the correct definition of the market, but what Government’s proper role is related to the market and economy. That issue is at the center of political debate and will be until the end of time. Oh, where to begin…
VP Vance made the following statement in his recent rebuttal – “One needn’t look far in American history for examples of lawmakers wielding the market to the betterment of our people. President Franklin Roosevelt famously directed the U.S. automotive industry to build the Arsenal of Democracy in World War II.” What he left out is that the Arsenal of Democracy was created because Roosevelt had the sense not to micromanage industry but to trust the business leaders across multiple industries to produce what was necessary. He essentially asked them to help and then got out of their way. It is telling that even when the Vice President tried to cherry pick one instance in which the government wielded the market to the betterment of our people, he whiffed.
In another example, Dwight Eisenhower called Andrew Higgins, “the man who won the war for us.” Higgins built the landing craft that the Allies used to storm the beaches of Normandy on D-Day. Again, it was business innovation and industrial expertise that rose to the occasion, not government wielding.
Next, Vance contends that “everyday our lawmakers are faced with choices for how best to improve the lives of our citizens.” Perhaps I am too cynical, but the sentence should read – how best to remain in power and build their own personal wealth. Even for those legislators who somehow try to do their best to work in the people’s best interest, their record is decidedly lackluster. Inefficiency, corruption, and special interests have tainted the process. The economy would be much more vibrant over the long term if the government stuck to its constitutional role and refrained from trying to manage the economy.
Meanwhile, Mr. Hennessey states that, “Markets whether for cheap consumer goods or government bonds, can’t be bullied into compliance with a political agenda.” I think he’s wrong here. It’s called Crony Capitalism, which is what we have today. Big business, with their deep-pocketed lobbyists, are constantly trying to persuade government bureaucrats to pass legislation favorable to their interests. At the same time, companies change their strategies to garner government backing financially and through future legislation. A good recent example is GM’s abrupt switch to electronic vehicles despite knowing the economics of it made no sense. Demand in the automotive market remains overwhelmingly in the favor of gasoline powered vehicles. GM’s CEO, Mary Barra, was trying to be politically correct instead of economically responsible.
Having said all this, there is a role for government in our economy and markets. But it is a limited one. Government is there to uphold property rights, the rule of law, and to adjudicate legal disputes. It is not there to determine winners and losers, nor to create artificial demand, nor is it there to bail out business failures of any size in any industry. Entrepreneurialism and innovation thrive when government plays a limited role. Elitists and bureaucrats believe they can make better decisions than the rest of us. They are decidedly wrong.
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Michael Kayes
*These views are my personal opinions and are not the viewpoints of any company or organization.