Tom Coyne, writing for the Louisville Courier Journal, had an article covering President Obama’s visit to Elkhart. One quote, in particular, stood out to me. Speaking of the stimulus plan:
“I don’t think it’s going to help enough of the right people,” said Sue Wyatt, 64, of Bristol, who works as a hotel manager and a hair stylist. “I think it’s going to give more to the rich and a lot less to the poor.”
It’s hard to blame her for this perception, given the talk of the TARP funds pouring into the hands of, by and large, the same bankers who were instrumental in getting us into this mess; funds being used to subsidize their lavish lifestyles — lavish, in particular, I would suppose compared to a woman in Bristol holding down two jobs. The funds also are pouring into the hands of companies who simply can’t obtain this stunning results without paying their CEOs more than $500,000 per year.
Negative perception of government is inevitable, I suppose. First, it is a very large organization, and with such organizations, the failures are going to be noticed more than the successes. Second, you have at least one of the major parties proclaiming that government is the problem and often seeming dead set on proving that very thing after getting elected.
Going unnoticed, however, are all the ways in which government works and makes our lives better. Notice those property rights you have? Like them? Me too. But, here is the thing. There are no property rights without government. Instead of property rights, without government, you have property only so long as you can hold it by force. I’ve used this one often in the past, but only because it gets overlooked: without government, you have a Hobbesian state of nature, the war of all-against-all leading to lives that are solitary, poor, nasty, brutish, and short. Government courts help us enforce contracts and other property rights. Government employees with guns will help enforce court orders if not complied with “voluntarily.” Those same government employees with guns will help you out if someone is trying to take your stuff by force. The point being that the “no government” crowd often seems delusional in that they just think people will magically refrain from stealing your stuff. In fact, it wouldn’t even be “stealing” inasmuch as there would be no law prohibiting the strongest from acquiring as much stuff as they could until such time as a bigger, better armed mob came along to take it from them.
Government does other fundamental things such as regulating weights and measures, organizing and maintaining drainage for a jurisdiction, maintains the roads, maintains traffic controls, clears the snow, takes away the trash, defends the country, helps keep the air and water clean, provides for a minimum of workplace safety, regulates the currency, provides for a creator’s monopoly on intellectual property — just to name a few off the top of my head.
This is not to say that government is a universal panacea — but neither is it the universal toxin we seem to hear about from some quarters. For those who, however grudgingly, acknowledge that government can do some good — we’re now just haggling over the price. How much government is good and why?
I’ll have to leave my rant here. I had a notion to forge on into some discussion of the New Deal and how it made the lives of ordinary Americans better than they had it before FDR and how a certain contingent of high society still hates FDR for committing treason against his class. But, speaking of property rights has reminded me that I have to head to work and try to acquire some of my own. Maybe later.
How much government, indeed, and what price, indeed.
Again, if borrow-and-spend was the problem before Obama was elected, why is borrow-and-spend now the solution?
That might, just might, be where some of the doubt lies.
By the way- the ‘no government’ crowd are the anarchists. I don’t know any myself. Do you know any?
Part of the issue is what the money is being spent on. If it’s being spent to deliver pallets of money to disappear in Iraq, that’s not much help. If it’s going into the sucking chest wound of a credit default swap balance sheet, that probably doesn’t help a lot either. If it’s going to improve land that makes that land economically productive, that’s a little better. If it’s going into technological R&D, that probably helps more as well.
As to the “no government” crowd, it’s kind of hard to divide the “government is bad” people into subsets of “government is all bad” versus “government is only kind of bad” since the latter group doesn’t often seem to acknowledge that we’d be well and truly screwed without government.
With the new “stimulus” (LOL!), it’s six of one and half dozen of another for Ms. Wyatt. Now the targets are connected people in the middle and upper-middle income classes. The Dems are better at the rhetoric, but it’s a canard.
Aside from a few anachists, everyone agrees with your points about limited govt. But govt has extended far, far beyond that in terms of scope and size. Such conflation is not helpful…
Doug –
Those men with guns also ensure that you make your contribution to the ‘stimulus’ package.
That will be combined with printing money to the extent that our currency will be inflated, reducing the value of any of your cash holdings – and your cash income.
This is what I expect – although I’d pay money to be wrong about it.
Government does not create wealth, any more than referees create football games.
I’m not sure why this is a necessary truth. Why can a corporation create wealth where a government can’t? In both cases, at the end of the day, it’s a bunch of people exerting effort in various ways. If, for example, government uses tax money to have its employees do a bunch of R&D and invents a satellite or the Internet or something and then sells or licenses these things, seems to me like it has created wealth.
In your example, though, the government has stopped acting as such.
Having the government as an economic actor tends to distort things.
For example, a government body could also create wealth by operating a McDonalds franchise – or a law practice.
But are these proper functions of government?
Well, now we’re talking about a different thing — not an inappropriate question, at all, just different. Rather than “government doesn’t create wealth” it sounds like we’re really saying “government shouldn’t create wealth.” More prescriptive than descriptive.
Doug, don’t try to reason with losertarian greedheads.
As the saying goes, “Never argue with an idiot – they’ll pull you down to their level and beat you with experience.”
To me, this felt like a friendly discussion more than an argument. I don’t expect to change a lot of minds — at least not in the immediate case, but I can sharpen my own thinking and come to recognize where opposing thought is strong and where it is not.
My theory is that these kinds of discussions almost never result in an immediate about face. But, 10 discussions down the road, some sort of intellectual osmosis may have occurred where some give and take has taken place.
(And my preferred variation on your “don’t argue with an idiot” quip is “don’t wrestle with a pig – you’ll get muddy, and the pig will like it.”)
Govt can “create” wealth– or more precisely, facilitate the creation of wealth– by providing a friendly environment for productive private to occur. Beyond that, it may have occasion here and there to deal with the few areas where markets struggle (e.g., pollution).
Once it moves into the redistributive realm, it often gets credit for “creation”– and in a narrow sense that’s true. But since it relies on coercion to achieve its goals, the destruction will outweigh the creation, on net.
Maybe that’s worth it on occasion (to some/many people), but we shouldn’t fool ourselves into thinking that govt will create something out of nothing.
Where in these categories would you put the Internet and other technical inventions that have been by-products of government activity?
Hi Doug,
Your post reminds me of my all-time-fav Monty Phython big — the ‘what have the Romans ever done for us – [YouTube link]‘ routine in the Life of Brian.
Doug –
You raise a good point, and I accept your reformulation.
The question then becomes, I think:
Are activities that directly create wealth a proper function of government?
And, if the answer is ‘yes’, how do you decide which such activities should fall into the government sphere?
[And, did I kick Blue Fielder’s dog, or something? Terribly sorry, if so!]
infrastructure….some potential for govt intervention– in the face of its “public goods” aspect.
But, before we get too far afield, it’s worth nothing that this topic is largely unrelated to the stimulus package or the idea of stimulating an economy quickly…
eric –
Not sure I concur – don’t we want to stimulate the economy to create wealth? That’s a key purpose of economic activity, as I think of the term.
And I think infrastructure is a good example – government acting as a purchasing agent for public goods that no individual could buy, but which can be of great public benefit.
That puts the gov’t in the role of facilitator rather than creator of wealth – at its best, a role of great value in its own right.
what else aside from (good) infrastructure?
and infrastructure is a long-term pursuit, not especially effective as a short-term stimulus…
Just wanted to pass on a little story…
I took my 88 year old grandmother out for lunch the other day. While eating, we ran into another elderly gentleman we know. We began discussing the current economic crisis and eventually found our way to FDR and The New Deal.
He said he was very upset about certain politicians and their party trashing FDR.He said they had no idea what is was like prior to the New Deal. He had worked in the CCC camps and other WPA programs had helped his family.
He ended our conversation by making a recommendation about the Wall Street mess. He said “500,000 dollars is a lot of money. Anyone that says they can’t live on that much ought to be drug into the street and shot.”
Interesting account by Chris.My mother is also 88,and Ive heard many stories of the Depression and ww2 era. It’s true that the moment the last witness to history is dead,the ideologues of the day will begin to rewrite history in light of their own ideologies.
The point I would make is that without bad government of last 8 years,no way any black *liberal* Democrat could have been elected president.Political movements are reactions to what is perceived as extremism,imo.
In 30s there was a ‘real’ socialism movement building ,and it’s ironic that today any piece of legislation that isn’t laissez-faire economics is quickly labeled ‘socialism’ by the free-market-at-all-cost ideologues .Hopefully their day is past,and whatever evolves from now will be more common sense and show more light of day.
Socialism is a grass roots movement sprouting from the desperation of *no* government intervention,and socialism was a building goverment alternative movement building back in the 30s. A case could be made that FDR saved us from socialism..If re-destributing the wealth sounds positive to large numbers of people,then the government has already failed.
I wonder how appealing libertarianism would have been back in 1933 for those out of work?
Of course socialism can be imposed by dictators ,but so can capitalism( China).
These are just my views and I have no expertise in anything.That’s why I like Obama so much; he takes people like me seriously.
It’s important to note that the WPA and CCC at least seemed to help those who were involved with it. (And back to our earlier discussion: the WPA, as infrastructure, helped those beyond it as well.) But the New Deal did not help overall. Putting it another way, if there had been no New Deal, the economy would have recovered much more quickly– and so, Chris’ grandmother would likely have benefited in ways we can’t imagine.
And that’s part of the problem with govt activism. It gets credit for causation for many occasions when its efforts are only correlation. To be cynical, that is probably part of the current political calculus with the “stimulus”: the economy will recover soon and if we do something, we’ll get credit for fixing it.
To Lou’s post: Libertarianism was unattractive to Hoover (thus, his policies) and was unattractive to most people in 1933 (thus, support for FDR to do even more to intervene within the economy). Hoover is painted as laissez-faire (like Bush); both were avid interventionists.
“Capitalism can be imposed by dictators”? Can you explain that one to me?
Seems like there was a cycle of booms and crashes in the late 19th century/early 20th century with less government intervention in the economy during those days. From what I read, those booms and crashes have been smoothed out and haven’t been as severe following the Great Depression and government intervention. Correlation doesn’t equal causation, of course, but where there is correlation, it’s probably a good idea to take a look at causation. Were the economic policies of the late 19th century insufficiently laissez-faire? Or was the choppy economic cycle somehow not a necessary result of laissez-faire economic policies?
I’m not sure I agree with Mr. Schansbergs last comment. It has been argued by those more knowledgeable than I am that The New Deal did in fact improve the economy throughout the 1930s.
I know the GDP grew every year except during the brief period where the programs were scaled back on worries of increasing debt. The immediate recession which corresponded with New Deal roll-back seems to indicate that without the New Deal economic recovery would have taken longer or may not have come at all.
I can deal with Doug and Chris’ comments at the same time.
Before the Great Depression, we had considerably more laissez-faire– especially with respect to Macroeconomics and recessions. The result was deep and nasty but quick recessions.
Since the Great Depression, we’ve had mostly milder recessions of about the same length and frequency– with two exceptions. The early-1980s recovery from the 1970s inflation (so far, a worse situation than what we’ve endured recently)– and the current problems– are exceptions. Interestingly, both of those were (have been) marked by significant govt intervention.
The Great Depression is unique in its length and depth. It is also unique in terms of the level/extent of govt intervention. The correlation– and probably the causation– points to the extent of govt intervention during the 1930s under Hoover and FDR as the cause of the GD’s length.
There is no basis for arguing that the New Deal helped the macroeconomy. The easiest stat here is that unemployment was 19% (!) seven years into FDR’s policies. Putting it another way: if FDR had not intervened, do you think it would have taken more than a decade of phenomenal unemployment for the market to adjust?
If anything the recession of 1937 might indicate that the massive governmental interventions beginning in 1933 were not particularly helpful in actuality. Still, that recession was mitigated by the big rearmament programs that began in late 1939.
While there are still valid arguments as to the actual successes, or failures, of the New Deal, it remains obvious to me that there was a “perceived” success in that FDR was seen as being proactive in addressing the economic problems persisting from the 1929 stock market crash. History doesn’t currently smile upon the policies of Coolidge who certainly was perceived as being the “hands off” type of problem solver.
Perception may again be as important as actuality here.
Agreed with perceptions and reality, especially with FDR.
For the most part, Coolidge is ignored. And then people focus their blame on Hoover– but oddly, for being laissez-faire. The record says otherwise.
Also relevant to today is the key role of the Smoot-Hawley protectionist legislation in instigating the GD. Hopefully, we won’t duplicate that.
Agree.
‘Capitalism can be imposed by dictators’.’What does that mean’?’.. I was asked.
It had been a longstanding belief by many back in the 70s that should Communist China adopt capitalism ,that alone would bring China a freer, more open government enhancing individuial rights.
China seems to be very capitalistic now and has maintained the same repressive government it has always had. So capitalism is no more democratizing than socialism.It depends on the agenda of the ruler(s) and a despot is a despot,and an economic system is neutral. Socialism is very democratic in Scandanavian countries.
But when we hear conservative political pundits ponticate, socialism is always a repressive form of government and capitalism always is presented as the freeing of people. The current formulation of free market capitalism has kept many people poor and beholding by design,because that’s the only way the system can function.Capitalism can afford to pay out targeted perks,but not health insurance.
And didn’t capitalism flourish during Hitler’s National Socialism era?
So many people have only one definition ; socialism is always repressive and forced on us and capitalism is always liberating and free choice ;It’s a belief rather than an evaluation of a situation.
I realize my observations are superficial,but no more so than what passes today as *common knowledge.*
I agree that Smoot was bad policy, as are most tariffs. Reciprocal foreign relationships make them so.
I would make another point about FDR and the New Deal. Some of the programs,like social security, have proven to be very effective at maintaining basic levels of living for many citizens. Without SS, 50% of our retirees would live below the poverty line. I know conservatives and libertarians don’t like the program because it’s not a “market driven” idea. However, your “free market” (which is a complete illusion) doesn’t exist in a vacuum. It is part of a larger society that has priorities and obligations beyond private sector profits.
Lou,
Very true. Dr. Cliff Staten, one of my professors at IU Southeast, points out that China practices capitalism better than we do at the moment.
This is also one of the arguments behind allowing China to enter the top tier of nations in our current North/South international political alignment.
Chris, I agree with your assessment of SS. But we’re combining discussions: the long-term usefulness of X vs. its ability to get us out of a recession.
SS was one of two key policies that kicked the economy in the shorts in 1937-38. Both it and the minimum wage made it more expensive to hire workers– and surprise, firms hired fewer workers as a result.
China has become *more* capitalistic– and *more* free. But it is far from capitalistic or free. All indicators/measurements of such things concur.
Capitalism is certainly more freeing (as opposed to democratic per se) than socialism– in practice. I agree that there is no necessary relationship there– and there are some interesting semi-exceptions (the relative lack of freedom in Singapore)– but one would expect freedoms to be highly correlated.
We don’t have anything close to a formulation of free market capitalism in this country. It is a mix of capitalism, socialism, and mercantilism (the heart of the current “stimulus package”). All three systems can keep people poor– especially socialism and mercantilism.
Lou, do you mean in Germany? I would think not.
Socialsim, at least elements of it, can lift people and the country up. I point specifically to universal healthcare. Healthcare costs have done moreto damage domestic business thanany other factor. How many jobs potentially imported jobs will we lose to Canada because of healthcare costs?
I point more to Democratic socialism than the puritan form.
It’s difficult to say about health care– if you have the American experience in mind. It is has a healthy (or unhealthy) dose of socialism and mercantilism within it.
I tend to like the blend we currently have. I can debate where to add or subtract certain elements(like universal healthcare).
The people I tend to get angry with are those that insist on a pure version of capitalism, socialism, communism. Fundamentalists always fail to see the common sense violation behind their arguments, which is that no system is flawless. Blending the strengths of each system is probably the best way to create a system that actually functions.
Wow…very few people are happy with the status quo (or anything near it) in health care.
The “blend” vs. a pure version of X sounds nice. But a different analogy would be to talk about blending arsenic with your milk. The analogies simply beg the question and don’t take us very far.
The reference to fundies is true to some extent (there are fundies within each camp), but not all that helpful in moving the debate forward. “Fundy” implies a blind faith without reason– and implies that reason is available. (As such, the term can apply to topics like global warming and Evolution.) That’s certainly the case in economics and political economy. In my experience, there is far more “faith” in government– and a far larger gap between theory and practice in govt activism.
Sorry, I should have explained that a little more.
I am content with the current economic system. I may disagree on specific policy here and there (universal healthcare, structure of the stimulus) but I cannot imagine a wholesale shift towards a capitalist or socialist system.
I also cannot imagine government not acting when faced with a problem like we face today. It is clear to me that the private sector is unable to meet the needs of the public good without government prodding. I wish they were capable of doing what ought to be done with out threat of punishment.
Greed had proven too great a temptation to allow a true free market to exist.
Pure capitalism would probably work pretty well if people were disposable.
Are both of you thinking of anarchy– or limited government (to protect property rights, deal with pollution, provide national defense, etc.)?
Chris, how does greed manifest itself within political markets? Why do you find those outcomes more pleasing?
Doug, why do you find the outcomes of political markets– for the most marginal in our society– to be acceptable?
I don’t follow your question about political markets. But I should clarify my quip about capitalism and the disposability of people.
I suspect that an unregulated free market is probably the best mechanism around for efficiently pricing and distributing goods and services over the long term. However, its machinery doesn’t account for the fragility of humans. They have to eat, they have to have shelter and, as a society, we have decided that we aren’t just going to let people die. Maybe if we could go without things like food and shelter for long periods, if necessary, we could more readily ride the waves of capitalism to maximum prosperity. But, we can’t. So, we have to interfere with the machinery of capitalism so it doesn’t treat us too indelicately.
Making sure everyone has at least a degree of food and shelter seems unobjectionable, but the question then becomes what other components are necessary parts of the social safety net. And that’s the subject of considerable debate.
By political markets, I mean the interplay of agents within the political realm– how public policy comes into being, the motives of those actors, the outcomes, etc.
Two things here: the role of govt today extends so much further than merely handling those who are at the thresholds of survival. And even the efficacy of govt’s involvement there is debatable, since the private sector– through charity– may well be able to take care of that level of need.
Beyond that, the fact is that the govt repeatedly mistreats the common man (unless attached to an interest group) and, to the point of this thread, the most marginal in our society. Why would one trash “free markets” in that vacuum– when the alternative is none too attractive (if not far worse)?
Doug, I think one thing we do as a society is encourage a fair amount of human fragility. Consider the evolution necessary for humans to have gotten where we have, and what the most over-developed organ of the body is in terms of size relative to other primates.
We get why we shouldn’t feed the deer. They become dependent and learn not to fend for themselves. Why don’t we get this with humans? It strikes me often that our compassion may lead us straight to a de-evolution.
varangianguard says:
“Lou, do you mean in Germany? I would think not”.
I have always understood that German industry stepped right in and produced at a high level of efficiency for the Germans ww2 war effort.
As the war continued toward inevitable German defeat, Hitler was gradually sinking into dementia and interferred personally in all levels of the war effort.
Well Lou, not exactly. I don’t want to present a boring, pedantic exposition, but to oversimplify, the Nazis kind of backed (or perhaps wandered) into a planned economy.
I think unemployment was the biggest political problem when the Nazis came to power in 1933. Their remedy was to institutionalize a bureaucracy to specifically address this. Since remilitarization was an early goal, this was much easier to achieve than re-employment strategies in other western European countries. But, the fix for unemployment created an excess of money which then threatened to bring back rampant inflation, which was very politically unpalatable for people who remembered the hyper-inflation in the early 1920s Weimar Republic.
Anyway, the fix for this was to go further with bureaucratization of economic functions which did address the threat of inflation, but then institutionalized inefficiencies in resource allocations, production, labor, AND made pricing controls completely unrelated to reality. The Germans never really did recover from this, although Albert Speer gave it a good try.
So, it was in actuality then reverse of what you thought. The Nazis economy was fairly inefficient throughout the late 1930s and into the middle of 1944. It was one of the inherent failings of their system that made eventual defeat a foregone conclusion. It is one of those alternate history arguments that really can’t go anywhere. If the German economy had been more efficient, then Germany could have performed better during WWII. But, for the economy to perform better, the type of government would have had to have been different, and led by different men. But, if that had been the case, then Germany likely wouldn’t have been belligerent enough to initiate WWII…oops. pedantic, after all.
Chris and Doug, I hope you’ll return to the table– to deal with posts 39 and 41. The discussion was just starting to get good!
Varangianguard,
As far as I can follow your argument about Germany ww2,you have proved me wrong on a point I didn’t make. The only point I meant to make was that when war started German industry stepped in and began the war effort,just as it did in the USA.
Both USA and German economies were bad up to the war,and I accept your point that Germany economy remained inefficient,but the Nazism itself had nothing to do with that although Hitler did interfer as war went on.
I have traveled to Europe ,both Germany and France quite a bit and a lot of what Iunderstand concerns the plight of people who actually lived the war. Both countries had huge displacements of people;Germany used slave labor to make up for it..
In France it was a matter fo staying ahead of the bombing by Germans,and in Germany there were huge evacuations of people from industrial areas after 1943 to escape very effective widespread allied bombings.Once Germany bombed London, it was no-holds-barred for Allies in Germany.The Ruhr areas was absolutley leveled in very short order.
Hitler tried to protect German production and sought to put all production underground and then they wasted time on trying to develop the super weapon that would bring Great Britain to their knees. Neither succeeded and finally the war was lost.USA war effort went foawrd til end of war 24/7. I spend lots of time in Bethlehem PA and the old timers remember the war years when there was non stop steel production,meaning constant noise and layers of dirt on everything.
They were also on the alert for bombing attacks,and they had many practice blackouts. My history knowledge is just what I picked up along the way,and I don’t have a personal thesis for what I know,except I would have advised Hitler that if youre in a war make sure you don’t interfer with the military plan of action,and that people suffer greatly.
My greater point was that capitalism or socialism can both function under totalitarian regimes.I believe that if democracy doesn’t exist already capitalism or free market isn’t going to reform totalitarian government into representative democratic government..
Both Germans and French have told me that the USA is very cavalier about war because World Wars havent been fought on US soil,so we don’t understand war. I don’t agree entirely but I couldn’t think of a reply.
Lou, the National Socialist government become intimately involved with industry fairly quickly. That made the German economy a “planned” economy over “free market” one.
You’ll just have to believe me (or go look for yourself) that the Nazi economic bureaucracies directed industrial production, assigned scarce resources, decided on products produced, apporved capital spending for capacity improvement, the whole gamut.
This began no later than 1935, so it wasn’t the onset of hostilities that “encouraged” german industry to pitch in or work harder. It was the state bureaucracies.
I would have to disagree that Germany used slave labor due to population displacement. They used slave labor because it was “cheaper” than importing larger numbers of foreign workers. Some people continue to rationalize it away.
I would also take issue with your assessment of the effectiveness of strategic bombing. Air Force propaganda.
Your greater point that capitalism or socialism being able to function under totalitarian regimes cannot stand the test of history. In Germany’s case, the direction from the national bureaucracies trumped all but the most small scale cottage trades. All of the strategically important economic activities were tightly regulated and controlled from above.
Finally, whatever colloquial beliefs might be held by either French or German citizens is a discussion for another day. Suffice it to day that their premise is lacking validity in that “World Wars” weren’t fought in Europe either. When it comes to combat, “world war” is a meaningless debating point. If they meant “terrible” wars, then they just don’t know what they speak of.
Thank you ,varangianguard, for taking the time to give a point by point response..
but I can imagine why you might not want to…
Eric, I’m not sure I entirely have my head wrapped around your political markets statements, but I think I get the gist. I’m not sure it’s an either/or proposition between whether the common man gets abused by the economic marketplace or abused by the political marketplace. My suspicion is that the common man (whoever he may be — he’s forever talked about by the likes of myself but rarely adequately identified) does better when economic power and political power is divided and played off against one another.
Sure, you fare worse in the political marketplace if you aren’t attached to an interest group. But, by the same token, you fare worse in the economic marketplace if you don’t possess or are not associated with someone who possesses wealth.
A poor loner probably isn’t going to do very well in any society. But one where economic power is balanced against political power and some protections for the minority are enshrined in the Constitution (and enforced by the courts) are probably about the best they can hope for.
A system where economic and political power are aligned and majority sentiment is always allowed to trump minority prerogatives will probably be the worst case scenario for the poor loner.