(Aside: I remember reading a comment from David Ricardo concerning the following quote from Abraham Lincoln: “I don’t know much about the tariff. I do know that when I buy a coat from England, I have the coat and England has the money. But when I buy a coat in America, I have the coat and America has the money.” “Lincoln was right,” claimed Ricardo, “he didn’t know much about the tariff.” I don’t have a thorough knowledge of the economic/financial issues raised in this essay. Perhaps after reading it you’ll agree.)
Economic news of late has been plentiful to say the least. Due to lack of regulation JP Morgan Chase lost a bazillion dollars (and counting); challenger Francois Hollande defeated incumbent Nicolas Sarkozy proving that austerity is bad; Vice President Biden said the economy is stronger because we’re making stuff; and Republicans would rather shut down the government than feed small children.
A few points to keep in mind:
1. Banks aren’t the government.
Governments keep people—good, bad, or incompetent—from doing harmful things. Most of the financial regulations I’ve heard pundits arguing over are an attempt to make business more like that, i.e. to ensure that the JP Morgan’s of the world don’t do greedy, incompetent, or negligent things. The problem of course is that the possibility for those shortcomings is essential to the nature of business. Perhaps our reforms should focus on mitigating the consequences of the inevitable mistakes, oversights, and squanderings of those (often helpful) capitalists.
2. France’s spending since the financial crisis hasn’t exactly been austere.
But if by “austerity” we mean slight increases in public sector spending and higher taxes, and if the recent presidential election was primarily about economic policy and not about personality, then yes, the French have spoken. Bad austerity. Bad.
3. Our economy can be (and has been) healthy in spite of a small manufacturing sector.
Both Vice President Biden and Treasury Secretary Geithner recently visited manufacturing sites in Ohio and talked up the importance of that sector to our economy. Strangely enough, they seem convinced that fabricating physical objects is a requirement for economic growth. In fact, from his tirade against “Romney Economics,” it appears that Vice President Biden prefers manufacturing to less tangible services.
Hmmm…Since venture capital is out, what’s to be done when we need money to start a new manufacturing company? Oh, of course, manufacture it.
(My guess is that neither of these gentlemen actually holds this view. They’re in Ohio because it’s a swing state; they’re stressing manufacturing because Ohio is in the Rust Belt.)
4. Desperate times call for desperate measures.
Many critics are upset about the debt-ceiling “showdown” starting again. Threatening the credit-worthiness of the U.S. seems ugly and juvenile no matter the goal. Nevertheless, I’ve witness a change in fiscal perspective that has resulted from the Tea Party’s influence. The federal organizations I’ve worked in are now constantly searching for ways to do more with less (whether or not those efforts are effective is another post for another time), and this approach is contrasted with “the way things used to be.”
Our national understanding of goods and services is fairly juvenile: we want the goods, and we want someone else to fit the bill. Maybe these extreme measures aren’t so ill-suited to our current condition.