Sunday, March 20, 2011

Smokescreens

Whatever your source of the news, you must feel bombarded by the headlines from Japan, from Libya, and from other troublespots around the globe. These headlines and news stories are obscuring the underlying facts about what is going on.

Oil is not going to spike to $ 200 -- no matter what happens in the Middle East. There is not going to be a nuclear conflagration in Asia or even in Japan resulting from the damage to Japan's nuclear facilities. And, yes, there is no one to blame for the earthquake and tsunami.

The news media is so preoccupied with finding people to blame about every possible difficulty that the world faces that it obscures the real facts about what is taking place. The real facts remain: the western economies are mired in one of the slowest economic recoveries in the history of the world, while Asian economies and some Latin American economies and Eastern European economies are booming.

Western economies have mortgaged their futures by massive transfer payments to current citizens, mostly the older half of the population, financed by younger citizens and citizens yet to be born. The method, debt financing, is now seen as unsupportable. This is true of Greece as it is true of the United States (and Japan). There is no real answer other than some form of bankruptcy. Whether these steps are taken now or in the future just depends upon the outcome of political jockeying. But, it will take place. The numbers do not permit any easy fix, short of some form of bankruptcy.

The slow pace of economic recovery in the Western economies is mainly a result of their governmental policies toward labor, health care, the environment, and the regulatory regime. The attempt to shower private and public employees with benefits has made labor much more expensive to (all) employers -- hence a dramatic and permanent drop in hiring. This has been a deliberate policy in the United States and in Western Europe. If you increase a price, the demand for the product falls. If you increase the cost of employees, the demand for them will decline and has declined in the Western world (and will continue to decline).

Economic growth, which will continue in the West, will eventually lead to more jobs and, two or three years from now, to lower unemployment rates. But, we will never regain the vigor of the past unless the rules governing employees change in the Western world, which is unlikely. Slow growth and decadence are the future for the US and Western Europe. This is the new normal. Only a move toward free markets can change this and a move in that direction seems politically unlikely. Politicians of all stripes in the US and Western Europe support the legislative agenda that has lead to the current morass. That's not likely to change.

Meanwhile, Asia marches on, Japan aside. Asian nations have not mortgaged the future of their young and unborn to the current older generation. Thus, they have a real future. Economic progress is not shackled by a host of walls built by good intentions. You can't eat "good intentions."

Rich folks everywhere support making employees more expensive and increasing the stranglehold of regulations on businesses. Bill Gates and Warren Buffett certainly support this program, but so do most rich folks, because it is not going to change their lifestyle.

Many college students, dreaming of working for non-profits and basking in the glow of self-congratulatory adulation, have been sheltered from the harsher side of the economy for most of their lives. They have little or no sympathy for the plight of the average citizen, struggling to find work, but finding themselves priced out of the market by government rules and regulations.

The elites, as Tom Sowell calls them, are mainly about looking in the mirror and talking about what "good people" they are. Katie Couric is the poster child for this kind of self image. But, others, like the NPR folks, are pretty stong candidates for runner-up poster children. If it feels good and sounds good, who cares how many people get hurt in the process. That seems to be the position of the elite of the news media.

That lower incomes are battered by these policies is not the concern of the elite who push these regulations. If you were to ask a college senior if he/she would support a law making it against the law to hire someone at a salary less than $ 100,000 per year, they would instantly recoil. But that same college student supports minimum wage increases, living wage proposals and other things that damage the future prospects of the poorest among us. Bill Gates and Warren Buffet will never suffer from an increase in the minimum wage, but countless millions of Americans have already suffered from this type of punitive legislation and untold millions will be similarly penalized in the future.

So, don't get lost in the hysterical headlines about Japan and Libya. The real facts on the grounds are that government policies in the Western economies are hastening their declining share of real economic output. Other parts of the world, that have not put such policies in place, are growing rapidly and will, within a generation, surpass the Western world economically. This is the real story.

1 comment:

A. Barrow said...

The brilliance of this post is exceeded only by the common sense it expouses. Well done. Please run for president.