Sunday, April 21, 2013

Even the WSJournal Doesn't Get It

David Wessel has a lengthy article in this morning's Wall Street Journal about the future direction of the world's economies.  He begins with Europe and then walks the reader through the US, Japan, China, and the rest of the world.  In every case, Wessel's discussion is about government policy.

The overall theme is that economic recovery depends upon government policy, discretionary policy at that.  He discusses the twists and turns of policymakers as they, according to his story line, attempt to guide their economies to the promised land.

But, that is exactly the problem.  Once government policy becomes the determinant of the economy's future, the economy no longer has a future.  The proper role of government in a free market is to lay down the rules of the road and then to get out of the way.  Increasingly, a government of rules is not to be found.

Instead we watch daily as policy makers, who frequently have a very limited knowledge of economics, move this way and that in a vain attempt to get economic growth going.  Such things cannot work.  They never have worked and they never will.

Economic growth occurs when businesses make capital expenditures and hire workers to create product.  They aren't going to do that if they have to spend their time wondering what the next move is going to be by their government.  Government action is detrimental to an economy's future.  Government inaction and consistent application of the rules of the road is the ticket to prosperity, not frenetic political activity and polarizing rhetoric.

If Obama had played more golf and forgotten about the stimulus, Obamacare and Dodd-Frank, we would probably be looking at 4 - 5 percent unemployment today and economic growth rates of 3 1/2 to 4 percent.  Unfortunately, Obama thought he had something to contribute.  So, we stagnate.  that's the price of a responsive government.

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