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Thursday, July 19, 2012
Economics/Business ... Politics ...

Continuing on Mr. Obama’s “you didn’t build that” statement and the discussion that it seems to have inspired regarding the future role of big government in America: I also hope that Mr. Obama will expand this discussion to the difficult but inherent choice between maximum economic growth versus a fairer distribution of wealth. I hope that he will be honest with the public and not sugar-coat this issue in the name of politics.

Let’s face it; if you want maximum economic growth for the nation as a whole, as Mr. Reagan proposed in the 1980’s, the rich are going to get richer at the expense of just about everyone else. If you impose mechanisms to share the wealth, if you install mechanisms that somewhat reduce entrepreneurial incentives and raise the cost of government oversight (i.e., via higher taxes), then you will NOT get maximum economic growth. If you impose too much government regulation and redistribution, you can stop growth altogether and start the nation on the road to poverty (perhaps Greece is the latest case-in-point; and let’s not forget Cuba and North Korea, poster children for the Soviet bloc nations of the 40’s, 50’s and 60’s).

Side note: It is my opinion that one of humanity’s biggest challenges is to find a political economy that continually creates wealth through growth and innovation, and yet distributes its wealth relatively evenly while still allowing political and personal freedom. In pre-historical days, humans lived in hunter-gatherer tribes where just about everyone had the same level of material being, and there was no economic growth. Only after history began and the first rulers and kings and armies emerged from these tribes, and after tribes began to specialize and trade amongst each other, did economic growth allow some people to enjoy vastly better lives than others, in terms of food, shelter, clothing and luxuries. The masses accepted nominal improvements to their lot in exchange for the loss of freedom imposed by these power elites. They accepted that there had to be leadership, and members of the leadership demanded to be treated better than the average peasant (they didn’t get to be leaders by being shrinking violets).

These trends started around 10,000 years ago in the Nile and Euphrates valleys, soon emerged in China, continued through Biblical times and through the centuries of Roman dominance, then into medieval times and hardly changed despite the Renaissance and the rise and fall of various empires around the world. Only for a few decades following the Second World War did an extensive middle class arise in America, followed by Europe and Japan. Russia experimented with a radical redistribution system which attempted to foster economic growth while severely limiting personal and political freedoms. For a time, this system improved living conditions for the masses while still allowing growth, but eventually it collapsed. Today, the gaps between the rich, the middle class and the poor have stopped shrinking and are returning to levels more typical of the start of the 20th Century. The big exception to this reversal appear to be happening in China and India; but these nations have a long way to go before they deliver to their masses what the average American and European came to expect in the 1960s and 70s.

So where is the ‘sweet spot’ between too much government control and too much unfettered capitalism? And if we impose greater government involvement, how do we assure the public that this government is truly acting in its behalf, and is not a powerful elite acting to maximize its own power and wealth (as the Republicans are so fond of saying these days in their attacks on government workers). When government is small, e.g. in a village or a rural county, there is a lot of volunteer involvement on the part of the citizens being governed, such as unpaid school boards.

On the federal level, is there any volunteer spirit remaining? The White House, Congress, the EPA, the Pentagon, the Supreme Court, Homeland Security, Health and Human Services . . . can they hear the voices and concerns of everyday people in Spartanburg, South Carolina or Green River, Wyoming or Lima, Ohio or Lincoln, Nebraska or Boise, Idaho? They certainly hear from Goldman Sachs and Exxon Mobil and Yale University and the Washington Post and the Ford Foundation . . . they hear from Congressmen who are continually lobbied by big interests . . . but should the average people trust these voices? Do these interests really know better than the masses? Why should average people trust the feds, if they aren’t involved in what those feds do everyday?

If the President is going to convince those average citizens to give greater power over their everyday lives to federal politicians and bureaucrats, he needs to do better than to say “well, this is better than allowing Bain Capital to determine your fate”. He needs to imagine new ways to inject localism into the huge, impersonal machinery of big government. He needs to inspire new-found trust for Washington out in the boondocks. He needs to find ways to allow ‘ordinary Joes and Janes’ to get involved, e.g. with the Congressional Budgeting Office, the Joint Chiefs of Staff, the health care planning agencies that will implement Obamacare (assuming that the GOP does not incite these ordinary people to annul Obamacare, and all the good it can do for them, in a fit of distrust), etc.

The Tea Party movement is a clear warning. Mr. Obama and his supporters need to take it VERY seriously, much more so than they have to date. Obama needs to convince the Partiers that they did NOT build what they know in their daily lives. Better said, they did NOT build it ALONE. Obama and the Dems need better ways to convince ordinary people that the federal powers that he wishes to increasingly impose in their lives are not controlled by some distant “BIG BROTHER”; but on the contrary, involve people just like them. Otherwise, the new revolutionaries WILL dump much of our existing nation-wide government structure into the bay, without considering the value of what they are disposing (just like the 1774 Revolutionaries thought not about the value of the tea which they tossed into Boston Harbor).

“Freedom” is still an intoxicating concept, one that can inspire economically irrational behavior here in the USA (read the book “What’s The Matter With Kansas” for more details). Americans would rather be economically insecure and relatively free, versus more secure but also more politically regulated. The Chinese seem to be going the other way in that equation. By the year 2100, historians should be able to say which philosophy and which example convinced the rest of the world. That is, unless Mr. Obama or someone else can imagine and implement an imaginative “third way” for our political economy. (Forget about such a way emerging from modern Europe; the last, best hope for such a movement, i.e. Tony Blair, is now in retirement . . . and so is the original American ‘third way’ maestro, Bill Clinton). The historical challenge of combining growth of wealth, fair distribution of that wealth, and personal / political freedom has no resolution in sight.

◊   posted by Jim G @ 12:58 pm      

  1. Jim, I tend to think that you have a really idealized view of President Obama, the future of big gov’t vis-à-vis the ordinary person, and the “little person” having a role in maximum economic growth.

    One thing I think you leave out of this whole thing is that even the founding fathers, when they spoke of freedom and equality for “everyone” limited “everyone” to *white*, *rich*, *men*. They certainly did not include the Black slaves nor did they include women; and I doubt they cared much really about the poor and/or the common man. I think to get what you seem to be aiming at here one would need to have the sense of a saint who wants the best for everyone, regardless of who they were, what color or gender they were, and how much money they had.

    I tend to think that what we are seeing in Mr. Obama is what JFK would have been had he not been assassinated so early in his administration. JFK was stymied by Congress on every stand he took and in every way he tried to move. Somewhat similar to what has happened to Barak Obama. Obama has lived longer, been president longer than JFK was, so his faults show more than JFK’s did.

    I’d like to see Mr. Obama become a little more political savvy and beat his opponents politically as they need to be beaten. If he gains office again and manages to get a Congress that will work to cooperate and compromise with him in his proposals for the economy and every other aspect of government, then he may have some chance to put through some of his proposals. I do not for one minute think that Mr. Obama will have the *perfect* solution to our problems, but I think he will be much better than Mr. Romney and his solutions.

    I don’t think we have *ever* had a totally ideal economy (to say nothing of many other problems) in this country; after all, our forefathers built this country on the backs of the free labor of so many Black people. Somehow, tho, we have managed to muddle through and achieve a freedom and a sense that the “common” person can achieve whatever he/she would like to achieve—and many people from many countries still see the advantage America offers over their own countries. (I’ve even seen people from countries that are much opposed to America say, “death to America; when as soon as I can get a chance, I want to go there.”) So we must have *something* worthwhile for the common person.

    So, while Mr. Obama may have his imperfections, I still say should Mr. Romney win the election, I will be seriously wishing I could move to Canada. MCS

    [Mary — so, you don’t have an idealized view of the importance of the American Presidency and what government can and should do to help the lot of the common person? Enjoy Canada! Jim G.]

    Comment by Mary S. — July 20, 2012 @ 8:56 pm

  2. Jim, I don’t agree with your example of Greece failing because it was over-regulated. I believe Greece is failing because its Government was unwilling to tax the wealthy. it had way too much government spending relative to its taxation, and the wealthy were often off the hook. And certainly government spending is required for growth. For businesses to grow, it helps to have an efficient transportation system, a reliable energy system and an effective education system All of these requires money which requires taxation.

    And I don’t believe that taxing the wealthy necessarily reduces incentives. if Mitt Romney was taxed at 50% instead of 10% (or whatever he averaged at Bain), I don’t think he would have stopped working just because his income was reduced. in fact, he might have retired later rather than earlier. if so, increased taxation would have increased his productivity rather than decrease it.

    [STEVE — hey man, thanks for checking in!!! As contrarian as ever, I love it! But Greece — they were unwilling to tax ANYONE! Still, they need to get a real economy going, get something they CAN tax.]

    Comment by Zreebs — July 22, 2012 @ 7:49 pm

  3. Jim, Sorry for the contrarian tone. I am much more likely to comment when I disagree with something than when I agree. And actually the way YOU responded helped me realize that responding the way I did respond is quite unproductive in that it almost encouraged you to be defensive. So thanks for the advice – even if that was probably not the intent of your comment.

    I do believe that there is some truth that big government reduces our collective need to volunteer. And that cannot be a good thing. For one, it makes us more insensitive to the plight of others. I probably need to think about this more. Thanks for stirring this thought.

    Comment by Zreebs — July 28, 2012 @ 5:00 am

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