Tag Archives: obama

An Economy Is Not About Jobs

One of the bizarre fallacies propounded by President Obama, the Congressional leadership, and their intellectual enablers such as Paul Krugman, is the notion that society should be organized to give people jobs, and that if the supply of jobs is insufficient to meet the demand, the government should step in and create an additional supply through economic policies.

Walter Block, restating an argument made famous by Frederic Bastiat, points out that nothing could be farther from the truth.

The purpose of an economy is to align production of goods with demand, so that people have their desires to consume goods satisfied.  Dr Block points out that if we lived in a society where 30% of the population dug holes that were filled in by the other 30%, with the remaining 40% laboring to supply food, clothing, shelter and tools for the hole-diggers and hole-fillers, we would be far poorer than if that 60% were redirected to other forms of labor that produced things useful to the other 40%.

This becomes obvious when you consider a thought experiment.  If you ask people to choose between having a job, and having the enough food, clothing, shelter etc, they will choose the latter in a heart-beat.  People work primarily so that they can produce what they need in order to be comfortable, either by making the stuff they want to use directly, or making stuff that they intend to trade to other people for the stuff they want to use themselves.

Much of the proposed stimulus project is makework that is little better than hole-digging and hole-filling in.  Absent the stimulus spending, the people who will be employed under the stimulus project would have to find tasks to busy themselves with that produced goods and services that people were willing to pay for.  Instead of working to identify what unmet needs were most urgent and in the greatest demand, now they will coast, “earning” a paycheck, while working on either less profitable tasks, or even unprofitable ones, where the resources they consume are greater than the product they produce.

No doubt that some people would read the above paragraph and say, “Aha! But what if they can’t find anything to do?  What if they can’t find anyone willing to hire them, don’t know how to subsistence farm, etc!  What, Mr Free-Market Anarchist, should they just hurry up and die – making sure that they starve to death out of sight?”

At first, this seems like a powerful argument, until one considers what percentage of the population is actually unemployable?  I would expect that they number no more than 5% of adults, perhaps 25 % of the entire population adding in the elderly and young children.  And, these people are probably unemployable even under a government make-work project.  Even if there was a massive shortage of workers, they would be unemployed and dependent on charity.  Rather, most of the people employed under any job-generation scheme will be able-bodied.

Nor will the able-bodied be unable to find work.  We humans live in a universe of scarcity.  We always have unmet needs, we want more shelter, better food, better cars, better streets, better entertainment etc.  Many of these needs are not met not because humanity lacks the raw materials or the land needed to realize these needs, but because there aren’t enough people around to satisfy them.

The only way to find out which of these unmet needs are th emost urgent is via the price system.  People will pay more for labor that is needed to satisfy more urgent demands and less for labor that satisfies less urgent demands.  The higher wages will act as a signal to the unemployed who can do the job to start doing the job.

The temporary unemployment that accompanies recessions occurs becasue the price system requires the passage of time to reach an approximate equilibrium.  Essentially, in a recession, people who were producing things that were not in heavy demand stop that undesired production and spend some finite period of time looking for othe rthings to do.  Simmilarly prospective employers need time to figure out where the shortages are, or to identify opportunities to start expanding production again.

By attempting to sabotage this feedback system, the proponents of the stimulus plan are setting the stage for long-term stagflation at best, and a future crash at worst.  Not only are they shifting the problem of what to do with the unemployed into the future, they are encouraging, though false price signals, people to abandon productive pursuits in favor of the make-work projects being promoted by the state.  If, for example, the state promotes the construction of dams, then people who otherwise would have chosen to become farmers or mechanical engineers or home builders will instead gravitate to civil engineering.  They will then form a political group which strives to keep the emergency programs going indefinitely, much as farmers continue to agitate for the price supports borne from the “emergency” of the Great Depression, of the California Prison Guards’ Union agitates against the repeal of anti-drug laws.  This would be bad enough if government official were to attempt, in good faith, to guess what the unmet needs in greatest demand were.  When one considers the inevitable corruption and rent-seeking that accompany the establishment of such emergency programs, the true scope of the danger to the economy presented by the stimulus project becomes clear.

Barack Obama has been in office less than a month.  The early signs are that he will prove to be a bigger disaster than George Bush.

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

Another Permanent State of Emergency

Many people have expressed a hope that Barack Obama will be an improvement over George Bush and that he will roll back some of George Bush’s excesses.  They see in Obama a man who understands nuanced argument, who at least acknowledges that those who oppose his policies can have good reasons and arguments for doing so.  However, those who are so hopeful are doomed to have their hopes dashed.  Barack Obama may give of good vibes, but a review of his policy papers show nothing more than a few crumbs of freedom thrown to the people.  Make no mistake, under Barack Obama’s leadership, the federal government will seize more wealth, violate more liberties and wreck the economy more thoroughly than George Bush did.  The Obama administration will permit, nay encourage, the looting of the treasury by their cronies to a degree that not even the Bush administration dared to.  Reading his policy aims, I see that he offers us no quarter, no accommodation.  He demands that the American people hand over more of the wealth they create, and threatens them with more pervasive monitoring and violence in order to ensure their compliance with his edicts.  He wishes to rework society – to impose his vision of how society ‘ought’ to be organized – using the state security apparatus to impose his dreams.

In every policy proposal, one sees the same theme, the expansion of government, in size, in scope and power.  Typical is his proposal as to how the government will begin respecting civil liberties:  rather than ordering the justice department to respect civil liberties in the court system by voluntarily complying with historical precedents governing government power, rather than announcing his intention to rip out the listening rooms used by the NSA to eavesdrop on the communications of the citizenry, he announces his intention to create a ‘civil liberties board’, with subpoena powers.  If the attorney general of the United States lacks the power to enforce respect for civil liberties, or even worse, is disinclined to respect them, how will the addition of this board alter the calculus?  No, this board will provide sinecures to political allies and something to point to when questioned about his respect for civil liberties while allowing the Justice Department, the Defense Department and the Department of Homeland Security to continue the business as usual, that of exercising their powers lawlessly and without limit, in furtherance of the public and private aims of the officials staffing them.

Nowhere in his policies does he announce his intention to relinquish control of anything that the government currently controls.  That which the Federal Government controls today, the government will continue to control under the new administration.  Much of which is currently out of its control today they will seek to bring under its control.

According to the Obama administration, the current economic crisis warrants expanding government spending well beyond George Bush’s record-breaking levels.  Only in passing does he acknowledge the need to raise money for this spending, which will have to be either through increased taxation, borrowing or via the printing of new money.   The U.S. economy will not provide enough in taxes or in loans to pay for this spending.  It is incapable of it.  Thus, we will see the Federal Government borrowing from anyone who will loan it money, and when those sources of funding dry up, from the Federal Reserve, which pays for the bonds it purchases with newly printed money.  The ‘inflation rate’, so called, already near 10% according to the calculation method in use in the 1970’s will rise to much higher levels.  In the meantime the standard of living will stagnate, and in all likelihood decline.  Nor is there any plan to end this spending once the economy exits the crisis.  This, like the Global War on Terror, is yet one more open-ended emergency.

And when these policies fail to have their intended effects, as unemployment continues to soar and prices continue to rise, it is inevitable that the Obama administration will blame people who it sees as standing in the way of their policies.  The Obama administration will be tempted to go after bankers, intellectual opponents, industrialists, and corporate offices in exactly the same manner as when FDR excorciated bankers and industrialists.  And, like Wilson, FDR, Nixon, Clinton, and many others, the Obama administration will be tempted to use the state security apparatus against these enemies, citing the economic state of emergency to justify it. So now the U.S. will not only be under a permanent state of emergency against external enemies, it will be in a state of emergency.  This time the enemy won’t be people living a continent away…  It will be us.

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.