Government “Investment” And Management Of The Economy

Whether we like it or not since January of ’09 we have been in an era of much greater control of our economy by the Federal government than anything in the past.   Our landscape is filled with the examples of this expansion and domination.   GM, Chrysler, AIG, Solyndra, the Dodd-Frank bill and the Consumer Protection Act and the exponential growth of regulations and grabs for power by the Labor Dept and EPA all confirm this view.  Of course the elites and government groupies think this is the perfect formula for society and the economy.  They believe they can manage everything much better than the people who will only make bad decisions or allow themselves to be duped.   Their confidence in the common man is rather low but their confidence in the wisdom and goodness of government led by the elites is boundless.  History has had other examples of government expansion and central planning and mayhap we should at least consider how well those worked out before we take that next gulp of the cool aid the Dems offer.

The seventies were another time of tremendous government expansion.  It began in the second half of that decade under that fearless and dynamic leader Jimmy Carter.   The Dems had been planning for years how they were going to exploit and use the “war savings” from the wind down of the Viet Nam war to advance the next round of their social agenda.   That war had been very expensive and even some Dems and the media had been critical of Johnson for pursuing his policies of “guns and butter” at the same time on borrowed money.  Of course the war did wind down after Nixon came to office.  Regardless of what you may think of him that is a promise he made and kept–to bring the war to and end and it started as soon as he came to office.   You don’t have to take my word for it just look at the Viet Nam War Memorial and see how the deaths in the war starting dropping dramatically after he took office.   Then in ’75 we were out completely.  Unfortunately, that was followed by the election of Carter. 

Especially in the area of energy Carter and his cronies believed they could control prices and events and naturally protect us from ourselves.  We had already been through one Arab oil embargo and then a second came.  The continued and accelerated spending by the government made the already painful inflation a real disaster.  More regulations rolled off the presses at breakneck speed.  We also got FERC to control oil and its price.  Inflation was over 13% for much of this era; mortgages were equal that and the dollar wouldn’t buy a bucket of spit in the world market because no one wanted the dollar because it kept falling so fast.   The centrally planning for energy led to those awful gas lines and mis-allocation of fuel.  Oil  profits were restricted because they were “windfall” profits and not truly earned somehow.   They got one price for old oil and another for “new” oil and had to ship fuel were instructed by bureaucrats.  Guess what?   Lots of the oil people simple decided to sit on their hands and hope for a better day.   Why run the risk of drilling and building new refineries if you weren’t even sure you would make a profit or if you did then the bureaucrats might decide their were excessive or windfall and take the away from you.   Domestic production of oil and gas dropped and imports rose even more.   The Arabs loved Carter and his  bureaucrats.  

This was similar to the kind of “economy” they had in the Soviet bloc countries by this time.   The central planners  had their ideas about what should be manufactured and how and the industries of course had to follow suit.  They were required to comply.  No one in the Soviet Bloc and the world market really wanted the Czech steel or the East German machines and thus the central governments had to subsidize these and other industries even more heavily.   The planners were sure they were right and it was great redistributive policy and good social policy for the workers.  They ended up by actually subtracting value from their economies because the finished product they made were a net loss; the finished products were worth less than the raw materials.   During Carter the oil in the ground was worth more than taking it out so why drill.    East Germany made computers during the ’90’s but they weren’t very good and besides they couldn’t make enough of them; they only made 1/50th of what Austria produced during that time with less than half the population.  But when the central government and the elites have an idea they won’t take no for an answer from other parties or the people and pour even more money into their ideas.   Anyone heard of Solyndra?   Read the papers and you will also see the First Solar is shutting down some production as are many other solar companies around the world simply because there is little demand without heavy government subsidy and the Europeans are cutting back big time now that they have to try to balance their books.

What mattered to the Communists was not economics but politics.  (Judt–Post War).  That is true with all with a socialist bent.  The current administration is about politics not economic growth.  The growth is subject to their social agenda and the distribution of not only money but power.  If society is structured the way they want it to be then they don’t really care about the economy.  If economy was really important to the WH then why don’t they have many senior advisors and cabinet members with real backgrounds in the private markets?  The WH is filled with academics and career bureaucrats or politicians.   Nothing but elites.   They are pulling us in with a velvet rope that is all nice and soft but a rope nevertheless. 

“That way madness lies”  King Lear, Shakespeare…



Filed under business, Culture, Economics, government, history, Politics

2 responses to “Government “Investment” And Management Of The Economy

  1. Adam

    Very true very true. Great read once again.

  2. olcranky

    I read an interesting article in the TheWeek about Oil Commodities and how some believe that the price per barrel is at least 30% driven by speculators. This is believable.

    Anybody opposed to changing the way commodities, like Oil, or maybe just Oil, are traded. To be honest, I don’t know what good comes from paper-less, and possession-less commodity trading. Can anyone explain that to me?

    Why should all of us pay 30% more per gallon just so investors can make more money on Oil? They have plenty of other non-essential trading around the world they can do.

    I disagree with high regulatory environment on oil producers, oil drillers, oil refineries. But tell me..what do commodities traders have to do with any of the “business” of oil?

    I don’t think a “Free-market” argument can go far here, because this is a specialised financial tool that got birthed at some point in history whether viable or not today is the questions, and I am not afraid to question. Are you?

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s