Tuesday, October 28, 2008

Facing the Trade off between Economic Security and Economic Freedom

I am concerned about the economic policy that an Obama presidency with a super majority in Congress may pursue. Assuming Obama is elected, it is my hope that he governs as the centrist he has portrayed himself to be; however, Obama's stated goal of "spreading the wealth around" concerns me.

There is a reason that the U.S. has led the world as the economic superpower ever since the industrial revolution. It is not simply that we are blessed with natural resources. It is not that we are naturally smarter than the people of every other country. The U.S. has had a political and economic climate that rewarded the risk taker and encouraged investment and there has been an American “can do” spirit and American optimism. Americans believed anything was possible.

Most American’s have always thought that their children would be better off than they were. American’s never accepted that some people were better, just because they were better off. Americans wanted to become better off themselves. We did not accept that we were born to a certain station in life. Whereas in much of the world, the non-rich resent the rich, in America many hope to some day become rich. It has only rarely been popular to hate the rich in this country. America has been more concerned with growing the economy and upward mobility than redistributing the wealth.

Our bureaucratic burden has been relatively light. In some third world countries it may take months, if not years, to do something as simple as get the permits to open a new business, whereas in a matter of days one can do so in most American cities. You do not have to present a market study to a bureaucrat and show the need for the new business. You don’t have to put up a huge bond. We have thought it was our right to follow our dream and take risk.

In America, while we have labor laws protecting the health and safety of workers and some laws protecting workers from discrimination in the workplace, for the most part, we have a mobile work place. The workforce can expand and contract as needed. If you recall, in France a couple years ago thousands of students took to the streets and rioted expressing their outrage at a law that would allow employers to dismiss any newly hired employee under the age of 26 within the first two years of employment. Despite France having a youth unemployment rate of over 20%, the French preferred job security to job growth. Americans have never expected security and have embraced risk. We have had the attitude that no one owes us anything; we have to earn it.

What has distinguished the US is that we have had, relatively speaking, a non-intrusive government, less regulation and lower taxation. Maybe the American Spirit is the reason we have non-intrusive government and lower taxes, or maybe it is those things that allowed the American Spirit to flourish.

Within democratic countries, there is a scale along which at one end there is relatively unregulated capitalism and opportunities for wealth creation, however there is little economic security and a lot of risk of failure. At the other end of the scale is a stagnant economy where few business decisions can be made without the approval of government and where success is punished, but there is less chaos and more “fairness.” There is trade off between economic security and economic freedom.

I hope that Obama’s economic policy is only a slight adjustment leftward along that scale and not a wholesale embracing of European-style social democracy. It would be ashamed to kill the goose that has laid all the golden eggs for all these many years. I hope the American dream and the American spirit has not been traded for the security of mediocrity. I would miss the America that was.

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  1. Don't worry Obama is falling in the polls!

    check out http://www.youtube.com/watch?v=1I77cU3jsFs

  2. I can hunt and grow a garden. If it came down to worse - I can build a sod house.

    I want my president to promise homeland security. Broke is better than dead!

  3. Do you truly believe that everyone who is in a state of poverty in the United States of America is in that state because they deserve to be, solely because of their own actions or lack of them?

    Conversely, do you also truly believe that everyone who is in a state of wealth in the United States of America is in that state solely because of their own actions, and if that is so, because those actions were always carried out in a decent and fair manner?

  4. Corin, No I do not believe that. I don't how you concluded that from what I wrote. I do believe there is a trade off however between freedom and security. I accept some loss of freedom in order for some security. We have never had a pure market economy. A pure market economy has never existed. Some economic safety net is necessary. Most Americans and most Republicans accept that.

    The Earned income tax Credit is a large income redistribution program, first advocated by Richard Nixon, first passed by Gerald Ford and greatly expanded by Reagan. I support limited redistribution. I am not a pure Libertarian, but a conservative. It is all about striking the right balance. However, I don't want to destroy our market economy that has created great wealth compared to the rest of the world. Markets the profit motive and trade has listed more people out of poverty than all the government programs combined. I want us to be remain a relatively free market economy. I prefer us to remain the way we are and not become more like France or many other nations.

  5. "I don't how you concluded that from what I wrote."

    Sorry if you felt that I was implying that you did believe those things -- I was asking the question for an answer and explanation, which you have graciously provided.

    Therefore, although you may deride the social policies of European nations, it is now clear that you do allow that because poor people are not necessarily suffering poverty because they only want free handouts, it behoves society to provide some form of social welfare.

    And yes I agree that there are indeed a minority, small though, that are not workshy and are looking for a free handout -- but their abuse of the system should not be the reason to cut off the assistance provided to those who do need it, unlike many conservatives who argue that almost all of those on welfare are just lazy scroungers.

    Surely this is one area that Clinton, despite his other gross failings, deserves praise -- that he encouraged a policy of welfare being used as a means for people to get back on their feet (or on their feet for the first time) rather than a lifetime handout, just as welfare should be -- a helping hand / social safety net in time of need.

    A man with secure fairly paid employment is obviously going to be more prosperous and happier than a man on welfare, and through his efforts and taxes also contributes back to society. Which is why I would hope you would agree that it is better in times of recession for the government to spend money on public works, particularly to renovate and improve the infrastructure of the nation, creating opportunities for employment rather than paying people to sit at home watching TV on social benefit payments.

    Wealth redistribution is only necessary when those at the bottom of the economic level are below the acceptable minimum standard of living, and that includes the necessary level of health care (prevention, treatment, and drug costs inclusive).

    And despite your criticism of France, capitalism and innovation is alive and does prosper, contrary to what you may have been told -- in fact the size of the economy of France has recently overtaken that of the UKofGB&NI, which has been broadly following monetarist free market policies (derived from those of Friedman and Reagan) since the Thatcher regime.