Discovery Institute boss Bruce Chapman has some ideas about your financial future.
The disappearance of Lehman Brothers and the transformation of Morgan and Goldman Sachs into heavily regulated commercial banks presents an opportunity for entrepreneurial risk taking by someone else. ? The turmoil in the markets world-wide disagregates the economy and makes new entitites possible. ?
Overall, is this not a political problem as much as an economic one? Is not the risk of posturing members of Congress now at least as big a scare factor as the housing market and financial markets?
In October, he touted Disco. co-creator George Gilder’s claim that “Creativity Will Revive Economy.” Note, though, that despite Gilder’s noteworthy “confidence and hope,” his record as a financial prognosticator is rather disappointing.
And now, on vacation in Boca, he finds that things aren’t so bad:
tourism statewide in Florida is down about three percent this December from last. But you wouldn’t know it from the stuffed Alaska Airlines flight to Miami or the discouraging realization at Hertz’s lot near Miami International Airport that all the cars are checked out–even for “Gold Club” members with reservations. In Miami, supposedly Number One Hertz, indeed, is a metaphor for a straining Boom–too many customers, apparently, and exasperated clerks. It doesn’t look or feel like an eagerly aspiring company that is worried about staying on top.
Not only is Hertz having trouble with demand (during top vacation time! in a top vacation spot! who could imagine!?), but the supermarket’s shopping carts are all being used, and they’ve sold all their copies of the London and Toronto papers. Not only that, but a fancy French restaurant is hiring help. “Don’t these people know that times are tough?,” Chapman wonders.
Yeah, Bruce, they do:
The Conference Board?s consumer confidence index fell to an all-time low of 38 in December, down from 44.7 in November and 38.8 in October. Excerpts of some economists? reactions to the news:
John Ryding and Conrad DeQuadros, RDQ Economics: Continued deterioration in the labor market appears to be the major factor continuing to push down consumer sentiment, which hit a record-low reading in December (the records go back to 1977 on a monthly basis and 1967 on a quarterly basis). Along with monthly jobless claims, this report points to an employment decline of at least 500,000 in December and a further rise in the unemployment rate to possibly as high as 7.0%.
Yes indeed, last month saw a record number of job losses, with 533,000 jobs lost, the most since 1974. The Chronicle reported economist Nigel Gault, with IHS Global Insight was “gloom[y].” “The economy,” he explained, “is now locked in a vicious downward spiral in which employment, incomes and spending are collapsing together.” Of course, the millions of people who lost their jobs since the recession started (and the millions more who gave up on getting a good job during the “jobless recovery”) are probably not trekking to Boca for a winter tan.
It is only after this stunning, we might even say Burns-like, indifference to the actual facts of the current economy, that Chapman gets to his real point, which is that he enjoys the debunked work of English major-turned New Deal denialist Amity Shlaes:
Pull up a chair, order a Tarte Tartin and pull out a paperback copy of Amity Schlaes’ The Forgotten Man, “A New History of the Great Depression.” It is comprehensive, readable and surprisingly droll. It will get you out of your funk about the economy and make you realize that our present difficulties are very different from those that produced hard times in the 1930s. Yet there are so many lessons in these pages, too, that make the book pertinent. Such as, 1) the importance of predictable policies and the danger of experimental ones; 2) The need for encouraging, rather than punishing, private investment, and; 3) The genius of the American economy that really does not need instruction from overseas.
Of course, Shlaes cherry-picks her numbers, choosing outdated statistics that have been supplanted by better estimates of unemployment, and ignores empirical reality. Chapman’s lessons are, not surprisingly, all wrong, because they are built on sand. There was no fear of experimental policies. The major boost in unemployment and in private investment both correspond to a return from Keynesian economic policies to more orthodox economic approaches. And the New Deal built on the experience of anyone who had a good idea, whether of domestic origin or from overseas.
In the current instance, the lessons of the Japanese financial collapse in the ’90s is instructive, as is the Swedish success with a brief nationalization of its banking sector. Heck, Nobel-winner Paul Krugman credits his success as an economist to ? evolutionary biology. “I find in evolutionary biology a useful vantage point from which to view my own specialty in a new perspective,” Krugman explains. “In a way, the point is that both the parallels and the differences between economics and evolutionary biology help me at least to understand what I am doing when I do economics – to get, to be pompous about it, a new perspective on the epistemology of the two fields.” That same dynamic is as true of national borders as it is of disciplinary ones.
For instance, the idea of, and policy of, the Federal Reserve builds heavily on the example of the Bank of England. While that Bank’s role in stabilizing markets evolved gradually, American policy-makers were able to step in and graft that successful model into American finance with considerably less difficulty. We do this because it works, and requires much less of that supposedly dangerous experimentation.
Not that there’s anything wrong with an experimental approach to government.