Friday, May 6, 2011

Why Obamomics is Failing

Today, with 244,000 new jobs from the Labor Department's Establishment Survey, people are talking about "better than expected."

But if you look, as I do, at the Household Survey you see a downtick in Employment of 190,000 and an uptick in Labor Force of 15,000. (That's why the Unemployment Rate went up to 9.0 percent.)

What is going wrong with the Obama recovery, which Jay Cost shows is the worst in 50 years? I will tell you why. The problem is that the ruling class of the educated elite is grasping the wrong end of the stick. At both ends.

Back in the old days, humans lived in egalitarian hunter-gatherer bands. Their government was up close and personal, and it wasn't very powerful. Humans hate it when other people have power over them. Then came the agricultural age, and egalitarianism went out the window, replaced by rigid hierarchy that we know and hate as the feudal system.

But then, about 500 years ago, a new age began to dawn. It combined, in a curious way, both hierarchy and equality. We call it democratic capitalism.

On the one hand, everyone was to be considered equal "in the sight of God" as we say. On the other hand, hierarchy was allowed to form as successful businessmen piled up huge fortunes in the new economy that delivered mass-produced goods for the ordinary person. So we may say that, while the hunter-gatherers were egalitarian right across the board, and the agriculturalists were hierarchical right across the board, the new democratic capitalism embraced political equality and economic hierarchy.

But then arose a reactionary movement that tried to turn the new democratic capitalism upside down. Let us call it social democracy, the rule of the educated elite. This movement of well-born and well-educated men and women sought to impose egalitarianism on the economy, and hierarchy on politics. They were scandalized by inequality of economic condition, but insisted that government should be controlled and staffed by people like them, educated experts that could develop a rational economy and politics out of the chaos of the free market. But the trouble is that it doesn't work.

The new rule of the educated elite doesn't work in economic terms because the hierarchy of the educated experts, attempting to impose equality on the economy with their faddish ideas on planning, energy, education, health care, and the relief of the poor, just cannot adapt to the irreducible complexity of the economy. You can say: we should pursue alternative, clean energy solutions. But the economy is likely to prove you wrong, or deliver clean energy in an unexpected way. As things start to go wrong, of course, the educated experts turn to more and more hierarchy and compulsion to impose their egalitarian solutions on the economy.

The Obama administration is testing the concept of social democracy, the rule of the educated experts, to destruction. What is needed is not for targeted government programs to create green jobs and very fast trains with the rich paying "a little more" in taxes to make sure that the results are egalitarian. What is needed is for the government to create a level economic playing field where all people can compete to serve the consumers with the best products and services. That means dissolving all the special subsidies and mandates that assume that the educated expert knows best, and lowering tax rates and regulations so that the best economic actors can get on with finding out what a recovering economy needs to get its mojo going.

Let's say this again. The whole point of democratic capitalism is to treat everyone equally before government and the law. Then it says: go get 'em, and the people that figure out what the consumers want, and deliver it to them with innovation and reliability get to make tons of money, which they then probably give away in philanthropy years later. People that are good at this, or just lucky, get to climb the greasy pole and get more resources to deploy to back up their ideas. People that aren't so good at this game get to work for other people.

The question is: why does the educated elite work to hard to destroy the remarkable combination of equality and hierarchy that we call democratic capitalism and turn it upside down? What is their problem?

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