Economic Dams Break, Too … (Eventually)

DamGovernment hates competition. Seeing Uber attacked by governments in California, New York City, Paris and Germany on behalf of traditional cab companies and their unions attracted our attention. Seeing Airbnb under fire in response to complaints from hotels competed the picture for us. Nothing new really; Adam Smith wrote of the economic fallacy involved.

China is the classic case: Chinese ships longer than football fields were exploring the world; technology was advancing three hundred years ahead of Europe. But one Chinese government, fearing the instability brought on by massive change, used laws to stop it all in its tracks. Possession of a seagoing ship acquired a death sentence, for instance. That government put China to sleep, leaving it a weak, defenseless victim when the Europeans finally arrived. In the U.S. the government had no such power when it later underwent its industrial revolution; the result was the Civil War, followed by the Progressive political movement, both highly destabilizing. As these events proceeded, the Chinese government probably told itself: “See? We told you so!” When steam powered ships armed with cannon appeared offshore, it was too late to rethink that attitude.

Automobiles met government resistance at first as well; city speed laws and traffic rules were maintained for horse-drawn vehicles, not cars. But cars appealed to voters and so, triumphed. Today’s internet services appeal to voters too; cheaper and more efficient than the old ways. Yellow cab and Hilton hotels will contribute to politicians and prevail against the true public interest for a while, that will delay progress but it cannot stop it. Even a Chinese emperor could not stop it indefinitely. But progress will be slowed just when it is sorely needed in a lackluster economy.  Government speaks of creating jobs while it is busy preventing that. That’s an existential human problem, seems to us.

Our elite governing class is pursuing world government, a willow-the-wisp fluttering among the branches of the United (humor!) Nations. As though a committee sitting in New York could make intelligent decisions for folk in Berlin, Odessa, Beijing, Hiroshima, Bogota’ an Tbilisi. Ridiculous! A serious goal, nevertheless. Never mind that the folk in Washington seem unable to make sense of much beyond the Beltway. There is a basic (but unpopular) principle of Political Science:”Subsidiarity.” It says that government should be as close as possible to the results of it decisions. Sensible enough, it provides for better knowledge of events affected by governing and for accountability. That last offends politicians, of course.

The U.S. was in turmoil from its industrial revolution, people displaced, political struggles, war, stable careers vanishing with buggy whips, farms emptying into cities, massive unemployment at times, constant change. Government was under constant threat, too weak to impose stability as China had. The result? Millions of people impoverished and millions more wealthy inhabitants of a golden city on a hill, attracting the world’s multitudes of the impoverished, seeking improvement in opportunity.

Opportunity is the key word here: Opportunity exists in the disorder that comes with freedom; it is handcuffed in the “stability” that comes with government-impose stasis. All governments desire that stability; they are threatened by the wildness of real freedom. It is uncontrollable, no government willingly abides that.

The result is a pattern in history: governments evolve toward the increasing control they need to assure stability and as they do so, they restrict the freedom necessary to create wealth. (Nothing is free, right?)

And there is a familiar joker in that deck as well: The more rigid the “stability” that the government is able to impose, the less productive the economy but the greater the demands upon it. In the end, government cannot find the resources it needs to buy the influence it requires to maintain itself. It collapses economically or by revolution and the cycle repeats. Or so it seems to us. (DNA, anyone?)

The U.S. government has used taxpayer billions to nourish numerous “green” power startups; most of them have failed, wasting the billions. A famous example, Tesla, is an affront to present science, an economic joke that is burning through its dwindling borrowed cash and losing some $4,000 on every Model S Sedan it sells. The entire “clean energy” political science is economic suicide, as any reading the business news regularly can see. But the government is trapped in its own political construct and must proceed. Until it all falls, anyway.

Around the globe, local issuers are now putting out alternative currencies, good only where they originate, excepting Bitcoin. The historical dollar, pound, euro, etc. are no longer enough to satisfy the needs of everyone. It’s small scale, but it’s telling, we think, A financial “cloud upon the horizon, no bigger than a man’s hand … ”

Not much has been changing in the U.S. recently sans government permission. America has become more stable. And less wealthy … We suspect that may be about to change!

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About Jack Curtis

Suspicious of government, doubtful of economics, fond of figure skating (but the off-ice part, not so much)
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