As Joel Kotkin detailed in the Washington Post this weekend, the Wall Street Bailout and Trillion Dollar Deficit Plan being pushed through Congress this month mark the transfer of power from commercial cities like Chicago, New York, and San Francisco, to Washington DC.
In the business world, campaign contributions and lobbying efforts have replaced cost cutting as the way to maximize profit. Going to Washington with hands outstretched can prevent bankruptcy, and can provide a stimulus to the bottom line. Competing without such government aid is becoming more and more difficult, and rebels who shun such tactics are a dying breed.
This “political entrepreneurship,” or use of political power in place of competition, is not new. In fact, as far back as the “robber baron” age, some businesses preferred to use the power and purse of Congress, rather than have to do the hard work of cost cutting and innovation necessary to be a successful market entrepreneur. The true “robber barons” were not businessmen competing freely in the market, but those businessmen who gained monopoly advantage by lobbying Congress and buying market power.
Today, we still have some “robber barons,” protected by government and producing shoddy products, but we also have endless more miles of red tape on regular business, an incomprehensible tax code with favors for special interests, and subsidies and “pork” for every conceivable interest group request. It. Yet with all this spending and protection, we’re told we need more “stimulus,” and we need to “protect” more jobs.
In the academic world, two developments are driving the movement from economics to politics. The all-round analysis of economics, which can take into account all interactions and effects of various policies, has been abandoned for narrow subtopics and mathematical abstractions. Meanwhile the economists themselves have taken political views and ignored economics in their policy recommendations (for example, Paul Krugman).
But, the movement away from rational and realistic economics – the realization that there are limited resources and limited time, and that we cannot at once waste time digging holes and filling them up again, and also be productive and create prosperity – and toward politics – the art of deception, favoritism and trading favors – will necessarily bankrupt the country.