Bambi's first mistake: He can fix what ails us

by: Clyde   posted: 2009-01-08 15:28:00
Viewed 349 times. 3 Comments.

Bambi said something today that we already knew he thought: Only government can fix what ails us.

What, precisely "ails us"? We have an economic contraction. Contractions are wonderful things. They spawn creative destruction, the very engine of a capitalistic system. Old technology that cannot compete is washed out. Inefficient labor is replaced with new labor processes that are more efficient. Undercapitalized companies either innovate or die. Fat bloated companies either get smart or die. It's the winter that Chancey the Gardener spoke of - we should welcome the cycles; as long as the roots are strong, then new growth comes in the spring.

Everything is measured according to GDP - Gross National Product. GDP is the total value of all goods and services produced by the economy. Yes, there's some twists and turns in the calculation, but we aren't going there. GDP at the end of Calender Year 2008 Quarter 3 was $14.4 trillion.

Our presidents have had vastly different approaches to dealing with the economy. But capitalism is, well, capitalism. So to set the baseline, let's go back to Adam Smith. Here's the quote from which the oft-cited "invisible hand" comes:

Every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.

How can we apply this? No one goes to work for the lowest wage they can achieve - if economic security is their priority. Further, while an individual may work in a lazy fashion, the company wants to put forth the best product that it can. The system is geared towards growth and excellence. In the aggregate, systems naturally cycle as new technology becomes available, new labor practices emerge, and markets either emerge or faded away. Cycles are normal.

So along come presidents with their differing views on how to "manage" the economy. Johnson does his vast social engineering. Nixon introduces wage and price controls, abandonment of the international gold standard, depreciation of the dollar, and deficit spending. Ford brought modest tax cuts and spending restraints. He also sought to "decontrol" energy prices in order to stimulate production. Carter tried (and largely failed) to reform the tax structure, welfare, and health care. Reagan brought supply-side economics with significant tax cuts to free industry. George the Elder lost ground when dems lied to him about spending cuts and tax increases - the economic legacy was basically a clusterfuck. Clinton opened markets with NAFTA and reformed welfare (both pub policies blocked previously); he didn't do much else. George the Younger returned to supply-side economics with a moderate's voice.

Could the philosophies have been much different?

So what did the economy do - GDP - during each of their reigns?

Here is GDP source data 1964 to present. Instead of narrowly looking at quarter to quarter, let's quote the numbers at the beginning of each presidential term (US$Billions):

It seems that the economy did what it wanted to do irrespective of the president's policies. Yes, Reagan controlled inflation and unemployment. Yes, recessions and wars are not highlighted. But you cannot point to huge swings in growth or contraction of GDP based upon presidential policy.

So when Bambi says that only the government can fix what ails us, I am compelled to ask - why is this situation so much different than anything else we have faced in the last 45 years? What makes you so special? Never forget, Child in Chief, FDR prolonged the Great Depression by seven years doing just what you are suggesting.

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