Michael Barone‘s latest contribution to the Washington Examiner discusses the failures of the Obama administration’s efforts to manipulate the economy:
[I]n this summer of unrecovery, it’s still important to understand how so many smart people got so much so wrong.
One answer comes from economist Arnold Kling writing for american.com. Kling argues that the collapse of the housing market and the financial crisis disrupted what had been “a sustainable pattern of specialization and trade” and that we need to let the market economy develop a new one.
Instead, the policies of the Obama Democrats have been aimed at propping up the old order — holding up housing prices and the mortgage market, keeping the Detroit auto companies in place, maintaining the lush standard of living of public employee union members (the purpose of the $26 billion the House was summoned back to Washington to approve Tuesday).
Maintaining unsustainable patterns of production, Kling writes, prevents the trial-and-error process of private investment that creates new jobs and patterns of production that will be sustainable.
Across the Atlantic, Marc De Vos, director of the Itinera Institute, a Brussels think tank, advances similar arguments in his book “After the Meltdown.” The financial crisis, he argues, has brought a revival of “state capitalism,” in which governments “have an increased and distorting role in economics.”
“The state should be the partner of the market, not the owner or manipulator of the market,” he writes. “Governments should not pick economic winners and losers. The state may be back, but the politicians should be modest.”
Modesty, unfortunately, is not the dominant character trait of a president who predicted that his election would be seen as “the moment when the rise of the oceans began to slow and our planet began to heal.”
But facts are stubborn things. The fact that the private sector economy has not responded as administration economists expected and confidently predicted should be a wake-up call.
It shows the limits of expert knowledge and the ability of political actors to make optimal economic choices.
