Tag Archives: political economy

A Tidbit

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…of a concept that’s lost on one of the main groups of central planners of the world, those of Russia.

This one comes from an article in Pravda, which plays a role for the Russian government similar to that of The New York Times for the Democratic Party’s administrations. Interestingly, in addition to being missed by the Pravda author, it’s also missed by Tom Friedman, who cited the article in his NYT article.

The context is an alleged oil war being waged by the US and Saudi Arabia against Russia and Iran, an attempt, supposedly, to destroy those two nation’s economies. (I say “alleged” and “supposedly” because of course President Barack Obama wouldn’t do such a thing. Both he prefers engagement with our enemies over contesting with them, and an oil war would be inconsistent with Obama’s promise to Vladimir of greater flexibility in this post-2012 election period. Besides, the Pravda author denies the existence of a war, so that settles it.)

The tidbit from Pravda:

The planned economy of the Soviet Union was not able to cope with falling export revenues [from collapsing oil prices]….

The planned economy was not able to cope.

Planned economies just aren’t flexible enough. More, by introducing like a dam into a river a small body of men into the information stream that is the core of a free market economy, planned economies can’t react with the speed that a freely flowing river of information produces for an unfettered market economy.

This is a fact well known to capitalist economists and empirically demonstrated all over the world, repeatedly, if most dramatically by that Soviet Union collapse.

Unfortunately, this tidbit also is lost on our own central planners, and so we get Obamacare and Dodd-Frank; an explosion of economy-governing rules from EPA, the CFPB, et al; and a burgeoning production of Executive Orders from our Democratic Party President.

Yet Another Reason for Smaller Government

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German factory orders fell 5.7% in August, real GDP is stagnant or falling in many European countries, Standard & Poor’s has downgraded France to AA from AA+….

There’s more.

[T]he 18 euro area countries had zero real growth in the volume of production during the second quarter of 2014. Euro area real GDP grew only 0.5% in 2013 after falling 1% in 2012. In other words, output was lower in mid-2014 than it was at the end of 2011.

And yet—or because:

Euro area government spending was 49.8% of GDP in 2013 versus 46.7% in 2006. In other words, euro area governments have co-opted an additional 3.1% of GDP (roughly €300 billion, or $383.6 billion) compared with before the crisis—about the size of the Austrian economy.

France spent 57.1% of GDP in 2013 versus 56.7% in 2009, at the peak of the crisis. This is the opposite of austerity—but the French economy hasn’t grown in more than six months. It is no wonder S&P downgraded its debt rating.

Italy, at 50.6% of GDP, is spending more than the euro area average but is contracting faster.

And so on.

There seems to be a pattern developing. An old, old pattern.

You can’t take money out of the private sector of an economy and give it to government without both growing government and shrinking the private sector. Government is simply incapable of spending the money as efficiently as the private sector (if only from a confluence of greater internal friction due to bureaucracy and an in-built lack of concern for the cost of money, with which the private sector must always contend, while leaving aside a system of graft that grows faster in a bureaucracy than in a private sector entity that will surely be punished by the market).

Redistribution of money from the private sector to government holds back growth, at best. As we’re seeing in Europe. Smaller governments have a harder time doing that than Big Governments.

Who Pays for Political Campaign Travel?

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In the case of some Democrats, like President Barack Obama, it looks like us taxpayers pay a significant fraction of the costs. As Mark Knoller of CBS News noted the other day,

Under Federal Election Commission (FEC) rules, the government must be reimbursed for parts of presidential political travel.

“When a trip is for political or unofficial purposes, those involved must pay for their own food and lodging and other related expenses, and they must also reimburse the government with the equivalent of the airfare that they would have paid had they used a commercial airline,” states the Congressional Research Service in a 2012 analysis of “Presidential Travel: Policy and Costs.”

Further, when a presidential trip includes both political and official appearances, the White House is permitted to prorate the reimbursable costs.

However,

As President Obama embarks Thursday on a three-day Democratic fundraising trip to California, the White House again refuses an umpteenth request from CBS News for the political travel information.

[R]epeated requests are turned down for a breakdown of the costs and an explanation and specific examples of how the White House calculates how much is paid by taxpayers and how much must be reimbursed to the government by the Democratic National Committee or others.

The Obama White House justification? They insist that prior administrations also have refused such disclosures.

There’s that Democrat morality with which we’re all so familiar: the rightness or wrongness of a thing isn’t inherent in the thing; it’s entirely in whether someone else did first, or is doing it also.

Crony Capitalism and Big Government

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California’s health insurance exchange has awarded $184 million in contracts without the competitive bidding and oversight that is standard practice across state government, including deals that sent millions of dollars to a firm whose employees have long-standing ties to the agency’s executive director.

Several of those contracts worth a total of $4.2 million went to a consulting firm, The Tori Group, whose founder has strong professional ties to agency Executive Director Peter Lee, while others were awarded to a subsidiary of a health care company he once headed.

It isn’t just state government, though, nor is this problem limited to government-run medical “care.” Think, also, Solyndra and A123, Tesla in Nevada, “green” energy subsidies, Dodd-Frank and too big to fail, farm subsidies, loan guarantees for big corporations like Boeing and GE (roughly $6 billion between them, via the Ex-Im Bank), even the Senate barbershop (!).

If our government weren’t so big, so taxing, so spending; if we turned the rascals out more often in our biennial elections, our government wouldn’t have the wherewithal with which to engage in crony capitalism, and we citizens could get back to capitalist capitalism and general prosperity.