Thursday, October 8, 2009

An outcome based economy

The world is passing us by.

I was reading a review of Michael Moore’s new “documentary” that attacks capitalism (although I am quite sure that Mr. Moore will happily take the money he makes from this film) by Daniel Henninger this morning. It was an interesting send up of a man who makes a fortune by excoriating those who make a fortune. Not much new from Mr. Moore but the leftist sheep in America will no doubt flock to his latest “documentary”. The more salient point was made by Mr. Henninger at the end of his article where he points out that the world is hardly sitting still while the American economy flops around like a fish out of water.

In a recent visit to the Journal's offices, New Zealand Prime Minister John Key suggested Americans and Europeans don't quite comprehend the enormous "wealth" rising in Asia. Add to that Brazil. This isn't just fat cats but the wealth of billions rising on commerce—on crude, potent capitalism.

The Olympic Committee's rejection of Chicago played here as yet another Obama story. The real, less entertaining message is that from where the well-traveled committee members sit, Chicago is a has-been. Rio is the future.

The important difference between the "socialist" Barack Obama and the Republicans is he'd settle for 2% annual growth (gotta pay for the green dreams) and they might get 3%. In a world of China, India and Brazil, growing at rates between 5% and 9%, we need more. A future president who puts the U.S. back in the race with these fast runners could call himself a communist for all I care.

This is where we are headed. The economic policies being touted by this administration and in fairness in large part the Bush administration, are creating an outcome based economy instead of an opportunity based economy. In other words, the goal is not economic growth so much as it is particular outcomes. The end result is predetermined (i.e. “green” cars) so the goal in innovation is to find out what the minimum you have to do to reach your goal is instead being given opportunity and making of that the most that you can. The economy we are heading towards has a number of fixed targets and that will stifle innovation. Mandating health insurance, “cap and trade”, capping executive pay all have as their goal achieving some sort of perceived social equity. Instead of encouraging economic growth constrained by reasonable protections, the administration is putting its boot on the neck of the economy.

This has already happened in Europe where heavy government involvement has led to a neo-socialist state. Tales of Europe’s workers are almost incomprehensible in America. The enormous amounts of paid vacation and leave time, the huge number of workers who are “disabled” and on the government take, the minimal birth rate leading to a huge influx of foreign workers to support the welfare state that is rapidly changing the culture of Europe. In Europe there seems to be little incentive to work hard or innovate. Why work any harder than you have to if the outcome is already predetermined? Certainly there are people who are workaholics who will continue to work harder than others for a while, but eventually inertia will catch up and America will end up like Europe with a “do just enough” economy.

Meanwhile the developing world is rapidly catching up thanks to the global stability provided by the U.S. military (how many world wars have we had since the U.S. took preeminence in the Western world?) and the technological advancements we have innovated. By making the world more interconnected, we have innovated ourselves into being uncompetitive. Why pay someone to do something in America for ten times the cost of someone in India or China? People crab about call centers in India, but those same people would have a fit if their cable bill went up 20%. The solution is not to cut executive pay because the executives at these companies are by and large doing what the shareholder pay them to do: give a solid return on their investment.

We are on a path to economic suicide and world instability. We are deep into a “service” economy and we already have an enormous percentage of our economy based on consumer consumption. In other words, we have an economy based on nothing tangible, one that consists of people paying for services from one another and buying stuff in stores. That stuff is made somewhere else thanks to the outrageously uncompetitive benefits and wages demanded by unskilled American workers. The response from the Obama administration? Push through legislation making it easier for unions to bully people into joining unions and thus making American workers even less competitive. Having a union card doesn’t help you much when your job is outsourced to Mexico.

The end of this road is an America that is an economic dinosaur with an enormous military. That is a recipe for disaster. Can you picture a future America where unemployment is 20%, our Federal government is bankrupt and scared people are electing someone to “make things right”? Think back to the end of the Weimar Republic and the rise of Adolf Hitler. A once mighty nation in collapse electing someone who was willing to do whatever it took to regain prominence. I shudder to think of the military might of America in the hands of someone who is willing to use it to seize power. The partisan morons who painted the liberation of Iraq as “imperialism” have no idea what real imperialism looks like. If we were truly an imperialist nation that was after the Iraqi oil fields, there wouldn’t be roadside bombings in Baghdad because there wouldn’t be a Baghdad. We would have leveled it years ago and focused our attention on the oil fields in the south. The American Left hasn’t had anything substantive to say for years, so they are reduced to name calling and caricatures.

The solution, as Daniel Henninger succinctly points out, is not less capitalism, it is more. For every AIG and Countrywide, there are thousands of companies who do business the right way. Capitalism is not the big threat to freedom, totalitarianism is and the best way to get there is through an economic collapse. That is where we are headed and even though all logic and reason screams “Stop!”, this administration is bent on turning the economy of the world’s sole remaining military superpower into a crippled, socialist shell of itself.
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