Will Obama’s failure to create genuine wealth finally end Keynesian economics?
Many of Obama’s most educated supporters believe in him because they believe in Keynesian economics. Central to that belief is the theory that government itself can be an economic engine. If people aren’t working, have them work for the government or at least have the government fund their ostensibly “private sector” jobs. This theory holds that all jobs are good jobs, regardless of the employer. Indeed, ardent Keynesians say the government is both the best employer and economic manager, because it’s big enough to control the entire economy, getting money and jobs where they most need to be.
I turned my back on Keynesian theories when I finally figured out that there’s a difference between jobs and wealth. As Milton Friedman famously said, if all that you’re interested in is employment, forget shovel-ready jobs and aim, instead, for spoon-ready jobs, which will put more people to work. At the end of the day, whether you have ten people with digging away with shovels or one hundred people picking away with spoons, all you’ll end up with are holes. Under this model, any benefits from fuller employment are transitory.
What creates meaningful jobs, the kind that move the economy forward instead of create a static back-and-forth of taxes to the government and make-work to the people, is a dynamic private sector. That’s where you get innovation, imagination, and energy. Under this free-market economic model, the government’s job is to prevent abuse. It steps aside to allow the greed that’s necessary for capitalism, while acting affirmatively to prevent fraud, abuse, and other kinds of things that interfere with the marketplace.
During the debate, Romney was referring to this policing role when he said some regulation is not only good, but actually necessary. It’s when the government starts managing the economy that wealth vanishes.
If you have a rich country (or, as was the case with Europe when America paid for her Cold War security, a sugar daddy), you can keep the back-and-forth of taxes and government make-work going for quite a long time. Eventually, though, you’re left with jobs, but no wealth. And no wealth means no taxes, which means no jobs. Welcome to Greece.
What Romney has to do during the next month is convince undecided voters, or worried voters who aren’t as decided as they thought they were, that, while, Obama’s policies can and will create jobs (as today’s anemic, and suspect, job reports revealed), his policies not only cannot create wealth, they are antithetical to wealth creation. I think this ad is a good start:
