1/22/12

Bill Clinton’s contribution to the Financial Times’ series on capitalism is a big disappointment (Charity Needs Capitalism to Solve the World’s Problems). He says business can engage in charitable activities and also put people back to work. A partnership between business, charities, and government is needed “so that benefits and opportunities are available to more people.”

In “Reckless Endangerment” Gretchen Morgensen argued that it was Bill Clinton’s creation of a public- private partnership to expand home ownership that contributed to the financial crisis. In both America and Europe government spending ‘to bring benefits and opportunities to people”have led to unsustainable debt levels and the threat of financial collapse. What is needed is a return to first principles. Government must get out of the way so that individual entrepreneurs can focus on innovation and wealth creation. Without wealth creation there is no money for charities or government’ benefits.”

Clinton says that while our global economic system has brought benefits to many, “it has also exacerbated inequalities, both within and among countries.” This directly contradicts what Phillip Stephens wrote earlier this week about how capitalism in Asia has led people to look to the future with optimism. In places such as China and India millions have moved away from poverty and are enjoying rising standards of living.

Clinton shares the opinion of those on the left that business should support national goals set by politicians, and abandon the practice of maximizing profits by serving consumers. One problem with this is that in a democracy political goals are always changing. Moreover, the profit motive must be preserved because it is the mechanism that directs capital into the areas where it is most needed. It is the invisible hand of the free market that is supposed to correct distortions that develop in the economy.

The Keystone XL pipeline is a good example of how politicians and bureaucrats create obstacles to prosperity and jobs. The New York Times writes that Barack Obama made the correct decision when he rejected the pipeline that would run from Canada to the Gulf Coast (A Good Call on the Pipeline). The Times writes:

“Far more important to the nation’s energy and environmental future is the development of renewable and alternative energy sources.”

In other words, the development of fossil fuels must be impeded because the national goal should be to promote wind and solar power.

The Times says the “extraction and production of tar sands oil in the fields of northern Alberta would also cause far more greenhouse gas emissions than drilling for conventional crude.”

The Times also says that proponents are wrong when they say Canadian oil would reduce our dependence on Middle Eastern oil, because much of the pipeline oil would be refined on the Gulf Coast and sold into foreign markets.

When economic decisions are based on political considerations the free enterprise system is prevented from earning a profit by serving consumers. Obama is blocking the pipeline because he has concluded he is not likely to win in the industrial states of the Mid-West, and his chances are better among upscale voters in places such as Virginia and North Carolina.

Rejection of the pipeline will force Canada to try to sell its oil in Asia instead. It will not prevent development of the oil sands. It will mean America will continue to be dependent on oil from the hostile regime in Venezuela. Even if some of the oil was refined on the Gulf Coast and sold abroad it would be a profitable economic activity and mean jobs for American workers The pipeline decision will actually harm the environment because shipping the oil across the Pacific will result in increased emissions. The only “benefit” is that Obama might win in Virginia and North Carolina.

Another egregious example of how government interference with business hinders prosperity and hurts the consumer is the Obama administration’s attempt to prevent Boeing from manufacturing planes in South Carolina, where workers are not forced to join unions. Boeing eventually settled with the unions in Washington, but only after promising that a certain number of jobs will be reserved for that state.