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2 THE BEAR'S
LAIR The cost of
politicians By Martin
Hutchinson
As the United States political
season moves into high gear, a full year before it
will blessedly end, the thought inevitably occurs
to an economy-minded person: How much do all these
politicians cost? Not simply the cost of their
endless and annoying campaigns, but the money
diverted to economically inferior uses by
political pressure, the mistakes made through
their ignorance of subject matters in which they
have no competence but only
political authority and the
economically damaging decisions made in pursuit of
non-economic and often anti-economic goals. When
added up, the total is mind-boggling.
The
cost of politicians must be distinguished from the
cost of government itself. Anarchy doesn't work
very well, and once that option is ruled out you
have to have government and that government is
going to cost money. Nevertheless, examples such
as Britain before 1832 have demonstrated that in
societies where political considerations and
electoral success play only minor roles and war is
avoided, government can be managed at far less
cost than is now deemed necessary. One of the
great ironies of the American Revolution is that
the colonists, who rebelled against
British-imposed taxes lower than those of the
mother country, were in reality living in the
lowest tax polity in the history of civilized
mankind. Needless to say, once the United States
had achieved independence, the taxation on its
people was never as low again, even though for the
country's first century and a half most US
governments pursued admirably frugal policies.
In the category of money devoted to
economically inferior uses, agriculture subsidies
must surely hold pride of place. Initiated to
protect the living standards of impoverished
Dustbowl farmers and French peasant landholders,
they have become entrenched as a subsidy to
agribusiness and a huge blockage to freer trade.
Their cost is not only the direct out of pocket
expense of the US, European Union and Japanese
subsidies, but the economic cost of the trade
foregone by the death of the Doha Round of trade
talks. As such, the annual global cost of these
excrescences must be in the trillions.
A
second area in which politicians divert scarce
resources to economically inferior uses is that of
construction. Local governments build excessively
large public facilities that the market does not
demand. National governments build ugly modern
prestige public buildings (France) or unnecessary
motorways deep in the countryside (Japan). Both
local and national governments combine to
subsidize ludicrously wasteful bids for major
sporting events such as the Olympics or the
football World Cup, or unnecessary sports stadiums
such as the new baseball stadiums in Washington
and New York, both subsidies to sports teams that,
being in large wealthy media markets, emphatically
do not need them. The Third Reich was famous for
the quality of its public buildings and
ceremonies; other polities are equally
economically profligate, without the saving grace
of Leni Riefenstahl to film the events or Albert
Speer to design the buildings.
Ethanol
subsidies are a combination of government devoting
money to economically inferior causes and
politicians meddling in matters they don't
understand. Ethanol from corn, the production
methodology subsidized by the George W Bush
administration, is a thoroughly inferior way of
producing ethanol, itself a somewhat inferior
automobile fuel whose benefit to the environment
is indeterminate at best. Ethanol produced from
sugar cane, the Brazilian method, was itself
hopelessly uneconomic for two decades after Brazil
began to subsidize it in 1979, but is at least an
economically and environmentally sound means of
producing ethanol at the current market prices of
petroleum.
Global warming is an area in
which politicians don't understand the science,
but give Nobel prizes and gigantic subsidies to
the most alarmist scientists. Having "proved" to
its own satisfaction that global warming is real,
the political process is now attempting to close
off debate so it can perpetrate an entire new
range of controls, boondoggles and subsidies that
will reward favored groups.
The
irrelevance of the actual science is demonstrated
by the universal politicians' preference for "cap
and trade" control, which requires politicians to
set emission targets based on extensive lobbying,
over "carbon tax" methodology, which would require
politicians to impose an unpopular tax on the
electorate, thus bringing the true cost of global
warming boondoggles out into the open.
The
biotech sector and in particular cloning and
genetic manipulation represent another area where
politicians destroy economic value though their
amateurism. Laughably incapable of understanding
the science, they restrict advances on the basis
of media scare campaigns and religious dogma. This
is a potentially huge industry, the demand for
which and the benefits to humanity from which are
literally unimaginable; at present it seems most
unlikely to grow to maturity within the United
States.
Finally, politicians act without
due competence in the area of finance, a sector
vital to the health of an economy, yet the
workings of which are governed by well understood
if often counterintuitive economic laws. The
Federal Reserve made insufficient allowance for
bank failures after 1929 and thereby brought about
a monetary collapse that greatly worsened the
Great Depression.
The Securities Act of
1933, splitting commercial and investment banking,
was passed in a fit of populist rage and
decapitalized the investment banking sector,
causing new issue volumes in the middle and late
1930s to fall far below those of the 1920-21
recession and remain at those low levels
throughout the decade - again worsening and
prolonging the Great Depression.
The
excessive monetary creation of 1965-73, and still
more that of 1995-2007, created economic problems
far more intense than any short-term benefits of
stock market and housing euphoria that
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