Brian Wesbury from the American Spector argues in “The Conservative’s Big Mistake” that the government bailout and influx of capital is flooding the economy for an immanent boom. However, Spector fails to gives an functional evidence of how it would actually promote economic growth, much less a boom. He only cites the 75-76 and 93 growth amidst similar conditions. However, in 08 and 09 we have seen an unprecedented gargantuan amount of government influx. Spector neglects to show that the government stimulus in the seventies and nineties caused the economic immediate growth and that it did not cause long-term damage that was perhaps worse than no government aid might have done. Spector claims these are the concerns of the Conservatives and that they are wrong for thinking the stimulus won’t lead to immediate recovery. He does not sufficiently address these questions and his project demands it.
His main claim is this (a) Conservatives are foolish to shout that the stimulus won’t cause immediate economic recovery; and (b) that it will, because there is so much liquidity; and (c) he claims that mere liquidity in the markets will promote profit and growth. However, sadly there is good reason to think not.
That the markets are flooded with liquidity,
With new money flooding into the system and interest rates near zero, the Fed is easier than it has been in decades. The economy is floating on a sea of liquidity. This is impossible to fight. The economy can’t help but head higher.…people, of any stripe, misunderstand entrepreneurship. Taking economic risk does not mean gambling. Entrepreneurial decisions are designed to limit risk and increase the odds of success. And after 200-plus years, and trillions of decisions, the American entrepreneur has created a very robust and resilient economic system. It is nowhere near as fragile as people think.
Why Capitalism works,
The free market capitalist system is the best system for supporting human dignity and pushing humans to behave morally. It does this by allowing individuals to take personal responsibility for their behavior. It allows individuals to find their most productive occupation, and forces people to face the challenges of the real world head on. It respects competition between free people. This is why it works and why only capitalism, of all systems, has led to permanently and significantly higher standards of living.
The summary of the article hold that the economy is set to boom. It cites similarity of historic patterns 75-75 “amidst terrible economic policy,” or with Clinton in 93, where “easy money” kept the economy afloat amidst Clinton tax hikes and HilaryCare. But the article’s argument gave no reason why the economy’s function would improve amidst non-capitalist-government influx of capital.
In fact, it did not address the counter argument, which I have hinted here that capitalist investments encourage profit and lower risk. The article even mentioned this proposition, but it never considered its implication for its main argument that the market is set a major boom.
To the contrary, the article’s own evidence suggests the contrary, that capitalism’s investors (i) lower risk and increase profits by their very tenacity and shrewdness, and that (2) the government capital influx did not come through these shrewd capital investors; from here we see good reason to think the economy is not poised for boom. That is because, while the economy might be “floating on a sea of capital” as the articles asserts, it is capital outside the management of shrewd capitalist investors — in a word it is not monies for which investors have sweat and bled. So, it can be more easily “risked or gambled” for that which might turn a high yield. We all know how this goes.
When I was a young man, my Mother gave me a large sum of monies to finish school. I deeply believe that I would not have spent as much of that money eating out, if I had sweat for it each day. But the illustrious hope of “doing it better than the natural-system of work for pay” drives our government to give money away for the overall hope to conquer nature.
But the fear is that the government influx of money will only flood the economy with cash, but it won’t promote the needed organization of capital to promote wise investment and profit.
Big government, low interest rates, and high liquidity in the markets primes the pump for investment and expansion of business. BUT the worry is that the influx of capital has come through non-capitalist means and through institutions, such as banks and financial institutions, through relatively free means — where it lacks the safeguards of the traditional capitalist miserly investor. Hence, the worry is that the people and institutional structure of these bailouts will not use the money wisely — as normal capitalist investment prod them to do.