Friday, January 21, 2011

The Corporate Elite Have a New Platform for Intervening in the Economy

President Obama will name Jeffrey Immelt, General Electric CEO, to head a new advisory panel focused on "promoting economic growth by investing in business." Think of it as central planning by the corporate elite.

President Obama is, of course, all excited by this,“Jeff Immelt’s experience at GE and his understanding of the vital role the private sector plays in creating jobs and making America competitive makes him up to the challenge of leading this new Council,” said the President.

In a WaPo op-ed, by Immelt the truth was laid bare about this new panel.

Immelt sounds like a clueless central planner, who doesn't understand how markets foster innovation and move product to the most demanded parts of the economy. His comments indicate a lack of understanding with regard to price signals and the fact that central planning can not be successful in improving the standard of living of a country:
Business leaders should provide expertise in service of our country. My predecessors at GE have done so, as have leaders of many other great American companies. There is always a healthy tension between the public and private sectors. However, we all share a responsibility to drive national competitiveness, particularly during economic unrest. This is one of those times...

 We need a coordinated commitment among business, labor and government to expand our manufacturing base and increase exports...

Businesses should invest more of their cash and resources in advanced products and technologies that will create jobs in the United States, and government should incentivize this investment in innovation...

We must work together to construct an economy that creates more opportunity for more people.

What can one say other than this is banana republic talk. Companies have no duty to drive "national competitiveness".  The only goal of businesses should be to service their customers at a profit and compete against those in the same market they are in, whether those competitors are down the street or in Hong Kong. The use of the term "national competitiveness" is downright scary and suggests some kind of national planner designing rules or the government financing  "national competitiveness". This, of course, has nothing to do with free markets. It does, however, suggest the potential for the government to interfere with free markets and harass small businesses for the benefit of the corporate elite.

As far as a "coordinated commitment among business, labor and government". There really is no role for government in a sound economy. A government would contribute nothing. And business should be allowed to offer its workers whatever it chooses, while workers should be free to choose or pass on any offer. This "coordinated commitment among business, labor and government" is central planning that will benefit the corporate elite, union bosses and the government---and will be an overall suffocator of the economy.

Immelt's call for government incentivization  of investment in innovation is again central planning. Has Immelt never heard of Silicon Valley? There is no need for government incentivization, which is code talk for sending even more money to the politically connected.

"We must work together to construct an economy," says Immelt. Here, Immelt fails to understand the observations of Friedrich Hayek on what he called a "spontaneous order". Free markets are about this spontaneous order that develop complex economic and social systems without human design---no Jeff Immelts needed. Indeed, when Hayek promoted the concept "unintended consequences" he was using the term at a much deeper level than that at which it is used today by the intelligentsia. Hayek was referring specifically to the complex, unplanned, relationships that develop in society and in an economy. When Hayek thought of unitended consequences, he was thinking of such undesigned developments as language, money and a downtown business area--all of which developed (and continue to evolve) in a spontaneous fashion, and were the unitended consequences of other actions by humans. Governments have tried to intervene in all three of these sectors only to distort and hinder the ongoing spontaneous development.

When corporate elitists get involved in attempting to "construct" an economy, it's the same distortions and hindrances, with the additional kicker that they attempt to distort the economy in their favor. It's really rule in banana republic dictator style, with the only exception being the corporate elite don't subscribe to the fashion choices of banana dictators and thus tend to shy away from wearing military uniforms. But don't let that fool you, it's just about the only difference.