Monday, October 27, 2008

Another Reason To Be Afraid

There is some speculation that Larry Summers, Charles W. Eliot university professor at Harvard, may be the Barack Obama's choice for Treasury Secretary. In a column he writes for FT, Summers yesterday displayed his total lack of understanding of how a free market economy works. Given Obama's interventionist tendencies, this is the last man you want giving Obama advice.

Here's micromanager, interventionist Summers:

Even with the best conceivable fiscal, monetary, financial and regulatory policies, economic performance depends on deeper and more structural policy choices. Nations cannot fine tune their way to delivering a prosperity that is more broadly based. In important ways, then, the crisis creates space to address longer standing problems. Just as patients hear advice regarding diet and exercise differently after a heart attack, so recent events should make it possible for the next US administration to accomplish more than might previously have been thought possible....

...there is a need to ensure that the pressure to increase spending is directed at areas where it will have the most transformational impact. We need to identify those investments that stimulate demand in the short run and have a positive impact on productivity...

The wealth and income gains from the easy availability of credit were highly concentrated in the hands of a fortunate few... More fundamentally, short and longer-term imperatives come together with respect to policies that seek to ensure that any future prosperity is inclusive. The policies that are most effective in helping to support demand are those that help households struggling either because of low incomes or because they have recently lost part of their income...

All of these considerations suggest that the pendulum will swing – and should swing – towards an enhanced role for government in saving the market system from its excesses and inadequacies.

Oh yeah, Larry Summers knows how to run the economy better than millions of people toiling every day to make the world better. F. A. Hayek called it a fatal conceit.

What can be said other than that Summers has no understanding of the free market system and is the type of economic tinkerer that will ignore supply and demand curves, and replace them with policies designed in a manner that will obfuscate the fact that the policies fly in the face of reality--and yet build big egos at the same time. Ultimately, these bizarre economic structures are doomed to failure. Thus, leading to one of two options, they are either abandoned or government attempts to enforce them at gunpoint. Be very afraid.

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