Those two parts add up to the old economic philosophy of central planning, when the government determines what people need and then manages the whole national economy for producing those products. The result is well known from the Soviet experiment. Most products produced by that economy were not desired by anyone, their quality was substandard, and even they couldn’t be manufactured in sufficient quantity. The country, which put the first man into space, could not feed its people or give them adequate housing and health care. The environment of one sixth of the world’s territory was devastated.
On the contrary, in the United States, where government traditionally played a minimal role in the economy, people enjoy an exceedingly high standard of living, good health, and high longevity. They have enough food and clothing, breathe fresh air, and drink clean water. The American private economy not only provides for its own people, but feeds million in other countries where the governments decided to run the economies.
Obama and Plouffe may still wonder how America managed to do all this for almost three centuries without their help. Together with the Ukrainian academician they may ask how without such guidance our country hasn’t plunged into complete chaos, and instead became the richest country in the world.
Maybe the idea of market self-regulation is complicated, but some simple considerations may help. People proved to be smarter than government experts in deciding what is best for them. They cannot be so easily lured into buying what is wrong for them and will eventually drive out of business those who do not serve them well. This is not the case with the government. A governmental agency that issues harmful regulations cannot be closed by irate consumers and the bureaucrats responsible for them will seldom be fired.
Self-regulation does not guarantee against business cycles, but assures long-term growth and the capacity for self-recovery. Even at the bottom of each recession we are usually better off than we were a decade earlier and we return to the positive growth of the past once again. Vladimir Putin, who had the insolence to criticize the volatility of the American economy, should remember that Russia still has to go a long way to catch up with the U.S. as a result of its experimentation with central planning. Those who criticize capitalism for allegedly not allowing the majority of the population to benefit from its prosperity should realize that the American poverty line is higher than the median income in China, which is considered by many now as an exemplary economy.
Ronald Reagan once said: “The government is not a solution, but a problem.” We may add to that: “Capitalism is not a problem, but a solution.”
Not for Obama, though. He campaigned for president by accusing Romney of being … the ideal capitalist. Indeed, Mitt Romney is rich and successful. But only people who have no understanding of the invisible hand do not appreciate the fact that private equity companies like Bain Capital are much more effective tools of market regulation than central planners and create much more public wealth than the Ukrainian academician or the Obama administration.
In going after Romney’s business record and promoting his policy of governmental regulation, Obama attacks the system of private enterprise — the goose which lays the golden eggs. If we want to save that big bird, if we believe that we can decide by ourselves what is good for us, if we trust the private economy to provide for us, our choice in this presidential election is clear.