Belmont Club

The Second System

The glass is either half full or not empty enough. The people who worry about ’empty’ include the US Chamber of Commerce, which predicted high unemployment and a weak economy in this election year.  The Christian Science Monitor quotes Chamber of Commerce president Thomas Donohue as saying, “The state of American business is improving – but it is doing so weakly, slowly, and insufficiently to put our nation back to work. ”  The Monitor writes:

The Chamber is the nation’s largest organization representing both small and large businesses. A key challenge to President Obama’s reelection effort is the fact that 23 million Americans are unemployed, unwillingly working part-time, or have given up looking for jobs. To put these individuals back to work, “our economy has to grow much faster than it is today,” Donohue said. The Chamber predicts the US economy “will actually slow down in the early months of the year,” he said.

The Chamber estimates economic growth will average about 2.5 percent in the first six months of 2012 and then “work its way back to about 3 percent by the end of the year,” Donohue said. That prediction is in line with forecasts of private forecasting firms. Economists surveyed by Bloomberg News predict growth of 2.3 percent for 2012, while Moody’s Analytics predicts economic growth of 2.6 percent.

Incidentally, a reader noted that the Baltic Dry Index is in sharp decline. The Baltic Dry Index (BDI) tracks worldwide international shipping prices of various dry bulk cargoes. A fall in the index is worrying sign of declining business activity.

The index indirectly measures global supply and demand for the commodities shipped aboard dry bulk carriers, such as building materials, coal, metallic ores, and grains. …

The supply of cargo ships is generally both tight and inelastic — it takes two years to build a new ship, and ships are too expensive to take out of circulation the way airlines park unneeded jets in deserts. So marginal increases in demand can push the index higher quickly, and marginal demand decreases can cause the index to fall rapidly.

 

A Sign That We Need More Hope and Change

So the idea that the world is in rough times and high unemployment is certainly plausible. But that doesn’t worry everybody. Some people believe the economy is doing badly because it is too full of the wrong kind of economic activity.

Inside Higher Ed reports that left wing student groups are trying to exclude representatives from the financial industry from recruiting on Ivy League campuses, in the way the US military was once excluded. This has not gone down well, even with the students. The Harvard Crimson and the Daily Princetonian denounced the protests as ineffectual and “childish”.

But others harked back to the 1960s, when it became embarrassing to admit openly on campus to considering employment at the Dow Chemical company.

“If you are embarrassed to admit that you’re going to go to work for one of these firms, that’s an argument against picking that kind of a job. I think that that was a cultural shift you saw in the 1960s, where in 1957 if you said you were going to go work for Dow, that was a very exciting thing. But if in 1969 you said you were going to work for Dow, that made you a persona non grata in a lot of circles.”

Who said the sixties would never return? In the hopes of some, it already has.

From the leftist point of view any activity has another metric, which for want of a better term can be called  ‘political content’.  Thus the utility and value of the financial sector, or work in it, is not reflected in the market or in something so sterile as the Baltic Dry Index. True value is reflected by an application of social, that is to say political, criteria to it. Just as back in the 1960s, to work for a public interest law firm was ‘good’ but to work for Dow chemical was ‘bad’, today joining OWS is good and letting banks recruit on campus is bad.  Market signals are secondary. Even if the market wants financial services of a certain type, and is willing to pay for them, political value is the controlling question.

Ultimately the superposition of a second value system over the market requires even more political action.  It may be local, as in convincing a university to ban recruiters from banks. Or it may be legal, as in actually prohibiting such recruitment by law. Recruiters from ‘bad’ companies will be treated like cigarettes; tolerated in very limited circumstances but shunned otherwise.

The difficulty of course, is in getting supply and demand to fall into lines with the second value system. Even if the forces of political correctness could somehow gain power over every political institution, they could not command food to spring up from the ground nor cause goods and services to come into being. That requires the price signal, which as we have seen, should be overridden when it comes into conflict with the sensibilities of the enlightened.

George Will, writing in the Washington Post, recognizes that applying a political criterion to economic activity will not abolish capitalism, only create its mutant offspring: crony capitalism. Empowering government to pick winners and losers, argues Will, will only make it more certain that the politically connected and venal, not the efficient, rule the roost.

The tax code, government’s favorite instrument for distributing wealth to favored factions, has been tweaked about 4,500 times in 10 years. Generally, the beneficiaries of these changes are interests sufficiently strong and sophisticated to practice rent-seeking. …

Government uses redistribution to correct social outcomes that offend it. But government rarely explains, or perhaps even recognizes, the reasoning by which it decides why particular outcomes of consensual market activities are incorrect. When taxes are levied not to efficiently fund government but to impose this or that notion of distributive justice, remember: Taxes are always coerced contributions to government, which is always the first, and often the principal, beneficiary of them.

The Left has never had a bone to pick in principle with the financial industry. They have called it the “high ground of the economy”. The only problem they have ever had with it is not being in control of the purse. Give it to them and they will like it just fine. If financial services companies declare they will only recruit people recommended by ACORN — watch the doors open wider than than wide.

The President’s electoral strategy recognizes this fact and blatantly builds upon it. Faced with the near certainty of a bad economic climate in an election year his message-makers have decided to argue that it is the lack of the second value system that is the cause of hardship. Times are hard because the Other has been “greedy”.  The economy is therefore “unfair”. The present difficulties have been caused by the bad guys, the class enemy.

Therefore the solutions put forward for the economic crisis spring directly from the suggested value system. The world can be saved by adopting moral, i.e. “green” energy; it can be rescued by redistribution; it can be led forward by showing humility toward America’s enemies, in order to atone for past guilts.  In a word, all our current economic problems have political solutions. And all solutions involve putting the “right people” in charge.

His message is simple. In this world it is “us” versus “them”. Join me and Happy Days Are Here Again.

People may take one side of the argument or the other in this debate. Surely they will vote for one point of view or the other. But it should be abundantly clear that this argument — whether to fix the current crisis by market means or political action — is what the 2012 Presidential elections is all about.


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