Wednesday, July 14, 2010

Victor Davis Hanson: Conservatives are destroying capitalism

National Review's Victor Davis Hanson reports his frustration with a business-owning friend who won't buy equipment or expand his business. It deserves quoting at length:

I asked a businessman two weeks ago why he said that he was neither hiring nor buying new equipment. He started in on “rising taxes.”

“But wait,” I interrupted. I pointed out that income-tax hikes haven’t taken effect. The old FICA income caps are also still applicable. Health-care surcharges haven’t hit us yet.

He countered with “regulations” and “bailouts.” I said, “Come on, get specific.” He offered up “cap and trade” and “the Chrysler creditors.” I parried with more demands that he tell me exactly how the federal government has suddenly curbed his profit margins, or how his electric bill had gone up since January 2009, or whether he had lost money on any investment because the government had violated a contract.

Exasperated, he talked now instead of more cosmic issues — the astronomical borrowing, the staggering national debt, and the new protectionism. I pressed again, “But aren’t interest rates historically low? Inflation is almost non-existent, isn’t it? New products are still comparatively cheap? Rents and new business property are at bargain-basement prices?”

This give-and-take went on for ten minutes; but you get the picture. Private enterprise is wary, hesitant, even frightened, but nevertheless hard pressed to demonstrate in concrete fashion how Obama has quite ruined them in just 18 months.

So why are a lot of cash-solvent financial firms, banks, and manufacturing companies not hiring, not expanding, and not buying new operating equipment as they did in past bottoming-out recessions?

In a word, fear. Remember that capitalism is in large part psychologically driven. Confidence, optimism, and a sense of calm about the future foster risk and investment, while worry, pessimism, and a sense of foreboding ensure timidity and stasis.

Barack Obama — who is mostly a creature of the university and the dependable government payroll — does not seem to grasp that fact.

Hanson goes on to say that Obama has created a climate of fear through the hiring of appointees -- like Van Jones -- with radical pasts, or through insufficient worship of free markets. But if there really is a climate of fear in the business community, who really has created it?

Conservatives, that's who.

They've devoted considerable time and resources to proclaiming the Obama Administration an era of "socialism" and "tyranny" -- even though, as Hanson admits, the actual rules and taxes on business right now should be encouraging growth and expansion. The country has been force-fed a diet of Glenn Beck and Tea Parties over the last 18 months, all of them making the case against Democratic policies in the most dire terms possible. Is it any wonder that some people actually take it seriously?

I don't think Victor Davis Hanson or other conservatives should refrain from criticizing Obama in order to revive the economy. But I do think a constant stream of hyperbole can have consequences. Hanson's column, though, shows how Republicans all-too-easily win: They get to create a climate of fear -- and blame it on the victim. It's cynical stuff, and in this case -- if Hanson is to be believed -- it has demonstrable harm.


Monkey RobbL said...

Unfortunately, this is what parties and partisans do. When Bush was in power, the Democrats went on and on about how he was bankrupting the country and turning the world against us with his wars. Now Obama's on the throne and the Republicans (and their fellow-travelers) all-of-a-sudden care about government expansion, spending, and the unwinnable war in Afghanistan.

Both were right, and both were wrong. Their criticisms often contained some truth, but that truth was embellished and spun in a way that would most likely damage the opposing party and benefit the accusing party. The actual country, both individuals and businesses, is just a playing field in the big party politics game.

namefromthepast said...

Just want to get this straight

I read your comments to contend that pointing out and commenting on ignorant policies is as damaging to the economy as making the ignorant policies?

I think you give commentators way too much credit in the economic world.

On fear..fear is an emotion. Good business people rarely make strictly emotionally driven decisions because they are usually wrong.

Furthermore creating and sustaining any illogical fear or any other emotion is impossible by words alone. Reality and rationality creep in if the stimulus isn't credible.(read that however you choose) This is true in every aspect of life.

Critical comments from any group has little longterm impact on someone who actually makes daily or business planning decisions.

But this radical left wing agenda creates a climate of uncertainty that does influence the decision makers.

Joel said...

"I read your comments to contend that pointing out and commenting on ignorant policies is as damaging to the economy as making the ignorant policies?"

If you read Hanson's column, he's pretty clearly saying that lots of factors that could promote good business expansion -- tax rates, regulations, etc. -- are already pretty favorable. He's blaming the "climate" for the refusal of businesses to get back into the growth business.

If he's right, then we have to figure out who's responsible for that climate. You can blame Obama for creating that climate -- but as Hanson seems to concede, the reality of Obama's actions doesn't seem to be the problem. So ... yeah: If the policies aren't the problem and the "climate" is, well -- you don't think Obama wants to create a climate that makes him look like a business-hating tyrant do you?

Admittedly, this only goes so far: You hope that business owners really are the rational and cold-eyed realists you suggest they are. But I don't believe that's entirely the case. If it were, we probably would've avoided the economic meltdown in the first place.