Economic Populism And Its Discontents

Yesterday, President Bush gave a speech at a G-20 summit that was heartening. He reiterated his support for trade and warned nations not to over-regulate because the free market still works. Indeed it does.

I’ve been very concerned about the railing against the free market and against trade. This is usually advocated as an attack on greed. Of course nobody likes greed. Greed is not a good thing. But earning a living and accepting more money rather than less when you can is not immoral.

During the campaign, Obama repeated the simplistic “we tried deregulation” mantra over and over again and it didn’t work. This is easy for him to say. But what he actually means and what policies he will enact that will solve our problems are vague, which is not surprising for Obama. Is he suggesting a massive new wave of regulation? Or, that in general regulation is preferable to deregulation?

Of course there are sensible regulatory frameworks. But what we need now are tweaks, not an overhaul. My fear is that Obama’s instincts will lead him to throw the baby out with the bath water. Free trade is a good thing. This is so obvious that I feel almost silly having to write it.

The Republican candidates this year were a cause for concern to me. John McCain’s promised crusade against Wall Street and corporate greed, combined with his obvious lack of basic economic knowledge made me cringe at times. It seemed he recast serious economic issues in his usual terms of heroes (the American People) and villains (the greedy Wall Street types who preyed on them). This is more cartoonish than a serious analysis of what is a complex problem. I didn’t find Mike Huckabee’s rhetoric on the issue comforting. Sarah Palin doesn’t seem to really know enough one way or the other. And the only guy who does seem to understand it is Mitt Romney, but he’s unelectable.

Let’s hope that conservatives find their bearings on the free market. A market reveals the prices that individuals are willing to pay for goods and services. Unnecessarily interfering or distorting prices through regulation does not best advance the general welfare of a nation’s citizens. There certainly are some markets where the price signals are distorted for one reason of another. But inefficient markets are the exception, not the rule. Regulation and protectionism only help politically connected groups over others without the same political clout.

America is the land of opportunity and not the land of parochialism and tribalism. Conservatives join in the regulation and protectionist chorus at their nation’s peril.