Shomron Center for Economic Policy Research

In Search for an efficient Institutions

President Obama, the New Keynes, and Some Associations


In a recent July 13, 2012, address delivered in Roanoke, VA, President Obama aptly and adequately expressed the essence of a new way of reading Keynes. In his view, the state not only has the honor of disbanding the economy and sustaining output and employment on a high level. After working intensively for the benefit of society, the government and its people have a right to fame, something that society bestows upon the successful entrepreneur by virtue of its own benightedness and ignorance.

As we noted in “Modern Anti-Capitalistic Ideologies,” Chapter 9 of our book, ideology is an easily digestible form of worldview and morals. We may also add: of science, as well (at least, of such a far-from-strict-science as economics).

Moving right along from the idea of forgetting about the Long Run period and about the differences in investment quality for state and private ownership (J. M. Keynes original), we go on to the model of Munchausen (with some people in this connection referring in politically correct manner… to Lincoln), which represents the state’s pulling itself and its steed (the economy) out of the swamp “by its own hand.” A transition, it should be noted, which is quite logical. This idea, which forms the complement to Keynes’ own implicit assumption of the equal value of private and state investments in terms of efficacy (return on investments), is also the basis for government policies in most of the leading economies for “overcoming crises.” This is the policy of redistributing means from effectively operating businesses to ineffective ones. Investments grow drastically while this is in process, but, for some reason, employment and output show evidence of almost no growth at all. This is probably because the generation of today is living during that same Long Run period that Lord Keynes was not willing to think about, so as to avoid getting upset.

Let’s see, on what account did Mr. Obama make out a final invoice for business?

The entrepreneur and his workers have paid all the taxes used to finance the government sector (including the salaries and even the salary taxes for the President and government officials). For this money, the businessman and his people get all the worst type services (including defense and security, if they do not overly interfere with the terrorists; as well as education for potential firm employees, roads, and the rest). Workers can, for the time being, be recruited from China, India, and Russia (since, judging by the results of international Olympiads in mathematics, the likelihood of finding an ambitious educated young guy with good math is there a few times greater than in the US). They may also be drafted from the private schools and universities still remaining. But competition against the state is difficult and risky.

These risks make it clear why it was the state, and no other, that built BRIDGES AND HIGHWAYS FOR AUTOMOBILES in the US. This holds, while railroads, a grandiose network of hundreds of thousands of kilometers, as well as railroad bridges, were in the US built exclusively by private business. Add to this that these developments came decades before state construction of the Autobahns (not only Roosevelt, but the Fuehrer of the Third Reich, too, adored highway construction). True enough, at a certain stage, the state decided to stimulate construction, based on both economic and strategic considerations. The stimulating turned into a decades-long problem of lines ridden with losses (naturally, more had been constructed than it was profitable to maintain given the conditions of the severest competition). The state not only in Russia, but also in the US, is reminiscent of the mythical King Midas. But the other way around: any gold which it touches turns into a product of dubious quality.

And so, behold this state, represented by the President, as it puts forth claims not only to taxes to be levied from business. It claims the very success of business, along with the moral reward accruing to those who continue to make ever new goods and services available for the millions.

The honor and respect due for making available electric home appliances, automobiles, or computers with user-friendly software, may go to Roosevelt (F. D.), Clinton, or Obama. To them, the chosen ones, do the honors go, and not to self-appointed upstarts who are the likes of Edison, Ford, Jobs, or Bill Gates.

In conclusion, let us repeat. After having paid the state for all its programs by means of taxes and credits, business is compelled to purchase services it never asked for. Services (education, first of all) of a quality level which it finds satisfactory are something business is more and more often forced to seek abroad or from other businesses, or else from a third sector. Services providing the education already mentioned or the access to automobile highways are not of the best quality because these areas have been invaded by the state without due cause – to put it mildly.

This much done, the entrepreneur still remains in “inexhaustible debt.” And should the entrepreneur be so imprudent as to give money to the Republican campaign (and not to the Democratic one, like George Soros), then guys from the IRS may pay him a visit, and spend a long time inquiring into the details of his life and creative work.

Does this not remind you of anything?

English version –  by Elen Rochlin

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