There is a word missing from the “solutions” offered by both Democrats and Republicans to the searing economic crisis visited upon America by a combination of craven financial speculators, complacent regulators, feckless politicians and not a little bit of greed amongst many borrowers.

That word is “sell.”

It is only in the selling of surplus manufactures – as Adam Smith taught us – that new income enters the economic system, with the corollary effect of demonstrating, maintaining and advancing the  institutional and operations frameworks for national competitiveness.

So we must ask ourselves, what is America selling to the world? (more…)

As an economist, I eschew the soft-headed convenience of ready-made ideologies, together with their carrying rationalities, turning upon intellectual vulgarities I haven’t the stomach to bear. But even when we look askance at ideologies, focusing instead upon flinty economic facts evidenced in history, a certain resolve may be expressed without overstatement:

1. Markets are the best means to capture the wisdom of individuals acting in their own interests.
2. Taxes should be moderate, clear and specific, to afford business and individuals the most efficient options for planning investment and economic activity.
3. Regulations should be specific and not speculative; written with sufficient flexibility to address new situations, with a clear, speedy review process to put right such anomalies as may arise from human action.
4. Under this framework, capitalism provides, not merely, the most efficient means of producing prosperity for the largest possible number of persons, but also the best means by which those without it may acquire capital, by which they too can become more direct authors of their won prosperity.
5. So long as the above is true, the well-off, the well and the not-so-well-off can co-exist in social harmony, because there is the belief that with application and diligence anyone who is not well-off may become so, within the system as described.

There are further elegant truths in history offering wisdom by which clear thinking on these questions may be maintained, advanced and reinforced:

1. Too aggressive a tax rate offends the sense of accomplishment of those who toil for their own prosperity; increasing the feeling that the fruit of their labours is being apportioned by an unaccountable few for the sake of an increasing many.
2. The habitual debasement of the currency undermines the assumption of value, which instigated the resolve to labour for oneself, in the first instance.

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In 1999, I was lecturing at the Smithsonian Institution (The Smithsonian Associates), on The History of Revolutions. At the end of the series, a question was put to me, namely: which country was poised for revolution? My answer was “this one”.

Why? came the inevitably anxious reply.

Again my answer was not comforting. ‘Here in the most economically significant and militarily powerful nation in history has blossomed, an endemic entitlement attitude which has fomented a dysfunctional culture. This culture encompasses not merely welfare mavens or dead-beats, so to say. But also corporations and politicians; the latter whom in a zero-sum, future-be-damned spirit, have fed and fostered this culture for their own perceived advantages’.

Such was my view then as now. The ‘fallout’ from such mendacity often results in social upheaval. However, Americans tend to watch public apoplexy in other countries with a gyroscopic fascination, expressed in the mirthful assumption that “such things cannot happen here”.

Yet, they can, have and are; perhaps now, increasingly.

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