Named and shamed

Ronald Reagan summed up the government's view of the economy: "If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." Economic historians have a term for this philosophy: "mercantilism." It was the dominant politico-economic system in Europe from the 16th through the 18th century. And it is still far from dead---just consider the IRS, the FDA, and the trillion-dollar bailout scheme.

The original mercantilist philosophy was based on the premise that wealth is not something to be created but a pre-existing reality, a fixed pie of gold. Thus market exchange was seen as Michael Douglas described it in the movie Wall Street: a "zero-sum" game. The benefits to one nation come by imposing costs to other nations.

Between 1500 and 1800, ruling elites sought total control over economic life through cartelization and regulation of all market activity. The collusive relationship between governments and businesses resulted in imposing barriers for foreign goods to come in and for domestic capital and skilled labor to move out. Other measures included subsidies and exclusive privileges to domestic manufacturing, compelling producers to join and obey guild regulations, and the creation of new state-supported monopolies. Sounds familiar, does it not?

Last week the leaders of the G-20 promised that protectionism will be "named and shamed." They should have started with the tall and handsome American guy. Remember how---in order to win the support of the unions and the millions of patriotic but economically ignorant Lou Dobbses---Barack Obama pushed the Patriot Employer Act? With all the good intentions, this and other similar pieces of legislation could easily alienate our allies and destroy much American potential to create wealth by redirecting the nation's resources from their most productive uses to areas deemed "patriotic" by the ruling clique.

Neo-mercantilism arises from the same forces as the mercantilist policies of 500 years ago. Bankers and industrialists (the rich) use their ties to political elites (the powerful) to secure government intervention for the protection of their narrow interests. And they arrogantly claim to seek benefits for the nation as a whole. Big business gets bigger and the idiots amass even more power over us. Labor unions are also able to preserve their artificially high incomes. It's a great deal---unless you happen to be a consumer or a taxpayer.