Part 1 of this article discussed two problems with the Obama presidency: The vague slogan of change and world pundits' rejection of Republican policies based on hatred of George W Bush. This part continues with three more problems and starts by asking: What's wrong with love? Ideological war of love vs trade Medical care and welfare are the other favourites of the Democratic Party. Were it so easy to give, the Republicans and politicians the world over seeking the same votes would have promised the same, at least for their own self interest. Why not? The differences between the Republican and Democratic Party's tax, medical care and welfare policies respectively simply boil down to this: Republicans demand 'tough love' and Democrats promise 'easy love'. One views welfare as a privilege; the other as a right. This is an ideological battle as old as civilization itself, not just in America. There are only three ways to get what we want outside of Robinson Crusoe's island. They are violence, love, or trade. Most of us can rule out violence as a preference, even though we cannot seem to avoid it when love and trade fail. The second option is Love. The giving of love necessitates the loss of the essence of liberty, fairness, individual responsibility, and even productivity. And only family, charity and religions should practise love on the helpless. The government should not deliver love - not because it does not have the power but precisely because it has too much power to do so. Asking the government to distribute loving care will only require new laws that will make the government more powerful, centralised and overbearing. Government intervention necessitates the implicit threat of violence – to collect tax to finance love. It is amazing how many smart minds adore Henry Thoreau's passive resistance to taxation on Walden Pond, yet find all kinds of pretenses to raise taxes to be 'progressive'. The third option to get what we want is by trade. Trade is the only fair and responsible means to get what we want - without resorting to private or government coercion and without having to beg others to sacrifice themselves. Today's younger and non-business-owning voters might have preferred 'government love' - hence many Democratic Party policies – because being used to familial and collegial environment, they misjudge the risk of inviting government violence. It's also not surprising that authoritarian governments reject free trade because trade transfers decision power to the people, away from the government. It is no coincidence that terrorists repeatedly bombed the towers named World Trade Centre, until they succeeded. The different levels of trust for 'government love' is also one reason why the Republicans and Democratics tend to react differently to foreign military interventions, making Republicans look 'hawkish' and Democratics permissive. As for the world's intellectuals and journalists, almost all of us were born into leftist, activist, or loving families. We can go through half a lifetime before running into Ayn Rand's pristine logic that defends money and trade in 'The Money Speech' in her novel 'Atlas Shrugged'. It is a real shame Rand is not made required reading in high schools all over the world. Campaign debt to the left The fourth problem with Obama is the campaign debt he owes to the left and labour unions who contributed money and grassroot election efforts. Lobbyists and labour unions can be as oppressive and corrupted as the big businesses when they gain political clout. For example, the main thing the labour unions want is to get rid of secret ballot in union election. That will hand union bosses potentially oppressive organisational power. One of the labour union's prime targets, Wal Mart, grew to be so big because it provides consumers with the largest volume of products at prices consistently favoured by and favouring the consumers. The low prices ensure that consumers - including union workers themselves - can maximise the enjoyment of their income or the fruits of their own labour. Minimum wage is another union favourite. The times when minimum wages were high were also the times when more inner-city unskilled teens could not find jobs. Why hire young punks when you have to pay a high 'minimum' wage not matching their skills? Remember wages make up a huge percentage of the cost for service businesses which tend to be prime employers of low skilled workers. Unions, when made too powerful by the law, can hold a society at ransom with strikes. It will discriminate against legal immigrants that help to regenerate a society and this tends to lead to racism. Excessively powerful labour unions ignore the economic principle that the employer absorbs a whole range of risks of pre-paying for business idea, capital, material and salary. The American economic resilience is substantially based on its labour flexibility. While the world outside counts its recessions in years (and Japan seemingly in decades), the US usually counts its recession in quarters. Any loss of labour flexibility in the US will crank down the speed of adjustment in the US - which is everyone's export destiny. This should send a shiver around the world - as it has if you have noticed today's endless market crashes. Loss of checks and balances The fifth problem about Obama is a substantial loss of checks and balances in the four pillars of power in the US political system - the administration, legislature, possibly the judiciary and the media. Furthermore, over the next four years, Obama will likely have opportunities to replace retiring supreme court judges. He will be in a position to tilt the US Supreme Court towards the left. Fair-minded as he may want to be, Obama will be greatly pressured by a powerful Democrat-led legislature and his election debt to labour unions and left-leaning lobbies. When and if that happens, all three branches of the government of the world's only remaining super power will fall under the influence of the Democratic Party policy of government love, intervention and protectionism. How about the Fourth Estate - the Press? Unabashedly left-leaning and generally pro-Democratic. Why is it different this time? When the Republicans were in power, there was always the Press acting as the opposing thumb. When Bill Clinton was president, there was the Republican Congress to check on him and the gridlock ensured budget balance and medical care restraint. When Democrats took the Lower House in 2006 and gradually the Upper House in 2007, there were enough Republican filibusters. But post-November 2008, these restraints are essentially gone. However, between the next four to eight years we can expect political abuses and scandals, which can come in the form of pushing through badly-thought-out, self-dealing and bloated legislation and spending on tax, energy, medical care, union regulation and mortgage financing, not excluding corrupted and over-zealous aides as the other possibilities. In developing countries, for example, emboldened family members are the mainstay of political scandals. Over-popularity tends to lead to too much power and corruption which eventually drown previously-inspiring icons of democracy, such as in Taiwan (Chen Shui Bian and family), South Africa (Mandela and Winnie) and South Korea (Kim Dae Jung's son). Market is forward looking This is not a criticism of Obama the man. In fact I am excited and proud about the Obama presidency because he spent two years at my alma mater. And to be fair, it will not all be Obama's doing. The problems include the Democratic Party policies, the loss of checks and balances, the hatred for Bush that has poisoned rationality and our intellectuals' despise for money and trade. Republicans have messed it up too, failing to hold fast to their libertarian tradition and getting themselves mired in sexual and corruption scandals when they had too much power. That contributed to their down fall by the 2006 mid-term election. McCain's campaign was unconvincing. Although it is difficult to decipher the markets, the trick is to remember that markets are forward-looking. Equity values (in stocks, properties, and business ventures which are really job creators) are highly leveraged on very long time horizons and therefore their prices are subject to wild swings triggered by minor departures in today's key political-economic decisions, such as whether or not the best ideas will continue to have the freedom to compete in the domestic and international markets. The series of market crashes in the past year likely reflect an increasing realisation that Obama's policies are coming for real. Every election campaign round, speech, poll and debate increased the certainty and panic that culminated with the November 2008 election results and continues with the cabinet selection and policy preparation. The failing World Trade Organisation (WTO) negotiations and the dimming prospect of Russia being drawn into WTO only anchor a horribly pessimistic world scenario. If we value our assets and jobs, our best hope is for WTO to be revived by a miracle and more checks and balances to be installed in the US mid-term election within two years. Save our consumers But there are a couple of things the world outside the US can do, specifically world opinion makers, intellectuals and the media can do a better job. First, push Brazil and India to revive WTO negotiations and watch the market shoot up overnight. Second, push our governments to liberate our own consumers by liberating imports, domestic services and cross-border investments. The moment we liberate domestic services such as banks, communication, transport, education, media and medicine is also the moment we expose our legislative weaknesses and endemic bureaucratic corruption. Consumers must be freed. Why complain condescendingly about over-borrowing U.S. consumers, when hardworking Asians are forced by unfair domestic rules to distrust their own future, such that they hoard savings and forgo enjoying the fruits of their own labour? Meanwhile, the American consumers can reap more than what they sow simply because they have a constitution and legal system in which they can trust their future with (mainly through an artificially depressed borrowing rate financed by Asians). Asia mercantilist policies to leech wealth from the US consumers through exports are actually schemes to mask misgovernance at home. We end up leeching and oppressing our own consumers, that is, our very own selves for far too long. CHEAH KAH SENG considers himself a student of the Austrian School of libertarian economics. An investment analyst who has watched financial bubbles build and burst since 1987, he feels contrarian opinions can be upsetting but still valuable. This article was originally published on 2009 Feb 17, at MalaysiaKini.com at http://malaysiakini.com/opinions/98467 |
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