In September of 2004, I attended a conference on economic development in the Donetsk region of Ukraine. A Ukrainian academician proudly presented the major achievement of his institute – a twenty-year plan for developing the market economy in the region.
After his presentation I asked: “Why does the market economy need a twenty-year plan?” The angry scademician replied: “How can it develop without a plan? It would be a chaos.”
“I don’t think so,” said I. “The market will regulate itself. No one planned for Microsoft or Apple.”
“I am sure that you are wrong,” said the academician. “Some people in the White House definitely thought that through.”
I recalled that exchange recently when I heard President Obama say: “If you’ve got a business, you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.”
I realized once again that the idea of an invisible hand may be not so agreeable, even for people with high intellect and good education. Indeed, the idea of market self-regulation is very complicated theoretically and is yet to be proven with the rigidity of the laws of physics.
Many of those who appreciate the idea do so as a result of personal experience. The Obama administration has a dearth of such people. The fact that there are far fewer persons with entrepreneurial experience in the current administration than in any previous one may explain the administration’s obvious distrust of the market economy and strong belief in government regulation.
In a recent TV interview, White House adviser David Plouffe said: “We wouldn’t have an automotive industry if he [Mitt Romney] had been president. President Obama secured that.” Plouffe was talking not about any particular plant, not even about General Motors, but about the industry created by Henry Ford, Alfred Sloan, and other entrepreneurial geniuses and the thousands of talented engineers and highly trained workers that work in it. To think that the existence of that industry is secured not by all those people, but by a few bureaucrats, who have never created anything in their life, is delusional.
Unfortunately this delusional economic philosophy underlies the basic premise of the Obama’s administration that without guidance by the government the private sector is unable and unwilling to do things which are good for the American people. That is why Obama decided to spend $90 billion to develop “new” sources of energy. The money was not spent on fusion but on technologies that can be developed by private companies, without governmental assistance, if the companies decide that there is a demand for them.
And here comes the second part of Obama’s economic philosophy: we cannot count on demand since the people don’t know what is good for them and can be easily deceived by evil corporations. The only benevolent force to protect people not only from those corporations but also from themselves is a federal government.