Economics

I think when I am reading about economics that I see a lack of focus, a lack of standing back and looking at the big picture.

Why did America become an economic powerhouse in the first place? This was the result of the American state of mind, a place where it is believed that anything is possible. The American economy has always been extremely volatile. Businesses come and go. A store front might say "Since 1965," for instance. That's because in American terms that's a long time for a business to stay in the same location. In Italy one could imagine a sign that said "Since 1465." That would be something to brag about in old world terms.

I am writing these things because I am not seeing any sense in the media treatment of this subject.

In the larger picture volatility is good. If a business isn't cutting it, it is best for everyone if it fails and makes room for someone else. This logically includes General Motors.

I confess I am not comfortable extending this volatility to banks. Is it good for everyone if Bank of America fails? I'm honestly not sure. But then I am also not sure the government should extend loans so they can buy Merrill Lynch.

The superiority of the American economy derives from the individual American. We invent freely. We embrace the new. We both make and consume innovation with great enthusiasm. This is what makes us strong.

It is now almost 30 years since Ronald Reagan began the by now conventional wisdom that all economic objectives can be obtained by cutting taxes. This has resulted in huge growth by large corporations whose taxes have been cut and very little growth in the welfare of ordinary Americans whose taxes have generally not been cut.

I judge economic success solely on the basis of how well off the individual American is. I see the ordinary American trying to retain the sense of prosperity through increasing emphasis on borrowing. We want the illusion of prosperity and achieve it on credit. In the past people borrowed to purchase houses and cars. Now they borrow to purchase everything.

I think current free trade low taxes economic theory ignores the importance of the individual. We the ordinary American consumers are what drives the global economy. If our needs are perpetually ignored in favor of the needs of large multi-national corporations, can the global prosperity survive?