President Barack Obama gave a news conference on Friday June
8, 2012 during which he said a few words about the economy. This being an
election year, he raised a few eyebrows among his detractors who commented
negatively on what he said. In turn, their response compelled him to take up
the subject again later in the day to explain to them what they must have
misunderstood.
The next day, the editors of the Wall Street Journal came up
with an editorial which they published under the title: “The President on
Growth” and the subtitle: “An instructive Friday press conference.” They put
their idea in a nutshell this way: “The President's response is to say … that
the federal government should borrow or tax more so it can then finance more
hiring by state and local governments,” and they too had negative things to say
about that. But this being how they understood the message of the President,
they reiterated their advocacy for a contrary course of action; that of
shrinking the size of government and letting the marketplace decide on all
matters pertaining to the economy with little or no interference from the
government. Well, I hate to do this but I must respond by starting my argument
in the same way that they started theirs.
This is how they started their argument: “That sure was a
revealing White House press conference...” and this is how I start mine: That
sure is a revealing editorial. I say this because the Wall Street Journal used
to be a journal of business; it is no longer that. It used to understand
business; it no longer does. Sadly, the Journal has become a mouthpiece for the
advocacy of an ideology that is more attuned to a political posture than it is
to an economic theory. And their editorial is proof of that.
Let me explain. An ideologue is one who believes in an idea
as if it were a religious dogma. He does not question it, therefore does not
parse it or tries to see if it would apply in whole or in part to a given
situation. To him the idea is rigid, absolute and must apply everywhere in
whole without compromise. If it does not suit a given situation, it is that the
situation was perverted and must, therefore, be fixed or abandoned. On the
other hand, a theory is not a simple idea but the coming together of several
concepts. These need not be glued to each other so tightly as to resist being
parsed or remodeled. And parse to remodel is what we do to a theory we adopt
having deemed it useful and workable. We modify it to fit every situation we
encounter while avoiding the stress that may result as the situation begins to
change trying to evolve.
What we know after ten thousand years of civilization on
this planet is that all situations evolve at one point or another. What we also
know is that we are at this time in a global economy where things are evolving
so fast, it is absurd to be married to one ideology, be it a very rigid one or
less so. A good theory of economics to adopt must, therefore, encompass the
entire spectrum from the John Maynard Keynes pole on the “Left” to the Milton
Friedman pole on the “Right”. And the approach we take when applying the theory
must be so flexible as to allow the decision makers to slide back and forth on
the economic spectrum thus harmonize with the yearly changes in the economy;
and if necessary even the quarterly changes. The aim would be to stay abreast
of the real economy, and where possible anticipate how it may evolve to get
ahead of it.
While it is easy for some people to take the flexible
approach to economics, it is difficult for others to do so. This is because the
subject matter is closely tied to culture where the social dogmas abound. For
example, we have on the flexible side the people who believe in the Keynesian
approach. They readily accept the social mores that tend to be liberal and
permissive. On the other hand, we have the people who believe in the Friedman
approach. They tend to reject the permissive mores of the liberals while
clinging to the traditional conservative mores even if they profess to adhere
to a libertarian ideology.
While the new economies of the Orient, Latin America and
Africa have understood those realities and have modified their strides in such
a way as to make giant progress, the old economies of America and Europe
have remained frozen in their old ideological postures, refusing to budge away
from them. Whether these people adhere to the policies of the Left or those of
the Right, very little seems to work for them because they fail to see that
what counts is not where they stand anymore; what counts is how flexible they
need to be in moving with the flow. In the absence of such flexibility,
therefore, it would be useful to take a look at the lessons of history.
One lesson is that of Turkey 's
Ottoman Empire . It was called the sick man of
Europe because it began to lose the client states that were orbiting it to the
rising powers of Europe at around the middle
of the Nineteenth Century. When you come right down to it, you will find that Turkey 's general decline came largely as a
result of its economic decline in relative terms as compared to the rising
industrial might of Europe . It was the
evolution of industry that gave the European nations both the excuse to embark
on the conquest of the world and the means to do it. They needed the natural
resources that did not exist on their continent, and they had the know-how to
make the weapons by which to defeat any rival and go grab what they need from
those that had the resources.
For a while near the end of the Twentieth Century, the Soviet Union was beginning to look like the next sick man
of the West and maybe the sick man of the East as well, but things turned out
differently. What actually happened was that the Russian
Federation at the core of the Soviet Union voluntarily
shed the republics that were troublesome to the Union
but kept itself intact in every other way. Rich in hydrocarbon and other
resources, the Federation used its natural wealth to rebuild itself standing on
the foundation of modern economic principles. It had a wobbly start as do all
beginners but things stabilized with time. The current prognosis is that Russia 's best days are ahead, and this may be
the reason why some pundits are predicting that the breakaway republics will
want to come back to the fold and reconstitute the old Union .
Caught between a rising Russia
and a rising North Africa , the European
nations will be forced to change their ways and catch up with the times.
This leaves us to wonder what will happen to the United States of America ,
the current superpower that seems to be adrift in an age of globalized culture
where the old rules that were largely formulated by itself no longer apply, and
the new rules have not yet been formulated because no one knows what they ought
to be. Yes, some rules are made by anyone that has a skin in the game on the
basis of make them as you go; they are tentatively used but then discarded when
they prove to be unworkable which is most of the time. And this is the free for
all sort of situation to which America
is not used, one that puts it in the awkward position of having to follow the
rules of a lesser someone or opt out of the game altogether.
These two choices being perceived by many Americans as the
only ones available at this time, the internal debate has become polarized around
them. Two opposite camps have formed: one calling on the country to opt out of
the global scene altogether so as to live in isolation; the other calling on
the country to harmonize its behavior with the rest of the world and to embrace
all global trends. Amid the cacophony of these two groups, you have the editors
of the Wall Street Journal who use economic speech to promote a peculiar kind
of social and political agenda. In doing so they prove to have lost the
business acumen that used to be felt in the old days when reading the Journal.
For example, the new crop of editors is doing something that
the old editors would never have done; they complain bitterly that the
Administration is standing in the way of big oil doing what it wants. Hell,
Wall Street Journal, big oil is doing exactly what it wants now as much as
ever. Look here, kids, let me tell you something you may be too young to
remember or to know. Big oil has known about shale oil and shale gas for as
long as they have known about the tar sands of Canada – and this is a very, very
long time. But they did not start to develop the tar sands until conventional
oil came close to “peak oil” time. And this came about primarily because of the
worldwide increase in demand. The price of energy went up and made it
economical to develop the tar sands, so they did.
And they will start to develop the shale oil when the time
will come which is not too far into the future. It will happen regardless as to
who is in power in America
or anywhere else in the world. Get this through your heads, Wall Street
Journal, money talks and if Armand Hammer was able to convince the Kremlin to
do what was good for his company and his shareholders, the Chairman of any oil
company in America
will convince the White House or the governor of a state to do what is good for
his company and shareholders. In the meantime, because the development of the
tar sands as well as the upcoming development of shale oil will require
tremendous amounts of natural gas, they are now developing shale gas to be
ready for that day.
And guess what, Wall Street Journal, there is something else
you ought to know that you don't. I am going to tell you what it is but don't
turn cynical on me; it is just the way that business operates. You know why the
price of gas went through the floor? Because the big guys are pushing the
little guys out, buying them at a dirt cheap price when they go bankrupt. When
the big guys will have acquired most if not all of the known reserves, they
will find all sorts of excuses to jack-up the price as high as the market will
bear. Get it now, my friends? This is what moves business; not what the White
House says or does. So, stop bellyaching and start writing the sort of
editorials that make sense economically not the rubbish social and political
stuff that has entered your bloodstream.
When you get to understand this, you will know that big
business is apolitical as much as it is international. It will look around to
see where the opportunities exist and go first to where they look better, then
turn its attention to lesser opportunities. For this reason, business considers
America
to be just another place where to do business. It has advantages and
disadvantages not in terms of the political and social garbage that seems to
preoccupy you but in terms of the availability of resources – natural, human
and in terms of infrastructure. Big business will work with a Castro as well as
a Kennedy unless a Jesse Helms gets in the ways and pushes a law through
Congress that outlaws such a relationship.
Thus, if America
will suffer the fate of the Ottoman Empire to become the sick man of the world,
it will not be due to what the White House says, it will be due to what the
Congress and the media will do to America .