Andrew WhiteWhole Foods Market CEO John Mackey seemed to suffer the wrath of some bloggers when we wrote an article, picked up by the Wall Street Journal, then the Economist, that swam against the populist mass-media. To be “in” and a “good guy” one has to be seen to support socialist tendencies, but Mackey swam against this. His blog, “Health Care Reform”, opened with a very telling quote: “The problem with socialism is that eventually you run out of other people’s money”-Margaret Thatcher.
I had to smile. Some years ago, even after she left office, the Economist used to track the number of times Margaret Thatcher’s name was in the press, week on week, as a measure of success (or notoriety) of her beliefs. I lived in the UK through her reign, and just before and after it, and am well versed in the history of Britain in the ‘70’s. Bottom line – her beliefs were divisive – one part of the population understood her message, believed it, and realized the world had changed and we had to change (somewhat painfully) with it. The other segment of the population did not understand, did not agree, and felt they could/should preserve (or grow) the “nanny state”. One group, the former, believes in equality of opportunity; the other in equality of outcome.
It is the “nanny state” to which we now march so willingly in America. But her quote stands up well. In fact while driving one of my boys to school today and listening to the news, I heard an article being debated about applying government funds to appliance manufacturers. The point promoted was: “if the auto-industry get’s hand outs, and banks too, why not us?”
This led me to think of two important economic issues: crowding out and distortion. For every dollar pushed by the government toward one stake-holder, and by definition, not for another, the balance across all stake-holders is revised (read distorted). The natural order of things – whatever that would be – is consciously changed not by an economic behavior but by political behavior. Two things we know – the law of unintended consciences will lead to other stake-holders to get around the system; to “level the playing field”. Second, we are playing with income or wealth re-distribution.
Crowding out takes place when enough government invested money, prevents commercial funds from making the same investment. On the surface this sounds fine; in practice it leads to a mess. Governments are not investing for any profit-based strategy that follows any creative destruction motivation. Governments invest for social and political reasons. The former creates, through pain, cyclic growth. The latter creates pain, through infrequent step-wide growth.
The year after Margaret Thatcher was kicked out of the Conservative Party, I joined that organization at a local level (where I lived). I was so upset at how the “dark suites” (as the grandees of the party were called) treated her. I wanted to do my part to help. For local elections I did door to door work, polling my neighbors on their political voting leanings. I was aghast! These houses were nice: detached, 4+bed, nice yards, with 2 or 3 cars, color TVs, computers, even boats. These were home owners (something that had improved dramatically under Thatcher). They were mostly middle class to working class. Not 50 years before they would have felt themselves working class and happy to a black and white TV and 1 car. The very policies that led to sustained growth, despite the odd call to the IMF and currency devaluation, were being ignored. I could not understand how picky “normal” people are; how easily they pick and choose which part of history they remember. Too many folks said to me, on door step after door step, “well, what did she do for me lately?” I quit the party – realizing that there are no rational voters – just people.
Go Margaret!
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