Reforming in the Wrong Direction

In speaking small businesses today, Barack Obama issued forth a technocratic vision of business. Small business is a petty small-minded affair in which people take out loans for predictable static returns. Small businesses hire people at fixed salaries, pay fixed insurance rates, etc., etc.. The small business owner is nothing but a soulless cog in a computer simulation run by an omnipotent 2nd year econ major.

Barrack Obama further claims that he is wonderful beyond any leader in the history of civilization as he and the Democratic Congress wish to relieve the petty-minded small business owner of healthcare though one of the greatest extra-Constitutional power grabs in the history of the nation. (NOTE: Amendment 10 of the Constitution reserves health care and most other matters to the states or to the people).

Sadly, a large number of Republican politicians seem to share this same technocratic vision of the economy in which the economy is top down equation that can be controlled with the right inputs from an unbridled Federal government.

The top down vision of the economy created by Marx is not new. It was, in fact, the rule of the feudal society and a long period called The Dark Ages.

From the Renaissance through the penning of the Wealth of Nations by Adam Smith, people began developing a different idea of the economy. Both the feudal and Marxian system see the wealth of the nation flowing from the glorious leader, through the political structure to the petty-minded people.

The free market brand of thought saw wealth as a creation of the human mind. Wealth was created by the investments of the people. The wealth of the nation did not flow from the king through the people, but was the accumulation of the wealth created by the people in their various undertakings.

If Adam Smith is correct, the Obama's stimulus and health care reform are not the cure of our economic woes, but the cause of it.

The technocratic view is not unique to Democrats. An increasing number of Republican politicians (Alan Greenspan, Poulson, etc.) appear to have adopted this view. Greenspan was enchanted with the notion that an all seeing and all knowing economist at the Federal Reserve can regulate the economy through a fractional reserve lending system. The Feds lend out a dollar at a given rate. That dollar is then lent by banks a dozen or so times

The fractional lending regime created an economy where people took wild margin plays against equities. The system of margin plays has proven to do little more than to create series of wild bubbles and chaotic market moves.

If the technocratic view is the problem, the cure is for people to deleverage and to return to the free market economy described by Smith … which was controlled by people building equity and saving … opposed to people taking out loans and running margin plays against the economy.

Health care reform should move away from the technocratic vision of insurance (with fixed monthly payments) to one in which people are building equity in anticipation of future medical expenses … such as the Medical Savings and Loan.

If the technocratic vision of a static economy that runs like a computer program is wrong (and Adam Smith was right); then the health care reform before Congress is reforming our health care system in the wrong direction.