Free Markets, Free People

Fareed Zakaria


It isn’t rocket science, Mr. President

Seriously, by now just about anyone – to include the President’s panel of economic advisers – should be able to figure out why there are no jobs. The QoD below tells you why in so many words. Fareed Zakaria tells you why without mincing words:

The key to a sustainable recovery and robust economic growth is to get companies investing in America. So why are they reluctant, despite having mounds of cash? I put this question to a series of business leaders, all of whom were expansive on the topic yet did not want to be quoted by name, for fear of offending people in Washington.

Economic uncertainty was the primary cause of their caution. "We’ve just been through a tsunami and that produces caution," one told me. But in addition to economics, they kept talking about politics, about the uncertainty surrounding regulations and taxes. Some have even begun to speak out publicly. Jeffrey Immelt, chief executive of General Electric, complained Friday that government was not in sync with entrepreneurs. The Business Roundtable, which had supported the Obama administration, has begun to complain about the myriad laws and regulations being cooked up in Washington.

In other words, back off, get out of the freaking way, quit talking about massive new taxes and programs that deincentivize investment and employment, and let the 1.8 trillion in cash sitting on the sidelines in private hands do its job.

Wow, I wish I’d been saying that for, oh, 18 months or so.

It still astounds me, though, that I and others are still beating this drum this late into this economic disaster.  As the title points out – this isn’t rocket science.  Incentives work to increase behavior you want, disincentives work to discourage behavior  you don’t want.   If you talk about making it harder and more expensive to hire someone, you disincentivize hiring.  Same with investment.

And that’s precisely what’s going on.

One CEO told me, "Almost every agency we deal with has announced some expansion of its authority, which naturally makes me concerned about what’s in store for us for the future." Another pointed out that between the health-care bill, financial reform and possibly cap-and-trade, his company had lawyers working day and night to figure out the implications of all these new regulations.

The immediate implication is they’re sitting on the sidelines, sitting on their cash instead of investing it, and they’re not hiring.  And every reason you seen listed above has to do with government.  Not down markets, or lack of demand, or whatever else one might want to blame on “capitalism”. 

Of course, as an aside, I have little sympathy for many of these CEOs.  They’ve learned you get what you vote for:

Most of the business leaders I spoke to had voted for Barack Obama. They still admire him. Those who had met him thought he was unusually smart. But all think he is, at his core, anti-business.

Yet these titans of industry and banking apparently weren’t astute enough, or didn’t want to look under the veneer this “smart” guy presented.  Seems interesting to me that they never got it, but many of us out here in fly-over land saw through candidate Obama immediately. 

Now they – and we – are paying a pretty high price for voting for someone they see as “anti-business” and apparently clueless about how to do what is necessary (or, perhaps, unwilling) to settle the markets, help establish a positive business climate and provide incentives for flowing that 1.8 trillion (it won’t cost the taxpayers a dime) into the economy and spur expansion and hiring.

They must be so pleased with the regime they’ve helped put into place, given their current positions on the sidelines trying to figure out how to stay in business.

Brilliant!

~McQ


Is It Different In Iran This Time?

I believe the answer is “yes”. It has to do with the breaking of the aura of divine authority coming from the ruling mullahs  and casting doubt, among the people, on the belief that the theocracy is divinely sanctioned.

Fareed Zakaria offers an excellent summary of the point:

CNN: Do you mean you think the regime will fall?

Zakaria: No, I don’t mean the Iranian regime will fall soon. It may — I certainly hope it will — but repressive regimes can stick around for a long time. I mean that this is the end of the ideology that lay at the basis of the Iranian regime.

The regime’s founder, Ayatollah Ruhollah Khomeini, laid out his special interpretation of political Islam in a series of lectures in 1970. In this interpretation of Shia Islam, Islamic jurists had divinely ordained powers to rule as guardians of the society, supreme arbiters not only on matters of morality but politics as well. When Khomeini established the Islamic Republic of Iran, this idea was at its heart. Last week, that ideology suffered a fatal wound.

CNN: How so?

Zakaria: When the supreme leader, Ayatollah Ali Khamenei, declared the election of Mahmoud Ahmadinejad a “divine assessment,” he was indicating it was divinely sanctioned. But no one bought it. He was forced to accept the need for an inquiry into the election. The Guardian Council, Iran’s supreme constitutional body, met with the candidates and promised to investigate and perhaps recount some votes. Khamenei has subsequently hardened his position but that is now irrelevant. Something very important has been laid bare in Iran today — legitimacy does not flow from divine authority but from popular support.

CNN: There have been protests in Iran before. What makes this different?

Zakaria: In the past the protests were always the street against the state, and the clerics all sided with the state. When the reformist president, Mohammed Khatami, was in power, he entertained the possibility of siding with the street, but eventually stuck with the establishment. The street and state are at odds again but this time the clerics are divided. Khatami has openly sided with the challenger, Mir Hossein Moussavi, as has the reformist Grand Ayatollah Montazeri. So has Ali Larijani, the speaker of the parliament and a man with strong family connections to the highest levels of the religious hierarchy. Behind the scenes, the former president, Akbar Hashemi Rafsanjani, now head of the Assembly of Experts, another important constitutional body, is waging a campaign against Ahmadinejad and even the supreme leader himself. If senior clerics dispute Khamenei’s divine assessment and argue that the Guardian Council is wrong, it is a death blow to the basic premise behind the Islamic Republic of Iran. It is as if a senior Soviet leader had said in 1980 that Karl Marx was not the right guide to economic policy.

Once the genie is out of the bottle in this sort of a situation it is pretty much impossible to get it back in. The split among the mullahs, who have, in the past, always sided with the regime, is a critical point. Someone comes out of this being declared “wrong” (whether they actually are or not). And the split will remain even of those declared “wrong” are replaced. As Zakaria points out, the very fact that some mullahs have acknowledged that there may be some credibility to the charges of vote fraud and are willing to investigate it is a huge blow to the legitimacy of “divine authority” (which originally supposed “approved” this election), the power of the mullahs and Ahmadinejhad.

I agree with Zakaria that it is indeed a mortal blow to the basic premise behind Iran’s government. How long it will take for that blow to finally kill the regime is, as of yet undetermined. But I think the assumption that it is merely a matter of time is basically correct.

Certainly the regime may muster the force necessary to put the protests down at this moment. But the powder keg will remain, just waiting for the proper detonator event to blow it sky high. I don’t think these protests are going to stop any time soon. And at some point, if the protesters keep the pressure on, the tide is going to begin to turn. The ability of the regime to muster the will and the thugs to do this over and over again is, at some point, going to fail.

It always does.

My question is, will whatever government eventually takes the helm there see the US as a supportive ally in their quest for freedom or a country that sat on the sideline, mouthing platitudes and trying to keep their options open with the oppressive regime now gone (on this particular question, Fareed Zakaria and I seem to disagree)?

~McQ