WASHINGTON – America’s biggest problem –as the recent presidential elections have demonstrated– is that a bit more than half the country no longer believes in unfettered free enterprise as the main engine of both personal and national growth.
Government is better
Obama’s re-election (with 51% of the votes) as the defender of entitlement programs as they are, of state intervention and as proponent of income redistribution through taxation shows that a majority of American voters today believe that the benign hand of government helping them is a better and safer bet than the Republican promise to lower taxes and public spending, so that the spirit of can-do enterprise can be once more liberated and put to work. At least 51% of American voters are not so sure about free enterprise.
Capitalism as a model lost the battle of ideas
Let’s face it. The 2008 recession destroyed capitalism’s credibility and mystique. The system failed. And it failed big time. Most of the almost theological assumptions about the sanctity of markets were proven wrong by the Financial Catastrophe.
Nothing illustrates this failure more than Alan Greenspan’s contrite admission that he –The Flawless Maestro– had made a huge mistake. All his life he believed that financial markets would self-regulate in a fashion that would allow them to price risk appropriately and thus avoid excesses. Well, it wasn’t so. No self-regulation. On the contrary, even the most elementary rules dictating restraint were broken.
And it turned out that our Wall Street Captains were not just unwise, they were in fact complicit in a sinister orgy of speculation and greed in which they all succumbed to the zany idea that financial manipulation would make them super rich. In so doing, they almost sank America.
Romney successfully portrayed as the enemy of the common people
Right or wrong, this is the prevailing narrative. And this is what those who voted for Obama believe in. Poor Mitt Romney came along saying that he had the super manager credentials to really fix this mess.
The premise for his challenge was that Obama had done a poor job as economy’s steward during his first term. “Well –said a confident Romney– let the amateurs go back home and let me, the real pro, handle the economy. I know this stuff. I have done it all my life”.
Well, this impeccable resume became Romney’s main political liability. Precisely because of his close identification with venture capital, Romney was conveniently depicted by the Democrats as the arch-enemy, as the fox in disguise who wanted to run the chicken coop. Thanks to the clever character assassination dished out by the Obama campaign, Romney was doomed.
The audience does no longer believes the old story about capitalism
But Romney was doomed also because a bit more than half of the audience no longer believes the old American narrative of “self-help and individual effort”. People are tired and disoriented. Capitalism failed. Corporate leaders behaved like gangsters.
Therefore, now a liberal Government that promises help looks like a better bet.
And so it was. Obama won the political battle.
That said, the Obama policy medicine is a disaster. He may want to help out with more of this and that –and the people cheer. But he of all people should know that the cupboard is bare. There is no money, while public spending is still trending up.
America does not grow
Obama’s ideological blinders prevent him from understanding that the country needs first and foremost higher growth. From a post war average of about 3%, we are down to 2%. This trend will get us closer to stagnating Europe and all its problems. In order to get to higher growth, it is essential to have a new Grand Bargain that would place entitlement programs on a sustainable course, while reforming our incomprehensible tax system in order to provide a strong encouragement to business creation.
Public assistance for ever?
Of course we need to extend a helping hand to those in need. But only if this is a way to make people self-sufficient sooner rather than later. Unfortunately, the message now is that there are some perpetually weak constituencies that will need assistance in perpetuity.
If you are on the receiving end of these public goodies, this may sound great. Easy for the moment to ignore the combined consequences of low growth, high spending (that goes mostly to assistance and income support, as opposed to investments), and more debt. If we looked at where sorry-looking Southern Europe is today, after having followed exactly this course of action for a few decades, the end game should be obvious. But nobody within this new majority will point this out.
Who will make capitalism believable?
Until and unless somebody will come up with a credible message that will reignite enthusiasm for free market capitalism and sober governance, along with policies aimed at opening up real opportunity to all, America will continue to slowly slide into higher debt, mediocrity and eventually national decline.