Sawtown Report V6 N 1 – The Stuff of Dreams

A common myth among public policy wonks and too many economists is that, “You can’t pick winners”. Instead you must allow the invisible hand of the market to decide winners and losers and thus guarantee optimal efficiency of resources. Aside from the fact that Los Vegas, Reno, Atlantic City, and a host of Native American casinos thrive on the idea that in fact winners and losers can be picked with sufficient regularity that owners of these operations get extremely wealthy, it seems clear that winners can be picked in the economy as well.

On a more serious note, the record of governments that have picked “winners” is almost endless. The KIA and every other car manufactured in Korea is the result of government picking an industry it wished to develop and did successfully. Of course Nokia, the Finnish cell phone company is perhaps a more famous example. Germany with its highly centralized industrial strategy still produces cars even though it has some of the highest labor costs in the world. In fact most governments that engage in industrial planning having stronger industries then we do. Just look at Airbus as an example. It completes with our own Boeing products yet is essentially a government-planned project as was the SST.

In fact winners can be picked and government has an admirable record of doing so.

Likewise the notion that there is an invisible hand that ensures positive social outcomes is equally flawed. The Dot com bubble, the housing crisis, the banking crisis, and now the unemployment crisis are all examples that the invisible hand doesn’t work in any matter that matters to mere mortals. As the Occupy Wall Street movement is now highlighting, markets tend not to be free or fair but rather are controlled and influenced in such a manner that benefit the 1% to the detriment of the 99%. Consumers want safe and fresh food. Yet our agro-industrial complex delivers high fat, high sugared processed food and has been so economically successful that an entire generation has been raised on it and thinks it is normal in the face of massive evidence that such food is dangerous to human health.

If the myths are just that and the reality is that we need to control and regulate the market to promote the general welfare why is there so little debate about this on our media? One answer is of course is that the media is owned by the same 1%. The other answer is that it is not in the interest of the 1% to have this discussion. The notion of a liberal media is as false as government’s inability to promote and provide social benefits. Yet the myths persist.

Private equity markets intentionally and knowingly deceived government regulators causing the worse depression in our generation. Yet where is the response that calls for better and more regulation of these actions? Yes, government could have been a more diligent watchdog but blaming the watchdog for being tricked completely ignores the fact that crimes were committed and that the 1% once again defrauded the 99%.

Perhaps the notion at the core of these myths is our concept of efficiency. As used in the media and on Wall Street efficiency means the ability to produce profits with the least costs. But the only costs measured are on the balance sheet of the corporations owned by the 1%. The above example of our food distribution system shows the flaws in our definition of efficiency.

We measure the profits to agro corporations as part of our national wealth but we do not subtract the costs of surgery, health care, and even death caused by foods high in calories and devoid of nutrition.

We do not measure the costs to rural communities that have been destroyed by agro business. The social and family disruption goes unreported. Without a national discussion aimed as exploding these myths the next generation will accept this massive injustice and inequality.

A Charleston waitress informed yesterday that she earns $2.50 per hour which is ok since she gets tips to make up for the difference as if it is acceptable for one human being to work for another for an hourly rate that does not enable her to survive. Tips are voluntary and are for extra service. I prefer the Swiss system myself. The meals all cost 20% more and no tipping is required. The wait staffs have college degrees from the food service institute and provide professional services. It is a career, not a way to exploit workers.

We are the only industrialized country in the world that engages in industrial planning for the rich at the expense of the poor. We have created a series of myths that would make George Orwell gasp. We have re written our history more completely that he could have ever imaged in his book, 1984.

As spring approaches and the Occupy Wall Street movement reemerges it might be time to listen to them carefully. It is another myth that truth frequently comes from the mouths of babes, perhaps this myth might be based more on reality then the others cited above. Helping the next generation avoid the myths of our own seems to be a worthy inheritance to them from us.