The True Threat to Prosperity
Americans are living in a phantasmagoria of deceptive economic statistics.
Looking at the rearview mirrors of economic and financial numbers, they stumble toward the future with no idea of their actual conditions.
They imagine a dozen preposterous things every day before they finish their emails.
Productivity is going down… in the midst of an efflorescence of new technology, new learning curves, pervading the entire economy.
Interest rates are negative… meaning that opportunity costs are negative — cash yields more than an investment — despite a productivity boom.
The middle class is losing ground… though to buy virtually any good or service on sale in the economy entails drastically fewer hours of work for a blue-collar worker than in the past.
China costs the US income and jobs… though during the ascent of China, US jobs have risen some 45% and incomes have risen threefold, based on time-prices.
The U.S. faces a vast crisis of debt and deficits… though debt is cheaper than ever and according to the work-hours it takes to earn it, GDP is far larger than economists believe.
Even in the White House, surrounded by eminent experts, President Trump lives in this phantasmagoria. He focuses on a further rearview number: the trade gap regarded as a form of debt.
At War With the Administrative State
Trump’s remedy to a false crisis of employment is to focus on immigration and trade as a threat to American jobs. At a time when far more high-quality immigrants are leaving the country than entering it, the Administration is preoccupied with immigrants taking American jobs.
His answer is socialism: government control of trade through “deals” with our trading partners. He should know that socialism never works even when explained by some bogus foreign threat.
This diagnosis of debt and foreigners as the American problem exonerates liberalism. It suggests that our doldrums are the result not of their administrative state still in control but of decades of bipartisan bingeing on everything from mid-east wars and bank bailouts to Medicare costs and housing subsidies.
Nothing is more advantageous to the socialists in our midst than a futile and confusing preoccupation with debts, whether embodied in national budgets or trade gaps or deficit spending. Embodying liabilities, debts can be a symptom of socialism. But the solution is to pursue new opportunities for innovation and entrepreneurship.
The threat to prosperity is not debt but socialism. The Federal Reserve has effectively nationalized and stultified the nation’s leading banks, which no longer make loans to entrepreneurial companies. In an amazing feat of regulatory overreach, the Environmental Protection Administration (EPA) is regulating the emissions of CO2 across the entire economy.
The Trump administration is commendably battling the administrative state on many fronts. But even beyond its socialist program of federal controls on foreign trade, the administration has unleashed on our leading tech companies, such as Google, Facebook, Intel, and Amazon — a pack of federal and state agencies. It’s hounding them for everything from possessing non-existent monopoly power to making sales of chips to China to perpetrating murky violations of privacy to hiring a plethora of Asian male computer scientists.
Republican politicians are even making these companies responsible for “fake news” or “hate speech” in the billions of posts from their customers. If such rules had been in effect in the early years of the Internet or for telephone companies in the era of Alexander Graham Bell, we might still be communicating by some form of upgraded pony express.
Once again, we must return to the counsel of Peter Drucker: Don’t solve problems. Pursue opportunities.
I’m now on my way to Israel where I will pursue opportunities among the world’s most inventive entrepreneurs. I hope to bring back some breakthrough investments for my readers.
Editor, Gilder’s Daily Prophecy