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Cooking the Economy, the Great Government Bread Machine 

Economics / Government Intervention Jul 19, 2009 - 06:49 AM GMT

By: LewRockwell

Economics

Best Financial Markets Analysis ArticleDavid Calderwood writes: "Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded – here and there, now and then – are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty. This is known as ‘bad luck.’" ~ Robert A. Heinlein


Many people behave as though the world (and the human place in it) is like one big bread machine.

They talk about macroeconomic aggregates like ingredients in a bread recipe. If the dough isn’t rising enough, just add more yeast. Others might argue that adding more sugar, as a substrate for the yeast, is called for.

These people clearly act as though electing or appointing the best bakers to management positions in the Big Government Bakery will guarantee that we all have bread (jobs, nice homes, worry-free medical care, security from foreign hobgoblins, etc.) in abundance.

Today the appointees and elected politicians endlessly debate how the recipe should be manipulated in order to reverse a decline in bread quantity and quality. Should there be more money created or lots more, more roads and bridges built or lots more, more wars and invasions or lots more, more demands placed on employers or lots more, etc.

The reason these people cannot grasp the error of their theories is found in the metaphor they use in understanding reality. They think the world is a machine, with levers, buttons, raw materials and finished goods. This makes thinking of the economy like a Big Bread Machine very straightforward, leaving out messy and distressing concepts like entrepreneurship, risk, failure, or "the unknown."

A far better "fit," when it comes to metaphors, is thinking of the world (and our place in it) organically, like the ecosystem of a farm field. We know quite a lot about what makes plants grow, but there’s more to it than crudely adding various elements and energy to seeds and obtaining produce. Sometimes we don’t know why success or failure occurred, and not all of the inputs are subject to our control in the first place. We recognize that there’s a lot going on there that we don’t necessarily see, so variation among approaches to farming, and letting unsuccessful approaches fail, seems pretty wise.

Watching today’s "leaders" debate the merits of various economic and political manipulations, seen from this organic view, looks a lot more like watching neophyte managers of a farming co-op debate how to add nitrogen and energy to their field so crops will thrive.

The first manager read a book by a British mathematician on farming, and he advocates adding nitrogen in the form of KCN, and energy in the form of sunlight. The second one knows a little about chemistry and more about physics, and he advocates adding nitrogen in the form of NH4NO3 and energy in the form of gamma radiation.

In the aggregate, they both plan to add the same proportion of moles of nitrogen to the field and the same ergs of energy per acre. After all, nitrogen is nitrogen and energy is energy.

Both managers are mechanists. And obviously, both will poison the field beyond hope for growing anything at all. If they are macroeconomists, their failure will unquestionably stem from applying too little of their proposed ingredients, a deficit they will rectify when they are given even more control over more farms in coming seasons. If anything grows in spite of their abject stupidity, they will cite it as proof of the wisdom of their methods.

One job is not the same as another. Government spending is not the same as private investment. The sum of Peter digging a ditch (+1) and Paul filling it in (–1) is not 2. Thinking of the economy in terms of macroeconomic aggregates reveals a profound misunderstanding of how the world works, and dooms society to the same kind of destruction those two idiots managing the farm will experience.

Another metaphor helps clarify the scene we watch today in the halls of power:

It’s a drunken orgy of a party. Two rival families are in attendance. The Federal Reserve Cartel family, with its Goldman Sachs nieces, its Law Firm nephews, and its media owner cousins, has left its Military-Industrial-Congressional-Complex rivals to sack the wine cellar and the pantry. The financiers have discovered the barn out back where the seed corn is stored for the next planting, electing to use it as fuel for the great bonfire they have set in the back yard.

While many writers talk of the Fed monetizing the new debt being created by government bailouts, war, etc., it looks more like most of the debt is being sold outright. What we are witnessing is the U.S. Treasury, a bought-and-paid-for prostitute for the financiers and other political cronies, strip-mining the world of investment capital.

Vast amounts of private investment capital are bypassing the increasingly risky private economy (the one being crippled by government policies, edicts, taxes, etc.) in favor of supposedly trustworthy government debt instruments. It’s 1930 all over again.

The irony is that the "trustworthiness" of government debt is built on its taxing power, and as the seed corn of private capital is vacuumed into the Treasury and squandered on the Pentagon’s murderous adventures, make-work political/media stunts and paying off cronies in financial firms around the world, the future crop of taxable activities is withering in the fields. Who are they going to tax when unemployment surpasses 30%? The green shoots of today are weeds struggling to survive the deluge of economic poisons being poured by our idiot managers in government and the Fed.

The two rivals are partying like there’s no tomorrow because they’re insuring that exact outcome. They are a plague of locusts on our society, but because most people derive some of their identity from supporting the central government and because the plague’s tendrils penetrate nearly everyone’s occupation and finances, there is no way to fight it. There are varying degrees of guilt, but nearly everyone is tainted at some level.

We have created the macroeconomic equivalent of a suicide pact.

Whether we envision them as idiot managers of our farms or rival gangs of criminals sacking our homes, they have planted all the same seeds of destruction as those of the Great Depression, only on a scale not witnessed for centuries, if ever.

This suggests that while things may show brief periods of improvement (like the last four months, and maybe a couple more), they will be but pauses in a larger downtrend until the average man is weaned of his infantile belief in the Great Government Bread Machine.

Note: this is not in any way an attack on that great libertarian classic, The Incredible Bread Machine by R.W. Grant. The fundamental difference between that book and this article is freedom vs. coercion. Sticking with the analogy, bread baked in a market economy is produced in variety, quantity and quality organically coordinated by willing suppliers and willing customers arriving at mutually acceptable prices. Bread baked in a government bakery is provided in quantities and at prices mechanically derived by naked political calculation, using resources extorted from citizens by thugs in uniform and delivered with that special surliness peculiar to the bureaucratic animal.

Many thanks to Robert Klassen for providing editorial assistance.

David Calderwood [send him mail] a businessman, artist, and author of the novel Revolutionary Language, selected January 2000 Freedom Book of the Month at Free-market.net.

    http://www.lewrockwell.com

    © 2009 Copyright David C. Calderwood / LewRockwell.com - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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