The Remora Economy

posted at 11:45 pm on September 8, 2010 by Doctor Zero
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Thomas Sowell begins his latest column with an idea that has long fascinated me:

When people learn that you are an economist, they often want you to predict which way the economy is going. There seem to be more than the usual number of calls for such predictions lately. But an economist should be more aware than others are of how hazardous such predictions can be.

One reason is that what happens in the economy is affected by what politicians do in Washington– and who can predict what politicians will do?

As Dr. Sowell explains in the remainder of his characteristically brilliant piece, the one thing politicians most certainly will not do is nothing, even if that is clearly the wisest course of action.

Think about the economic disruption caused by the presence of an aggressive, activist government in our markets.  It’s like a great white shark, prowling through a sea of much smaller corporate and individual fish.  It obeys none of the rules binding the other players in the market.  It can suck virtually unlimited funding from private entities… at least, until this suction causes the rest of the economy to implode.  This allows it to shrug off financial wounds that would kill any other fish in the sea, and makes it almost completely blind to the signals of pain that would cause private industries to change their behavior.

The government can rewrite the law to suit itself, or ignore laws it finds inconvenient.  It can rig the marketplace to punish competitors, as the Obama Administration has been doing with the health insurance industry.  It can shape media coverage to smooth over errors in judgment that would be public-relations disasters for any corporation.

As Sowell points out, these factors combine to make the State extremely unpredictable.  Would a company with President Obama’s record of abject failure dare to approach its investors for another $50 billion in funding to continue the same ineffective policies, under the same management?

How should private-sector fish deal with this massive predator cruising among them?  The very smallest fish might initially hope to avoid its notice, but there is simply no way to escape broad national mandates like ObamaCare, Card Check, or cap-and-trade legislation.  The best way to avoid the gaping jaws of the government shark is to stay agile and keep a low profile.  The last thing any small-business owner wants is to grow large enough to draw the direct attention of this Administration.  They can only hope political expedience doesn’t place their industry on the target list for taxation, regulation, or demonization.

For larger companies, invisibility is not an option.  The smart play is to become like remora fish, attaching themselves to the State and feeding on the scraps it leaves behind.  The flavor of socialism practiced by contemporary Democrats relies upon this behavior.  The objective is to bend the private sector into compliance with political ideology.  Only a modest percentage of the private sector can be directly nationalized, unless the government shark is ready to mutate into something even more huge and feral.  This leaves the statist hungry to take on a number of “partners” in the private sector.  It has trillions of tax dollars, plus even more valuable regulatory incentives, to purchase all the partners it needs.  Al Gore became a billionaire selling carbon credits, an entirely artificial industry created out of thin air by oppressive government regulation.  There are more billions where those came from.

Investment is not gambling.  It is a carefully reasoned attempt to predict the future, and profit from anticipated conditions.  When the government directly controls the economy, to the degree ours currently does, scientific prediction becomes extremely difficult.  Who knows what bailouts and injunctions might lie ahead?  Businessmen are reduced to reading tea leaves, like which industries the State is spending the most time slandering, or which states the most powerful Senators hail from.  They become eager to purchase influence, which politicians are equally eager to sell.  Big Business finds it very useful to direct the hungry shark’s attention toward its smaller adversaries.  If corruption is defined as the exchange of financial support for unequal treatment, all large governments are inherently corrupt.

For the remora economy, anticipating the needs and desires of consumers is all but futile.  The smart play is to anticipate the needs of the State, and the desires of its dominant ideology… then latch onto the bloated shark when it swims by, and hang on for dear life.  Businesses attached to the State always find ways to profit from the relationship… and eventually, they become dependent upon it, and actively resist attempts to restrain the government spending and regulation which has become integral to their business model.

When the great white shark dies, everything attached to it will die along with it.  That future is unthinkable, so the State insists no one should waste any time thinking about it.  It’s also less than twenty years away.

Cross-posted at www.doczero.org.

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