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Capitalism Doesn’t Suck

(BTW, if you haven’t read yesterday’s book chapter, please do and comment before reading this. This is just a rant. Your comments on yesterday’s post would be much more helpful.)

Just a few months ago, when oil was trading upwards of $140 a barrel, plenty of observers were predicting that gasoline could end up costing $10 a gallon by the end of the decade. Certainly $5 a gallon gas was inevitable in the short term, and America would have to accept the fact that, as Barack Obama put it, ““We can’t drive our SUVs and eat as much as we want and keep our homes on 72 degrees at all times…and just expect that other countries are going to say okay.” I don’t really care what other countries say, personally, but the message was clear that America’s days of big cars and cheap fuel were long behind us.

Gas is now half as expensive as it was two months ago. Oil is now projected to fall to $40 a barrel, and OPEC is desperately trying to slash production in order to drive up the price, but to no avail. Demand for oil just isn’t there to sustain the massive prices, and all the evil oil companies aren’t nearly as good at fixing the price as the conspiracy nuts think they are.
You cannot repeal the law of supply and demand.

You can try, though, which is what Obama intends to do with tax cuts for people who don’t pay taxes and cash payments to failing industries and all manner of compassion that will alleviate short-term pain by devastating markets over the long haul. (I’m not trying to be partisan here – George Bush’s instincts are to do exactly the same thing, albeit on a slightly lesser scale.)
Why doesn’t Washington recognize that markets work? They work quickly; they work effectively; and they’re almost brutally efficient. Government, on the other hand, is slow, ineffective, and kindly inefficient. Politicians are good at making you feel better while making the problem worse. They do that with the best of intentions, but no one human being, or one group of human beings, or even the entire government can possibly understand every element of every transaction and how it benefits everyone else.

It’s remarkable that Democrats are so distrustful of markets when the Free Market is the most democratic institution in existence. Government election only take place once every few years. But every day, with every dollar, you cast a vote on everything you do – what and where you prefer to eat, wear, do, go, shop, buy – you name it, you vote with your dollar every time you use it. You don’t like the greasy spoon you eat lunch in every day? Go to the one on the other side of the street. Your old greasy spoon will then have to figure out a way to get you back. Or they’ll have to get someone else to come. If enough people follow suit, that greasy spoon is out of business, making way for something else that can use those resources more effectively. It’s painful for the greasy spoon owner, but in the long term, it’s better for everyone.

Now imagine Obamasized compassion stepping in and ensuring that the good folks of the Greasy Spoon all keep their jobs in perpetuity. With enough government cash, the Greasy Spoon stays afloat whether you stay away or not. Those customers who keep going soon discover that nobody at the Greasy Spoon is too concerned if it takes too long to fill up their water or to bring them their food. They ignore complaints that the burgers are undercooked, because, honestly, what does it matter? The end result is a diminished product and a waste of capital. The food sucks, the service is ghastly, and nobody bothers to come anymore. But at least lousy waiters are never in danger of losing their jobs.

Sounds silly? It’s exactly what we’re doing in public education. Good teachers with tenure get paid exactly the same as bad teachers with tenure, and both have just as much job security. More money continues to get poured into education, and the teacher’s unions whine that it’s never enough, even as our test scores continue to drop. Our schools end up doing a lousy job teaching our kids.

But you know where they do a great job? Intimidating lawmakers into increasing their funding.
Education is as market driven as anything else. It’s just that their customer is the government, not our children. Teachers who can’t tell a noun from a triangle are darn good at leaning on elected officials. Forget Big Oil – it’s Big Education and Big Government that has a gift for fixing prices. Unless you’ve got the dough to take your kids to a private school with far better responsiveness to the real customer, you’re out of luck.

Expect even more industries, notably health care, to look more and more like the post office in the years to come. That’s the change we can all believe in.

Chapter 5.1
Changes to Chapter 5.1

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