Ashby 2008

Thanks for visiting the Ashby 2008 blog, and reading the first posting. Of all the candidates in the Republican field, Ron Paul to my mind is the most honest and certainly not a “Crack Smoking Republican”. People have suggested that I am more of a Libertarian than traditional Republican. On social issues I am close to the Libertarian view, which I think used to be the mainstream Republican view as well. It’s not so much a matter of being socially Liberal as socially disinterested – I really don’t care what people do in their private lives, as long as they don’t spend my money to do it. However I do believe the government needs to have a defined and in some ways strong role in the economy, as a pre-requisite of a functioning capitalist system.

On economic issues, the Libertarians have chosen conceptual purity over how things work in the real world. Ron Paul’s stance on the Internal Revenue Service is a great example. He calls for abolishing the IRS, which is a great applause line. Traditional Republicans have always seen benefit in comparing the operations of government to the operations of private enterprise. Every company that I have ever been involved with has had a process and usually a department for accounts receivable. Every private enterprise has to worry about collecting the money it is due. Why would the United States of America be any different – why wouldn’t the government need a way of collecting money? Paul talks about moving to a different tax approach. But whether sales tax, value added, income tax – regardless of the tax structure, the federal government will still tax its citizens, and need to have a way to collect the money it is due.

At a broader level, I believe that a defined and in some ways strong role for government in the economy is critical to the health of our capitalist system. Adam Smith talked about the sheep markets as an example of the tenets of capitalism. A key part of the market was that each buyer could have approximately equal knowledge and could know what they were buying – each buyer could evaluate the sheep for themselves. In a modern exchange economy, buyers lack this knowledge. We buy a can of green beans, without actually being able to see the beans. We buy a small part of a company through the stock market, without being able to see any tangible proof of ownership. All of these transactions are possible because of the role played by government – the government insures the integrity of the transaction. Why is this important? Because without the integrity of the transaction being insured, buyers are much less likely to buy from people they don’t personally know, or products they can’t personally inspect. Without the government, a widespread exchange economy can’t happen.

It is worth noting that it is not just consumers that want government in this role – businesses have recognized the need as well. The food safety laws that were passed early in the last century, that allowed the development of national markets for food and the industrialization of agriculture, were supported by major meat packing companies like Armour and Swift. These companies recognized that if that selling processed and canned meat to consumers would require that the consumers trusted that the contents would match the product claims. And the easiest way to give consumers this level of confidence was to put the government in charge of assuring compliance. The meatpacking companies wanted government oversight, to insure consumers that the products were sound and safe. Banks wanted the federal government to insure deposits, to give people the confidence to deposit their money. Banking oversight and government limitations on acceptable risks and leverage were considered a small price to pay, because banks realized without the government’s role in guaranteeing the integrity of transactions the banks would have problems attracting deposits. And of course, no deposits, no loans, no profit.

Something has happened to the Republican Party. It used to be aware of the importance of government involvement in the economy – it used to actually remember what the economy was like before the government started guaranteeing the integrity of transactions. You know, regular depressions and all, runs on banks, periodic widespread fraud. Now, it seems, the party has slipped off into some kind of weird theoretical world, with no connection to what actually happens in our economy. The fantasy world makes for great slogans, but it’s no way to run a country. Unfortunately, none of the current Republican candidates seem interested in rejoining the real world, and realistically addressing the necessary role of government in the economy. I’ve said it before, and I’ll say it again – the most “Republican” candidate in the field is still boring ol’ Hillary Clinton.

This entry was posted on Monday, November 5th, 2007 at 4:29 pm and is filed under Economics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.