Politics thrive in economic illiteracy
Updated: May 5, 2022
Saipan — From a Wall Street Journal article published last month:
“As yields on two-year Treasury notes this week moved above yields on 10-year notes, Wall Street analysts sent up warning flares…
“When short-term interest rates are higher than long-term interest rates, a phenomenon Wall Street mavens call an inverted yield curve, it is sometimes a signal of recession…
“The closely watched differential between yields on two-year and 10-year Treasury notes inverted this week. On Friday, the yield on two-year Treasury notes hit 2.44 percent and on 10-year notes it lagged behind at 2.38 percent.”
All that may be gobbledygook for many of us, but we know it’s about the economy and arithmetic.
The other — more understandable and hence more popular — explanation of what is happening to the economy is usually a morality tale involving ordinary, decent folks fleeced by greedy, price-gouging, environment-destroying businesspersons and their bribed enablers in government.
And that, more or less, has been the “message” of the “For the People” rulers and politicians all over the world—“since ever since.”
In their book about wage and price controls and inflation published in 1979, Robert L. Schuettinger and Eamonn F. Butler wrote: “The notion that there is a ‘just’ or ‘fair’ price for a certain commodity, a price which can and ought to be enforced by government, is apparently coterminous with civilization. For the past forty-six centuries (at least) governments all over the world have tried to fix wages and prices from time to time. When their efforts failed, as they usually did, governments then put the blame on the wickedness and dishonesty of their subjects, rather than upon the ineffectiveness of the official policy. The same tendencies remain today.”
In ancient Greece — the “cradle of western civilization” — politicians frustrated with the failure of their price control measures reassured the public that their government could reduce prices even in times of scarcity “if only they put an occasional merchant to the sword.”
Today in democratic nations, killing “greedy” businesspersons is no longer a legal option. Instead, they’re “legally” robbed through tax laws that tend to be punitive.
Then and now, the more economically illiterate politicians are, the more likely that they would blame the “usual suspects” — the greedy rich — for unemployment, high prices, low wages, etc. because it is the “popular” explanation. Most voters believe it.
“No one” likes the rich. “Everyone” hates the very rich. Even the Bible is “anti-rich.”
The rich get richer. The poor get poorer.
So. Wages are low? Raise them! Businesses too successful? Tax them more! Trade deficit is bad. Profit-seeking is greed.
Economic illiteracy affects a lot of people, including and especially intellectuals and other highly intelligent, well-educated folks. Politics thrive in economic illiteracy.
It’s “hard” to explain basic economics to voters. Moreover, many voters consider politics as a transaction. Do this for me and/or give me this or that, and I’ll vote for you. In an election year, the typical voter’s question to a candidate for office is, “What have you done for me lately?”
In the second debate of Democratic President Obama and his Republican opponent Mitt Romney in October 2012, a 20-year-old college student asked them: “What can you say to reassure me, but more importantly, my parents, that I will be able to sufficiently support myself after I graduate?”
The debate was broadcast live in the U.S. and watched all over the world. The young man phrased his question nicely, but he was actually asking the presidential candidates for financial motivation to vote.
“[W]hat we have to do,” one of the candidates replied, “is two things: we have to make sure that we make it easier for kids to afford college and also make sure that when they get out of college, there's a job…. I'm going to make sure you get a job. [Chuckles.] Thanks. Yeah, you bet.”
That was the answer of the supposedly pro-free-market Republican candidate.
The Democrat, true to form, promised to impose higher taxes on the wealthy and spend more on “roads, bridges, schools.”
Election year is like Christmas. All the candidates want to be Santa Claus, and the voters are kids.
As the very great American economist Thomas Sowell would put it, “No one will really understand politics until they understand that politicians are not trying to solve our problems. They are trying to solve their own problems — of which getting elected and re-elected are No. 1 and No. 2. Whatever is No. 3 is far behind.”
Zaldy Dandan is editor of the NMI’s oldest newspaper, Marianas Variety. His fourth book, If He Isn’t Insane Then He Should Be: Stories & Poems from Saipan, is available on amazon.com/.