Let’s not rush to elevate outgoing Treasury Secretary Robert Rubin to sainthood. Rubin is like a surfer who accepts credit for creating the big wave that carries him to shore. He might look good riding the board, but he’s not responsible for the wave’s motion.
The accolades being heaped on Rubin are based on a glaring fallacy. A successful economy doesn’t have an architect. It doesn’t require policy activism. It requires enforcement of property rights and an otherwise hands-off policy.
Any credit Rubin deserves for the economy would have to be for whatever restraint he imposed on President Clinton’s and the First Lady’s interventionist instincts. The Wall Street Journal says he also refrained from distracting Alan Greenspan from a policy of monetary stability. Let’s give him credit for that.
But there is a big black mark on Rubin’s record. The federal government’s tax take is at a peacetime high. What reason in the world is there for the feds’ taking well over 20 percent of our income? The administration brags that it got rid of the budget deficit. That’s not really true. The budget, minus Social Security, is still in deficit. The Social Security account is in surplus not because of any creative policy but because the middle and working classes are being taxed to the hilt. You should get rid of a deficit by eliminating government programs and agencies, not by increasing the burden on the taxpayers. The Clinton-Rubin administration has gone the tax-burden route.
And let’s not forget that Rubin has been a big advocate of international economic meddling, such as the International Monetary Fund intervention and the bailout of Mexico, which was really a bailout of Mexico’s American creditors. These policies have only rewarded irresponsibility and forced destructive monetary and tax measures on shaky economies.
We really need to get over this need to give a government official credit when the economy goes well. It reveals an embarrassing ignorance about the market process. After all, the study of economics began only after some discerning people noticed that economic order and general prosperity occurred without anyone’s having planned it. “Paris gets fed,” observed a group of French writers many years ago, although no one controlled the decentralized process that daily delivered meat, bread, wine, milk, and produce to the grocers’ shelves. Economics grew out of the investigation of how there could be undesigned order.
There is nothing mystical about undesigned social order, although some people think Adam Smith’s term “invisible hand” suggests mysticism. The market process gets its coordinating tendencies from purposeful human beings’ seeking to better their situations through production and trade. The resulting network of mutually beneficial exchanges through the division of labor makes everyone wealthier and provides incentives for further cooperation and improvement. It’s a virtuous circle.
This notion of undesigned, or spontaneous, order has grown into a major object of study. It was a prime interest of the late F.A. Hayek, who won the Nobel prize for economics in 1974 and who was born 100 years ago this month. Hayek, who taught at the University of Chicago, noted that to ignore or deny the self-ordering nature of the market process is to miss the whole point of economics.
Government can safeguard the market by enforcing property rights and contracts. But if it does anything more, it subverts the self-coordination. Taxes reduce the rewards to production. Regulation substitutes the whims of bureaucrats for the wisdom of the market’s participants. Government spending transfers wealth from earners to nonearners. Monetary manipulation distorts crucial market signals.
In recent years the economic news has been good. (Although, we might ask why we should be satisfied with 4 percent growth. Chile’s free economy grows at more than 6 percent.) But the good news started before the Clinton team came along. That doesn’t mean Republicans deserve the credit either. The real credit should go to everyone who has produced, and especially to those who helped corporations become leaner and more efficient in the 1980s and those who have spearheaded the information revolution, which has boosted productivity dramatically.
If we must single out individuals, let’s give the honors to financial innovator Michael Milken, Microsoft’s Bill Gates, and Intel’s Andrew Grove.