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The Economic Ignorance of Our ‘Leaders’

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Vice President Gore may think President Clinton is the “one of the greatest economic stewards in the history of the United States,” but that just shows you how little both of them know about matters economic.

A free-market economy needs no economic steward, and to the extent it has one, it is not free. The very idea of the president-as-steward is an affront to all Americans and everything this great country used to stand for.

Imagine if Gore had called Clinton one of the greatest shepherds of the American flock in our history. It would have been insulting, right? What Gore actually said is no less insulting.

Despite the mythology drummed into us in government schools, the economy is not an unstable machine that needs a wise and benevolent operator at the controls. It is people-you and I-peacefully pursuing our material betterment through production and exchange. Through those activities we produce a great, orderly, and self-regulating process that benefits everyone. When you understand that, you will see that an economic steward is perforce a meddler, sticking his nose in our business, dictating the terms of our voluntary exchanges, and punishing recalcitrants who are jealous of their liberty.

I could point out that Mr. Clinton is palpably unable to be the steward of his own life, but that would be off target. No one , however well he runs his life, is qualified to be the steward of our lives. As Adam Smith said long ago, the last person to trust with such power is he who aspires to it.

It so happens that Mr. Clinton has given us a valuable illustration of his economic ignorance. He recently proposed to spend about a hundred million dollars to stimulate U.S. exports. He said that the recession in Asia has damped purchases of American products and threatens layoffs here. His stimulus package, he added, will protect jobs and produce new ones.

The money will go to the Export-Import Bank, a government agency (it is not a bank!) that uses taxpayer money to help big American companies sell their products at a cut rate to foreign countries and beat out their competition. The logic is that we can get richer by giving our wealth away. Close enough for government work.

Defenders of Ex-Im have long argued that without it, some major sales, such as those of commercial aircraft, would not have been consummated. As a result, workers would have been laid off from companies like Boeing. We can assume that this is a self-serving exaggeration and that many of those sales would have taken place anyway.

But even if the defenders are right, their case collapses. They look only at the visible effects of Ex-Im activities. The unseen effects are too important to ignore. If Mr. Clinton gives a hundred million dollars to a few corporations, that’s a hundred million less for us taxpayers to spend as we wish. We would have invested some of that money and spent the rest on consumption, creating profits for other companies, as well as new jobs. We, they, and the people they would have hired lose out in the deal. So let’s not talk as if export stimulation is good for everyone.

There is a general lesson here, one that seems lost on the brainy former Rhodes scholar who occupies the White House. Government cannot intervene in the economy for the general good. All its intervention can do is help a special interest at the expense of everyone else. In a free economy, our interests fully coincide only on the matter of civil peace and the protection of liberty. Apart from that, there are many contending interests. Markets amicably manage those contending interests. Government cannot.

Mr. Clinton may be a great steward of special interests, but he’s a lousy economist.

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    Sheldon Richman is vice president of The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.