A recent International
Monetary Fund research report listed the countries expected to suffer
the worst currency depreciation—that is, the worst inflation—this year.
Zimbabwe (a mind-boggling 300,000 percent-plus), Venezuela (25.7
percent), Bolivia (15.1 percent), Nicaragua (13.8 percent), and
Argentina (9.2 percent) are the top five. What do these countries have
in common? You could reply in two ways: 1) they are poorly governed; 2)
they are leftist governments, which is simply another way of saying
that they are poorly governed.
Indeed, it is difficult to think of any
economic indicator that exceeds inflation as evidence that a country is
poorly governed. Leftist governments—defined here as regimes unfriendly
to private property, private enterprise, and private profits; regimes
that constantly seek ways to redistribute wealth from the economically
productive members of society to favored political constituencies; and
regimes that reject free markets and instead expand government control
over economic activity—invariably cripple production while increasing
government spending. The inevitable result is inflation.
This is no mere academic discussion. It was
less than 30 years ago that inflation in the United States was in the
13-14 percent range. Today, resurgent inflation in the United States is
officially listed as 4 percent, but for many Americans, it feels much
worse. Is it possible that we might break into the IMF’s list of the
top-five inflation-plagued countries in the next year or two? To answer
that, we should ask ourselves if we have sound governance or poor
governance. Sadly, examples of the latter seem to be proliferating. The
following are some examples:
- In just eight years, U.S. federal spending
has ballooned from $2 trillion to $3 trillion—a 50 percent increase at
a time when the average private income increased only 28 percent.
- At 35 percent, the United States now has the
second-highest corporate profits tax in the world—absolute insanity in
a time of intense global competition when Congress should be doing
everything in its power to help domestic employers compete against
- At a time when formerly communist countries
in central and eastern Europe have adopted flat-rate personal income
taxes less than 20 percent, and are booming as a result, the United
States clings to an outdated Marxian, growth-retarding, class-warfare,
graduated income tax, and at least one presidential candidate wants to
raise those rates even more.
- Last fall, Congress decided that financial
institutions were making too large a profit on student loans, so they
mandated lower returns on such loans. As a result, many private lenders
have dropped out of the student loan market entirely, and Congress is
now trying to bail out such lenders by empowering the Department of
Education to purchase student loans directly from private lenders.
Where will the Department of Education come up with the necessary
funds? From higher tax revenues, of course.
- Congress recently passed a $307-billion
farm-subsidy bill. President Bush tried to get Congress to limit
subsidies to those making no more than $200,000 per year, but Congress
rejected that proposal, paving the way for subsidies to those with
annual incomes over $2 million. Some senators solemnly intoned that
they were doing this to prevent bankruptcies. Apart from the fact that
the centuries-old trend is toward fewer agricultural producers (i.e.,
farm bankruptcies) as a result of improved efficiencies and economies
of scale, and in spite of the fact that many farm prices are at
multi-year highs, we should ask why Congress, instead of the
marketplace, should decide which businesses survive and which do not?
Central planning, anyone?
- Congress’ recent denunciation of private oil
producers include comments that perhaps Congress should “socialize”
these companies, or at least increase taxes on them. Apparently, some
members of Congress subscribe to the school of thought popularized by
that eminent political philosopher, Jane Fonda, who has long felt that
the cure for Big Oil’s alleged oligopoly is to create a federal
monopoly. Does anybody seriously believe that monopolies are good for
consumers? And another question: if Congress confiscates more profits
from Big Oil, who will make up the resulting reduction in spending on
discovering and developing oil reserves?
- Congress is currently working on a
multi-trillion-dollar plan to impose a cap-and-trade system on carbon
dioxide emissions. The Wall Street Journal and others have
already explained what a colossal boondoggle this would be, but the
fundamental question is this: Why, at a time of record energy costs
that are imposing great hardship on many Americans, does our government
want to make the use of hydrocarbon energy sources even more costly?
If you keep your eyes and ears open, I’m sure
you will discover other ways in which our government is seeking to
expand its own reach while making Americans poorer. We are on a
leftward course already, and we may accelerate our march in that
direction after the November elections. If we do, don’t be surprised to
see inflation get worse and the United States appear near the top of
the list of the world’s most inflation-prone, poorly governed countries.