The False Primacy of Politics over Markets


Why Must Politics Have Primacy?

Back in 2010, German Chancellor Angela Merkel was making a major push for “the primacy of politics over the markets.” To a far greater extent, the entire doctrine of Keynesian economics which is now crashing against the rocks of high government debt levels and broad economic reality, is founded on the notion of the primacy of politics: that politics must have such primacy.

My question: why?



Prosperity As A Broader Goal

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Wealth is held by individuals, but prosperity is a high level of wealth across society at large.

Prosperity is not, and cannot, be equal or utopian. It need not be in the other direction, but absolute equality in wealth isn’t likely to work out.

Identifying prosperity as a strategic goal leads to several corollaries:

  • Freedom allows the enjoyment of wealth large and small.
  • So far as possible, freedom should be maximized.
  • So far as possible, the creation of wealth should be encouraged.
  • Redistribution of wealth is not a priority.
  • Equalization of society is not a priority.
  • Every effort should be made to encourage bottom-up prosperity.

Now, about that last point.

Bottom-Up Prosperity

Simply put, people should be able to make a profit with the least means possible. Barriers to entry into small business should be low. Government regulation should be the minimum possible. Taxation should be limited as far as possible.

It’s not a matter of handouts or redistribution. It’s a matter of empowering people to make money themselves.

This leads to:

  • Pride in one’s work
  • Higher quality of effort
  • Greater creativity

These are the things that add value, not only to products, but to society itself.

Personal wealth is obviously a goal for people in business, but insofar as the broader world can be influenced by us, it is mutually beneficial for prosperity to be a goal for society.

Prosperity is something that should be beyond reproach, but sadly, this is not so. It is something that should recognize that both supply and demand, both labor and capital, play crucial roles in creating prosperity, and both must exist for prosperity to exist, but sadly, this is discarded in favor of political jockeying on a wide scale.

To me, it’s rather simple. It got simple when I studied the issue and discovered it to be so.

Prosperity: The Most Benefit For Most People

Making prosperity a goal is to hold the general interest, the societal interest, above any particular section thereof for the purposes of creating big-picture, wide-ranging policy.

Being simple does not make it easy. In fact, I find it hard to believe much of anyone will agree with what I have written. It is a hard lesson for some. But, I see no point in not writing what I have come to believe over years of studying these issues.

For Want Of A Free Coke, The Company Was Lost

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Do yourself a favor and read this absolutely fascinating article. It’s not denying a free coke to employees that creates an exodus of employees (though offering the coke for 50 cents just makes you look cheap and petty); it’s the perceived lack of respect.

Difference between the cost of a free coke and a 50-cent coke: Very little.

Difference in perceived respect: Very large.

Sun Tzu advised treating personnel like your beloved sons. He also explicitly counseled against spoiling them, but that’s not the point here: the point is treating them with respect. Respect, let it be said, is always personal; perceived lack of respect is, therefore, always taken personally.

I mention this because some seem inclined to draw the lesson that start-ups need to become depersonalized (and therefore, impersonal) to succeed as large organizations. This is an unrealistic expectation. When an employee believes he or she is being disrespected, the type of organization or the history of that organization doesn’t matter; it will be taken personally.

What’s fascinating is that “the free soda issue” seems to be the defining signal of negative change in a small to mid-sized company over and over again. After all, it’s something immediately visible; it affects everyone; and it is universally regarded as petty.

Some may read this and object: but wait! It’s not petty. It’s costing the company money. It’s a perk. This, however, ignores a subtle point.

Why do employees drink cola in copious amounts? This is because they are working longer than 9-to-5 and require extra caffeine to function at a high level. Free cola is seen as a business expense for the men and women investing “sweat capital” into an organization. Charging for it is seen as a sign that management has no idea of what sweat capital is, what role it plays in a business, or why it’s important.

That’s why those seeking a high level of satisfaction in their work look first at the sign on the coke machine – and second, for the nearest exit.

(Late edit: I found the original blog post to be even better and funnier, titled “The Elves Leave Middle Earth – Sodas Are No Longer Free.”)