Wednesday, October 21, 2009

How to Fix Our Economic Mess

It is not as hard as it seems. You don’t have to go to Harvard or Columbia to figure it out. You don’t have to spend hours and days campaigning for your candidate to create a change you can believe in. No, you don’t have to do any of those things. In fact, the answer is so obvious even the average Cuban businessman can tell you what to do. I am not kidding. This is really the case. To prove my point, let me introduce you to Evelio and Carlos, businessmen living in the island of Cuba—notorious for its economic follies. They were interviewed as part of a report by the Financial Times on said country.

What does Evelio think about Cuba’s central economic planning? Let’s see.
"Farmers have never wanted the state to give them anything,” one farmer,
Evelio, aged 60-plus, said in a telephone interview from the provinces. “What we
want is that they sell us what we need to produce and then not waste it through
poor planning, transport and other problems.”

What about Carlos, who is an industrial worker? Maybe he can enlighten us. What did he say?
“Our work does not depend on us but on orientations from the ministry. I can’t
plan anything because they decide the factory’s work and supplies and that’s
where the problems are and continue.”

See, this is the problem with government intervention: it ends up causing a bigger mess than what it intended to solve. It hurts the very people the system is claiming to help. It is as if you are going to cure your headache by banging your head in a wall. You will reach a point when the headache will be gone. In fact, if you continue doing this you will reach a point that you’ll have no more headaches, but at a high cost: your life. It is the same with central economic planning.

It is rather amazing that policies of state intervention are being hailed as the next best thing since sliced bread in the Western world these days. Always and everywhere government intrusion in the free-market economy fails and causes poverty. The recent state guarantees in various sectors of the U.S. economy contradict this logic. A large majority of our leaders truly believe they have done a great deed by promoting de facto communism/socialism. Politicians can put a different spin and/or play on words, but the essence in the same. Don’t listen to what is said, look at the action. You don’t take my word for it, simply listen to Evelio and Carlos. They know more than I do, and as well as most tenured economists, political leaders, and Wall St. CEOs.

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