Markets Have Few Friends in Politics

It's often hard to devine how a politician's public pronouncements will affect policy when he or she assumes office. Both President Obama and former President Bush praised our nation's reliance on markets. In Audacity of Hope (2006) President Obama wrote,

Our Constitution places the ownership of private property at the very heart of our system of liberty.... The result of this business culture has been a prosperity that's unmatched in human history...The result of this business culture has been a prosperity that’s unmatched in human history. It takes a trip overseas to fully appreciate just how good Americans have it; even our poor take for granted goods and services – electricity, clean water, indoor plumbing, telephones, televisions, and household appliances – that are still unattainable for most of the world. Our greatest asset has been our system of social organization, a system that for generations has encouraged constant innovation, individual initiative and the efficient allocation of resources.

President Bush expressed faith in markets during a CNN interview held June 18, 2009 in Eire, Pennsylvania, when he criticized President Obama's reliance on government rather than markets to solve the nation's problems.

Concerning the economy, Bush told the 104th annual Manufacturer and Business he knows "it's going to be the private sector that leads this country out of the current economic times we're in. You can spend your money better than the government can spend your money."

Bush remained optimistic about the country's future, pressing for free trade, open markets and the free enterprise system, the Times reported.

"We'll come out of this better than before," he said.

He was less sanguine bout Obama's plan to overhaul the U.S. healthcare system.

"There are a lot of ways to remedy the situation without nationalizing healthcare," Bush said. "I worry about encouraging the government to replace the private sector when it comes to providing insurance for healthcare."

Also in the Audacity of Hope, President Obama emphasizes the role of government in correcting perceived imperfections of markets.

Aside from making needed investments that private enterprise can't or won't make on its own, an active national government has also been indispensable in dealing with market failures...But it was during the stock market crash of 1929 and the subsequent Depression that the government's vital role in regulating the marketplace became fully apparent. With investor confidence shattered, bank runs threatening the collapse of the financial system, and a downward spiral in consumer demand and business investment, FDR engineered a series of government interventions that arrested further economic contraction.

At best, President Obama's actions indicate that prior to his administration there was a huge imbalance in our economy incorrectly favoring markets that required a vigorous government to correct. At worst, he gave lip service to markets that he described as the "very heart of our system of liberty."

The second quote shows that President Obama also exhibits a distressing view of the positive influence of government during the Great Depression, our longest and most severe economic crisis. The government made the recession much worse than it would have been if it had not intervened. The Federal Reserve contracted the money supply when it should have been expanded. The Congress and President Hoover promoted protectionism when they should have defended trade. Both the Hoover and Roosevelt administrations used a variety of policies to freeze wages and prices that should have remained flexible. If government policy helped, it was by accident, not well thought out coordinated policy.

President Bush said that he supported markets, but when the financial crisis hit and push came to shove his administration overrode bankruptcy law and passed the biggest bailout in American history. President Bush was famously quoted as stating that, "I've abandoned free-market principles to save the free-market system." At best, President Bush feared to trust market institutions he extolled when the economy under stress. At worst, his support of markets was feigned and as Don Boudreaux writes,

The man who never cheats on his wife because no other woman will have him is not particularly principled - but he proudly fancies himself that way. So the first bimbo he sniffs who'll do him the honor will prompt him to "abandon his principles" with as much alacrity as a hungry dog will attack a ham. Such are the principles of our "leaders."

In one case, we have a president who secretly waits for a crisis to eagerly replace market institutions with government, and on the other, a president who fears trusting markets to solve economic upheaval once it occurs. Neither was a friend of markets.