Submitted by Bill Bonner via Bonner & Partners [2],
Stifling Growth
Zombies and cronies stifle the process of growth and wealth creation.
To add wealth, you have to add knowledge. That is, you have to learn to do things better.
The trouble with zombies is that they don’t want to learn. Learning is hard. And costly. Zombies just want to take the fruits of someone else’s learning.
Likewise, cronies try to freeze the process of accumulating knowledge.
New knowledge – accumulated by others – is threatening. It is what causes disruption. And what economist Joseph Schumpeter called “creative destruction.”
Cronies fear this new knowledge and try to block it from ever happening – with subsidies, licensing requirements, and other regulatory impediments.
George Gilder, in his latest book, Knowledge and Power: The Information Theory of Capitalism and How It Is Revolutionizing Our World, is that an economy is fundamentally a learning system, not a way for distributing wealth, believes that this obstructionism is a bigger threat to prosperity than debt.
When Capitalism Fails
Information, says Gilder, is always surprising. It tells us things we didn’t know.
In an economy, the person who is the source of most important new information is the entrepreneur. He is the fellow who takes risks, builds a new business, and then – surprise, surprise – it works!
The cronies want to stop him, before he undermines the value of their old assets and old business models with new information.
The zombies want to drag him down, leeching on him so greedily that he runs out of energy.
But without the entrepreneur, capitalism fails.
Capitalism also fails when the information the entrepreneur relies upon is distorted.
When the feds fiddle with interest rates, for example, they turn the most important signal in capitalism into misleading noise. Gilder:
[I]nterest rates are noise, rather than signal. Interest rates near zero cause finance to hypertrophy, as privileged borrowers reinvest government funds in government securities. Only a small portion of these funds goes to useful “infrastructure,” while the rest is burned off in consumption beyond our means.
Gilder believes the signals must move through channels – secured, but not corrupted – by government!
Yes, government exists. It is going to provide “channels” – laws, property protection, speed limits, and so forth – whether we like it or not. And it will be better for us all if it just keeps the channels open and free from twists and tolls.
But that is very different from providing “guidance.” Politicians don’t have the information or experience to provide guidance. They are zombies. They don’t want to learn the nitty-gritty details of real wealth building. They should just make sure basic laws – against murder, theft, and fraud – are enforced.
And otherwise butt out.
