Chicago is a wonderful city. They claim to have invented the sky-scraper, and they have examples from every decade since. If you’re ever there, be sure to take the architectural boat tour.
Curious that one city should have been associated both with the famous Chicago School of economists, and with the President who has done more than any other to undermine Chicago School Economics: Barak Obama.
The Chicago School is, of course, the American manifestation of Austrian economics — in other words, classical liberal free-market economics. Liberty, enterprise, free markets, property rights, the rule of law, enforceable contracts, small government, low taxes. Its luminaries included Friedrich Hayek, and Milton Friedman (whom I met at an ALEC Conference shortly before his death in 2006).
Obama, on the other hand, is about big government, fiscal incontinence, massive debt and high taxes. He believes that there is no problem which government (and tax-payers’ money) cannot solve, whereas the Chicago School might argue that there is no problem which government intervention cannot exacerbate. Obama has never heard of the Laffer Curve — or if he has, he has chosen to ignore it. He appears to believe that you can always raise more revenue by hiking tax rates, though all experience suggests otherwise.
So there really are rather serious worries following Obama’s better-than-expected win in his re-election campaign. These worries are exacerbated by the economic/demographic breakdown. Obama polled above average with Hispanics (and other ethnic groups), because of his relaxed attitude toward immigration. He polled well with other minorities, because of his liberal social attitudes. But most importantly, he did well with lower-income Americans, because they have no wish to turn off the welfare spigot, even though we all know where that leads — to the edge of fiscal cliff.
This voting pattern seems to vindicate the wholly false idea that Republican/Chicago-style economics favour the rich, and disadvantage the poor; whereas as Milton Friedman would have explained, classical-liberal economics lead to economic growth, lower debt, higher employment. Or as Mitt Romney memorably put it, “more jobs, and higher take-home pay”. As we are finding in the UK (and France will find out even more starkly), soaking the rich costs jobs for the poor.
I fear we’re at a tipping point, where there are so many Americans now dependent on government hand-outs that there is an in-built leftist Democratic majority. In the gaffe which perhaps cost him the White House, Romney infamously referred to “the 47% of Americans dependent on government, who won’t vote Republican”. Another startling figure: it seems that 47 million Americans receive food stamps. Scary.
This of course is exactly the strategy that Gordon Brown adopted, with considerable success, in the UK. So many people on handouts, that Labour can at least aspire to an in-built majority. Perhaps democracy inevitably leads to major parties out-bidding each other to increase handouts, and pile up debt, until the markets revolt, as has happened in Europe.
The fact is that Obama is taking the United States of America away from Reagan’s Shining City on a Hill, and pursuing the perilous path into the swamp of EU-style welfare and debt. We know where that leads. Flag-burning in Madrid. Soup kitchens in Athens. And the doors of the IMF.
My good friend Dan Hannan takes a more sanguine view (for the UK at least). He feels that Romney lost because of right-wing social policies that no major party in the UK would ever endorse, and that therefore there might still be a place in Britain for classical-liberal economics, coupled with a more inclusive social outlook.
I hope he’s right — although it’s increasingly doubtful that it will be the Tory Party that benefits.