American Elephants

Austan Goolsbee Creates Jobs? by The Elephant's Child

Sigh.  It would really help if someone in the White House had ever worked in the private sector.  Austan Goolsbee is the Chairman of the president’s Council of Economic Advisors.  (He replaces Christina Romer who has returned to the University of California at Berkeley).  He’s been doing these White Board thingys from the White House for a while, and he always yells.

He gets this partly right.  American entrepreneurs have created huge businesses.  Successful startups are an engine of business, and hire a lot of people as they grow.  But governments are notoriously bad at deciding which businesses should be supported and choosing which should become successful.

Obama has already been a shining example of this.  His passionate belief in his green clean energy economy has no basis in science, engineering or energy expertise.  Neither wind nor solar will ever make a significant contribution to our energy supplies.Yet he has “invested” billions in subsidies for those favored businesses.  Wind farms and solar panel makers and electric battery factories could not exist without government subsidy, because they are not economically viable.

Obama champions a kind of crony capitalism.  He subsidizes business, business supports his plans, he does favors for business, business supports his campaign, he gives business special perks, business does what he wants because they are obligated.  Business becomes a creature of government.  It is practiced in many countries.  We usually refer to them as corrupt governments.

There is a long struggle between the guy with an idea in a garage and the huge business.  And if that’s the way Obama is planning to solve his unemployment problem, we’re in bigger trouble than I thought.  Venture capitalists are picky about the way they hand out their own money— in direct contrast to the Obama administration which shovels it out the door by the trillions.  Because VCs don’ t like to waste their own money, they do a lot of due diligence.

I am deeply suspicious of the “comprehensive review of regulations.”  What entrepreneurs need is freedom from regulation. Obama wants to control. Government assigned mentors?

What entrepreneurs need is for government to get out of the way.

The Government Does Not Have a Green Thumb. by The Elephant's Child

The United Nations’ food price index has hit an all time high. It is understood widely that food price hikes are a trigger of Egyptian revolt. Egypt is the world’s largest grain importer in most years, importing about half its wheat. Half the population lives on $2 a day or less. The current instability could have a disastrous effect on the country’s ability to feed its population. Egypt depends on tourism and revenue from the Suez Canal for much of its income. Scratch the tourism, and Egypt is in trouble.

World agricultural output has been falling behind population growth for almost two decades, and so has productivity. Countries around the world are hoarding food to protect their citizens, which can only make the crisis worse. Indonesia bought 820,000 tons of rice last week, Algeria bought a million tons of wheat.

Weather has played a part. In Australia, a massive cyclone added to damage from floods. U.S. wheat prices hit a two-and-a-half year high last week because of massive snowstorms in the Midwest. Drought in Russia, hot dry weather in Argentina, weather happens.

The Green Revolution has played a major part in helping to feed the world, but many of the discoveries such as golden rice, genetically modified to contain vitamin A to prevent blindness, and other crops, bio-engineered to resist weed killers have been attacked by environmentalist accusations of “frankenfood” and legal action to prevent growers from planting genetically modified food. Mother Nature has been bio-engineering plants for years, but when it is done by modern technology, it frightens the greenies.

Bio-engineered crops which pose no health problems to humans can be modified to resist cold, drought, insect damage, disease or herbicide damage, vastly increasing crop size and health. Green fantasies, however, are playing a part in world food prices.

Zimbabwe used to be the breadbasket of Africa. Mugabe’s Marxism put and end to that. Ghana and Sierra Leone were asked by Friends of the Earth to reject genetically modified food. Zambia rejected U.S. food aid though the nation faced famine. The European Union has been slow to allow plantings.

America’s fourth biggest crop is alfalfa. Only last week has the Obama Agriculture Department decided to allow the planting of bio-engineered alfalfa. Roundup Ready soybeans and corn, modified to resist the weedkiller Roundup have been on the market for a decade. In 2007, a court found that the USDA hadn’t produced an “environmental impact statement” to consider the economic impact on “organic” alfalfa growers, who represent only about 1% of the market. Foodies’ embrace of “organic” food has meant that people are willingly paying 30% more for produce that differs only in the label that says “organic.”

“Organic” alfalfa (hay to you city folk) is fed to “organic” cows so that consumers can pay extra to buy milk that says “organic” on the label. An expensive and useless label. And “organic” crops require far more land to grow than do bio-engineered crops.

Forty percent of America’s corn crop now goes into our gas tanks. This trend is the deliberate result of policies designed to subsidize ethanol. Yet the fuel provides no environmental gain. Consumers did not buy enough ethanol last year, so the government is raising the cap on how much ethanol has to go into gasoline.

Government regulation is playing a significant role in the world food crisis, and it is not a healthy role. Taxes and mandates and subsidies are mostly destructive. Governments are ill-prepared to decide which crops should be planted and which businesses should be favored.

%d bloggers like this: