How a long, debt-loving bipartisan consensus has warped U.S. business

by George F. Will,

Economic policy during a second Joe Biden term would be even worse than policy during a second Donald Trump term. Both, however, would continue a bipartisan consensus that for decades has grown broader, deeper, and more economically and culturally debilitating. Americans are sleepwalking toward convulsive pain, a consequence of decades of easy money policies to prevent minor pains.

Social outcomes that are deemed flaws of capitalism — increased inequality and corporate power — are actually largely consequences of government. It has grown excessively interventionist and confident as it and the nation have become addicted to prolonged low interest rates, the “socialization of risk” and the resulting misallocation of capital. Because of government’s “paternalistic fear,” a “bailout culture” has grown: “A safety net once meant to catch the poor at the precipice of hunger was extended under the financial markets.” This was the result of a vow by the Ayn Rand-reading Alan Greenspan, appointed Federal Reserve chairman by Ronald Reagan.

So argues Ruchir Sharma, investor and chairman of Rockefeller International, in his invigorating “What Went Wrong With Capitalism.” This nation has become “the biggest deficit spender in the capitalist world” by increasing increments of risk-aversion and pleasure-delivery by government.

Between the 1790s and 1970, Sharma writes, the nation “ran consistent surpluses, with significant deficits only during five crises: the War of 1812, the Civil War, the Great Depression, and the two world wars.” Since 1970, there have been significant deficits every year but four.

Conservatives’ faith that tax cuts will pay for themselves is mirrored by progressives’ faith that their “investments” pay for themselves. The result is the same: debt.

Greenspan’s successor, Ben S. Bernanke, said the Fed’s bond-buying was designed to drive down interest rates, thereby driving up asset prices for a “wealth effect”: Feeling richer, Americans would spend more. This was not demand management, it was the manufacturing of demand; government planning, not capitalism, wherein market forces allocate wealth.

Socializing risk benefits the rich most, but others, too. Total U.S. social spending — including health and pension benefits delivered by private employers but mandated or subsidized by government — is about 30 percent of gross domestic product, and the welfare state is world’s second-most (behind France) generous. But everyone eventually loses from what Sharma calls “a business culture pickled in debt.”

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