It is possible today to become President without having any idea how to set up effective processes for making and implementing decisions. That does not mean that a President will necessarily lack those skills. It seems to me that President Clinton maintained effective processes. He used his economic team well enough. But I expected the current President to be roughly similar, and I was wrong.

…politicians and pundits who repeatedly demand that China dramatically appreciate its currency, or that the United States impose tariffs on Chinese imports until they do, are really advocating higher prices for the many American families and businesses that purchase such goods.

As he explains, and as we and others have pointed out, the plan is to have insolvent European banks load up on insolvent European sovereign debt. That is what I keep describing as two drunks trying to prop one another up and make it home.
Another metaphor that keeps coming to mind is the Monty Python pet shop routine. The politicians are like the store clerk, insisting that the parrot is alive. The market is like the customer, who thinks that the clerk is, er, mistaken.

In political terms we are probably witnessing the end of an empire, and when such an event occurs it can be swift. Forward-thinkers need to look beyond the EU as an institution, and in this respect an alternative and as yet unrecognised future for Germany is evolving. She faces stagnant markets in Europe, declining markets in the US, but booming markets for her products in China, South East Asia and other emerging economies. Even if the eurozone does not break up, her economic motivations will lie increasingly elsewhere and the weaker EU members will remain an unwelcome burden.

The Solyndra scandal demonstrates that often, the real beneficiaries of government interference, be it subsidization or regulation, are elected officials and their preferred interest groups. Additionally, unnecessary government involvement in marketplaces, like that for “green” energy, stifles competition and inhibits companies from producing novel, moneymaking ideas and instead encourages them to expend resources keeping their government supporters happy.

It is also hard for me to imagine that much in the way of reform will actually take place—why should one reform if money is readily available from one’s domestic banks? Because we have signed on to a tougher, tighter fiscal treaty? We did not even manage to respect the previous, easier, treaty. Why assume that it will be any different this time? Fool me once, shame on you; fool me twice…

…politicians can’t just do the “obvious best” thing. There is no such thing as a perfect rational maximizer in policymaking. Politicians are always limited by what their voters think is fair. The voters may be right, they may be wrong, but in the end (hopefully), they’re still the boss.

The Secretary of the Treasury of the United States comes to Europe to lecture Europeans on what to do about policy and financial-market disarray and about dealing with deficits, currencies, and economic issues. He brings nothing but words. He has no political power. His government, the Obama Administration, is stymied by a divided Congress. It cannot add funds to the IMF, even if it wanted to. Geithner traipses around Europe telling people whatever he chooses, making bland commentary about the need to correct imbalances; and then he returns home. He returns to a country that is running deficits as large as the worst deficits in Europe. He returns to a country politically divided and rancorous in its inability to solve a problem. He leaves an impression of American arrogance and failure.

The practice of politics is built, essentially, on rhetoric rather than education. The process of acquiring and exercising political power involves only at the margins the truth of the persuasion it engages in. It values successful persuasion systematically over truth, and we see that effect carried out systematically over both electioneering practices and in legislation (where public choice explains the sorry disconnect between professed values and legal/political results). The disconnect is endemic, and corrosive to human social life. Decent people regulate their speech and conduct with each other to a considerable degree (not perfectly, of course) with the truth, or anyway what they take to be the truth. In general, if you tell me something, I ascribe to you the belief that that something is true. Not so in politics, where the incentives to acquire and exercise power over other people is the currency of the practice. It is, as Plato pointed out, just what dictators do, only in different form.

The professional left in America and their chattering-class useful idiots have followed a consistent pattern for a century: sympathizing with tyranny in their musings over how to implement policies fueled by jealousy and an undying fear of economic liberty.

In the ongoing discussions about the Occupy Wall Street movement, for example, I think we need to be very careful to distinguish between the very correct and very justified opposition to and anger about “crony capitalism” or special privileges and wrong-headed arguments against free markets. My impression is that what outrages the Occupiers is not merely that firms co-opt the state to increase their profits. They are upset that firms pursue profits to begin with. In short, I think that there are more than a few members of the Occupation who are suspicious not of the way that patterns of exchange are distorted by government intervention and rent-seeking special interests. My impression is that they are suspicious of exchange itself. I hope I’m wrong.