The Economist: Obama an Economic Illiterate, Not a Socialist

“The American right  misses Mr. Obama’s real flaw.  He is not a ‘socialist’; but he does not understand business.  As even Democrat-leaning CEOs complain, he neither expresses enough appreciation of capitalism nor shares the wavelength of those who practise it.  Bosses are ushered in for photo-calls and then ignored.  It is one thing to seek redress from BP, another to vilify it as an alien invader.  He is interested in economics and technology; but not in how to make money.” Lexington, ‘The 70-30 nation’, The Economist, June 19, 2010

The Economist – itself a magazine that has drifted over the past quarter century from classical liberalism through social democracy to 21st century socialism – is only half-right in this judgment.  Obama is economically illiterate; and he is also a socialist. The two conditions typically go hand in hand. For, as my former colleague Gordon Tullock was wont to say, one cannot be an economist and a socialist,  because socialism runs directly counter t0 all economic logic.

The large majority of Americans, sadly, are economic illiterates as another of my colleagues at George Mason University, Bryan Caplan, has ably demonstrated. This is a consequence of a simply dreadful public education system in which the basic principles of economics – economics 101 if you like – are rarely taught, and when taught, are taught badly. The large majority of  American politicians are also economic illiterates, as their wealth-destructive policy actions clearly demonstrate. Barack Obama, as a consequence of his upbringing,  his education choices, and his choice of colleges – public affairs and the law at Columbia and Harvard respectively – is less economically literate than any president since FDR. But this degree of economic illiteracy places him only at the median of the United States electorate, which explains why he was a strong candidate for office at a time when economic literacy should have been at an absolute political premium.

However, if Obama is also a confirmed socialist – as I have shown to be the case in many columns – then he locates firmly in the minority 30 percent tail of the U.S. electorate, a location that may prove fatal to his re-election chances in 2012. For, as The Economist acknowledges, even after the 2008 financial crisis an overwhelming majority of Americans confirm in opinion poll after opinion poll that they prefer capitalism to socialism.  In January 2010, Gallup found that 61 per cent of those polled had a positive view of capitalism and a negative view of socialism. In March 2010, the Pew Research Center asked Americans whether they were better off in a free market economy even though there may be severe ups and downs from time to time. Seventy per cent of those polled answered in the affirmative. Seventy per cent of Americans consistently poll that federal income taxes are too high (at an average of 18.2 per cent of gross domestic product). Even those who favor high taxes on the rich think the top rate should be 20 per cent or less (rather than the 40 per cent that soon will be the case). 

So, in a 70:30 nation, how come that a socialist candidate was elected to the presidency of the United States?  The answer, I believe, lies not just in economic illiteracy within the electorate, but in the ideological composition of the 30 per cent socialist tail. The tail is heavily represented in the politically influential media and universities, and within the wider public sector, by so-called elites that have little or no capitalist experience. It is also heavily represented within the Black and the Hispanic communities, large proportions of which are unusually dependent on hand-outs from the state. Obama, half-black and half-white, attracted both the elites and the minority interests without   alienating required support within the naturally more pro-capitalist White majority and Asian minority voters.

Because Obama and the Democrat-controlled Congress have successfully pursued socialist policies – and because such policies predictably have failed – the American electorate predictably will  reverse course in 2010 and 2012, and begin to ease their country back to its natural capitalist roots. And Barack Obama, and many of his economically illiterate, socialist cohorts, will find themselves relegated to the trash-can of history.

Tags: a return to capitalism in the United States, economic illiteracy and socialism of Barack Obama, electoral correction in 2010 and 2012, electoral misjudgment in 2008