Earlier this week, President Obama stood before the Chamber of Commerce and implored them to “get off the sidelines and invest in America.” It was a speech reminiscent of King Cnut, the Nordic monarch who built his throne on the beach and commanded the waves to cease so that they would not wet his robes.
The difference is that King Cnut quickly learned of his fallibility. According to chronicler Henry of Huntingdon, when the tides failed to cease, Cnut said, “Let all men know how empty and worthless is the power of kings, for there is none worthy of the name, but He whom heaven, earth, and sea obey by eternal laws.” [Check out a roundup of political cartoons on Obama.]
The invisible hand of free market capitalism continues to swat Obama’s pesky attempts at control, yet there he stands, just as he did two years ago, demanding that it obey his commands.
In speaking to the chamber, Obama said:
As we work with you to make America a better place to do business, I’m hoping that all of you are thinking what you can do for America. Ask yourselves what you can do to hire more American workers, what you can do to support the American economy and invest in this nation. That’s what I want to talk about today--the responsibilities we all have--the mutual responsibilities we have--to secure the future that we all share.
He went on to list the responsibilities that businesses share with society; namely, to invest in America’s education, infrastructure, and ability to innovate. They should do it by using the “nearly $2 trillion sitting on their balance sheets” to put more Americans to work.
The government is focused on job creation--a laudable goal that Americans can get behind. Businesses are focused on profits--something society has characterized as the evil aim of soulless corporations. During his presidency, Obama has sought to play up this dichotomy for political gain. It’s the old Wall Street versus Main Street line. [Read more about unemployment.]
It may make for great political theater. It may even win you some votes. What it won’t do is create jobs.
Neither will his dogmatic belief that businesses must, for the greater good, aid in the recovery by a blind policy of job creation. In a letter to the Wall Street Journal, George Mason economist Donald Boudreaux shows the ridiculousness of this request:
The job of entrepreneurs, investors, and business owners and managers is to invest and to produce in ways that are most likely to yield the highest profit in the market. Period. By doing so, businesses follow the best available signals to guide them to promote the well-being of others. The additional goals that Mr. Obama wants business people to pursue sound splendid when trumpeted in public speeches but, in practice, are far too nebulous to be workable. No business person can possibly know enough to do consistently and successfully what Mr. Obama asks.
Businesses in the free market don’t care about the unemployment rate. That statement no doubt disgusts some people, but that disgust is misplaced. Out of their single-minded pursuit of profit emerges the greatness of the American economy that, even in its darkest days, made more goods than the Japanese, Germans, British, and Italians-- combined.
It is those dastardly profits that, as economist Milton Friedman pointed out, provide "the incentive for investment in factories and machines, and for developing new products and methods.” More productivity means higher wages. Higher wages means more demand. More demand means more jobs. [See a slide show of the best cities to find a job.]
That is the “virtuous cycle” that Obama should have been speaking of. Instead, we get a call for businesses to set aside their profit motive, to put away, if only for a while, their naked self-interest, forgetting that if they did, the economy would collapse.
While Obama continues to fight the tide of the free markets, while he continues to urge the waves of profits to cease, I won’t be surprised when he finds his robes soaked through.