Anno Domini 2013 was an excellent opportunity to learn the lesson that we failed to learn in 1857, 1933, 1971, and 2008: Uncertainty is the destroyer. Economic growth remains unsteady, with a consensus among experts that the economy is slowing down as the year closes — Bloomberg calculates the average of economic-growth forecasts at a tepid 1.8 percent. Key figures remained negative in 2013, from the labor-force participation rate (down 2.7 percentage points since Barack Obama took office) to the employment-to-population ratio (down 2 percentage points during the same period). The most important of those economic indicators, at least so far as future growth is concerned, is net domestic private investment, which remains far away from returning to pre-crash levels.
Weak private investment means weak growth and bleak long-term employment prospects. There is no way to finesse away that fact. The question is: Why are we still in this position, all these years after the end of the recession?
This is complicated by the fact that politics is about more than policy, to the extent that politics is about policy at all. Politics is emotional and tribal. There is, for example, nothing inherent in the socialist model that necessitates its being paired with anti-Semitism, but in practice it generally has been, in both its major German and Russian expressions. There is really nothing in Deng Xiaoping’s dream of “socialism with Chinese characteristics” that requires such butchery as Beijing has executed — against Tibetans, Uighurs, Falun Gong, Christians, democrats, mothers, etc. — but it is difficult to imagine the Chinese national-socialist project without it. There is, likewise, nothing in the substance of Obamaite policy thinking on health care that necessitates an all-out assault on Catholic institutions, but those attacks are of fundamental importance to the political project of which those health-care policies are a part. For the Left, politics is heroic — and every hero must have an antagonist. In 2013, those nominated to wear the black hats were Catholics, the wrong kind of business executives, insurance companies, one half of Congress, more than half of the nation’s governors, the Koch brothers and their allies (real and imagined), gun owners and enthusiasts, and people who cling to what was the president’s own view regarding gay marriage until 600 days ago.
We find ourselves, then, in a kind of crossfire: The battle between competence and incompetence rages on one front, while another war — one in which the participants understand themselves to be in an epoch-defining contest between good and evil — is fought perpendicularly.
Whichever side you find yourself on, know this: No sane person builds a widget factory in the middle of a battlefield.
Robert Higgs, economic historian and author of the indispensable Crisis and Leviathan, describes a condition he calls “regime uncertainty,” under which the possibility of significant changes in the status of property rights makes investment decisions difficult or impossible. This is partly related to uncertainty regarding policy issues such as taxes and regulations, but it is a wider phenomenon, one that is partly cultural. Higgs writes: “Regime uncertainty pertains to more than the government’s laws, regulations, and administrative decisions. For one thing, as the saying goes, ‘personnel is policy.’ Two administrations may administer or enforce identical statutes and regulations quite differently. A business-hostile administration such as Franklin D. Roosevelt’s or Barack Obama’s will provoke more apprehension among investors than a business-friendlier administration such as Dwight D. Eisenhower’s or Ronald Reagan’s, even if the underlying ‘rules of the game’ are identical on paper. Similar differences between judiciaries create uncertainties about how the courts will rule on contested laws and government actions.”
The Obama administration has achieved a special distinction here: Investors are faced with considerable uncertainty vis-à-vis how it might interpret rules as compared with the Bush or Clinton administrations — and also about how it might interpret rules as compared with the Obama administration the day before yesterday. Now you see a mandate, now you don’t. And as bad as it is in 2013, the seething hostility of Elizabeth Warren is ascendant on the left, a fact that offers very little encouragement to entrepreneurs and investors considering illiquid, long-term positions — things like factories, stores, and buildings, as opposed to easily liquidated investments in financial instruments. Many on the left complain about the “financialization” of the U.S. economy, while unwittingly helping to encourage that very phenomenon. Given a choice between dividing up his investments between a couple of hedge funds and financial firms or locking it up for ten years in an assembly line in Indiana, a sane man will consider the question of uncertainty and predictability. And under current conditions, the assembly line is a risky bet.
Perhaps 2014 will be the year in which we learn the value of predictability. Who can say?
— Kevin D. Williamson is roving correspondent for National Review.