The Fed eases policy, and the stock market tanks. What does that tell you? Well, if you believe as we conservatives do that markets are smarter than governments, then it tells you something is very wrong with the Fed policy.
At the intersection of politics and policy, financial markets in today’s investor-class information economy provide a daily referendum on government decisions. Think of it as a real world polling survey, where people vote with their own money each day. Conservatives have always believed in the primacy of free markets over government planners. Nobel economist Frederick Hayek argued that only markets are capable of collecting and processing through the price system the fragmented diffusion of information and knowledge available worldwide.
If politicians were less stubborn and protective of their officialdom status, they would humbly acknowledge this. But don’t hold your breath for any admissions of government powerlessness from the political class.
So, it should come as no surprise that National Review Online is launching a financial sister site to render conservative commentary on the political economy of financial markets at home and abroad. Believing as we do in economic freedom and liberty, we see no reason why financial and business events cannot be explained through our conservative lens.
At the end of the day, a well-functioning political and financial economy should produce wealth creation, entrepreneurship, growth, prosperity, and — to quote the founding fathers — a successful “pursuit of happiness.” Because the U.S. is the freest economy on the planet, we have enjoyed more of our share of happiness than any nation on the earth. However, when government interferes, either through unstable money, high tax rates, overregulation, trade protectionism, or undermining the rule of law, then optimism turns into pessimism.
And markets atrophy into despair.
The root cause of eco-pessimism is seldom found in the stupidity of markets or the greed of business. Rather, economic decline is nearly always caused by excessive government planning, tinkering, or interfering. Politically incorrect as it may be today, that old conservative Calvin Coolidge had it right when he argued that the business of America is business. It is business that creates jobs, produces goods and services, provides income for free consumer choice, and generates wealth for investors. Business requires capital, and when capital is combined with labor it generates greater productivity and greater wealth. This thought, by the way, comes from the late National Review economics contributor John Chamberlain in his book The Roots of Capitalism, published in 1959.
Then, to this we should add the capitalist thoughts of the Austrian Joseph Schumpeter, whose technology model of economic growth teaches that it is entrepreneurs, not government, who create the innovative advances that unleash gales of creative destruction to transform the economy, and produce outsized rates of economic growth.
Supply-side economist Arthur Laffer has taught us that low tax rates are necessary to motivate and reward entrepreneurs and the workforce. And free market Nobelist Robert Mundell has taught us the virtues of sound money and stable prices.
Of course, conservative icon Milton Freedman has taught us the importance of free consumer choice, a thought that links with Ludwig von Mises’s “consumer plebiscite” to direct the economy.
It was William F. Buckley Jr. who launched National Review 46 years ago, and in so doing created the rebirth of classical free-market economic thinking.
The launch of NRO Financial is simply another step in the right direction. I am honored to serve as economics editor, and welcome all readers and contributors to this noble experiment.