Obama on markets, from his big speech today on regulation:
I've always been a strong believer in the power of the free market. It has been and will remain the engine of America's progress -- the source of prosperity that's unrivaled in history. I believe that jobs are best created not by government, but by businesses and entrepreneurs who are willing to take a risk on a good idea. I believe that our role is not to disparage wealth, but to expand its reach; not to stifle the market, but to strengthen its ability to unleash the creativity and innovation that still make this nation the envy of the world.
That sounds reasonable enough. The next sentence starts to get dicier:
That's our goal -- to restore markets in which we reward hard work and responsibility and innovation, not recklessness and greed...
Well, that is going to be a tricky goal to accomplish. Because sometimes hard work and innovation are motivated by greed. Sometimes recklessness leads to innovation, as in the story told by Alexander Graham Bell about inventing the telephone by accidentally spilling battery acid. And sometimes people work hard in free markets and fail. Markets, even under the proposed regulations of the Obama administration, aren't moral judgment systems the way that we think of God judging people when they die and assessing whether they have worked hard or were too greedy. They are simply more efficient and more successful ways of organizing an economy than the alternative, which is a government-run, non-market system that does even worse at rewarding hard work and innovation. What's more, it's hard to assess sometimes whether a success in a market was the result of hard work and innovation or the result of recklessness and greed. A lot of the folks at Lehman Brothers and Bear Stearns worked hard, and until their firms collapsed, there was a pretty broad consensus that they deserved to be rewarded. It's only after the fact, for the most part, that the hard workers are being criticized for having been greedy. Government has a tough enough time doing what it is supposed to do -- fix the potholes in the roads, win wars, collect taxes. Now it is supposed to be able to assess the virtue of market participants, judging whether they are greedy or reckless or hardworking and responsible?
Further toward the end of the speech, Mr. Obama retreats from his position as a defender of the free market -- "I've always been a strong believer in the power of the free market," he had said -- to a middle ground as a kind of neutral referee between the pro-market types and the socialists, someone who can see the advantages and disadvantages of both approaches.
There's always been a tension between those who place their faith in the invisible hand of the marketplace and those who place more trust in the guiding hand of the government -- and that tension isn't a bad thing. It gives rise to healthy debates and creates a dynamism that makes it possible for us to adapt and grow. For we know that markets are not an unalloyed force for either good or for ill.
This is a false dichotomy. There are very few people out there arguing that markets are either an unalloyed force for good or for ill, though Mr. Obama himself, just a few minutes before, calling the free market the "engine of America's progress -- the source of prosperity that's unrivaled in history," had made it sound pretty close to an unalloyed good. The question is whether markets are better than the alternative, and whether adding a more vigorous role for the government will make things better or worse.