Bill Emmott’s Good Italy, Bad Italy is a superb portrait of Italy as a country. Emmott offers to readers unfamiliar with Italian contemporary history a fascinating tour de force into the many ambiguities that made Italy at the same time a cradle of creative entrepreneurship and voluptuous joie de vivre, and a political basket-case. Mr Emmott was the editor of The Economist when that publication ran a famous cover, declaring Silvio Berlusconi “unfit” to lead Italy. That cover made Emmott the bête noire of the Italian right, and the hero of the Italian left. Coming to enjoy the status of…
The Mismeasure of the Economy
EU flags in front of the Berlaymont Building, headquarters of the European Commission in Brussels, Belgium (Image: jorisvo/shutterstock.com).
Economic growth and inequality are among the political matters most discussed these days. It is often thought that economy is more stagnant compared to the buoyant days of the middle of the last century and economic inequality much more pronounced. Politicians offer new government programs as remedies for these perceived reversals.
My skepticism about such claims has a common core. The government has difficulty measuring economic growth and inequality, particularly in an age of accelerating technology. A centralized decision maker cannot create a set of rules to pin down an ever changing and dynamic economy.
Famously, socialist governments in the last century wrongly thought they could calculate the appropriate prices for goods. Today calculation problems also beset government measurement of growth and inequality. In this post and in the next, I will take up economic growth. I will then discuss economic inequality.
The Deadwood of Crony Capitalism
Much of the recent rhetoric surrounding the supposed need to “create jobs” as a core goal of public policy has focused on the way in which government can, by promoting job creation in particular industries through subsidies and the like, also promote “sustainability” in both the economy and the environment. One need only consider how much political energy has been spent arguing for “green jobs” as part of the stimulus program as well as the longer term policy and budget goals of the Obama Administration.
Unfortunately, as the recent example of Solyndra demonstrates, these sorts of subsidy programs, and related public-private partnerships, have shown themselves to be failures at both job creation and economic growth. As I shall discuss below, the failure of Solyndra, after being given a $527 million government loan and being touted by the President as the exemplar of the “new economy,” “green jobs,” and the future of public-private partnerships, is a point-by-point example of what’s wrong with this approach.
