If I’m known at all to RichardCYoung.com readers, I’m known as the curmudgeonly foreign policy guy, I imagine. I have little respect and less faith in the ministrations of the Washington elite, which is in part why I stopped trying to break into it and decided to open a wine bar instead. As my final column here at RCY, I thought I’d turn my gimlet eye on the economic system that ‘brung me here: capitalism. Below, a few takeaways from dealing with banks, construction firms, real estate people, and booze and food purveyors:
Literally no one has any idea what he is doing.
A former intern at the Cato Institute was once asked to review three books by an esteemed historian of the Progressive Era. He returned to his master’s office with a washed-out, battle shocked look on his face. Quizzed by his boss, he could only mumble: “I thought there were procedures in place to prevent this sort of thing from happening.” The Esteemed Historian, it turned out, was a huckster
Worth remembering in all endeavors in life: none of us really has a clue. The signal phrase that sticks in my mind from a 9 month build-out of a decrepit space in a gentrifying neighborhood: “This is construction. Nothing is accurate.”
People think that in professions governed by engineers, architects, regulators charged with public safety, licensed tradespeople, et al, that there are rules. That the rules are followed. That violators of the rules are discovered, punished, and their work corrected.
Nothing could be further from the truth. I have come to firmly believe that it is by the grace of God that the nuclear arsenal of the United States or some other country hasn’t been launched at itself yet. Somehow, but without any real defense, humans rarely produce a Rana Plaza-level disaster. Thank God.
Government is even worse.
In Washington, DC, which in fairness is not a regular government, the legislators occasionally get captivated by a crazy idea, meet no one who asks them to think it through or run the numbers properly, and pass legislation. So it was with the District’s paid-leave bill, which taxes DC employers .62 percent of payroll to pay mostly Maryland and Virginia residents for 8 weeks per year of family or other leave.
In order to do so, the District is setting up a soon-to-be-monstrous bureaucracy to administer the program. In an effort to surrender, the DC business community agreed to the terms, but insisted employers administer the program themselves. Not enough for the city council’s most liberal members, whom even the liberal Washington Post editorial board condemned as engaging in “pure fiscal folly.”
Liberal Councilmembers like Elissa Silverman and David Grosso insist that the .62 percent payroll tax will pay for the soon-to-be-monstrous bureaucracy and the benefits themselves. If they’re taking 5 year bets on that claim, I’ll take even odds with everything I have.
The American Economy Seems Over-Financialized.
I’ve dealt a lot with banks, hard money people, and others, and it seems to me the only people doing *very* well in a DC that’s booming are holders of large amounts of capital. As people like to do, I looked for people thinking along the lines of my views. In a lecture, and later a book chapter, Harvard professor Benjamin M. Friedman wondered, in part:
Approximately a quarter of the graduates at my university go into the financial sector. Arguably, both at my university and at others too, those who choose to do so include many of our brightest, most energetic and most highly motivated young people. They could be doing something else.
He made clear why he was wondering along these lines:
As is by now well known, the share of total profits in the U.S. economy earned by firms in the economy’s financial sector rose from ten percent, on average from the 1950s through the 1980s, to above twenty percent in the 1990s, and then above thirty percent in the 2000s until the crisis.
I’m no economist, but I worry about this. I worry whether the marginal social value of the 180-IQ Harvard grad coming up with a tricky new algorithm that becomes the new Credit Default Swap, or some such, is worth the cost. The institutions that structure the incentives of the bright young undergraduate seem to me to veer ineffably toward the financial sector, and I worry that those incentives might not be aligned with the greatest social value of those brilliant people’s faculties.
Postscript: This is my last column at RichardCYoung.com. I would like to thank, from the bottom of my heart, Debbie Young, E.J. and Becky Smith, and most of all Dick Young for encouraging me to write this column. I owe them all, but particularly Dick, a tremendous debt of gratitude. It was Dick who decided that mine was a voice that should continue to be heard, and that decision has meant a tremendous amount to me and my family as we got our business off the ground. Nothing could have been more valuable, and nothing has been more appreciated. We look forward to welcoming the Youngs, the Smiths, and even ol’ Tim Jones to our place in DC before too long. Until then, thank you for reading.