In the previous post, we featured entrepreneur Steve Wynn discussing the uncertainty created by the Obama administration and how China today has a more stable business environment. This is an important point and reminds us of a recent discussion of the causes of the Great Depression by Amity Shlaes.
In The Forgotten Man: A New History of the Great Depression, Shlaes identifies one of the key factors that prolonged the Great Depression throughout the 1930s: the uncertainty created by the continued experimentation of Franklin Roosevelt’s New Deal. Not only did the government pursue policies that hurt the economy. Business leaders also never knew what crazy policy would come next. The failure of Roosevelt’s New Deal is often obscured by the fact that Roosevelt stayed in power long enough to lead the United States into World War 2 and, ultimately, to victory over Nazi Germany. A byproduct of the the war was that it finally ended the Great Depression.
Wynn’s point that China’s business policies are more predictable today than America’s is important. Despite the fact that China is still nominally communist and is an authoritarian country that oppresses many of its people, its leaders have learned that having predictable rules for foreign and domestic investors is essential for economic growth.
We still much prefer to live with the freedoms we still have in the United States than living in authoritarian China, but if we do not restore a stable direction away from ever expanding government and increasing taxes, our freedoms will erode and we may create conditions similar to those that transformed what should have been a normal recession into a decade-long Great Depression.