{"id":76633,"date":"2015-08-10T13:33:00","date_gmt":"2015-08-10T17:33:00","guid":{"rendered":"http:\/\/countingpips.com\/?p=76633"},"modified":"2015-08-10T13:33:00","modified_gmt":"2015-08-10T17:33:00","slug":"thoughts-from-the-frontline-closing-the-sausage-factory","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2015\/08\/thoughts-from-the-frontline-closing-the-sausage-factory\/","title":{"rendered":"Thoughts from the Frontline: Closing the Sausage Factory"},"content":{"rendered":"
August 10, 2015<\/div>
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By John Mauldin<\/span><\/h4>\n
\"\"\u201cBureaucracy destroys initiative. There is little that bureaucrats hate more than innovation, especially innovation that produces better results than the old routines. Improvements always make those at the top of the heap look inept. Who enjoys appearing inept?\u201d<\/p>\n

\u2013 Frank Herbert, Heretics of Dune<\/em><\/p>\n

\u201cEconomies naturally grow. People innovate as they go through life. They also look around at what others are doing and adopt better practices or tools. They invest, accumulating financial, human and physical capital.<\/p>\n

Something is deeply wrong if an economy is not growing, because it means these natural processes are impeded. That is why around the world, since the Dark Ages, lack of growth has been a signal of political oppression or instability. Absent such sickness, growth occurs.\u201d<\/p>\n

\u2013 Adam Posen, \u201cDebate: The Case for Slower Growth<\/a>\u201d<\/p>\n

Today\u2019s letter will be shorter than usual, because I\u2019m at Camp Kotok in Grand Lake Stream, Maine, where the first order of business today is trying to outfish my son (not likely to happen, this year). But I\u2019ve been looking closer at productivity barriers, and I want to give you some points to ponder.<\/p>

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<\/a>The New Normal?<\/strong><\/p>\n

Like many of you readers, I\u2019m old enough to remember a time when 2.3% annual GDP growth was a disappointment. We always knew America could do better. Not anymore, apparently.<\/p>\n

Some people actually cheered last week\u2019s first estimate for 2Q real GDP growth. It was 4.4% in nominal terms, but inflation brought the figure back down. While certain segments are growing like crazy, for the most part we are muddling along in a slow-growing malaise. You might even call it \u201cstagnant.\u201d<\/p>\n

I for one still think the United States can do more. We have a large population of intelligent people who want to build a solid future for their children. They\u2019re willing to work hard to do it. If that\u2019s not happening \u2013 and clearly it isn\u2019t \u2013 some barrier must be standing in their way.<\/p>\n

What is this barrier to productivity and growth? There are actually several, but government red tape is one of the biggest. I thought about this after reading an excellent Holman Jenkins column<\/a> in the Wall Street Journal<\/em> last week.<\/p>\n

Jenkins led me to an audio recording<\/a> of an interesting discussion on \u201cThe Future of Freedom, Democracy and Prosperity,\u201d conducted at a symposium held at Stanford University\u2019s Hoover Institution last month.<\/p>\n

Government research & development funding has fallen off considerably from its peak in the 1970s moonshot days. This holds back worker productivity. The federal government is doing too much to slow down business and not enough to boost it.<\/p>\n

The three economists who spoke at Stanford all pointed to important productivity barriers emanating from Washington DC:<\/p>\n

One of the participants, Hoover economist John Cochrane, spoke of fears that America is drifting toward a \u201ccorporatist system\u201d with diminished political freedom. Are rules knowable in advance so businesses can avoid becoming targets of enforcement actions? Is there a meaningful appeals process? Are permissions received in a timely fashion, or can bureaucrats arbitrarily decide your case by simply sitting on it?<\/p>\n

The answer to these questions increasingly is \u201cno.\u201d Whatever the merits of 1,231 individual waivers issued under ObamaCare, a law implemented largely through waivers and exemptions is not law-like. In such a system, where even hairdressers and tour guides are subjected to arbitrary licensing requirements, all the advantages accrue to established, politically connected businesses.<\/p>\n

The resources that businesses put into complying with government regulations is staggering. I have often envied people outside the highly regulated financial industry for their freedom to operate rationally. In my business we seem to spend half our time \u2013 and an ungodly fraction of our money \u2013 just maneuvering through the regulatory morass.<\/p>\n

Intrusive federal regulations touch every part of the economy:<\/p>\n