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This week: Kamala Harris; Reducing competition; Gigantism.
Joe Biden’s choice of Kamala Harris as running mate guarantees a lively presidential campaign. The performance of Harris 1.0 was a dud in the primaries, but Harris 2.0, recast as a vice-presidential candidate, may prove a hit among large constituencies of the Democratic party and among many independents. She brings her wit and combativeness to the ticket and will provide a sharp contrast to the calm and steady Mike Pence.
Although her appeal is not universal among minorities, owing to her controversial tenure as attorney general of California, her presence somewhat blunts the Republicans’ usual advantage on law and order issues, this in the wake of the street protests of the past two months. She will be walking a tightrope here on the one hand emphasizing her tough policies as AG to some audiences while feeling compelled to downplay that same toughness to others.
The market reaction today was overwhelmingly positive, a fact that is easily explained by her friendly relations, some would say too friendly, with Wall Street and Silicon Valley. Tech giants in particular may feel relief that Biden did not choose Elizabeth Warren, though their enthusiasm may wane in the event of a Democratic victory if Warren was included in the cabinet, for example as attorney general. But for now, it looks like business as usual for the markets.
All in, while the choice of Harris is ground-breaking in obvious ways, it clearly signals continuity in other important ways. Biden will be 82 in 2024, which means that whether or not he wins in 2020, Harris is a probable contender in the primaries four years from now.
Although they disagree on many things, both parties have been in agreement on one thing for a few decades now, and that is the idea that reducing competition is a desirable and reasonable objective. Neither party can be seen today as the party of laissez-faire or of ‘capitalism’. Although Republicans have a higher claim on that mantle, the 2008 financial crash and the 2020 pandemic show that they are open to watering down their principles and resorting to draconian government action when push comes to shove.
Both parties are promoting policies whose main effect will be to reduce competition. The Republicans want to reduce competition by restricting the flow of foreign goods (tariffs) and foreign labor (immigration). And the Democrats want to reduce it by adding regulation that hurts small and medium-sized companies and by being lax on the monopolistic practices of the largest firms. Democrats also seek to reduce competition by protecting some sub-segments of the labor market, by promoting single-payer health insurance, and by restricting, or even punishing, disagreeable (to them) opinions on a number of social and cultural issues.
None of this bodes well for the advancement of ideas, of business and of technology. It is true that these trends tend to be long-cycled and that today’s restrictionist policies may not have an impact for a decade or two. But they will certainly have an impact, and one that will be generally impoverishing if not reversed or mitigated in the interim period.
We live now in a world of giant government and giant corporations. This year, the Federal government will incur a budget deficit in excess of $3 trillion, mainly due to emergency programs enacted in response to the pandemic. As a percent of GDP, the deficit is projected at 20% for 2020 or twice its 9.8% level of the 2008 financial crisis, but not as high as the 26.9% reached during WW2. Beyond this year, the deficit’s baseline will return to a more normal level but it will be on an upward trend for several decades as baby boomers retire and receive support from Medicare and other entitlement programs.
Except for recipients of government help and shareholders of tech stocks, gigantism is not on the whole a positive trend at this particular time. We recommend on this topic Joel Kotkin’s new book The Coming of Neo-Feudalism.
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