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The return of government cheese
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It's not happening in America yet, but it could be a sign of how governments around the world intend to react to the growing economic crisis. It's kind-hearted, but wrong-headed.
In support of cheese producers and in response to data showing a growing underclass and longer food lines, the government of Italy has agreed to purchase roughly 3% of the country's production of Parmigiano Reggiano and Grana Padano cheese to give to the needy.
Industry spokespeople claim that "consumption is not the problem. It's a pricing problem". That just means that pricing has come down enough to keep demand stable. That's how the market is supposed to work. Many producers' margins get squeezed to the point that they have to go out of business or sell to another company. Production drops. Prices recover. Alternatively, enough producers find ways to cut costs and maintain healthy margins that prices can continue to fall or stay put.
In short-circuiting market dynamics you create a situation where there is no incentive to try to cut costs or sell to a more efficient producer. New-comers are discouraged from entering a market where their potential competition is being subsidized by the government. In the long run the market becomes less vibrant, quality drops off and innovation comes to a screaching halt.
Unfortunately this is the direction I see the economy heading. Politicians are all about the next election. It's much easier to get votes by going for the knee-jerk, quick fix, especially if it involves giving something away. You don't get crowds excited by telling them to "tough it out". The trend is hard to reverse once it gets started. In Europe some politicians came to realize that things like shorter work-weeks and restrictions on hiring and firing were detrimental to the economy and actually hurt the very people they were designed to help. Attempts to reverse such policies are usually met by tens of thousands of angry demonstrators, burning cars and smashing windows.
The "comfortable state of mediocrity" that Fred Thompson warned about, may be inevitable. We don't teach free-market economics in our public schools. We talk about the American dream, but we give no instructions on how to achieve it. Most of those I know who have entered the small business world are learning on the job. The next generation will be well-versed in global warming and the need to be sensitive to each other's feelings, but will be woefully ignorant of how to create value in the marketplace.
