Thursday, October 19, 2006

Single-State Recession

An interesting article in National Review examines Michigan's single-state recession.

Trained economists are debating the various factors that have contributed to Michigan’s single-state recession. These include fiscal, regulatory, trade, and monetary policy. By contrast, too many Michigan politicians have resorted to the logical fallacy of poisoning the well in an election year.


Before his untimely passing in August, Stephen Dresch advanced a neo-Hayekian critique of the Michigan government’s many failed attempts to pick economic winners with tax dollars. According to Dawson Bell of the Detroit Free Press, Dresch helped set in motion investigations of university economic-development activity “which led to public outcry, criminal convictions and the departure of high-level officials” at Michigan Technological University. Dresch was later elected to the state legislature as a Republican in a heavily-Democratic Upper Peninsula district.

It was Hayek who argued that governments lack the knowledge to successfully engage in central planning. And Dresch, a Yale Ph.D, was treated in a boorish manner in Lansing for defending this moral high ground. But there is cause for longer-term optimism. Dresch’s critics lost this year’s policy battle over the single-business tax, while more positive change seems inevitable in the wake of Michigan’s severe employment and income declines.

Those serious about solving Michigan’s economic problems should reflect on Dresch’s critiques and let private venture capitalists and entrepreneurs, not politically connected funds and authorities, allocate capital.

One lesson to be learned from Michigan’s single-state recession is that economics trumps politics. Another is that markets don’t wait for politicians.
Government can't pick winners and losers better than the free market can. That means that every time politicians take money by force and spend it on job creation, investing in education, targeted tax breaks, economic incentives, or whatever the latest fad is, they make the economy worse, not better.


Anonymous said...

The unions killed this state. They deserve what they get for bein so greedy.

Dan Roth said...

I still think the best thing that can happen for this state is it becomes a right to work state.