Tuesday, July 8, 2014

The Hand Of God And Economic Growth

The upset victory of David Brat over Eric Cantor many be a sign of the future for the Republican Party.  It has been successful as a coalition between those who believe in free markets and Christian fundamentalists.  Brat's electoral success suggests that the future of the Republican Party may be not be a coalition between free marketers and Christian fundamentalists.  Its base may become more like David Brat who believes that the source of economic growth is a free market system operated by virtuous Christians.

David Brat convinced the voters in his district that his opponent was not virtuous.  He accused Eric Cantor of "crony capitalism" by connecting him to Wall Street bankers who supported his campaign.  The bankers failed because they are not virtuous and government efforts to rescue the bankers will not work either.  Free markets do not need government regulation; they work best when the people running them are virtuous.

The business wing of the Republican Party has consistently blamed government for our economic problems.  The economy would work fine as long as we let customers, competition and shareholders provide the required market discipline.  The role of government is to enforce property rights by writing laws and providing resources to defend those rights.  God was not essential in the operation of the economy but it was a good idea to court the Christian fundamentalists who voted for them in elections.  Many of the Tea Partiers who voted for David Brat believe that Christian virtues are an essential ingredient for free market capitalism.

We live in a real world in which bankers continue to act badly and markets also break down when participants are virtuous.  Government cannot provide a substitute for failed virtue.  We need government to make markets work but we also have to find ways to limit the growth in "crony capitalism".  That is, can we build a government that we can trust?

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