At worst the tax cuts will validate current market valuations, says Tom Essaye. At best they’l...
04/30/2012 2:34 pm EST
One celebrity academic has made quite a career out of being mistaken, writes MoneyShow.com senior editor Igor Greenwald.
No one can be right all the time. At best, we can seek out experts who are frequently correct, and seek to profit from their insights.
But what if we could find someone who’s been consistently and comprehensively wrong? Those utterings would be valuable too, if only by saving us the time of ruling out some arguments and theories.
The search for the infallible oracle goes on, but as for its polar opposite, I’m happy to anoint a winner. Niall Fergusonâ€”armchair economist, sometime historian, and full-time television personalityâ€”has turned being wrong into a powerful brand, not to mention professorships at Harvard, Stanford and Oxford.
A short list of Ferguson’s more famous goofs would have to include:
- Enthusiastic advocacy of the Iraq war and, afterwards, of a prolonged US occupation.
- His 2007 prediction that the subprime crisis “does not portend the implosion of an equity market bubble”
- His 2009 prediction that the government’s fiscal stimulus would drive up interest rates
- Last year’s assurancesthat “austerity works.” Though Ferguson’s perfectly awful forecasting record may be in jeopardy, because he may be right that it will work in America just as well as it’s worked in Europe.
So it was terrifying to read in this week’s Barron’s that Ferguson believes we’re in danger of devolving into a risk-averse welfare state. Terrifying because, based on Ferguson’s demonstrated track record, this can only portend a risk-addled corporate kleptocracy.
Others might seize on news items like Apple’s (AAPL) tax-optimization strategies while millions of US children live in poverty to conclude that we’re in fact a lot closer to Ferguson’s preferred state of affairs, capably described by Dickens and Hobbes, than to the socialist dystopia he so fears.
But I’m not one to so easily dismiss a noted neo-something celebrity. I would rather sift Ferguson’s soundbytes for grains of logic and fact, so as to learn how he’s managed to be so consistently wrong about so many things.
So: Ferguson tells Barron’s the US has become a less attractive destination for investors because its legal system, regulatory climate, and institutions have diminished in quality over time and relative to international rivals.
But while he seems to hold up the “rule of law” as a positive, he seems to think that it should not require lawyers. The international competitors he mentions, Hong Kong and Germany, patently benefit from heavier regulation than is exercised in the US.
In fact, Ferguson cites rankings by the World Justice Project to back his assertions that the US has become less attractive. Yet those rankings incorporate “effective regulatory enforcement” and “access to civil justice,” two welfare-state characteristics Ferguson seems most eager to curtail.
Ferguson, who of course encouraged us to lose a fortune in Iraq, now decries the federal budget deficit as a major uncertainty discouraging private enterprise. He does not address the question of how discouraging the lowest effective corporate tax rate in modern US history can really be, in combination with near-record profit margins.
He calls the deficit “a classic problem of rent-seeking behavior triumphing over profit-maximizing innovation and entrepreneurship.” The fact that “profit-maximizing entrepreneurs” are often the most aggressive rent-seekers of them all seems to have escaped his notice entirely, as has the role played by the profit maximizers in the recent financial collapse.
Ferguson’s warnings that the US is about to emulate Europe’s welfare state must mean that we will soon rank as high on quality of life measures as Scandinavia, Holland, Switzerland, and Germany, wealthy northern European nations that nevertheless maintain extensive welfare states. Unless, of course, he’s wrong again and we’re actually moving toward a Chinese model.
And speaking of China, great news for the Chinese people: Ferguson thinks you’re not yet ready to be allowed to express your views, and may not deserve multiparty democracy “in our lifetimes.” That can only mean a democratic revolution is around the corner.
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