Does President Obama Understand Capitalism?

Last week, in attacking Gov. Romney for his association with Bain Capital, President Obama said:  “My view of private equity is that it is set up to  maximize profits, and that’s a healthy part of the free market.  But that’s not always good for businesses or communities or workers.”

The President simply doesn’t understand.

When business people seek profits for themselves they strive to satisfy the demands and wants of the market.  Yes, those are selfish goals.  But that’s the genius of the free market.  When businesses succeed they hire more workers and contribute to the community by paying more in taxes, for instance. Without the prospect of profits, why go into or invest in business?  To put it in the vernacular:  “What’s in it for me?”

The motivation of the business person is irrelevant to the economy.  If he serves the market, everyone (except his competitors) benefits.  That is among the keen insights contained in Adam Smith’s Wealth of Nations written over two centuries ago.  Harness human nature for the common good by instituting a free enterprise system. 

A sad irony of history is that efforts to structure economic models to do “good” (think socialism) end up doing bad.  They ignore human nature.  To pursue equality at the expense of opportunity is to discourage productivity at the expense of all. 

These comments are not meant to endorse a pure laissez-faire system. Government-enforced rules to require that businesses play fair with one another (protect trade secrets) or ensure safe food (meat inspection, for instance) are reasonable restraints. But, generally, government should stay out of the way.  The less free the enterprise system, the less successful it will be. 

That perspective would strongly suggest that a pro-capitalist president would want to do all he could to encourage businesspeople to seek profit.  He wouldn’t favor higher taxes on their income [shouldn’t the Administration want to do all it can to give incentives to those who create the wealth?  Actually reducing their taxes – not raising them – would make sense.]

President Obama, however, has supported measures that have increased governmental involvement in our economy, most notoriously Obamacare, as well as less well known restrictions on the financial and energy industries.  Remember the Keystone Pipeline which would have created thousands of jobs?

If you were a businessperson, would this anti-business climate fostered by the Administration encourage you to invest and increase your economic activities?  Or would you sit on your money and hope for better days? 

Another irony is that the Administration’s reelection prospects would be greatly improved by a healthy economy and that would be far more likely to exist if the business community felt that the President was supportive.

Why then does Barack Obama pursue policies which are so contrary to his political self-interest?  Certainly the evidence so far is that he very much wants to be re-elected.  The President’s campaign indeed is already focused on scorched-earth tactics it believes will achieve the objective.  There is only one answer that makes sense.  The President’s leftist ideology has blinded him to reality.  He believes that his approach must be right because that’s what he believes.  So how could he be wrong? 

His self-imposed economic ignorance will likely lead to his defeat in November.