I sometimes feel a little sorry for politicians during an election year. The media and the public press candidates for what they are going to do about (insert concern here). In West Virginia, the top concern is often the economy and jobs.
It is appropriate to expect a candidate to have a basic understanding about the fundamentals of the economy and plans or proposals that might affect those fundamentals, but too often those positions migrate into unrealistic expectations from government.
“Politicians like to come to the rescue of particular industries, professions, classes, or racial or ethnic groups, from whom voting or financial support can be expected—and to represent the benefits to these groups as net benefits to the country,” wrote Thomas Sowell in Basic Economics.
The promised return inevitably falls short, fostering even more distrust of politicians, but that does not keep them from drawing from the same well at election time as we extract even more promises about how government is going to fix the economy and a dozen other things.
Faced with fulfilling the obligation, politicians deliver on more government which results in even greater impediments to economic growth, as well as the flawed selection of winners and losers.
Conservative columnist George Will, paraphrasing Friedrich Hayek’s definition of “fatal conceit” said this amounts to “the optimistic delusion that planners can manage economic growth by substituting their expertise for the information generated by billions of daily interactions of a complex market society.”
In West Virginia’s case, what’s needed, among other things, is a culture of entrepreneurship, which economist Dr. John Deskins, director of WVU’s Bureau of Business and Economic Research, says is no easy task.
“We cannot allow ourselves to be sidetracked on so many issues that do not make West Virginia more attractive to potential businesses,” Deskins told me recently. “But instead, our business and community leaders need to be asking why does West Virginia lag in terms of business start-ups and what can we do to foster a more entrepreneurial climate?”
Among the myriad challenges facing the state is a shortage of investment capital, particularly the kind necessary for business start-ups. The PricewaterhouseCoopers (PwC)/National Venture Capital Association (NVCA) Moneytree Report shows West Virginia near the bottom of venture capital investments (California, New York and Massachusetts lead the way).
One reason is our state simply doesn’t have much wealth, compared with other states. According to Phoenix Marketing International, just 4.3 percent of West Virginia households have investable assets of at least $1 million, ranking us 48th.
We also have an increasing regulatory burden that inhibits business development and expansion. The Mercatus Center at George Mason University reports that for 2013, West Virginia ranked eighth for the impact of federal regulation.
“Although the ratio of the impact of federal regulation… fluctuates some from year to year, more dramatic growth has occurred in the total number of regulatory restrictions affecting West Virginia since 1997,” the report found.
More and more we’re asking politicians what they are going to do to “fix the economy and create jobs.” They stand at the ready with a multi-point plan with unrealistic goals. The real fallacy, however, is that we may be asking the wrong questions.