Politicians choosing the winners

Posted by Marc Hodak on June 19, 2009 under Invisible trade-offs, Politics | 3 Comments to Read

I picked up today’s Wall Street Journal this morning and saw a picture of two old Latvians literally at each others’ throats.  The story behind that pic is that Latvia has promised pensions and public sector jobs to many, many people.  Now that it can’t fund that promise (which was likely predictable at the time the promises were made), and is proposing to cut back 10 percent on pensions and 20 percent on public sector wages.  My guess is that one of the people in the picture is a pensioner, and the other is a public sector employee, or spouse of one.  My certainty is that they are frustrated by the perceived betrayal of their government, the reality that the losses are not going to hit everyone evenly, the reality that political influence will determine who gets what, and that they don’t have any.  So they do what people often do in that situation–they turn on each other.  Whenever the government must choose among the recipients of its largess, especially as it withdraws it, it is bound to create social strife.

You also see an echo of that in the headline story “Corporate Lenders Get Hit,” which describes how proposed rules for lending won’t hit all lenders evenly, and may even drive certain types of lenders out of the market.  In this case, the disfavored lenders are figuratively hitting back via their lobbyists.

If one takes political debates on economic issues at face value, one can be forgiven for thinking that trade-offs are never necessary.  Each side argues from an “all we need…” advocacy.  When they admit of any conflicts their scheme may create, they invariably assert that sensible bureaucrats can make sensible trade-offs against fair standards, never admitting that fairness is impossible when the standards are arbitrary, and that nearly every standard creates, at its contentious, man-made boundary, winners and losers, often in the millions.

But when tough choices need to be made, as they always will be with the imposition of man-made rules, we are also apparently amused by pictures of people at each other’s throats, as long as it’s not us in those pictures.