After U.S. Federal Reserve Chairman Ben Bernanke announced recently that the Fed would reduce its asset purchases through mid-2014, financial industry players and the journalists who cover them descended upon the Fed seeking any morsels of information they could get. Unfortunately, such dependency upon central authority has become all too characteristic of our economy. To revive America’s entrepreneurial spirit, we need to take back the personal responsibility we’ve ceded to Washington over the last few decades.
Businessmen and investors ought to be thinking about ways to create new products and generate wealth. Instead, they maintain a watchdog stare at the central bank, interpreting the meaning of Bernanke’s every nose twitch to get the jump on an interest rate swap or stock option. I’m often asked, “So…what do you think the Fed’s gonna do?” And while I try to reach deep into my crystal ball—er, mind—to come up with an intelligible response, I’m often frustrated by the sheer fixation upon one institution, especially upon one that doesn’t even have a good track record at managing crises—from the Great Depression to the 1970s stagflation to the 2008 housing bubble.
The Fed makes decisions that have big economic consequences, and it makes sense to keep a watch on it for that reason. But the common perception that crowns the Fed as king of an economy helpless without it is a dangerous one, because it cedes responsibility for creating wealth from entrepreneurs to an institution that can only redistribute wealth.
The Fed is only the beginning. Our Big Government dependency isn’t limited to the central bank. When disaster strikes, Americans look immediately to the White House for a solution. Where has this gotten us? The Bush administration’s emergency response to Hurricane Katrina, now considered an egregious case of federal incompetence, and local emergency responders dithering under contradictory federal orders during Hurricane Sandy.
If more Americans relied on themselves and collaborated with others to solve problems, instead of waiting for the Holy Word from Washington, perhaps communities would come together to develop solutions that address the specific needs of a given community. Six years as an emergency responder taught me that emergency operations work better at the local level than when faceless federal managers drop out of the sky and begin barking out orders. And perhaps without the expectation of a federal response, local police, fire, and emergency medical departments would take greater responsibility to work together in developing disaster response plans.
It doesn’t take an economic crisis or natural disaster for our Pavlovian government dependency to kick into high gear. Americans look to Congress and the social service bureaucracy every day for life’s necessities, and jump anxiously at any attempt to pare them back. TV ads characterize Medicare reform with wheelchair granny being pushed off a cliff, but the reality is that granny wouldn’t be so reliant on government if she had an incentive to take control of her own health care spending through a personalized approach like a Health Savings Account. But don’t worry about taking care of yourself. Government will do that for you.
Why do people like hierarchy so much? If something goes wrong, it’s comforting to know that we can point our fingers at one individual, one group, or one institution that supposedly had the ability to prevent said disaster. Nobel-winning economist F.A. Hayek termed this The Fatal Conceit—the erroneous notion that humans can aggregate information to impose hierarchy and structure to create specific outcomes. Not only does this give us a sense of control over events, but it also allows us to deflect blame.
Markets are scary to some because there is no one in charge of them. That’s one reason the regulatory establishment has grown so large. As information has become increasingly dispersed and vast, we’ve clung ever tighter to hierarchical state structures, ceding our responsibility for decision making within the impersonal collaborative wealth-generating process known as the “market” to bureaucrats who can only disrupt markets’ proper function.
We’re all to blame for Big Government. Acknowledging that fact is the first step toward fostering healthy communities of personally responsible individuals again. The second step is throwing out the security blanket of government bureaucracy. Americans ought to have the courage to rely on their own talents and skills for their prosperity, rather than being lulled into complacent apathy by impossible promises from Washington.