Reining In Hillary Clinton's 'Excess' of Economic Confusion

Story Stream
recent articles

In 1924, Howard Hughes Jr. inherited the wildly successful Hughes Tool Company from his father, and eventually took what aviation historian T.A. Heppenheimer described as a "bottomless pot of money" out to Los Angeles where he purchased control of TWA. Telling those around him "I've got the money," Hughes invested in what became the Lockheed Constellation, a fast plane that could fly above the weather. Its pressurized cabin meant that TWA's growing base of customers wouldn't choke and gasp at high altitude. Passenger travel by air became increasingly common thanks to inherited wealth more prone to back risky ideas.

Hughes's intrepid nature that drove huge advances in air travel would no doubt impress Peter Thiel. In his 2014 book Zero to One, Thiel lamented what he sees a perceived decline in technological leaps. Far from dismissive about the internet and other modern advances, Thiel's point seemed to be that they hadn't measured up to the air and automobile leaps that defined the early part of the 20th century.

What's important to stress about those advances is that they didn't reveal themselves in tear-free fashion. Failure defined each. Without an excess of capital and unrestrained capitalism, odds are the advances would have reached us much more slowly. The number of initial automaker failures could be numbered in the thousands, only for nearly every single one to go bankrupt. That Hughes had to match the desire for comfortable flight with a "bottomless pot of money" signals that the path to commercial flight wasn't a smooth one either. Hughes was valuable precisely because he had quite a bit of money to lose.

All of which brings us to Hillary Clinton's promise to "rein in the excess of capitalism." Really? Assuming she were able to do such a thing, why would any sentient being want her to?

To see why Clinton's thinking is so obtuse, it's worth remembering that most of us in our daily lives work and invest with an opposite of capitalistic "excess" in mind. Particularly in today's still uncertain economic environment, we act conservatively (in the non-ideological sense) at work out of fear of not having a job to come to the following day. That most of us have "jobs" as opposed to our own companies is another signal of how we generally exhibit the opposite of excess.

The same is true with our investing. Just as nearly every automaker failed in the early part of the 20th century, so did just about every internet company fail as the next one dawned. Silicon Valley is defined by constant failure, and that's why most Americans don't have a lot of exposure to Valley start-ups. It's way too risky, or yes, excessive. Only someone capable of losing a lot of money would invest there. The rest of us tend toward conservative investing: think McDonald's, General Electric, Microsoft, and IBM - well-established companies with a long track record of success. Unable to lose what we have, we seek the opposite of excess.

Thank goodness others don't. Adam Smith long ago made it plain that stationary economies were capital repellents. How the average American invests (including this writer) speaks to stationary investing. McDonald's is great, so is IBM, but it's unlikely that either will be the source of future economic surprise. How lucky then that others have the means to pursue what Clinton deems excess.

Of course that's why it's so important to highlight Clinton's confused promise to "rein in the excess." No, we need a lot more of it. Indeed, we require it. Without capitalist "excess" in the early part of the 20th century we'd still have been traveling by horseback at century's end. Transportation by car and plane were once again the living definition of intrepid excess.

Nearly 100 y ear later, the internet advances that profoundly changed our lives for the better were once again examples of "excess." We know this with certainty because most of the concepts died. Interesting there is that as internet failures piled up, confused politicians quickly went after Wall Street doings that supposedly led to all this internet-based carnage. Had the political class been in possession of an economic clue, it would have cheered the brilliant work done by financiers to match technological leaps with capital.

Indeed, the success and failure wrought by what was once deemed "excess" didn't just change how we do things, it also transformed how we work. Figure if you're reading this missive you're very much part of the internet present, but odds are increasingly good that you work in the internet space too. What begins as "excess" produces information that eventually leads to individual opportunity. Would any reader say they would be happier today without the wonders of the internet if it had meant we could have skipped the internet bust of 2001? Probably not. The '01 internet bust gifted the U.S. economy with a spasm of information (to paraphrase George Gilder) that thoroughly changed how we do things for the better.

Clinton and her partisans might respond that the "excess" she actually intends to rein concerns what took place back in 2008. Particularly alleged banking excess. The obvious problem with such a view is that the rush into housing was the opposite of excess. In fact, loans to facilitate housing consumption are more conservative than even an investment in McDonald's or IBM. That's why banks had and have so much exposure to housing loans. They're generally safe, and banks tend toward safety. They can't lend to Silicon Valley where failures are the norm. What Clinton presumably deems excess is the opposite, thus adding to her observable confusion.

Needless to say, what Clinton wants to think she desires economically reveals how little she knows about economics. Excess is what makes the U.S. so rich, and by extension is what makes it possible for someone of her observable lack of skill to run for president. A U.S. without capitalistic "excess" would be a very poor one, and as such, a country in which Clinton would have no chance. Only in a country this rich could voters have the luxury of being so flabby about their voting decisions.


John Tamny is editor of RealClearMarkets, Director of the Center for Economic Freedom at FreedomWorks, and a senior economic adviser to Toreador Research and Trading ( He's the author of Who Needs the Fed? (Encounter Books, 2016), along with Popular Economics (Regnery, 2015).  His next book, set for release in May of 2018, is titled The End of Work (Regnery).  It chronicles the exciting explosion of remunerative jobs that don't feel at all like work.  

Show commentsHide Comments

Related Articles