Politics Distorting and Undermining Markets

 by Ray Keating

The Keating Files – October 21, 2021

 

I know this will shock you, but here goes: Politics can fundamentally distort and undermine markets and the economy. 

 

Of course, given that most politicians choose to ignore economics – after all, economic truths and facts can be so inconvenient – no one should be surprised that politicians often act in ways that go against market logic, and therefore, damage or restrain economic growth. Just look at most tax increases.

But what I’m getting at here is how views of an entire sector of our economy can be so distorted by a political agenda that market signals, entrepreneurship, investment and innovation suffer in major ways. This is about politics changing how market players view what they choose to do in the marketplace.

 

Consider the environmental movement. Green politics has become so vocal and ubiquitous that it’s easy to find prices of green stocks being completely disconnected from the actual business, from the realities of future cash flows and earnings – and not just for a brief time. That’s striking. (Think Tesla.)

 

Under normal circumstances, entrepreneurs, businesses and investors work to gain customers and profits by presenting new and improved goods and services to consumers. That is, they’re working to provide something that consumers want or need, products that they currently or will value. Entrepreneurs and businesses compete to add value, to improve the lives, in some way, of customers.

 

But consider, for example, electric cars and renewable energy. Due to politics, these have become market darlings. But what exactly are they presenting, other than lining up with the preferences of a political agenda? Not much. 

 

In fact, bizarrely, it’s easy to make the case that even as these green stocks experience price appreciation, and companies seem to be falling all over each other in announcing various green investments and endeavors, they actually are working to offer products that will make life more difficult and costly for consumers. The full costs of wind and solar power, and of electric cars run far ahead of, for example, energy produced by oil, natural gas and coal, and gas-fueled autos. And that will be the case for the foreseeable future. Why? Politics overriding sound economics.

 

For good measure, a political agenda driven by climate change assumptions, for example, means that industrializing, or developing, nations will have to be compensated by industrialized nations for adopting green energy policies – if not, then the policies in developed nations will be for naught from the environmentalist’s point of view. But the price tag is never spoken of because the costs register at mind-blowing and economy-destroying levels.

 

Whenever politics supplants market freedom, innovation, competition and consumer sovereignty, the results are always negative. But when a political agenda runs as deep as the green movement’s at this moment, an even more troubling kind of market corruption is at work, and if this political agenda takes full hold, the undermining of true innovation and economic growth promises to be grim. Indeed, there’s emerging talk that anti-fossil-fuels politics has already undercut investments in fossil fuels that we need now and for the immediate future, never mind over the long haul. But common sense will be restored … at some point … I hope.

 

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Ray Keating is a columnist, novelist, economist, podcaster and entrepreneur.  Keating has three new books out. Vatican Shadows: A Pastor Stephen Grant Novel is the 13th thriller/mystery in the Pastor Stephen Grant series. Get the paperback or Kindle edition at Amazon, or signed books at www.raykeatingonline.com. Past Lives: A Pastor Stephen Grant Short Story is the 14th book in the series. Get the paperback or Kindle edition at Amazon, or signed book at www.raykeatingonline.com. And order the 15^th book in the series What’s Lost? A Pastor Stephen Grant Short Story.

 

The views expressed here are his own – after all, no one else should be held responsible for this stuff, right?

 

You also can order his book Behind Enemy Lines: Conservative Communiques from Left-Wing New York  from Amazon or signed books  at RayKeatingOnline.com. His other recent nonfiction book is Free Trade Rocks! 10 Points on International Trade Everyone Should Know. 

 

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Also, check out Ray’s podcasts – the Daily Dose of Disney, Free Enterprise in Three Minutes, and the PRESS CLUB C Podcast.

 

Check out Ray Keating’s Disney news and entertainment site at www.DisneyBizJournal.com.