In the spring of 1997 economist Robert Higgs wrote an article for the Independent Review titled: “Regime Uncertainty; why the Great Depression lasted so long and why prosperity resumed after the war.” The thesis of the article is that the “regime uncertainty” of Roosevelt’s New Deal prolonged the Great Depression (which would otherwise have ended around 1935) another six years, to 1941.
According to Higgs, Roosevelt and his lieutenants “created an outpouring of business-threatening laws, regulations, and court decisions toward investors as a class.” Furthermore, “The anti-business zealots who composed the strategists and administrators of the New Deal from 1935 to 1941 could hardly have failed to discourage some investors from making fresh long-term commitments. Last, Higgs says that “there exists a great deal of direct evidence that investors did feel extraordinarily uncertain about the future of the property-rights regime between 1935 and 1941.”
History may be repeating itself today. There seems to be no question that the movers and shakers in the Obama administration are anti-business and anti-property rights. They are unapologetic advocates of blatant income redistribution, but more than that they seek a massive cultural shift away from free market capitalism to more direct government control of the economy. Having bailed out Wall Street due to an irrational expansion of private credit, the government has opted for an irrational expansion of public credit as the cure.
Regime uncertainty matters most in the small business sector, which is the engine of job creation in this country. Small business owners have suffered from slacking sales, non-existent profits, pillaged balance sheets, and non-payment by bankrupted customers. Meanwhile, property rights are in complete limbo; anything can change during any weekend with the Obama administration. Small business owners are asking what will happen with healthcare. Will there be card check? What specific types of businesses will the Obama administration select as its preferred choice for government subsidies or tax breaks? What is going to happen to energy costs and when? What will be the administration’s response to (so called) global warming and how will taxes or energy use restrictions affect small business? What taxes is the administration going to raise or lower, and by how much? When the Fed monetizes the huge deficits of the Obama administration, when will we see the inflation and how bad will it be?
When a small business owner knows what he or she is facing, even when it is bad, adjustments can be made. Uncertainty, however, is an investment killer. Uncertainty makes us sit on our hands and wonder what to do next. In my opinion, without the extreme “regime uncertainty” of the Obama Administration, we would have already seen lower unemployment rates and more job creation in the US economy. Barack Obama; meet Franklin Roosevelt.