It would be disingenuous to pretend to ignore the political winds swirling this electoral season, so we will venture to point out the investment implications that we see coming from the current election.
Our view is that anything that advances the ability of private enterprise to operate freely is ultimately good for the economy. We believe (along with Thomas Jefferson) that persons and businesses should be allowed to manage their property and their affairs without government interference, as long as they do not initiate violence or perpetrate fraud. Government should prevent both fraud and violence, which is its lawful role.
The over-reach of government is now painfully obvious to even the most casual observer of economic activity. We would add that this over-reach has been bipartisan in recent years! If the upshot of this very interesting political season is less government over-reach, then that will be a good thing for businesses and for investors.
We would also like to add, in the spirit of Friedrich Hayek, that we are not arguing for a "free-for-all" in which enterprise can operate in an environment without rules, akin to roads and freeways with no lines, stop signs, traffic lights or right-of-way conventions. Hayek argued that government has a legitimate role to play in establishing predictable and orderly markets in which free enterprise can then operate.
We discuss this important distinction between "free markets" and "free enterprise" in several previous posts, including here, here, and here. We also pointed out the important work of Professor Amar Bhide in exploring this dynamic over the years, particularly in this recent essay and in his newly-released book.
This last topic has other implications which we will explore in later posts, particularly surrounding the unpredictability of monetary policy under the central bank, which places businesses in the position of drivers who never know how the traffic rules will change as they drive down the road.
However, the main lesson of the gale-force winds building in the political landscape is that anger at the government over-reach that has been expanding in America for over seventy years is finally boiling over, and that should ultimately improve the ability of businesses to innovate and grow.
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