Karl Rove: Still At It
End October 26 Column

Like A Forest Fire

Now, I'm no economist, but I do have a Bachelor of Science degree in management from the Massachusetts Institute of Technology. And one of the things I am sure we learned about was creative destruction. The Free Market only works when there is the possibility of failure--when it can engage in the creative destruction of ending one business so the capital is freed up to start another. If there is no chance of failure, risk is not properly weighted in decisions.

Historically, we suffered from something called the "business cycle," periodic contractions of the economy that wrung out excess and incompetence. Since 1929, most Western industrialized countries--call them the G7--have managed their economies to reduce the severity of the business cycle. It occurs to me, as it does to many, that we are doing this again at present. It reminded me of something I couldn't put my finger on. Until this week, when I was listening to coverage of the efforts to fight the wildfires near Los Angeles. The "control" of the business cycle seems similar to me to fire suppression, and I fear the results may be similar.

If you're paying attention, you realize that the U.S. policy of wildfire suppression that has been in effect for a little more than a century has some terrible side effects. A forest can remain healthy only if the dead wood and debris on the forest floor are periodically burned off, allowing new growth. Fire suppression makes forest fires unimaginably worse because of the huge accumulation of dead wood. Fires are hotter and harder to control because we don't allow periodic, smaller fires. Some foresters now propose controlled burns.

Do you see where this is heading? Control of the business cycle prevents the greedy and incompetent from being forced out of business. The result is a lot of duff on the floor of the economy. A lot of deadwood hasn't been removed for more than 70 years. I believe it is possible we are witnessing the result.

Maybe the equivalent of a controlled burn is a decision by capitalist governments to allow a wider swing in the business cycle--to clear out more of the trouble. As I said, I'm not an economist. But it makes sense to me, and right now, not a lot of what's going on makes sense to me.