Republican Governors Take Up Economic Central Planning

Published May 1, 2014

Indiana is only the latest of dozens of states to move toward a planned economy. 

That’s not how the Republican governors leading these initiatives describe them, but that’s what they’re doing. Leading the charge is Oklahoma Gov. Mary Fallin, president of the National Governors Association, a Washington DC-based shoulder-rubbing center. As NGA’s leader, Fallin has been promoting centrally planned economies to governors across the nation, including Iowa’s Terry Branstad and Missouri’s Jay Nixon.

On an Oklahoma TV show this spring, Fallin said, “If we don’t align education in the types of courses and certificates that are being awarded and degrees with what’s needed in the private sector, we’re not going to be competitive as a nation.”

Take a step back and think about that, because it’s astonishing. In a time of high unemployment and economic stagnation, people are not doing the logical thing and pursuing the available jobs, she claims.

Why? In a free-enterprise system, more demand for something drives up the price, which attracts more bids. So, for example, if there’s a doctor shortage, doctors will be able to earn higher and higher wages, thus attracting more people to switch professions and meet that demand. If this is not happening, something is wrong.

If these governors had taken Economics 101, they would have learned a so-called market problem like this usually indicates deleterious government intervention. If hospitals can’t hire doctors, it may be because government is forcing the hospitals to offer services below cost so they can’t afford to raise wages and attract more doctors, or perhaps regulations are making doctors’ working conditions so bad no one wants to do the job at the wages hospitals can pay.

Also, many people in the U.S. can get more-than-adequate food and shelter without working, depriving them of the most basic of reasons to pursue paid work. In addition, government subsidies for education and workforce training are muddying market signals to would-be employees. For example, both elementary education majors and engineering majors can get taxpayers to pay their college tuition despite their differing value in the job market and amount of work involved in getting the degree. This results in a supply of many more elementary teachers than jobs for them, and many fewer engineers than jobs.

Government further punishes risk-taking by imposing higher taxes on successful people. Finally, government policies such as payroll taxes, minimum wages, and extended unemployment compensation add so much to employee costs that many businesses can’t afford all the skilled employees they need. All of these policies, and more, are messing up the job market.

But instead of addressing these root causes, education and workforce alignment initiatives bypass them and implement even more government intervention and central planning, the very thing distorting our economies in the first place. It’s like a doctor prescribing more milkshakes and candy bars to cure obesity.

In addition to basic economic foolishness, the proposed solution is straight out of the progressive, technocratic playbook. States will construct huge databases that track citizens from childhood through retirement, keeping their health records, education information, earnings, employers, and more. This falsely assumes central planners can make society better if they just get enough information: If they were any good at it, they wouldn’t always need more and more information. This mindset also assumes citizens are creatures of the state, to be directed and rearranged by our betters like cattle.

The widespread acceptance of such ideas, especially among people who call themselves conservatives, indicates our culture’s shallow understanding of economics and history. Both resoundingly demonstrate central planning cannot work, regardless of who is at the helm. History also demonstrates that when people are not herded into job slots by bureaucrats wielding computers, but allowed to trade ideas and labor freely, they will be happy and prosperous.

Joy Pullmann is managing editor of School Reform News and an education research fellow at The Heartland Institute.

[Originally published at WatchDog]