Capitalism Needs a Purpose

I visited President Clinton's office in Harlem yesterday to talk about some potential digital projects. Unfortunately he was not there as we were working with some of his people, but on the way home I was thinking about an interview he did recently with CNBC's Maria Bartiromo in the same office for her Wall Street Journal Report. While the ex-President is brilliant on a number of topics, his instincts on the economy are probably the most notable. During his administration, the US experienced a phenomenal economic expansion and no doubt his instincts were refined by the incredible success of the e-commerce revolution due to the commercialization of the Internet. When asked if former Fed Chair Alan Greenspan was to blame for the current credit crisis because the Fed left interest rates so low, he had this to say.

The real problem was that good money at low prices didn't have a lot of options apart from housing, or other real estate. Because there was not enough other growth. I believe that if we had started a serious energy policy six years ago, we might still be in this fix, but it wouldn't have been nearly as bad. Cause we would have had whole other range of other things for people to invest money in, areas for people to work in, and less incentive for people to move this money in every more clever ways, just through the same old hole in real estate.

Clinton's government witnessed and benefited from the IT/dot.com revolution. More important he saw the decisive role an activist administration played in propelling the movement. Not through massive government intervention but by hyping the technologies and setting up the conditions for competition in this new industry and letting the investment flow in. Capitalism needs a purpose. It needs direction and cheerleading. Prime the pump then let the market churn out the details.