One might think that Wilbur Ross, the current U.S. Commerce Secretary, and Charles de Gaulle, the President of the French Republic from 1958 to 1969, do not share much. But they do share nationalist convictions and the belief that politics should rule over the economy.
On July 2, Mr. Ross was asked by CNBC what percentage of stock market downturn would change the administration’s protectionist drive. He replied (the video is worth watching too):
There’s no bright line level of the stock market that’s going to change policy…. That’s not how you make policy.
At a press conference in 1966, a time when the French stock market was low, General de Gaulle declared:
You know, French policy is not made on the stock exchange floor.
(Vous savez, la politique de la France ne se fait pas à la corbeille).
The répartie became famous as a reminder that a great state is not going to yield before the opinions of petty investors. De Gaulle’s formula is a bit clearer and more majestic than Ross’s declaration. In matters of dirigisme and rhetoric, as in some other matters, “they order these things better in France,” to borrow a sentence from Thomas Paine in a different context.
The stock market is not always right, of course, but it does incorporate all information that is known about the state of the economy. It is often a useful voice against what the rulers want their subjects to believe.
READER COMMENTS
Maniel
Jul 4 2018 at 11:45am
And yet, politicians happily take credit when the sun or the stock market rises in the morning.
EB
Jul 4 2018 at 7:25pm
To assume that politicians can ignore markets is as wrong as to assume that the economy (consumers, producers, traders, intermediaries) can ignore politicians and government. The first assumption is an illusion of some politicians that would like to think of state’s power as unconstrained (but sooner or later they learn how wrong they are). The second is an illusion of some economists that prefer to assume that bandits don’t exist (as long as they fail to acknowledge their existence, they continue talking to each other).
The worst scenario, however, is that in which some economists think that government should have unconstrained power in order to maximize social welfare by overcoming market failures and social injustices. It’s the worst one because those economists choose to live forever as devoted servants to bandits.
SaveyourSelf
Jul 7 2018 at 9:03am
Well said!
Thaomas
Jul 6 2018 at 12:27pm
There is a good as well as a bad sense in which one might mean that economic policy should not reflect market reaction to it.
If the market reaction to, for example, the expected costs to the economy imposed by the Trump tariffs was in line with what Secretary Ross was expecting, then there would be no reason to change policy. (“You can’t make an omelette with breaking eggs” as Lenin famously did not say.) If it was a surprise, then that might be and indication that the costs are higher than Sec. Ross had calculated and that the policy should be reconsidered.
It’s possible that DeGaul meant his remark in the former sense.
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