I am a fan of my colleague Dave Schuler and his blog, The Glittering Eye, but we don’t see eye to eye on a lot of economic issues, and this is pretty apparent to me when I read his prescription for economic recovery:

As I see it a number of things will need to happen to foster the sort of growth that will lead to a reduction in unemployment. They’re nearly all things I’ve mentioned here before: improved regulatory environment, incentives for capital investment, reduced costs of labor, predictable economic and regulatory environment. The federal government is doing very nearly the opposite.

The problem with this is that tweaks to the regulator system and some minor fiddling with tax rates does address the underlying problem with our economy, which is the fact that an ever-growing proportion of our capital is devoted to gaming the system to create more capital, rather than actually investing in the growth of business–and lining the pockets of the Wall Street middlemen on the way. If you watch CNBC, Fox Business, or read through the Wall Street Journal this is very apparent. “Investment strategy” is all about “diversification” and the pros go at it but coming up with clever gimmicks to get rich quick, not by investing in businesses with growth potential, but rather by using algorithms and taking advantage of the people who are buying or selling just a few minutes too late and aggregating those tiny, meaningless gains.

Even some of our largest “businesses” — Fortune 500 companies! — are nothing more than shell games for moving money around. There are companies who merely exist to be a face for goods made in China, marketed by Europeans, and sold in South America. They make a few pennies on each part of the transaction without actually adding any value to it.

Here in the United States, we have excess industrial capacity and a large population willing to work, but the economy is still weak and looking to remain that way. But at the very same time–the stock market is moving up. That should tell you something about the state of our system’s “capital investments.”

Our whole system is geared towards making investment a form of gambling and gameplaying rather than the building of wealth over time. Investments in large, publically traded companies are privileged over self-employment or investment in small, local businesses. Don’t believe me? Compare the taxes on $5,000 earned in an IRA index fund over those against $5,000 invested as a Limited Partner in a new small business. Compare the paperwork and the hassle. But what’s more beneficial in the long run? Encouraging people to put their money in already-market dominant players like Microsoft, Coca-Cola, and GE, or encouraging people to put some time and effort into building a local economy with strong players who can complete with the big boys? Take a look at our tax, legal, and regulatory system and who it favors, and you’ll see the answer our government believes.

A few tweaks here, a few regulations cut here, a few lower taxes there — that’s simply not the way to fix the economy. What we need to do is completely change the system. We need to re-align incentives, laws, and taxes away from Hamiltonian corporatism and towards Jeffersonian enterpeneurialism. Between the internet, cheap transportation, and the advent of affordable micro-manufacturing, there is no reason why more people can’t strike out on their own instead of simply “having a job.” We could work towards a “project-oriented” way of employment rather than a “career-oriented” one. (And for the love of all that’s Holy, let’s fix things so that we don’t need an entire industry whose sole purpose is to match people to projects like we do now. With our technological capabilities, this just doesn’t make sense.)

If you ask me, one of the major problems is that we’re asking the wrong questions. We shouldn’t be asking “How do we create jobs?” We should be asking “How do we create business?” Indeed, I would argue that what this country needs is fewer jobs, and more self-employed people. But that’s never going to happen under our current tax system, it’s really not going to happen under our current health care system due to the high cost of self-insurance, and it’s really, really, really not going to happen when so may people out there think that one of America’s problems is that “the cost of labor is too high.” How are people supposed to build wealth and new business when incomes are stagnant and personal debt increases as a result?

The answer is: they can’t. And the folks on top prefer it that way.