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I’m not an economist by any stretch of the imagination. You would think I’d be pretty handy with economics, seeing as that for someone with a political science degree, I am fairly skilled at math. On paper, it screams, or at minimum, shouts, economics. But no. Far from it, I always got C’s in most of my economics classes. I always felt there weren’t enough essays and too much multiple choice. But economics classes tended to be large at my school, and what professor wants to read 150 essays? (I mean, it’s only my parents’ tuition money. But I’m sure they had better things to do than, say, teach.)

So it’s with an ounce of trepidation that I put in my two cents about the economy, but I feel like I have to at least express my questions (that no one will read). The problem with doing this is that we are currently stuck in what I like to call the Age of Doctrine. To show you have principles and stand for something, your position has to be rooted in what is considered one of the two leading and competing philosophies of the moment. A strong point of view, a perspective. Or get out.

Well, what if the perspective of an observer is “I don’t know what the answer is, but I’m beginning to suspect most of you don’t, either”. Or “I’m not totally saying you’re wrong, but why the hell are you so sure you’re right?”

That’s pretty much where I stand on the issue of whether it’s time, as some think, for governments to move to austerity and deficit reduction, or as some others feel, the government better start spending to create jobs and other economic vehicles, because no else is.

While, like many, I do worry about government spending and debt, and what it means for our future long-term, the question that never quite seems to be answered, in my mind, is, why the blind faith in corporations to create jobs and innovation? If the government is not doing it, then who is going to? I’m not sold that today’s global corporations really can take up the slack, and really can be counted on to execute sound, long-term innovative thinking. Much like politicians making moves to get them through to the next campaign, most companies seem to be just trying to get from one shareholder’s meeting to the next, one CEO pay package to the next, and one product launch to the next.

All of which is fine, that’s what they’re supposed to be doing, for the most part. But should they really be burdened with this? And should we afford to hope that they’re willing to shoulder such burdens? I don’t know. (I know, I know, you’re not allowed to use such words when expressing an opinion. But this isn’t so much an opinion piece as an official declaration of doubt.) Most people who believe this never quite answer this question, because innovation and efficiency are supposed to flow from the private sector when left alone. Unfortunately, sometimes so do corruption, greed, and incompetence.

Which is what the anti-government crowd says is the problem with entrusting too much to government. Which is not entirely untrue, of course. The point is, though, are they also unaware of entrusting too much to corporations as well? Is that considered at any point? Because don’t kid yourselves, that’s, for the most part, who it’ll be on for job creation and growth.

Sorry, but I’m not really ready to buy that it’s small business. I keep hearing about small business and it’s role in driving the American economy, but I just don’t see it. At the end of day, small business seems to ebb and flow right along with the working people. A small business that comes up with a stunning innovation that revolutionizes the way business is done in America will become a big business. And there’s nothing wrong with that. If we’re counting on this, then shouldn’t the government and private capital be working to get more seed money than ever out there? There are certainly ideas, one would think. Because if there aren’t any out there, no amount of deficit spending or reduction will save your economy.

Like I said, I come not with answers, but with different questions, questions I’m not positive are being asked because of the “two and only two sides” way the debate is framed. I think they need to be asked, otherwise, this wacky global economy is just going to be spinning its wheels.

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One Comment

  1. I’m a business major, did very well in economics and overall finished my degree with a 3.9. I have a well developed interest in history and economics but hardly a theorist.

    That’s my background. My perspective is colored by my historical knowledge. The government has rarely done anything efficiently aside from blowing stuff up and killing people. They lack fiscal responsibility because traditionally they know they can borrow or tax their way through anything.

    Business is motivated by the desire for profit. Not always but mostly. Most businesses are not looking for outlandish profits because this would backfire since it would force their prices up against the competition. In fact most businesses are looking for the minimum profit that will sell the most product while satisfying the stakeholders. That is generally between 2 and 15%. Granted some companies fare much better but most do not.

    Let me answer you question now. “Why the blind faith in corporations to create jobs and innovation?” Blind faith, perhaps not blind. First one has to look at how economics works.

    Government public sector job creation without private job creation can be analogized like this. Let’s say you have a closed community. Everyone works for you and you collect your money to pay these people by taxing them a portion of their pay. The products they create are consumed by each other, they have no outside income generation. How long could that situation be sustained? A bucket cannot fill itself. Right?

    Business works differently. I hire workers who create more value for me than they cost me. My products are purchased by people from outside the company. Money is flowing in not simply around my company. If my product can sell well, I will need addition employees to sell more. I will need more resources thus creating jobs not just internally but in my supply chain as well.

    The more people I employ the more taxes the government receives. More employees = more income taxes, property taxes, sales taxes, ect. Get the picture?

    BUT if there is some outside drain on my business, such as high theft, increased cost of resources, higher taxes, regulatory costs, and the like, then I will cut costs as efficiently as possible. Since labor costs typically are the largest percentage of all expenses I will look for the least productive employees, I will not expand business, I outsource to a low labor cost nation, or I may even shut down operations. The result is that the government gets less taxes not just from decreased payroll taxes but it ripples.

    People default on loans, this costs the government in bailout funds. Unemployed people draw government benefits, this costs govt. Unemployed people don’t pay property taxes, they must cut their budget so less sales taxes.

    So how should government respond? Well we know what liberals do. They see less money coming in and more suffering so they respond by raising taxes on those evil businesses. Then businesses, who are really just people like us trying to make a living and keep budgets, cut spending, expansion, outsource to third-world nations, and/or downsize. Govt suffers more decreased revenue and is inclined to repeat the process demonizing business even more brutally.

    I believe the best answer is to encourage business. Deregulate it? Not necessarily. Just regulate wisely and tax wisely. Some wise person once said want to encourage an activity subsidize it, want to discourage it tax it.

    A big part of our problem is that we have been encouraging slave labor in third world nations through free-trade policies that the right sees as lowering business costs by leveraging competitive advantage and the left sees as spreading the wealth to less developed nations.

    I think businesses that outsource to nations known to pay below cost of living wages should pay fees associated with that practice. To encourage domestic employment perhaps a payroll tax incentive should be granted companies that hire new employees and keep them on for at least 180 days. American manufacturing should be exempt from corporate taxes as American wages alone are a competitive disadvantage in global trade. I could go on but I think I answered your question and then some.

    I think I’ll post this dialogue on my blog. Enjoyed your honest perspective and I respect that you are thinking about this issue. It is important.


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