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Economic Growing Pains


In my previous essay I addressed the idea of economies evolving from a growing, dynamic state to a static one where people try to maintain position and use their assets to build monuments to themselves. Nothing derogatory was meant about service businesses; in fact, the business I operate is a service business. The point is that without manufacturing, when people only move their wealth, as Kayser Sosa notes, from one place to another, nothing is produced; the economy doesn’t grow and so it will slowly, but surely deteriorate.

Most importantly, our economy is now in this state and has been for almost 100 years. If something doesn’t change to start us on a path toward a growing, dynamic economy, we will continue to slowly fade. Don’t misunderstand; this is not something that will happen soon, although symptoms of it abound. In fact, one of the reasons Barack Obama was elected was because he epitomizes the mindset of those who find solace in the efforts to use government to offset the economic distress caused by lack of economic growth. To explain further one need look at how economic growth affects individuals.

When growth occurs people have no trouble finding jobs; their expectation is that some job will be available and they will make a decent living. If they perform well, they believe they will move ahead, they will be able to accumulate some excess for their old age, and their children should be better off than they were. But when the economy changes into one where this is no longer true many things change.

During a period of growth, people get along with their neighbors, rich or poor. People have no concern about politics; it is something you do one Tuesday a year. One’s concern is his/her job and making a good living, knowing very well some will do better than others; but since everyone is doing better, it is fine that some do even more so. But as the ability to find a decent job goes away, dissent starts to creep into the social fabric. It is not ‘OK’ for your neighbor to do very well when you can’t do at all. It is ‘wrong’ for some to be making millions while you can’t feed your family and no good prospects are in sight.

This situation occurs for various reasons but may be distilled to one of a lack of investment in productive enterprises. It is not that there is anything inherently wrong with service or entertainment, but nothing is produced by these. When a lawyer sues some company because he can, nothing is added to the economy; it is only transferred. When the Panthers win a football game, nothing is added. A football stadium does not produce anything of use, that you can wear, that is used to produce more widgets. Getting a job selling popcorn is not the job that pays the rent. What occurs here is a transfer of wealth to the football players, but that transfer doesn’t provide any additional wealth to the general population.

Unfortunately, as previously noted, this situation has existed for a number of years. Today we hear about companies sitting on millions and not investing it. Generally speaking, they are afraid to. So where do the new jobs come from? We have been dependent upon housing, and it is slowly coming back. But it will not cure our long-term ills. The people have become disgruntled and seek solace from the government. They are angry with those who do very well and seek solace from the government. They need money to pay for their housing, food and clothing and seek solace from the government.

Barack Obama, having spent some of his formative years with ACORN, sees the symptoms and says he is concerned about those who are not so well off. He wants the power to fix things and so runs for office. He wins because he campaigns on the ideals of what the people see as the answer: punish the rich for keeping their money; make everyone equal. Take from the rich to give to the poor. Tax the rich.

But in punishing the rich, in taking the savings and earnings from the rich to give to those who cannot find the jobs, the economy is further pushed away from growth into deterioration. Those who are in need of an income to feed their family cannot see this because they are too concerned about their immediate needs. Those in positions of power, especially those in government, write news laws making it more difficult to invest or to lend and so they exacerbate the problem.

They do this because the people demand they do something to help them and so must do something to show they care. But their actions are often the reverse of what is needed. They continue to protect the special interests while doing little, if anything, to enhance innovation and growth. There are also many who have the money to invest but no longer wish to do so, wanting to maintain their position; and so they too seek solace from the government. As delineated previously, they ask the government to protect them from competition. Even worse, they build football stadiums instead of factories.

Growth is the answer to our divided polity. But it is growth our political actions are inhibiting. One answer is to stop catering to those whose goal is to maintain their economic and political position. Unfortunately we have elected a president whose overwhelming message is to slow economic growth. That may not be his intent, but that will be the result of his policies. One need only examine the results of his decisions to see that most are intended to help some group that is seeking protection from change. This might be the environmentalists, unions, Social Security recipients, Medicaid recipients, government employees and those who receive any sort of benefit from government, whether monetary or subsidy or tax write-off or credit.

President Obama wants to change nothing that has gotten us into this situation because it is the situation that gave him his position. He is a man for the times. If we want to return to growth, where people can find jobs, his policies are the wrong ones. Make no mistake; Mitt Romney did not propose anything drastically different.

There are a few in Congress and in the state legislatures and governors mansions who understand that something is wrong and needs to be changed. What they might do is take the perks away from the special interests and return opportunity to those who seek a chance to succeed. Otherwise we will continue on this path and will watch sadly as China continues to become what we once were.

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