In recent weeks, I’ve made the following observations on this website:
• There are eras in intellectual history – and we are in one now - where established wisdom about the way the world works no longer matches reality.
• Economic doctrines which may have worked when the United States was an industrial powerhouse, no longer work today.
• In particular, the Keynesian notion - that the government can restore prosperity by siphoning money away from private industry in the form of taxes and deficit spending and towards consumers - no longer works when the beneficiaries of that policy spend the money on foreign goods and not domestically produced goods and when dominant public labor unions ensure that the money never reaches those who need it most, but is directed toward highly paid union members.
• An economy can grow in a healthy fashion only if it is creating wealth. To quote the financial analyst Eduard Fischer,
“There are only a few ways to create real wealth; it has to be either dug out of the ground (farming and mining) or stuff has to be made from raw materials (manufacturing).”
• There are only three types of jobs in any economy: creators of wealth, redistributors of wealth and preservers of wealth. Most people, including all of Wall Street and the entire legal profession, are redistributors of the wealth of society. On a macroeconomic level, very few people actually create wealth.
• The United States has too many wealth redistributors and not enough wealth creators.
• The cause of the Great Recession - where there were too many people redistributing too little wealth – is the opposite of that of the Great Depression, where too few people were creating too much wealth.
• Accordingly, the policies necessary to recover from the Great Recession are much different from those that were needed to put the Great Depression behind us.
• Because so much of the stimulus has preserved the jobs of bureaucrats, who do not create wealth, and, like all of us, tend to spend much of our income on imported goods, President Obama has done a fine job of preserving the prosperity of Asia, but only worsened our own situation.
• No one in Washington, Republican or Democrat, is pursuing the obvious policies necessary to correct the economy. This is more the fault of academia and the media than it is the fault of the politicians.
But it is a point of honor that merely complaining about the status quo is inadequate. If one is dissatisfied, one is obligated to propose an alternative. So consider the to be notes toward the creation of a new paradigm, one whose goal is to restore wealth creation to its rightful place in the cultural hierarchy. It is neither complete nor irrefutable. I merely want to provide some thoughts toward looking at the world from a different perspective.
The restraints on economic solutions are:
1. We can no longer try to spend our way out of the hole we’re in. This means that both lowering income tax rates for everyone and the drunken sailor level of spending of the last two years are equally off the table.
2. Any government attempt to correct the problem is going to be tainted by political favoritism, which is simply a feel good word for corruption.
3. Big business will gain most of the advantages of any government initiative and will contribute nothing to the solution. Since the mid-1990’s, The Wall Street Journal tells us, big business has been moving jobs overseas. Small business, which creates most new jobs will take it on the chin. Crony capitalism is not the free enterprise system.
4. The other major beneficiaries of crony capitalism are lawyers and Wall Street, which explains why some polls show that 80% of all lawyers are Democrats and 60% of all Wall Street campaign contributions has gone to the Democrats in the last three political cycles.
The only solution that will work is one that avoids government intervention, encourages wealth creation and doesn’t spend money. With those limitations, the policy solution writes itself.
Simply put, the federal government should exempt small manufacturers and family farms and their employees from all federal taxes and federal regulation. With no federal taxes or regulation, the shackles of Big Brother would be removed from the wealth creating portion of society. Once these companies got too big, they would become subject to federal oversight, but that is how it should be. Big Business gets all the advantages of Big Government because that is the very nature of Crony Capitalism, while small businesses get all the disadvantages, because, in the words of that great Democrat, Leona Helmsley, “taxes are for the little people.”
Small should be small. No breaks for Wall Street funds which run a stable of small businesses. No family farm should be a family farm unless the owner of the farm is the one working the fields. No small manufacturer should be deemed a small business unless the majority owner is also the one on the plant floor calling the shots 40 hours a week.
Such entities would be subject to state taxes and regulations, and in some states, that would be no bargain. New York and California would continue their long decline, but at least they wouldn’t drag the rest of us down with them. By the same token, some States will favor the creating class to the detriment of the environment and workers, although politicians in such a state couldn’t expect to stay in office for very long.The whole purpose of having fifty states (or 57 states as our genius President would have it) is to allow laboratories of policy decision making. A dominant federal government practically guaranties decline.
Such a scheme might even attract the more sincere members of the left, who are concerned, like much of the right, about the collusion of big business, big government and big labor. The “small is beautiful” crowd from the 1970s has a lot of appeal on left and right. Small businesses provide most of the job growth in America and never gain the political clout to drive the decision making of the state government. They are the ideal good citizens.
More importantly, unleashing small business provides a means for working class people without college degrees to get rich. By emphasizing education to the extent that we do and by making advanced university degrees the ONLY pathway to wealth (aside from the sports arena and a few people in Hollywood), we have created an economy which is un-American, at least as the American economy has defined itself since the Civil War. We also have provided a very limited form of intelligence as the only route to the top. Skills like common sense and empathy play second fiddle to the skill of passing a test. The result is that, from Vietnam to subprime mortgages, the dumbest moves in American history have the fingerprints of the best and the brightest on them.
The exemption of small manufacturers from the demands of bureaucracy would allow us to channel the entrepreneurial energies creating jobs and wealth while we tried to straighten out our financial mess. Raise taxes? Sure, raise them on crony capitalism’s winners – lawyers, investment bankers, Hollywood stars, the upper management of public companies. They do not create jobs or wealth and all contribute to the “winner take all” society that the left decries. But we need a mechanism for growth more than we need deficit reduction or economic stimulus.
What better way to do that than by reviving American industry and the family farm?
Thomas F. Berner
www.WeThePeopleBlog.net
comments@wethepeopleblog.net
