Economy Root Causes

Professor Stephen Carter almost gets it right.  High marks, in fact, until the last sentence.  In it he describes a conversation with a small or medium business owner on a late flight.

From the article:

“I don’t understand why Washington does this to us,” he resumes. By “us,” he means people who run businesses of less- than-Fortune-500 size. He tells me that it doesn’t much matter which party is in office. Every change of power means a whole new set of rules to which he and those like him must respond. ‘‘I don’t understand,” he continues, “why Washington won’t just get out of our way and let us hire.”
There are a lot of responses I could offer at this point. But I am interested now; I prefer to let him talk.
It isn’t just hiring that is too unpredictable, he says. He feels the same way about investing. He has never liked stock markets; he prefers to put cash directly into businesses he likes in return for a small stake, acting, in short, as a small- time venture capitalist.
“Can’t do that now,” he says. For people like him — people who aren’t filthy rich — it has become too hard to pick winners. But he doesn’t blame the great information advantages enjoyed by insiders. He blames Washington, once more, for creating a climate of uncertainty. 


My seat-mate seems to think that I’m missing the point. He’s not anti-government. He’s not anti-regulation. He just needs to know as he makes his plans that the rules aren’t going to change radically. Big businesses don’t face the same problem, he says. They have lots of customers to spread costs over. They have “installed base.”
For medium-sized firms like his, however, there is little wiggle room to absorb the costs of regulatory change. Because he possesses neither lobbyists nor clout, he says, Washington doesn’t care whether he hires more workers or closes up shop.
We will be landing shortly in Minneapolis. I ask him what, precisely, he thinks is the proper role of government as it relates to business. 

But here’s the problem sentence at the very end:

Recessions have complex causes, but, as the man on the aisle reminded me, we do nothing to make things better when the companies on which we rely see Washington as adversary rather than partner.  (emphasis added)

Do you see the issue?  In the article the unnamed business man, asked what the proper lole of government should be, states that he wants government to act more like an assistant than a boss.  Yet Prof. Carter comes back to partner.  Government partnership in business, and usually that’s big business, is the problem.  They are already partnered with the big businesses in crony entanglements creating the environment described in the article.

George Washington is supposed to have said that government, like fire, is a dangerous servant and a fearful master.  True provenance of the quote aside, the truth of the content of it should be plain.  Even in wishing for an assistant, business may get some bad surprises (and you can’t fire this assistant for screwing up), but in no wise should government be the boss, even if it can successfully divest itself of the competing partnerships its accumulated.


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