A Rising Tide

I’ve been receiving emails with copies of opinion pieces that were forwarded to me by people who think I should get an insight into the viewpoint of those who are strongly opposed to any government intervention that they fear will become the foundations of what would be the end of Capitalism.

While I respect the concerns expressed, I’m equally cautious about the depth of the negative sentiments expressed based on what they project or perceive to be the ultimate goal of the current administration.

From a personal standpoint, I would hope that the government intervention that we’ve been witnessing of late is more akin to and can be likened to the air-bag in an automobile - it doesn't prevent an accident from happening and it shouldn't deploy until one happens. Like the air-bag, the government actions should help to cushion us from the full impact of the economic downturn. Similarly, just as it isn't advisable to drive around with a fully inflated air-bag, the interventions should not become permanent crutches that we become reliant on. Safe, defensive driving is always the better way to go.

Some notes of frustrations expressed in the emails were more pointed and pushed for the elimination of taxes (and thereby the government’s ability to spend or to intervene) and the adoption in its place a “user pays” system where the real tax payers are not forced to subsidize the cost of services rendered to those who don’t pay taxes. They argue that (i) American workers and industries are not competitive on an international level because of unnecessary regulations and taxes, and (ii) one half of the American population do not pay any taxes and they are the ones that take advantage of the services paid for or subsidized by the government through taxes imposed on the other half of the American population.

There is certainly merit to their claim that some of the recent government interventions have unfairly given the failing institutions a competitive advantage at the expense of others – why should any of the tax dollars paid by the innocent be used to save those who had lived vicariously and spent lavishly? In a free-market economy and in a true capitalistic environment, those institutions should be left to fail so that the laws of nature can prevail and others can come in and take their place.

Unfortunately, we have corporations and industries that have been allowed to grow so big that their executives can command remuneration levels that are sky-high while their failure have created a crater so big that it may cause other parts of the economy to implode. We also have been equally guilty of allowing unions to become so massive and powerful that the profits and resources that should have been reinvested into Research and Development to make better products to make our industries competitive have been diverted to fund benefits schemes that are way out of step with what the competition is paying.

If we truly believe that small businesses drive a major part of the US economy, we have to ensure that the laws favor them over the big corporations – or, at the very least, they are not at a disadvantage.

If we truly believe that executive compensation should be in line with the profits they are able to add to the bottom line each year, we have to ensure that a full assessment of the risks they have taken on are accounted for (and is transparent so that all investors are cognizant of their magnitude) and that the compensation is in tandem with obligations that stretches out for years beyond that in which the profits are reported.

If we truly believe that workers’ rights are trampled upon (with no unions to protect workers), we should enact laws that make them easily identifiable and punishable and leave the negotiation of wages and benefits to the dictate of the free market. If industry or a business underpays and is not competitive with other industries, it will so find itself with few qualified employees. What are elected government officials for if they surrender their duty and responsibility towards their constituents?

Government policy and intervention is a fact of our daily lives and are not all bad.

Monetary and interest rate policies affect businesses and individuals at every level but not everyone benefits at the same time. Businesses sure aren't complaining about the near zero interest rates of late but retirees depending on their savings for income are sure hurting.

The rich, in general, do not send their kids to public schools but millions of American families benefit from them. If only those who use public schools have to pay for those services, there would be a lot fewer Americans who can afford an education and that would be detrimental to the competitiveness of American employees and corporations.

Not everyone can afford the quality of healthcare that the insured, working population have access to thanks to the private medical insurance plans paid for (in full or in part) by their employers but it should not mean that the poor and those who are struggling and are uninsured should be denied even the very basic level of care. A healthy population can only be a good thing for the American economy. Anyone who says that the poor and uninsured can get medical attention by going to the Emergency Rooms at hospitals is in denial and ignoring the harsh realities of what that means. One can only wish on them the same ‘bad luck’ as they wish on the less fortunate.

A population that is continually progressing up the economic ladder can only be good for American industries and businesses. America needs a healthy, educated and progressively affluent consumer base. That’s what the economic growth in the last decades were based on.

These are exceptional times and we need exceptional solutions. We need to learn from history and not behave like Marie Antoinette who reputedly said “Let them eat cake” when told that the common, starving people on the streets of France had no bread to eat. Her head ended up on the floor of a guillotine.

These are times when the hard hit need the help of the more fortunate ones even more intensely. We can’t let the water drain from the lake and not be parched ourselves. After all, a rising tide lifts all boats.