As the politically manufactured debt crisis approaches denouement on Capitol Hill, it’s worth stepping back and considering what the government’s role should be in the national economy.
We hear conservatives – or people who style themselves that way -- assert that the smaller the government, the better for the economy. We hear liberals – or people who style themselves that way – say the government needs to play a larger role in cushioning the blow of recession to citizens and jump-starting the economy out of recession.
Where’s the right balance?
Let's recall: neither the economy nor the government is magical. Each is a way human beings organize needed activities within societies. A “market” is nothing more than the result of collective economic and government activity, and it’s no smarter than the people who make it up. We see patterns of wisdom in markets at our peril.
It’s obvious that going to extremes isn’t workable. Anarchy may require a certain level of enterprise to survive, but it has never produced prosperity. Places like Somalia have, in much of the country, no functioning government. If “no government” were the answer, money managers would be clamoring to invest in Somalia.
Planned economies where government controls everything haven’t worked either. No one is holding up, say, the former Soviet Union as an exemplar of economic wisdom, or of personal freedom.
But we tend to overlook, here in the US where we’ve had peaceful transitions of power for an astonishing two and a half centuries, how government and economic power check each other. Kings and emperors historically were looked to by common folk to balance the power of barons and wealthy elites. “The King’s justice” was sometimes the only hope for the powerless.
Some arguments we are hearing now assume that if government would only go away, personal freedom would blossom. History tells us that’s not the case – instead, the Bernie Madoffs and gang chieftans would blossom. Lack of government means less, not more, personal freedom.
But other arguments blow past the real problems created by red tape and bureaucratic ineptitude, as though they have no merit – but they do. Bureaucratic regulation ends up overwhelming small businesses and favoring the large and well-lawyered – ask any medical doctor who’s been forced to give up single practice due to the paperwork, government and private. Well-intentioned political appointees to, say, the Department of Energy have found it virtually impossible to cut through paperwork and give away stimulus money in less than two years.
And there’s the problem: while current-version conservatives and liberals have been haggling over the size and reach of government over the last 20-30 years, they’ve neglected to see to it that the government we do have is functioning properly.
And there is a proper function. Perhaps there are some Tea Partiers who would get rid of the Nuclear Regulatory Commission on grounds George Washington never heard of it, but traditional conservatives recognize that there is a reason for some government – that there are things a responsible, aware citizen cannot do for himself. Food safety, radiation safety, clean water, clean air and law enforcement come to mind.
Conservatives can object to liberal calls to ban some ingredients in processed foods, for instance, but requiring accurate and informative labeling, which enables individuals to choose their foods responsibly, accords fully with conservative tenets espousing a well-informed citizenry making its own choices based on adequate information. The balance for traditional conservatives is having society protected, where merited, with minimal interference with legitimate business, but firm enforcement against the illegitimate who harm everyone.
Inadequate regulation hurts industries in the long run, and not just with paperwork. Poor regulation was a factor – far from the only one, but a factor – in disasters like the Deepwater Horizon, the Big Branch mine explosion, and the credit default swap meltdown. Public reaction was swift and costly: Ban offshore drilling! Ban coal mining! Ban derivatives!
Responsible regulation – cooperative but not co-opted – could have alleviated that cost and industry-wide black eyes, and perhaps helped the industries avoid these disasters altogether.
Importantly for business, the US legal system has also been thrown into political play, with judicial appointments left vacant for years in haggles over belief systems, dockets backlogged, and disgusted judges quitting. Yet one of the strengths of American free enterprise has been the legal framework under which business has thrived. Its consistency has made the US a superior place to do business, for investors around the world.
Governments with inconsistently enforced frameworks, unreliable courts, or chaotic definitions of property and ownership are countries where investment becomes risky and undesirable – except for companies so powerful that they control the social framework in the absence of a government that protects ordinary people.
That’s pretty much the definition of a banana republic – a country where a (usually corrupt) government gives private companies free rein to profit, at whatever cost to the environment and society. While a few companies benefit, new or competing investment isn’t welcome – and can be discouraged brutally. Prosperity eludes all but the favored few.
Unfortunately, we can look back over the last century and count numerous times when a rigged economy like this was defended as “free enterprise” and necessary to counter “communism.”
The result, too often, when these governments finally fell, was de-legitimization of real “free enterprise,” a public boost for communism, and popular pressure to take collective control of national resources, sometimes destroying productive parts of the economy.
In the US, the neglect of the mechanics of governing while partisans fight over their belief systems has resulted in a government that doesn’t work for anyone.
It too often resembles a company whose employees know they’re ripe for takeover, where they can’t get clear decisions from management, hear management talking about how wasteful and inept the employees all are, and know they may be laid off soon.
There are no incentives to take career risks, like facing down a moneyed and powerful lobby. Instead, government agencies generate paperwork that too often does no good, and sometimes does harm.
This is no good for the economy, but it’s not an argument against having a government at all.
In fact, government agencies still have an amazing number of people who are knowledgeable, idealistic and committed to their jobs. That’s an enormous resource that Congress is frittering away. There’s nothing wrong with politicians debating political philosophies, but there is something wrong with their neglecting the basics of governing while they do it.
Our economy is sputtering and our government facing credit downgrade because of decades of increasing neglect. Now we have the most vocal group ever claiming, “See? It doesn’t work! Get rid of it!”
Government doesn’t work because those elected to make it work have failed to do their jobs. The economy needs a government that does well the tasks only government can do. The economy needs the politicians to buckle down and get to work.