U.S. Must Lead at Home to Change the Global Economy
For centuries, America has worked because of free enterprise: Millions of individuals communicate their preferences and producers respond with changes in products, services and prices. Free enterprise operates silently, efficiently and effectively to bring us the things we need at prices we can afford. Free enterprise creates great wealth through wages paid for to workers for production and profits paid to those who find innovative new ways to serve needs.
When government interferes with our nation’s founding market machinery, things begin to go awry. Consider wealth redistribution through taxes and entitlements that take money from those who earn it and give it to those who didn’t contribute to creating the goods and services. Everyone who creates receives a smaller reward, while those who are supported grow less likely to work or attain success.
In free enterprise, government tends to have little to no role to play beyond protecting public safety and avoiding worker abuse. The system doesn’t need a middleman to charge producers some tax so non-producers can prosper at their expense.
To believe, however, that the state should play no role is not correct. What is needed is vision to find a reasonable balance that preserves free markets, drives innovation, and creates jobs – without destroying personal success or robbing those that produce.
Let’s look at the emerging global economy. Global competition poses a risk to both the American free-enterprise system and to Americans that work and consume. Our politicians too often ignore how global impacts hurt employers and even more often forget that employees are caught in a cycle of job loss as businesses go under and wages fail to compete with those available on the world stage.
We all enjoy Walmart, Costco, and other big-box retailers for their everyday low prices — courtesy of low-cost offshore producers — but forget that consumers without a paycheck can’t afford even the lowest prices for these stores’ goods when their employers’ businesses fold and they are fired or demoted to jobs with lower pay.
We also know and love the rock stars of the new American economy, the companies like Apple, Google and Amazon with thousands of employees and market values larger than the GDP of many countries. By combining people, data and technology, American companies like these are reshaping the way America does business.
How do we bridge the gap between our old free enterprise system and the new innovation companies? Offering support in the form of unemployment-insurance extensions, welfare, or subsidies is, at best, a temporary, partial answer. America’s policy makers must give American workers new ways to sow, harvest and reap the rewards of the new economy instead of handouts. That way is free enterprise.
May I suggest using supply-side incentives to encourage capital investment, on-job education and new job creation? These include targeted business tax cuts and broad-based consumer tax breaks to encourage risk taking and new business formation. Young Americans need to see beyond looking for jobs; they need to know and act on creating themselves new jobs.
With those new jobs will come a bounty of new businesses and real wealth based on the bedrock of servicing real consumer needs. The pie will expand, and everyone’s piece will be larger. They say a rising tide floats all boats, and supply-side incentives are the engine we need to push America’s economic tide higher.
This country has the ability to create opportunity and hope for all Americans. Ours is not a choice between redistributing the wealth of economic “winners” on the one hand and ignoring the plight of the forgotten millions across our country on the other. Rather, it’s a way of considering the interests of all Americans when politicians chart our government’s role in the 21st century world economy.
A rebirth of free enterprise — of Americans innovating new solutions, products, services and goods — to replace our outdated, ineffective and punishing taxes on producers and free rides for non-producers is the right answer for what ails America. It’s our heritage, and it must be our future.
Damon Dunn writes the regular “Free Markets 101” column for “Right by the Bay”. He is a successful real estate developer, investor and businessman, former collegiate and pro football player, and was a Hoover Institution fellow from 2011-13.