- The Big Picture - http://www.ritholtz.com/blog -

Maybe Government Is the Solution

Posted By Marion Maneker On June 16, 2011 @ 12:30 pm In Think Tank | Comments Disabled

Over the last few years, and increasing in recent months, Fareed Zakaria has thrown off the shackles of his public role as a foreign policy commentator to become Time Magazine’s voice on the obstacles to American decline. Almost alone among the journalistic Mandarins, Zakaria is the voice of reason, common sense and adult responsibility.

Nowhere is that more in evidence than his new column on the ideological blinders that cripple American Conservatism. In an era when government is considered reflexively bad by both Democrats and Republicans, Zakaria takes a little time to remind us of some simple facts:

what is the evidence that tax cuts are the best path to revive the U.S. economy? Taxes — federal and state combined — as a percentage of GDP are at their lowest level since 1950. The U.S. is among the lowest taxed of the big industrial economies. So the case that America is grinding to a halt because of high taxation is not based on facts but is simply a theoretical assertion. The rich countries that are in the best shape right now, with strong growth and low unemployment, are ones like Germany and Denmark, neither one characterized by low taxes.

Many Republican businessmen have told me that the Obama Administration is the most hostile to business in 50 years. Really? More than that of Richard Nixon, who presided over tax rates that reached 70%, regulations that spanned whole industries, and who actually instituted price and wage controls?

In fact, right now any discussion of government involvement in the economy — even to build vital infrastructure — is impossible because it is a cardinal tenet of the new conservatism that such involvement is always and forever bad. Meanwhile, across the globe, the world’s fastest-growing economy, China, has managed to use government involvement to create growth and jobs for three decades. From Singapore to South Korea to Germany to Canada, evidence abounds that some strategic actions by the government can act as catalysts for free-market growth.

The Republican Right may be the most out-of-touch but Zakaria goes too easy on the rest of America. The idea that government has any positive role to play is entirely absent from our political culture. We complain bitterly about the lack of enforcement from Washington over a slew of industries and regulations—none more than Washington’s failure to rein in the mortgage and banking industries—but refuse to pay government officials and badger them over any status-conferring perks.

Worse still, in our zeal to denigrate government, we have taken to venerating the least efficient and productive sector of our economy, philanthropy. With Bill Gates and Warren Buffett touring the world with their misguided campaign to divert even more of the world’s capital into this wasteful and unaccountable sector, The Economist recently ran a side-by-side comparison of the IBM Corporation and Carnegie Endowment to determine which entity had created more social good over the last half century:

Judged on the past 50 years, there is a strong case for saying IBM has had more impact than Carnegie—especially if you count its accidental contribution to philanthropy by incompetently failing to stop Mr Gates from creating Microsoft. In part this is because its business, the management of information, has unusually large social benefits, and causes relatively few social or environmental costs.

In future, IBM expects to play an even greater role in profitably solving social problems by working with governments. “Everybody says they’re unsolvable—safe borders, clean water, energy. But the application of technology can solve a lot of these things we wrestle with,” points out Mr Palmisano. Firms in other, dirtier industries may not compare against philanthropy so well.

The Economist goes on to guess that the reason the Carnegie Endowment has not kept up with IBM is simply the dynamic nature of competition. Surviving a near-death experience and since having been remade again, IBM’s need to compete keeps the company from becoming sclerotic and complacent. The charity has no commensurate mechanism to keep it’s leaders “up at night.”

Returning to Zakaria’s point, what’s most striking about this bake off between IBM and Carnegie is that the mother of all social institutions–government–is absent from the evaluation. Despite government’s pervasive role–for both good and ill–in our lives, Americans seem determined to ignore its existence.

Even with all its flaws, government has accountability and competition built into the democratic system. The only question is why we—as citizens—don’t demand more of it.

>

Sources:
How Today’s Conservatism Lost Touch with Reality [1]
FAREED ZAKARI
Time Magazine, June 16, 2011
http://www.time.com/time/nation/article/0,8599,2077943,00.html

The Centarians Square Up [2]
The Economist, June 9, 2011
http://www.economist.com/node/18802844


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2011/06/maybe-government-is-the-solution/

URLs in this post:

[1] How Today’s Conservatism Lost Touch with Reality: http://www.time.com/time/nation/article/0,8599,2077943,00.html

[2] The Centarians Square Up: http://www.economist.com/node/18802844

Copyright © 2008 The Big Picture. All rights reserved.