Advocating for a Mixed Economy – An Article on the Benefits
of Government in a Free Market and why we need regulation.
America
is under attack. But the greatest threats do not come from outside our country,
but from our country itself. Since the 1970s, there has been a decline of
government, and thus a rise of unrestricted free market. While during the 80s
to 2007, that was considered a good thing and was endorsed by many economists
and politicians, today a much larger portion of economists realize the faults
of a market without any cooperation or influence by the government. Why is
government interference a good thing? Shouldn't a market, free of any
regulation or restriction, bring about equilibrium through the guiding of the
“invisible hand” proclaimed by none other than Adam Smith, founder of modern
economics? That, surely, would be the most efficient system, while any
interference by the government to gain a hold of our tax dollars would only
decrease competition and lower the incentives to work hard. Especially if some
of those tax dollars went directly to the poor or unfortunate, to create a
perpetuating cycle that lead to laziness and no competitive spirit. While this
is true to a degree, government was also claimed by Smith to have a necessity
in economics for things that the market couldn't or wouldn't do by itself. Even
the most conservative of economics geniuses realized the need for government,
and we as a nation threw those ideas out the window through the election and
endorsement of Ronald Regan (and Margret Thatcher in England), who falsely proclaimed
that the rise in oil prices and other economic faults late in the 70s were the
result of our government’s overbearing reach, and no other normally occurring
and fixable economic forces. In turn, we lost a government that worked for the
people and gained a government that simply worked for profit.
And
that profit invested was a perpetuating cycle. The lobbyists endorsed their
candidates through large donations, and in turn, when they were in office, they
repaid them through legislation that benefited them and continued turning in
profits. Democrats were now on the right, and conservatives on the far right of
politics, anyone on the left was now left little chance of seriously competing
in politics, since larger endorsements often favored a more conservative and
right-winged approach. While there is nothing naturally wrong about that, it
has encouraged policies like those that reduce our investment into alternative
energies (oil companies have a large investment, especially in Republicans, to
be sure that they remain the major shareholder in energy). While you may not
“believe” in global warming, everyone must confess that our access to oil is
going down quickly, and within the century will become largely ineffective as
we have to harvest oil unconventionally, inefficiently and expensively. So
while it benefits the average American and world citizen to support research
into alternative energies that can be sustainable and efficient, our country at
least is brought down by these lobbyists who cap our knowledge for their
profit. While these lobbyists remain in charge of our government, there is
little doubt that our system will remain as it has, for it isn’t in the benefit
of those with the lobbying power to change the system at all.
The
government has to take back the reins it handed over to large corporations and
put our nation back on track to success. The government (in turn, us as a
nation) can’t afford to leave the market to its own devices like they have the
last 40 years, the result of leaving the market alone was shown in by the
buildup of the housing bubble until the eventual crisis in 2007 (which I can
get into at another date). We need regulation, and we need to have a larger
government to enact policy to get us out of the economic crisis that the
unregulated free market got us into. But what line should they draw? Where
should they create legislation, and where should they let the market work its
usually effective devices? Well, while just about every economist has a
different perspective about that, there are two places that I would argue
require the attention of the government.
I’ll start off with the need for
price of a product to factor in larger amounts of costs that are currently
being ignored. When a tree is chopped down and sold, the person who chops down
the tree doesn’t charge for the damage to the ecosystem that the lost tree
influences. In large part that is because the damage has no visible effect on
our lives. After all, we aren’t an animal living in the woods, dependent on
nature for survival. So the market would naturally not factor this into a
price, as it has no short-term impact. The market pays only for the man who
goes out and chops it down, since otherwise there would be no lumber at all. I
argued against this claim myself at first, saying that there was no way to
enforce such a system. Since the world has become more ‘flat’, even if America
issues a policy that requires the charges of an ecosystem be added to a product
such as lumber, other nations would not have such hesitations, would chop down
lumber without regard to the cost, and sell it to America for the “incorrect
price”. Not only that, I said, it would be difficult to even quantify a price
that the chopping of a tree had for the ecosystem, especially if you had to
calculate the future cost to the ecosystem. It was impossible to put a number
on that.
I can’t
proclaim to know the answer to these problems or many others that I’m sure
would arise from such a policy, but I can proclaim that without such a policy,
the market will continue to ignore the damage on the ecosystem until eventually,
there is nothing left for our grandchildren and great-grandchildren. While we
may never meet our great-grandchildren (with any luck, we will), that doesn’t
mean that we can ignore what our choices do to them. Market cost should
accurately reflect the cost of the product, and that cost includes the impact
it will have on future generations. Continuing to ignore that will only require
future generations to pay for the costs.
The
second role government should play in our economy is another controversial one,
but in my opinion more immediately important, being the redistribution of
wealth. The rich are enjoying a period of wealth unlike what has ever been seen
or conceived, and the poor and unfortunate will only continue to be worse off
without policies that redistribute wealth back into their hands (to a degree).
The flattened world has caused a large amount of corporations to look overseas
to cheaper labor and tax evasion, which has certainly had an effect on America:
the number of people without a bachelor’s degree or higher are gaining
increasingly higher unemployment rates, as companies ship whatever jobs they
can overseas for personal profit. Taxation rates, despite claims by the rich,
have been largely unchanged since the 80s and aren't even a fraction of where
they were during the 1930s to the 1970s. While the claim can be made that the
government taxing the rich is not only morally wrong, but inefficient, I would
claim that those people should take a look at government such as Sweden, who
are looking at policies such as that where the highest earning member of a
corporation will be unable to receive a salary more than 12 times that of the
lowest earning employee, which would be outrageous to even consider in America.
Taxation there is already much higher than in most western countries. The
result? Their bottom line of workers is much better off, and is working much
harder than our bottom line. Not only that, but their CEOs and richest members
are not working less for their decreased turnouts. The truth boils down to if
taxation policies encourage laziness or efficiency, and certainly in Sweden’s
case, it seems to be the latter. So, if the global market requires Americans to
gain access to a higher level of education to remain competitive (or on the
market for employment at all), shouldn't we as a nation encourage that through
ways such as taxes directed towards financial aid for higher education? Or do
we simply ignore the need for it, proclaim that a large amount of the
unemployed won’t have the motivation and desire to succeed in college (despite
their livelihood being at stake), and continue to feed them through a stream of
food stamps and a safety net that excuses us from personal responsibility of
the issue? Poverty needs to be treated like a problem that can be solved, not
just a symptom of a global market. And, more importantly, taxes need to not be
treated as the enemy of freedom (as they have for the past 40 years), but as a
way to encourage competition and invest in relevant parts of our economy.
In the end, our actions and will to
change as a nation will boil down to if we can represent more than the
lobbyists, and to do that our voices need to be heard and sustained like we did
through the SOPA act. But it is possible, assuming that we want to help our
nation and future generations have a brighter and enlightened future.
