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Ballast Needed to Keep the U.S. Economy Afloat
By Andrew J. Powers
As any Captain worth his salt knows when destined for rough seas sufficient ballast, proportionately distributed, is needed to keep the ship from capsizing. The taller the ship, the deeper the draft and the more ballast needed to maintain center of gravity and weather the storm. If you think of our economy today as a ship it is simple to understand what is needed to keep us afloat and survive turbulent waters.
A deep draft with a broad beam filled with adequate ballast keeps the ship sitting low in the water serving as a foundation to support the overhead weight. Distributing weight proportionately in cargo and passenger compartments is critical for maintaining a center of gravity keeping the hull level, especially on tall ships.
One need not be a rocket scientist to understand that when too much weight is positioned on the upper decks without sufficient and properly positioned ballast that once that ship is pitching and rolling that it is destined to take on water or capsize and go down. So why would this not be true for our economy? The more topside weight created by big government the greater the odds that the ship will sink.
Recent employment reports show another 11,000 jobs lost in November 2009 with unemployment continuing at 10%. A year ago when the fiscal crisis was first acknowledged, the alarm was sounded when unemployment passed the 8% mark. But rather than take on ballast and reduce topside weight, our economic rocket scientists in Washington are determined to increase government topside weight while dumping ballast, and as the U.S. economy is founded on capitalism (not socialism), U.S. business, especially small business which creates 4 out of five American jobs) serves as the ballast that keeps our economy afloat.
To me, the solution was obviously to take steps to foster business development by reducing government spending while lowering taxes and encouraging investment and lending to businesses so existing businesses could weather the storm and new entrepreneurs could build and launch stronger ships. Enhanced business opportunities naturally evolve to foster creativity and new ideas that improve existing businesses and lead to the development of new business opportunities. However, instead we have witnessed a progressive evolution of the opposite. Government (both federal and state/local) are spending more money (claiming it is to “create” jobs) and not only is little being done to foster business development, higher taxes and increased restrictions will spell the demise of our capitalist system.
What government leaders and many people do not understand it that the reason that the United States has become the greatest economy is that we are a nation built on a capitalist system. Yes, it is true that the primary objective of any business is profitability, and not specifically “creating” jobs, as any business expands it is a natural process that jobs are created to support business growth in order to remain competitive and successful, and the greater the business success, the more opportunities for employment. As more people are employed by business, the better the lives of the American people. As businesses become more profitable, the more taxes are paid on both profits as well as compensation paid by workers.
The converse is equally true. Government is based on a system of budgets and appropriation spending. It fosters a mindset that if money is appropriated in the budget it must be spent in order to justify an equal or greater appropriation in future year’s budgets. It does nothing to foster creativity or a desire to work harder for the benefit of the employer, but rather fosters an attitude of entitlement. The strength of the American economy has historically been built on the concept that every American has an equal opportunity to become the best they can be and rise to the top. Although not everyone has the ability to do so, everyone has that opportunity regardless of their social background, race or creed. These are the principles that have made the U.S.A. the greatest nation in the world and the reason so many people have risked everything to leave socialistic and communistic societies to come to America in search of opportunity.
In this regard, when government dictates to private industry what products are to be made, and how they are to be made, and how captains of industry make business decisions, failure is an absolute certainty. When government redistributes wealth by creating projects and creating jobs that yield no long term national economic benefit, paying for these projects and jobs by spending money based on future anticipated revenues from increased taxes (and every government fee is in reality a tax), it removes the fundamental element of business competition and individual motivation which ultimately leads to economic collapse. As national economies continue to fail, more people are needed to support the inept system.
To comprehend this we only need look at history. The American economy was at its strongest when businesses had the opportunities and resources to develop and expand, thus creating both investment and employment opportunities. But throughout our history, whenever government became too big and powerful, we experienced business recession, a loss of real jobs and spiraling inflation. Throughout American history, every economic recovery was led by captains of industry and business growth that was supported by government policy to encourage that growth.
It’s actually very simple. In a capitalistic society if there is no business there are no real jobs, and when people lose their jobs they have no money to spend and the economy goes into a downward spiral. Government jobs may but food on the table for some, but eventually without business there is no money to support the government or to repay government borrowing. We saw this during the Great Depression. Many alive today experienced this during the recession and double digit inflation of the 1970s.
Looking outside our borders to other economies one need only look at the former Soviet Union and East Germany and Soviet block nations following WWII. Seeking to create a society where everyone had a job and food on their table, the government took created projects to create jobs. There was no incentive for people to be creative as they had a job working for the State. Seeking to create a society where everyone had a job and food on their table, the government took created projects to create jobs. There was no incentive for people to be creative as they had a job working for the State. Government buildings and military installations were built, the State decided what crops would be grown and what products would e produced, people went to work and came home to their families but no one had an opportunity to build a better life. Government corruption was proportionate with the size of government leading to the elite of the Politburo. Eventually the system collapsed and after so many years of living under communism, people had no idea how to compete in a global capitalist society. Companies such as Carl Zeiss, Inc. of Oberkoken Germany which once had a thriving business in Jena (East Germany) found itself facing an employee and management mentality in Jena that was totally incompatible with the rest of the company and it took years for Jena to become profitable. After two decades, the former Soviet Union has still not been able to position itself as a global business competitor.
So with history having proven that capitalism was responsible for the U.S. becoming the most powerful leader in the global economy, why is it that now we are witnessing a redistribution of wealth mentality in Washington with leaders having a steadfast conviction to follow the failures of history by creating a big brother system where people depend on government for its daily bread? Those businesses that support such a concept of working for the government and following their lead will see their management elite reap the personal benefits while eventually their employees will bear the burden. State and local governments have already proven that such a system is doomed to failure. Just look at California and New York while other states which stay the course have the strongest economies. Why is it that labor unions, which at one time served such a valuable purpose of confronting businesses that treated their employees as their least important asset, have grown to become organizations that exist only to create opportunities for their internal “elite” at the expense of union members and employers who support their corruption with expensive dues have grown to become powerless and meaningless organizations that have lost the confidence of most of its members. Yet these same union leaders are in bed with our government leaders as part of the “job creation” process. Andy why is it that the voices of organizations of the United States Chamber of Commerce are silenced during this supposed “government job creation” process?
In my life I have learned on thing. If it walks like a duck and quacks like a duck, it is probably a duck. Our government leaders for all appearances seem to be emulating the policies of socialistic societies and to some extent almost to be heading toward the first stages of communism which has created nothing but misery for the people of the former Soviet Union and communist block countries.
In my humble opinion, the answer lies with the American people who need to remove their blinders and do their own homework and realize that unless they camp out on the doorsteps of their elected representatives and make it clear that the very positions of these representatives are at stake unless they do what’s right for business and stop this growing madness in government (federal, state and local).
The answer is NOT in “creating” jobs by big government dictating what projects will be created, and controlling business to dictate how they will be run and destined to fail. The answer is by supporting a free, creative economic environment. Decisions should include reduced pork spending, reduced government waste, streamlining efficiency of government agencies and developing an attitude of supporting business growth in a free economy. Economic development programs, investment tax credit incentives, encouraging businesses to work with small business-helping them by accepting that small businesses may have hit difficult times but by working together those that can show a sound business development plan (not just one with numbers that look good but show sound marketing and business development strategies) will be supported by government backed loans where progress is monitored by bankers who are experienced in business development with the support of local Chamber of Commerce leaders with a proven track record, employment tax credits, etc.
For generations the relationship between business and bankers was built on trust and loyalty. Bankers were partners in business, especially small business. They would discuss the plans of their customers face to face, make suggestions and work with them to avoid problems and strengthen their business plans as they knew that by helping the business by working as a team, rather than just a lender, that this maximized the chances of success and in the long run, not only would a business loan be repaid, their business with the customer would grow as the business grew. Many far eastern business support groups understood this and as a consortium provided financing for businesses to open in America. As a result of the loyalty that developed, small business owners and their financial backers were like family and not repaying a debt to those who supported their early beginnings was like striking down their own parents. We need to re-establish this personal sense of loyalty and this is where the government through the SBA can help bring banks and small business together. But the SBA and government sponsored small business groups need to employ the resources of experienced business people, not lifetime government employees who never managed or owned a business.
Let the captains of industry along with small business owners lead the path to America’s economic recovery, not incompetent government Czars and appointed officials who have absolutely no business experience.
Washington needs to know that if they want to keep their jobs, they need to increase ballast, redistribute ship weight (not wealth) and stop increasing the burdensome weight they are placing on the upper decks if we are to weather this storm and reach clam waters with our ship in tact.
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